Interim / Quarterly Report • Aug 16, 2012
Interim / Quarterly Report
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| 2012 January – June |
2011 January – June |
|
|---|---|---|
| Established business fields | ||
| Sales in 1 million | 1,148.8 | 1,004.3 |
| EBITDA* (Earnings before interest, taxes, depreciation and amortization) in 1 million |
221.3 | 181.6 |
| EBIT* (Earnings before interest and taxes) in 1 million | 177.6 | 141.2 |
| New business fields | ||
| Sales in 1 million | 14.7 | 5.1 |
| EBITDA in 1 million | -72.7 | -5.5 |
| EBIT in 1 million | -73.9 | -6.0 |
| Total | ||
| Sales in 1 million | 1,163.5 | 1,009.4 |
| EBITDA* in 1 million | 148.6 | 176.1 |
| EBIT* in 1 million | 103.7 | 135.2 |
| EBT* (Earnings before taxes) in 1 million | 95.8 | 127.9 |
| EPS (Earnings per share) in 1 | 0.32 | 0.41 |
| Employees at end of June (number) | 5,972 | 5,204 |
| Share price at end of June (Xetra) in 1 | 13.55 | 14.50 |
| Q3 2011 | Q4 2011 | Q1 2012 | Q2 2012 | Q2 2011 | |
|---|---|---|---|---|---|
| Sales | 527.7 | 557.0 | 576.9 | 586.6 | 510.8 |
| EBITDA* | 85.0 | 78.9 | 70.5 | 78.1 | 85.6 |
| EBIT* | 63.6 | 52.4 | 48.3 | 55.4 | 64.9 |
| EBT* | 66.0 | 40.4 | 44.4 | 51.4 | 63.1 |
* Positive special items Q2 2011 (Versatel): EBITDA and EBIT effect: 1 24.8 million; EBT effect: 1 16.3 million; EPS effect: 1 0.07 Negative special items Q2 2012 (Sedo impairment): EBIT, EBT effect: 1 46.3 million; EPS effect: 1 0.24
(Possible addition differences due to rounding effects.
| June 30, 2012 | June 30, 2011 | |
|---|---|---|
| Customer contracts, total | 11.28 | 10.16 |
| Access contracts, total | 4.38 | 3.79 |
| of which DSL complete (ULL) | 2.61 | 2.41 |
| of which Mobile Internet | 1.06 | 0.48 |
| of which narrowband / T-DSL / R-DSL | 0.71 | 0.90 |
| Applications contracts, total | 6.90 | 6.37 |
| of which "domestic" | 3.98 | 3.79 |
| of which "foreign" " | 2.92 | 2.58 |
| Ad-financed accounts, total | 31.1 | 28.5 |
In its operating business, United Internet AG can look back on a successful first six months 2012. We succeeded in raising sales and customer contract figures to new all-time highs and – adjusted for special items – significantly increased earnings in our established business fields. At the same time, we invested large sums in the development of our new business fields.
Specifically, we raised consolidated sales to the new record level of 1 1,163.5 million in the first six months of 2012 – representing a year-on-year increase of 15.3%. Sales in our established business fields rose by 14.4% to 1 1,148.8 million. In addition, there were sales in our new business fields of 1 14.7 million (prior year: 1 5.1 million). There was also strong growth in customer contracts: with the addition of 610,000 new contracts to 11.28 million, we easily exceeded the corresponding growth figure for the first six months of 2011 (400,000 new contracts).
Earnings in the first half of 2011 and the first half of 2012 were influenced by various special items. Whereas in the previous year, there was a positive effect on consolidated earnings from the sale of our Versatel shares in the second quarter of 2011 (EBITDA and EBIT effect: 1 24.8 million, EBT effect: 1 16.3 million, EPS effect: 1 0.07), there was a negative effect on earnings in the second quarter of 2012 from impairment charges, as the United Internet subsidiary Sedo Holding AG recognized impairment on goodwill in its half-year figures for 2012. These impairment charges were necessitated in particular by a significant change in expectations regarding the company's Domain Parking business. United Internet AG included the impairment in its consolidated financial statements on the level of the Applications segment. The non-cash-effective extraordinary impairment charges amounted to 1 46.3 million.
In our operating business, i.e. without consideration of special items, we succeeded in raising earnings significantly in our established business fields during the first six months of 2012. Earnings before interest, taxes, depreciation and amortization (EBITDA) grew by 21.9%, from 1 181.6 million last year to 1 221.3 million, while earnings before interest and taxes (EBIT) improved by 25.8%, from 1 141.2 million last year to 1 177.6 million.
As previously announced, we used this positive earnings development in established business fields for the strong development of new business fields. In the first six months of 2012, we focused on the international marketing campaign for the 1&1 MyWebsite, and the development of De-Mail applications. In line with planning, we expensed EBIT-effective start-up losses of 1 73.9 million (prior year: 1 6.0 million) for these activities in the first six months of 2012. These start-up losses result mainly from high expenditures for marketing the 1&1 MyWebsite in seven European nations and the USA, and are part of our planned start-up losses for new business fields in 2012.
As a result of these start-up losses, there was an expected overall decline in key earnings figures compared to the same period last year. Without consideration of special items, EBITDA amounted to 1 148.6 million (prior year: 1 176.1 million) and EBIT to 1 103.7 million (prior year: 1 135.2 million).
In our "Access" segment, the number of fee-based contracts grew by 300,000 in the first six months of 2012 to reach 4.38 million as of June 30, 2012. In our Mobile Internet business, we were able to activate 270,000 new customer contracts and thus raise the total number of customers to 1.06 million. We also achieved growth in complete DSL contracts (of particular importance for us), adding a further 100,000 customers to reach a total of 2.61 million. As expected, however, the number of customer contracts for those business models gradually being phased out (narrowband, T-DSL and R-DSL) continued to fall (-70,000 customer relationships). As a result of the encouraging development in customer figures, sales of our "Access" segment grew strongly by 16.3% to 1 764.0 million in the first six months of 2012. Despite greatly increased costs for new customer acquisition (+300,000 contracts in the first half of 2012 compared to +160,000 in the same period last year), there was strong year-onyear growth in EBITDA of 35.0% to 1 88.4 million (prior year: 1 65.5 million) and in EBIT of 47.1% to 1 75.0 million (prior year: 1 51.0 million).
In our "Applications" segment, the number of fee-based contracts world-wide grew by 310,000 to 6.90 million in the first six months of 2012. The success of our international expansion campaign is documented by the contribution to contract growth from abroad, where we added 190,000 new contracts to reach a total of 2.92 million. In the field of Business Applications, we added 240,000 new contracts (of which over 130,000 contracts for our 1&1 MyWebsite, compared to 40,000 last year) to reach a total of 4.91 million. The number of Consumer Application contracts grew by 70,000 to 1.99 million contracts, while our ad-financed accounts rose by 100,000 to 31.1 million. Thanks to this strong customer growth, sales in the "Applications" segment also rose by 13.4% to 1 399.3 million in the first six months of 2012. In the established business fields of our "Applications" segment, sales were up 10.9% to 1 384.6 million. In addition, there was also revenue from new business fields of 1 14.7 million (prior year: 1 5.1 million). Without consideration of goodwill impairment of Sedo, EBITDA in the established business fields of our "Applications" segment rose from 1 116.9 million last year to 1 131.3 million, while EBIT improved from 1 91.1 million last year to 1 101.1 million. These strong earnings in our established business enabled us to make planned investments in new business fields and bear EBIT-effective start-up losses of 1 73.9 million (prior year: 1 6.0 million). As a result of these start-up losses, there was an expected year-on-year decline in segment EBITDA to 1 58.6 million (prior year: 1 111.4 million) and in segment EBIT to 1 27.2 million (prior year: 1 85.1 million).
With the exception of Sedo Holding AG, all business divisions of United Internet AG are developing in line with plans. Against this backdrop, we can confirm our guidance for operating business and expects full-year sales to grow by around 15% to approx. 1 2.4 billion. The number of new customers added in 2012 is expected to rise to approx. 1.2 million, compared to 910,000 in the previous year. Despite start-up costs in new business fields of around 1 120 million, EBIT before special items is expected to remain at around the prior-year figure of 1 250 million. Due to extraordinary non-cash-effective impairment of Sedo goodwill amounting to 1 46.3 million, expected EBIT will be reduced to approx. 1 200 million. EPS 2012 will amount to around 1 0.58 (after approx. 1 0.42 start-up losses in new business fields and after approx. 1 0.24 Sedo impairments).
For 2013, we expect further strong earnings growth with an EPS of around 1 1.00 – 1 1.10 (after approx. 1 0.30 – 1 0.40 start-up losses in new business fields).
We are well placed for the next steps in our corporate development and optimistic about the remaining months of our current fiscal year. In view of the success already achieved in the first half of 2012, we would like to express our gratitude to all employees for their dedicated efforts, and thank our shareholders for their continued trust in the United Internet Group.
Montabaur, August 14, 2012
Ralph Dommermuth
The International Monetary Fund (IMF) believes that the global economy is in danger of losing further momentum. Already fragile, the global economic upswing showed further signs of weakness over the past three months. The main reasons for this negative development are renewed tensions on the financial markets and the sovereign debt crisis of the Euro zone.
Against this backdrop, the IMF now anticipates global economic growth of 3.5% this year in its July forecast – 0.1 percentage points less than in April. For the Euro zone, the IMF continues to forecast a decline in output of 0.3% for 2012. As for Germany, the Fund confirmed its previous growth forecast of 1.0%.
This pessimistic outlook for the world's economy was made shortly after fiscal policy was relaxed in the Euro zone, the UK and China – which was already seen as a sign of growing concern with regard to global economic prospects.
In spite of the international debt crisis, business confidence among small to mid-size companies in the IT sector remains firm. This was the finding of a recent survey among mid-size suppliers of ICT products and services conducted by industry association BITKOM. 71% of small to mid-size ICT companies reported sales growth (compared to last year) in the second quarter of 2012. Although BITKOM's SME barometer fell by seven points from its earlier record level to 57 points, it remains high. Demand from professional users for new IT solutions is particularly strong. Many IT projects currently involve topics such as cloud computing, business intelligence and the integration of mobile end-user devices into corporate IT environments.
According to the results of the quarterly business confidence survey, business was best for mid-size suppliers of software and IT services: 74% of companies interviewed achieved year-on-year revenue growth in the second quarter of 2012. For manufacturers of IT hardware, the figure was 58%.
Companies are particularly upbeat about their prospects for the year as a whole. Almost three quarters of mid-size IT companies (74%) expect revenue growth in 2012.
United Internet AG is the leading European internet specialist with over 11.2 million fee-based customer contracts and around 31 million ad-financed free accounts. The operating activities of United Internet AG are divided into the segments "Access" and "Applications".
The "Access" segment comprises the company's fee-based landline and mobile access products, including the respective applications (such as home networks, online storage, telephony or entertainment). United Internet operates exclusively in Germany in this segment, where it is one of the leading providers. The company remains independent of network providers by purchasing standardized network services from various pre-service providers. These are then enhanced with end-user devices, self-developed applications and services from the company's own "Internet Factory" in order to differentiate them from the competition. Access products are marketed by the strong brands GMX, WEB.DE and 1&1, which enable the company to offer a comprehensive range of products to a mass market while also targeting specific customer groups.
The "Applications" segment comprises United Internet's application business – whether ad-financed or via fee-based subscriptions. These applications include home pages and e-shops, Personal Information Management applications (e-mail, to-do lists, appointments, addresses), group work, online storage and office software. The applications are developed by the company's "Internet Factory" or in cooperation with partner firms and operated at the company's data centers. In its "Applications" segment, United Internet is active on the international market and enjoys leading positions in Germany, France, the UK, Spain, Austria, Switzerland and the USA. In late 2010 / early 2011, the company also launched operations in Poland and Canada and entered the Italian market in May 2012. Applications are marketed to specific target groups via the differently positioned brands GMX, WEB.DE, 1&1, united-domains, Fasthosts and InterNetX. United Internet also offers its customers performance-based advertising and sales platforms on the internet via Sedo and affilinet.
As a result of its dynamic customer growth, "Access" segment sales grew strongly by 16.3% to 1 764.0 million in the first six months of 2012. Despite greatly increased costs for new customer acquisition (+300,000 contracts in the first half of 2012 compared to +160,000 in the same period last year), there was year-on-year growth in EBITDA of 35.0% to 1 88.4 million (prior year: 1 65.5 million), while EBIT rose by 47.1% to 1 75.0 million (prior year: 1 51.0 million). All customer acquisition costs, as well as costs for the migration of resale DSL connections to complete packages (ULL = Unbundled Local Loop), continue to be charged directly as expenses.
| Q3 2011 | Q4 2011 | Q1 2012 | Q2 2012 | Q2 2011 | |
|---|---|---|---|---|---|
| Sales | 351.0 | 359.8 | 375.6 | 388.4 | 336.0 |
| EBITDA | 43.6 | 43.2 | 41.3 | 47.1 | 34.4 |
| EBIT | 36.2 | 35.0 | 34.8 | 40.2 | 27.2 |
| ACCESS | APPLICATIONS | ||
|---|---|---|---|
| Networks | Motivated team 6,000 employees, thereof 1,600 in and data centers |
product management, development | Content |
| Sales power 2.9 million customer contracts p.a. on a daily basis Operational Excellence |
40,000 registrations for free services | ||
| User equipment |
5 data centers 70.000 servers in Europe and USA |
42 million accounts in 10 countries | Standard software |
The number of fee-based contracts in this segment grew by 300,000 in the first six months of 2012 to reach a total of 4.38 million as of June 30, 2012. In its Mobile Internet business, the segment activated 270,000 new customer contracts and thus raised the total number of contracts to 1.06 million. There was also growth in complete DSL contracts (of particular importance for the segment) with the addition of a further 100,000 contracts to reach a total of 2.61 million. As expected, however, the number of customer contracts for those business models gradually being phased out (narrowband, T-DSL and R-DSL) continued to fall in the first six months of 2012 (-70,000 customer relationships).
| "Access" customer contracts | Dec. 31, 2011 | June 30, 2012 | Change |
|---|---|---|---|
| Access, total | 4.08 million | 4.38 million | + 300,000 |
| of which Mobile Internet | 0.79 million | 1.06 million | + 270,000 |
| of which DSL complete (ULL) | 2.51 million | 2.61 million | + 100,000 |
| of which narrowband / T-DSL / R-DSL | 0.78 million | 0.71 million | - 70,000 |
| "Access" customer contracts | Mar. 31, 2012 | June 30, 2012 | Change |
|---|---|---|---|
| Access, total | 4.24 million | 4.38 million | + 140,000 |
| of which Mobile Internet | 0.94 million | 1.06 million | + 120,000 |
| of which DSL complete (ULL) | 2.58 million | 2.61 million | + 30,000 |
| of which narrowband / T-DSL / R-DSL | 0.72 million | 0.71 million | - 10,000 |
In the period under review, the main focus was on implementing the 1&1 Principle launched in late 2011 (as a further development of the DSL quality drive) and launching the "1&1 Tablet Flat" tariff in the Mobile Internet business:
Thanks to its transparent and flexible product strategy offering excellent value for money and a variety of optional applications, United Internet sees good opportunities to enhance customer retention and achieve a further increase in average revenue per contract in its Access business. In particular, contract growth in this segment is expected to result from the migration of customers to complete DSL packages (ULL) – regarded as essential for improving customer retention – as well as from the marketing of Mobile Internet products.
Thanks to strong customer growth, sales in the "Applications" segment also rose by 13.4% to 1 399.3 million in the first six months of 2012. In the segment's established business fields, sales grew by 10.9% to 1 384.6 million. In addition, there was revenue from new business fields of 1 14.7 million (prior year: 1 5.1 million).
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the established business fields – without consideration of non-cash-effective extraordinary goodwill impairment of Sedo Holding AG – rose by 12.3% from 1 116.9 million last year to 1 131.3 million, while earnings before interest and taxes (EBIT) improved by 11% from 1 91.1 million last year to 1 101.1 million. These strong earnings in established business fields enabled United Internet to make planned investments in new business fields (especially in the international marketing campaign for 1&1 MyWebsite and the development of De-Mail applications) and bear EBIT-effective start-up losses of 1 73.9 million (prior year: 1 6.0 million). As a result of these startup losses, there was an expected year-on-year decline in segment EBITDA to 1 58.6 million (prior year: 1 111.4 million) and in segment EBIT to 1 27.2 million (prior year: 1 85.1 million).
| Q3 2011 | Q4 2011 | Q1 2012 | Q2 2012 | Q2 2011 | |
|---|---|---|---|---|---|
| Sales | 176.7 | 197.1 | 201.2 | 198.1 | 174.7 |
| EBITDA | 41.6 | 30.4 | 30.7 | 27.9 | 52.5 |
| EBIT* | 27.6 | 12.3 | 14.9 | 12.3 | 39.1 |
* Negative special items Q2 2012 (Sedo impairment charges): EBIT effect: 1 46,3 million
In addition to high investments for the establishment of new business fields, the "Applications" segment also invested heavily in customer growth during the period under review. As a result, the number of fee-based contracts world-wide grew by 310,000 to 6.90 million. The success of the international expansion campaign is documented by the contribution to contract growth from abroad: 190,000 new contracts were added to reach a total of 2.92 million. The segment continued to drive international expansion with its launch in Italy in May 2012. In the field of Business Applications, 240,000 new contracts were added (of which over 130,000 contracts for the 1&1 MyWebsite, compared to 40,000 last year) to reach a total of 4.91 million. The number of Consumer Application contracts grew by 70,000 to 1.99 million contracts. Ad-financed accounts rose by 100,000 to 31.1 million.
| "Applications" customer contracts | Dec. 31, 2011 | June 30, 2012 | Change |
|---|---|---|---|
| Total fee-based contracts | 6.59 million | 6.90 million | + 310,000 |
| of which "domestic" | 3.86 million | 3.98 million | + 120,000 |
| of which "foreign" | 2.73 million | 2.92 million | + 190,000 |
| Ad-financed accounts | 30.8 million | 31.1 million | + 300,000 |
| "Applications" customer contracts | Mar. 31, 2012 | June 30, 2012 | Change |
|---|---|---|---|
| Total fee-based contracts | 6.75 million | 6.90 million | + 150,000 |
| of which "domestic" | 3.92 million | 3.98 million | + 60,000 |
| of which "foreign" | 2.83 million | 2.92 million | + 90,000 |
| Ad-financed accounts | 31.0 million | 31.1 million | +100,000 |
In the period under review, activities focused on the migration of some 15 million active users to the new WEB.DE mailboxes – in the field of Consumer Applications – and the roll-out of new Dynamic Cloud Servers in the field of Business Applications:
New WEB.DE mailboxes: In January 2012, WEB.DE conducted one of the biggest migrations in German internet history. Around 15 million users received a new home for their e-mails: the new WEB.DE mailbox. It features a clear design and simple navigation, while the WEB.DE online storage facility offers secure space in the cloud for personal data. Important documents, photos or other files can be safely stored here. They can subsequently also be accessed on the move via any internet-capable PC or dedicated app. The WEB.DE MailCheck, a browser extension for Internet Explorer and Mozilla Firefox, also offers users fast mailbox log-in, secure encryption and immediate notification of new e-mails received. With its integrated phishing filter, MailCheck also provides added security while surfing outside the mailbox.
With its strong and specialized brands, a steadily growing portfolio of cloud applications, and existing relations with millions of small businesses, freelancers and private users, United Internet is well positioned to utilize the opportunities offered by cloud computing. In 2012, the company intends to tap the opportunities offered by launching its Business Applications in new foreign markets (especially via the international rollout of its 1&1 MyWebsite). In the field of Consumer Applications, the main focus will be on entering the field of legally secure email communication with the German De-Mail system.
United Internet can look back on a successful first six months of 2012. Consolidated sales of United Internet AG grew by 15.3% in the period under review, from 1 1,009.4 million in the previous year to 1 1,163.5 million. In its "Access" segment, sales rose by 16.3% from 1 657.2 million last year to 1 764.0 million, and in the "Applications" segment sales increased by 13.4% from 1 352.0 million last year to 1 399.3 million.
Despite increased purchases of pre-services in the Access segment as a result of strong customer growth (+300,000 contracts in the period under review compared to +160,000 in the previous year) and the complete recognition of smartphone subsidies for the fast growing Mobile Internet business with a corresponding effect on earnings (+270,000 contracts in the period under review compared to +210,000 in the previous year), consolidated gross margin rose from 33.2% in the previous year to 33.7%.
Due in particular to the international advertising campaign for the 1&1 MyWebsite, sales and marketing expenses rose from 1 150.4 million (14.9% of sales) last year to 1 232.2 million (20.0% of sales) in the period under review. There was a less than proportionate increase in administrative expenses from 1 46.4 million (4.6% of sales) last year to 1 52.5 million (4.5% of sales).
Earnings in the first half of 2011 and the first half of 2012 were influenced by various special items. Whereas in the previous year, there was a positive effect on consolidated earnings from the sale of Versatel shares (EBITDA and EBIT effect: 1 24.8 million, EBT effect: 1 16.3 million, EPS effect: 1 0.07), there was a negative effect on earnings in the second quarter of 2012 from impairment charges, as the United Internet subsidiary Sedo Holding AG recognized impairment on goodwill in its half-year figures 2012. These impairment charges were necessitated in particular by a significant change in expectations regarding the company's Domain Parking business. United Internet included the impairment in its consolidated financial statements on the level of the Applications segment (non-cash-effective extraordinary impairment charges: EBIT, EBT effect: 1 46.3 million; EPS effect: 1 0.24).
In its existing business fields, United Internet succeeded in raising earnings significantly during the first six months of 2012. Without consideration of the special items stated above, earnings before interest, taxes, depreciation and amortization (EBITDA) grew by 21.9%, from 1 181.6 million last year to 1 221.3 million, while earnings before interest and taxes (EBIT) improved by 25.8%, from 1 141.2 million last year to 1 177.6 million.
As previously announced, this positive earnings development in established business fields was used to invest heavily in the development of new business fields. In the first six months of 2012, the main focus was on the international marketing campaign for the 1&1 Do-It-Yourself Homepage, and the development of De-Mail applications. In line with planning, United Internet AG expensed EBIT-effective start-up losses of 1 73.9 million (prior year: 1 6.0 million) for these activities in the first six months of 2012. These start-up losses result mainly from high expenditures for marketing the 1&1 MyWebsite in seven European nations and the USA, and are part of the company's total start-up losses planned for new business fields in 2012.
As a result of these start-up losses, there was an expected overall decline in key earnings figures (adjusted for special items) compared to the same period last year. EBITDA amounted to 1 148.6 million (prior year: 1 176.1 million) and EBIT to 1 103.7 million (prior year: 1 135.2 million).
Including special items, the key earnings figures were all down significantly on the previous year: EBITDA totaled 1 148.6 million (prior year: 1 200.9 million), EBIT 1 57.5 million (prior year: 1 160.0 million), EBT 1 49.5 million (prior year: 1 144.2 million) and EPS 1 0.08 (prior year: 1 0.48).
| 1,148.8 | ||||
|---|---|---|---|---|
| Sales | 1,004.3 | +14.4 % | ||
| EBITDA* | 221.3 181.6 |
+21.9 % | ||
| EBIT* | 177.6 141.2 |
+25.8 % |
| Sales | 14.7 +188.2 % 5.1 |
||
|---|---|---|---|
| EBITDA | -72.7 | -5.5 | |
| EBIT | -73.9 | -6.0 |
| Sales | 1,009.4 | 1,163.5 +15.3 % |
|
|---|---|---|---|
| EBITDA* | 148.6 176.1 |
-15.6 % | |
| EBIT* | 103.7 135.2 |
-23.3 % |
6M 2012 6M 2011
| Q3 2011 | Q4 2011 | Q1 2012 | Q2 2012 | Q2 2011 | |
|---|---|---|---|---|---|
| Sales | 527.7 | 557.0 | 576.9 | 586.6 | 510.8 |
| EBITDA* | 85.0 | 78.9 | 70.5 | 78.1 | 85.6 |
| EBIT* | 63.6 | 52.4 | 48.3 | 55.4 | 64.9 |
| EBT* | 66.0 | 40.4 | 44.4 | 51.4 | 63.1 |
* Positive special items Q2 2011 (Versatel): EBITDA and EBIT effect: 1 24.8 million; EBT effect: 1 16.3 million
Negative special items Q2 2012 (Sedo impairment): EBITDA, EBIT, EBT effect: 1 46.3 million
Due in particular to the recognition of start-up losses in the new business fields (1 73.9 million compared to 1 6.0 million in the previous year), operative cash flow fell from 1 127.3 million to 1 95.2 million and net cash inflows from operating activities from 1 125.0 million to 1 107.8 million.
Net cash outflows from investing activities amounted to 1 14.9 million in the period under review (prior year: 1 1.6 million). This resulted mainly from expenses of 1 20.9 million for investments in intangible assets and property, plant and equipment as well as payments of 1 6.6 million for loans issued. These outflows were offset by inflows of 1 10.3 million from proceeds received for the disposal of associated companies (sale of investments belonging to the EFF funds). In the previous year, investments in intangible assets and property, plant and equipment amounted to 1 19.9 million. These outflows were offset by inflows of 1 6.0 million from the disposal of financial assets (sale of investments belonging to the EFF funds) and of 1 12.2 million from proceeds received for the disposal of companies (repayment of vendor loan by Hi-media).
Net cash flow for financing activities in the first six months of 2012 was dominated by an outflow for the redemption of loans totaling 1 31.4 million and the dividend payment of 1 58.1 million. In the previous year, net cash flow for financing activities was heavily influenced by a cash outflow of 1 155.5 million for the purchase of treasury shares and of 1 42.0 million for the dividend payment, as well as an opposing cash inflow of 1 67.9 million from the assumption of loans.
The Group's balance sheet total fell from 1 1.187 billion as of December 31, 2011 to 1 1.143 billion as of June 30, 2012.
Non-current assets fell from 1 868.7 million as of 31 December 2011 to 1 815.8 million, while goodwill included in this item was reduced from 1 401.3 million to 1 358.3 million. The main reason for this decline were non-cash-effective extraordinary impairment charges of Sedo Holding AG, stated in the consolidated financial statements of United Internet AG at 1 46.3 million.
At 1 66.4 million, cash and cash equivalents remained largely unchanged (1 64.9 million as of December 31, 2011). Net bank liabilities fell from 1 459.7 million to 1 426.8 million.
The number of treasury shares held by United Internet AG as of June 30, 2012 amounted to 21,014,663.
After deduction of these treasury shares, the Group's equity ratio amounted to 10.5% as of June 30, 2012 (compared to 13.0% as of December 31, 2011).
The Annual Shareholders' Meeting of United Internet AG on May 31, 2012 voted to accept the proposal of the Management Board and Supervisory Board to pay a dividend of 1 0.30 per share. The total dividend payment of 1 58.1 million was made on June 1, 2012.
The United Internet AG share closed on June 30, 2012 – and thus after the dividend payment – at 1 13.55 and was 1.8% below its closing price on December 31, 2011 (1 13.80).
At the end of June 2012, United Internet employed a total of 5,942 people (December 31, 2011: 5,593), of which 1,331 were employed outside Germany (December 31, 2011: 1,218). In the first six months of 2012, total headcount therefore rose by 379 employees or 6.2%.
The risk policy of United Internet AG is based on the objective of maintaining and sustainably enhancing the company's value by utilizing opportunities while at the same time recognizing and managing risks from an early stage in their development. The risk management system of United Internet AG regulates the responsible handling of those uncertainties which are involved with economic activity. This is achieved by establishing group-wide risk management, systematically dealing with potential risks, and promoting a risk-oriented approach throughout the entire organization.
In the first six months of 2012, the overall risk situation remained mostly stable compared with the risk report provided in the annual financial statements 2011. From the current perspective, the major operating risks for the company's present and future assets, liabilities, financial position and profit or loss focus on the threat potential of the internet, the use of hardware and software systems, market regulation, competition and data protection. With the further expansion of its risk management system, United Internet counters these risks and seeks to limit them to a minimum by implementing specific measures, wherever sensible.
There were no risks which directly jeopardized the continued existence of United Internet in the period under review, neither from individual risk positions nor from the aggregated overall risk situation.
Due in particular to the European debt crisis, the global economic climate deteriorated further in the first six months of 2012. This debt crisis has gradually developed into a banking crisis and a general loss of trust which is being felt more and more in the real economy. The Euro zone itself is affected most by this crisis. The so-called "Euro crisis" represents an increasingly significant risk for the development of the European and global economies and is thus also a considerable risk factor with regard to consumer behavior, bank lending and state fiscal policy. The Management Board and Supervisory Board are continually monitoring the risks arising from this economic environment with the aid of scenario analyses in order to take any necessary counter-measures as swiftly as possible. From the current perspective, there are no significant risks for United Internet from this situation.
There were no significant events subsequent to the balance sheet date which may have resulted in a different representation of the Company's assets, financial position and earnings or affected the company's accounting and reporting.
Signs of a further weakening in global economic growth over the past three months led the International Monetary Fund (IMF) to downgrade expectations slightly in its updated World Economic Outlook. According to the latest IMF forecast, the global economy will grow by 3.5% this year and 3.9% in the next – around 0.1 percentage points less in 2012 and around 0.2 points less in 2013 than forecast in April.
With regard to the Euro zone, the IMF continues to expect a mild recession this year with a decline in output of 0.3%. For the coming year, the IMF forecast is around 0.2 percentage points down on its previous outlook with expected growth of 0.7%.
Germany is among those countries for which the IMF has upgraded its 2012 growth forecast considerably – by 0.4 percentage points to 1.0%. For 2013, the Fund's forecast of 1.4% (previously 1.5%) is slightly less optimistic than in April.
These IMF forecasts presuppose that measures introduced in the Euro zone will be sufficient to reduce the burden on crisis-hit countries.
Despite the European finance and banking crisis, the global ICT market continues to enjoy stable growth. Global revenue this year is expected to rise by 5.1% to 1 2.57 trillion. The two major segments, Information Technology and Telecommunications, are both growing strongly at 5%. There are considerable regional differences in market development, though. In the emerging economies, the sector is booming while in Western Europe it is largely stagnant or even in decline. These are the findings of the European Information Technology Observatory (EITO) in its latest publication "ICT Market Report 2012/13".
The emerging nations will already account for more than a quarter (27%) of global ICT demand this year. By the year 2020, their share is expected to be almost 50%. The Chinese market, for example is likely to grow by 12% to 1 220 billion this year. Western Europe is the region with the slowest growth: ICT revenue is expected to rise by just 1.2% to 1 617 billion – providing there is no further escalation of the Euro crisis.
In Germany, the market for IT, telecommunications and digital entertainment electronics is expected to pass the 1 150-billion-mark for the first time in 2012. BITKOM anticipates growth of 1.6% to 1 151 billion. The IT sector is likely to lead the overall market with growth of 3.1% to 1 72.4 billion. Following a difficult year in 2011, the telecommunications sector is due to grow again in 2012 – by 0.6% to 1 66.1 billion. Thanks to major sports events like the soccer European Championships or the Olympic Games, which regularly boost TV sales, the situation in the entertainment electronics market is likely to become increasingly stable and shrink by just 0.9% to 1 12.5 billion.
Of particular importance to United Internet are the German broadband and mobile internet market in the subscription-financed segment "Access" and the cloud computing market and online advertising market in the subscription- and ad-financed segment "Applications".
FIn view of the comparatively high level of household coverage of almost 70% already achieved – and the trend toward mobile internet – experts continue to forecast only moderate growth for the German broadband market (fixed line-based). The sector association BITKOM, for example, forecasts revenue growth of 2.2% to 1 13.9 billion in 2012 for broadband internet connections.
| 2011 | 2012e | Growth | |
|---|---|---|---|
| Sales in 1 billion | 13.6 | 13.9 | 2.2 % |
| Source: BITKOM |
All experts continue to predict dynamic growth for the mobile internet market. Following market growth of 16.0% to 1 7.5 billion in 2011, BITKOM also expects growth of 12.0% to 1 8.4 billion in 2012. This growth will be driven above all by low – and thus for the consumer attractive – prices, as well as by the boom in smartphones and tablet PCs, as well as their respective applications. BITKOM forecasts sales growth of 35% to 15.9 million sold smartphones in 2012, as well as increased sales of 29% to 2.7 million sold tablets.
| 2011 | 2012e | Growth | |
|---|---|---|---|
| Sales in 1 billion | 7.5 | 8.4 | 12.0 % |
Source: BITKOM
For many experts and the press in general, cloud computing is currently the most hyped topic in the business. In a survey published in June 2010, IDC (International Data Corporation) forecasts that the cloud market will triple in volume from 2009 to 2013 to a total of USD 44.9 billion. Based on a study of the Experton Group, the sector association BITKOM expects consumer and business cloud sales in Germany to grow by around 47% to 1 5.3 billion in 2012 and reach 1 17.1 billion by 2016. Average annual growth of 37% is predicted.
| 2011 | 2012e | Growth | |
|---|---|---|---|
| Sales in 1 billion | 3.6 | 5.3 | 47.2 % |
| Source: BITKOM |
Online advertising activities continued to be dominated by a marked propensity to invest in 2011. As a result, the internet was able to maintain its position as the second most important medium in the media mix. In spite of the difficult economic environment and the uncertain development of the Euro crisis, the Online Marketing Group (Online-Vermarkterkreis - OVK) forecasts growth for 2012 of up to 11%.
| 2011 | 2012e | Growth | |
|---|---|---|---|
| Gross advertising spend in 1 billion | 5.7 | 6.3 | 10.5 % |
Source: BVDW / OVK
With the exception of Sedo Holding AG, all business divisions of United Internet AG are developing in line with plans. Against this backdrop, United Internet can confirm its guidance for operating business and expects full-year sales to grow by around 15% to approx. 1 2.4 billion. The number of new customers added in 2012 is expected to rise to approx. 1.2 million, compared to 910,000 in the previous year. Despite start-up costs in new business fields of around 1 120 million, EBIT before special items is expected to remain at around the prior-year figure of 1 250 million. Due to extraordinary non-cash-effective impairment of Sedo goodwill amounting to 1 46.3 million, expected EBIT will be reduced to approx. 1 200 million. EPS 2012 will amount to around 1 0.58 (after approx. 1 0.42 start-up losses in new business fields and after approx. 1 0.24 Sedo impairments).
For 2013, United Internet expects further strong earnings growth with an EPS of around 1 1.00 – 1 1.10 (after approx. 1 0.30 – 1 0.40 start-up losses in new business fields).
This Management Report contains forward-looking statements based on current expectations, assumptions, and projections of the Management Board of United Internet AG and currently available information. These forward-looking statements are subject to various risks and uncertainties and are based upon expectations, assumptions, and projections that may not prove to be accurate. United Internet does not guarantee that these forward-looking statements will prove to be accurate and does not accept any obligation, nor have the intention, to adjust or update the forward-looking statements contained in this report.
as of June 30, 2012 in 5k
| June 30, 2012 | December 31, 2011 | |
|---|---|---|
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | 66,419 | 64,867 |
| Accounts receivable and other assets | 108,876 | 106,702 |
| Inventories | 21,993 | 16,720 |
| Prepaid expenses | 53,347 | 43,094 |
| Other financial assets | 72,801 | 83,287 |
| Other non-financial assets | 2,677 | 3,632 |
| 326,113 | 318,302 | |
| Non-current assets | ||
| Shares in associated companies | 23,022 | 33,559 |
| Other financial assets | 114,560 | 102,594 |
| Property, plant and equipment | 104,388 | 110,922 |
| Intangible assets | 169,647 | 187,377 |
| Goodwill | 358,269 | 401,295 |
| Deferred tax asset | 46,939 | 32,962 |
| 816,825 | 868,709 | |
| Total assets | 1,142,938 | 1,187,011 |
25
| June 30, 2012 | December 31, 2011 | ||
|---|---|---|---|
| LIABILITIES AND EQUITY | |||
| Liabilities | |||
| Current liabilities | |||
| Trade accounts payable | 207,303 | 228,981 | |
| Liabilities due to banks | 93,366 | 125,152 | |
| Advance payments received | 10,247 | 9,077 | |
| Accrued taxes | 23,146 | 21,914 | |
| Deferred revenue | 150,529 | 138,789 | |
| Other accrued liabilities | 1,710 | 1,874 | |
| Other financial liabilities | 79,214 | 51,748 | |
| Other non-financial liabilities | 19,863 | 19,843 | |
| 585,378 | 597,378 | ||
| Non-current liabilities | |||
| Liabilities due to banks | 399,828 | 399,441 | |
| Deferred tax liabilities | 9,708 | 9,262 | |
| Other liabilities | 28,544 | 26,177 | |
| 438,080 | 434,880 | ||
| Total liabilities | 1,023,458 | 1,032,258 | |
| Equity | |||
| Capital stock | 215,000 | 215,000 | |
| Additional paid-in capital | 22,482 | 21,199 | |
| Accumulated profit | 139,459 | 185,065 | |
| Treasury stock | -268,066 | -270,751 | |
| Revaluation reserves | 24,761 | 18,276 | |
| Hedging reserves | -6,710 | -4,380 | |
| Currency translation adjustment | -17,210 | -19,287 | |
| Equity attributable to shareholders of the parent company | 109,716 | 145,122 | |
| Non-controlling interests | 9,764 | 9,631 | |
| Total equity | 119,480 | 154,753 | |
| Total liabilities and equity | 1,142,938 | 1,187,011 |
from January 1 to June 30, 2012 in 5k
| 2012 January – June |
2011 January – June |
|
|---|---|---|
| Sales | 1,163,545 | 1,009,391 |
| Cost of sales | -771,858 | -674,285 |
| Gross profit | 391,687 | 335,106 |
| Selling expenses | -232,227 | -150,356 |
| General administrative expenses | -52,487 | -46,419 |
| Other operating income / expenses | 4,039 | 28,946 |
| Amortization of intangible assets resulting from company acquisitions | -7,291 | -7,291 |
| Amortization of goodwill | -46,268 | 0 |
| Operating result | 57,453 | 159,986 |
| Financial result | -3,473 | -5,312 |
| Results from associated companies | -4,480 | -10,503 |
| Pre-tax result | 49,500 | 144,171 |
| Income taxes | -33,972 | -41,947 |
| Net income | 15,528 | 102,224 |
| Attributable to | ||
| - non-controlling interests | 317 | 456 |
| - shareholders of United Internet AG | 15,211 | 101,768 |
| 2012 January – June |
2011 January – June |
|
|---|---|---|
| Result per share of shareholders of United Internet AG (in D) | ||
| - basic | 0.08 | 0.48 |
| - diluted | 0.08 | 0.47 |
| Weighted average shares (in million units) | ||
| - basic | 193.79 | 213.58 |
| - diluted | 195.32 | 215.49 |
| Statement of comprehensive income | ||
| Net income | 15,528 | 102,224 |
| Results directly included in equity | ||
| - currency translation adjustment | 2,069 | -5,458 |
| - Market value changes of available-for-sale financial instruments after taxes financial instruments after taxes |
6,508 | 8,686 |
| - Market value of hedging instruments after taxes |
-2,330 | 0 |
| - Change in associated companies after taxes not affecting net income |
-23 | -288 |
| 6,224 | 2,940 | |
| Total net income | 21,752 | 105,164 |
| Attributable to | ||
| - non-controlling interests | 309 | 471 |
| - shareholders of United Internet AG | 21,443 | 104,693 |
from January 1 to June 30, 2012 in 5k
| 2012 January – June |
2011 January – June |
|
|---|---|---|
| Cash flow from operating activities | ||
| Net income | 15.528 | 102.224 |
| Adjustments to reconcile net income to net cash provided by operating activities | ||
| Depreciation and amortization | ||
| Depreciation and amortization of intangible assets and property, plant and equipment |
37,608 | 33,625 |
| Amortization of intangible assets resulting from company acquisitions | 7,291 | 7,291 |
| Amortization of goodwill | 46,268 | 0 |
| Compensation expenses from employee stock option plans | 1,284 | 1,244 |
| Results of at-equity companies | 4,480 | 10,503 |
| Distributed profit of associated companies | 0 | 730 |
| Income from deconsolidation of affiliated companies | 0 | -1,995 |
| Income from deconsolidation of associated companies | -4,105 | -17,525 |
| Change in deferred taxes | -13,532 | -1,982 |
| Non-cash expenses / income | 420 | -6,863 |
| Operative cash flow | 95,242 | 127,252 |
| Change in assets and liabilities | ||
| Change in receivables and other assets | 9,266 | -890 |
| Change in inventories | -5,273 | -2,087 |
| Change in deferred expenses | -10,253 | -2,559 |
| Change in trade accounts payable | -21,678 | -16,368 |
| Change in advance payments received | 1,170 | 419 |
| Change in other accrued liabilities | -165 | -978 |
| Change in accrued taxes | 1,232 | 1,200 |
| Change in other liabilities | 28,623 | 11,220 |
| Change in deferred income | 9,666 | 7,770 |
| Change in assets and liabilities, total | 12,588 | -2,273 |
| Cash flow from operating activities | 107,830 | 124,979 |
| 2012 January – June |
2011 January – June |
|
|---|---|---|
| Cash flow from investing activities | ||
| Capital expenditure for intangible assets and property, plant and equipment | -20,943 | -19,855 |
| Purchase of further shares in affiliated companies | -607 | 0 |
| Purchase of shares in associated companies | 0 | -2,260 |
| Payments from deconsolidation of financial assets | 960 | 6,040 |
| Investments in other financial assets | -1,388 | -25 |
| Payments of loans granted | -6,636 | 0 |
| Payments from disposal of assets | 2,297 | 2,263 |
| Income from deconsolidation of associated companies | 10,260 | 0 |
| Refunding from shares in associated companies | 413 | 0 |
| Income from deconsolidation of companies | 0 | 12,195 |
| payments from other financial assets | 696 | 0 |
| Cash flow from investment activities | -14,948 | -1,642 |
| Cash flow from financing activities | ||
| Purchase of treasury stock | 0 | -155,496 |
| Repayment / taking out of loans | -31,399 | 67,913 |
| Dividend payments | -58,132 | -42,000 |
| Dividend payments to non-controlling interests | -1,139 | -907 |
| Cash flow from financing activities | -90,670 | -130,490 |
| Net increase/decrease in cash and cash equivalents | 2,212 | -7,153 |
| Cash and cash equivalents at beginning of fiscal year | 64,867 | 96,091 |
| Currency translation adjustments of cash and cash equivalents | -660 | -2,171 |
| Cash and cash equivalents at end of period | 66,419 | 86,767 |
* Adjusted
from January 1 to June 30, 2012 in 5k
| Capital stock | Additional paid-in capital |
Accumulated profit |
Capital stock | |||
|---|---|---|---|---|---|---|
| Share | 3k | 3k | 3k | Share | 3k | |
| Balance as of January 1, 2011 | 240,000,000 | 240,000 | 41,649 | 326,663 | 20,563,522 | -240,977 |
| Net income | 101,768 | |||||
| Other net income | ||||||
| Total net income | 101,768 | |||||
| Issue of treasury shares | -3,727 | -305,616 | 3,727 | |||
| Cancellation of treasury shares | -15,000,000 | -15,000 | -23,502 | -140,035 | -15,000,000 | 178,537 |
| Purchase of treasury shares | 12,211,766 | -155,496 | ||||
| Employee stock ownership programme Sedo Holding |
-231 | |||||
| Employee stock ownership programme United Internet |
1,535 | |||||
| Dividend payments | -42,000 | |||||
| Balance as of June 30, 2011 | 225,000,000 | 225,000 | 19,451 | 242,669 | 17,469,672 | -214,209 |
| Balance as of January 1, 2012 | 215,000,000 | 215,000 | 21,199 | 185,065 | 21,225,158 | -270,751 |
| Net income | 15,211 | |||||
| Other net income | ||||||
| Total net income | 15,211 | |||||
| Ausgabe von eigenen Anteilen | -2,685 | -210,495 | 2,685 | |||
| Employee stock ownership programme Sedo Holding |
4 | |||||
| Employee stock ownership programme United Internet |
1,279 | |||||
| Dividend payments | -58,132 | |||||
| Distribution of profits | ||||||
| Balance as of June 30, 2012 | 215,000,000 | 215,000 | 22,482 | 139,459 | 21,014,663 | -268,066 |
| equity | interests | of the parent company | translation | reserve | reserve |
|---|---|---|---|---|---|
| 3k | 3k | 3k | 3k | 3k | |
| 382,423 | 9,684 | 372,739 | -20,038 | 0 | 25,442 |
| 102,224 | 456 | 101,768 | |||
| 2,940 | 15 | 2,925 | -5,473 | 8,398 | |
| 105,164 | 471 | 104,693 | -5,473 | 0 | 8,398 |
| 0 | |||||
| 0 | |||||
| -155,496 | -155,496 | ||||
| -291 | -60 | -231 | |||
| 1,535 | 1,535 | ||||
| -42,000 | -42,000 | ||||
| 291,335 | 10,095 | 281,240 | -25,511 | 0 | 33,840 |
| 154,753 | 9,631 | 145,122 | -19,287 | -4,380 | 18,276 |
| 15,528 | 317 | 15,211 | |||
| 6,224 | -8 | 6,232 | 2,077 | -2,330 | 6,485 |
| 21,752 | 309 | 21,443 | 2,077 | -2,330 | 6,485 |
| 0 | |||||
| 1 | 4 | ||||
| 1,279 | 1,279 | ||||
| -58,132 | -58,132 |
| Total equity |
Non-controlling interests |
to shareholders of the parent company |
Currency translation |
Hedging reserve |
Revaluation reserve |
|---|---|---|---|---|---|
| 3k | 3k | 3k | 3k | 3k | 3k |
| 382,423 | 9,684 | 372,739 | -20,038 | 0 | 25,442 |
| 102,224 | 456 | 101,768 | |||
| 2,940 | 15 | 2,925 | -5,473 | 8,398 | |
Equity attributable
Distribution of profits 0 -177 -177
Balance as of June 30, 2012 215,000,000 215,000 22,482 139,459 21,014,663 -268,066 24,761 -6,710 -17,210 109,716 9,764 119,480
United Internet AG is a service company operating in the telecommunication and information technology sector with registered offices at Elgendorfer Strasse 57, 56410 Montabaur, Germany. The company is registered at the district court of Montabaur under HR B 5762.
As was the case with the consolidated financial statements as of December 31, 2011, the interim report of United Internet AG as of June 30, 2012 complies with the Inter-national Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the EU.
The condensed consolidated interim report for the period from January 1, 2012 to June 30, 2012 was prepared in accordance with IAS 34 Interim Financial Reporting.
A condensed reporting format was chosen for the presentation of this consolidated interim report, as compared with the consolidated financial statements, and is thus to be read in conjunction with the consolidated financial statements as of December 31, 2011. With the exception of the mandatory new standards described below, the ac-counting and valuation principles applied in the condensed consolidated interim re-port generally comply with the methods applied in the previous year.
Initial application of the amended standard IAS 12 "Income Taxes" – Deferred Tax: Recovery of Underlying Assets issued by the IASB in December 2010 (January 1, 2012) as well as the amendments to IFRS 1 "Firsttime Adoption of International Financial Reporting Standards" – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (July 1, 2011) had no impact on the accounting and valuation methods applied in the consolidated financial statements. The two amendments have not yet been endorsed by the EU.
The Group will implement any amendments to its disclosures on transfers of financial assets necessitated by the amendment to IFRS 7 "Financial Instruments: Disclosures" – Disclosures – Transfers of Financial Assets as published by the IASB on October 7, 2010 (July 1, 2011) in its consolidated financial statements as of December 31, 2012.
Use of estimates and assumptions
The preparation of the condensed consolidated interim report requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of the reporting period. However, the uncertainty associated with these assumptions and estimates could lead to results which require material adjustments to the carrying amount of the asset or liability affected in future periods.
The consolidated interim report includes all subsidiaries and associated companies.
The following companies were formed in the reporting period 2012:
The shares in internetstores AG, Stuttgart (20.0%), were sold in the reporting period 2012.
Otherwise, the consolidated group remained largely unchanged from that stated in the consolidated financial statements as of December 31, 2011.
This consolidated interim report was not audited according to Sec. 317 HGB nor re-viewed by an auditor.
According to IFRS 8, the identification of operating segments to be included in the reporting process is based on the so-called management approach. External reporting should therefore be based on the Group's internal organization and management structure, as well as internal financial reporting to the "Chief Operating Decision Maker". In the United Internet Group, the Management Board is responsible for assessing and controlling the success of the various segments.
| Access | Applications | Head Office / | United Internet | ||
|---|---|---|---|---|---|
| segment | segment | Investments | Reconciliation | Group | |
| 3k | 3k | 3k | 3k | 3k | |
| Total revenues | 764,471 | 400,690 | 2,171 | – | – |
| - thereof internal revenues |
438 | 1,418 | 1,931 | – | – |
| External revenues | 764,033 | 399,272 | 240 | – | 1,163,545 |
| - thereof domestic |
764,033 | 272,500 | 240 | – | 1,036,773 |
| - thereof non-domestic |
0 | 126,772 | 0 | – | 126,772 |
| EBITDA | 88,370 | 58,611 | 1,639 | 0 | 148,620 |
| EBIT | 75,024 | -19,147 | 1,576 | 0 | 57,453 |
| Financial result | -1,539 | -1,934 | -3,473 | ||
| Result from at-equity companies | -4,505 | 25 | -4,480 | ||
| EBT | -4,468 | 53,968 | 49,500 | ||
| Tax expense | -33,972 | -33,972 | |||
| Net income | 15,528 | ||||
| Investments in intangible assets, property, plant and equipment |
1,450 | 19,368 | 125 | – | 20,943 |
| Amortization/depreciation | 13,346 | 77,758 | 63 | – | 91,167 |
| - thereof intangible assets, property, plant and equipment |
13,346 | 24,199 | 63 | – | 37,608 |
| - thereof intangible assets capitalized during company acquisitions |
0 | 7,291 | 0 | – | 7,291 |
| - thereof amortization of goodwill |
0 | 46,268 | 0 | – | 46,268 |
| Number of employees | 1,888 | 4,054 | 30 | – | 5,972 |
| - thereof domestic |
1,806 | 2,805 | 30 | – | 4,641 |
| - thereof non-domestic |
82 | 1,249 | 0 | – | 1,331 |
The Management Board of United Internet AG mainly controls operations on the basis of key earnings figures. The Management Board of United Internet AG measures segment success primarily on the basis of sales revenues, earnings before interest, taxes, depreciation and amortization (EBITDA) and the result of ordinary operations (EBIT). Transactions between segments are charged at market prices. Sales revenues outside Germany stated for information purposes are allocated to the country in which the company is domiciled.
The reconciliation of earnings before taxes (EBT) represents the corresponding EBT contribution of the "Access" and "Applications" segments.
Segment reporting of United Internet AG in the reporting period of 2012 and 2011 was as follows:
| January – June 2011 | Access segment |
Applications segment |
Head Office / Investments |
Reconciliation | United Internet Group |
|---|---|---|---|---|---|
| 3k | 3k | 3k | 3k | 3k | |
| Total revenues | 657,957 | 353,061 | 1,708 | – | – |
| - thereof internal revenues |
718 | 1,054 | 1,563 | – | – |
| External revenues | 657,239 | 352,007 | 145 | – | 1,009,391 |
| - thereof domestic |
657,239 | 244,680 | 145 | – | 902,064 |
| - thereof non-domestic |
0 | 107,327 | 0 | – | 107,327 |
| EBITDA | 65,512 | 111,407 | 23,983 | 0 | 200,902 |
| EBIT | 51,032 | 85,053 | 23,901 | 0 | 159,986 |
| Financial result | -3,905 | -1,407 | -5,312 | ||
| Result from at-equity companies | -10,536 | 33 | -10,503 | ||
| EBT | 9,460 | 134,711 | 144,171 | ||
| Tax expense | -41,947 | -41,947 | |||
| Net income | 102,224 | ||||
| Investments in intangible assets, property, plant and equipment |
2,689 | 17,133 | 33 | – | 19,855 |
| Amortization/depreciation | 14,480 | 26,354 | 82 | – | 40,916 |
| - thereof intangible assets, property, plant and equipment |
14,480 | 19,063 | 82 | – | 33,625 |
| - thereof intangible assets capitalized during company acquisitions |
0 | 7,291 | 0 | – | 7,291 |
| Number of employees | 1,716 | 3,459 | 29 | – | 5,204 |
| - thereof domestic |
1,645 | 2,432 | 29 | – | 4,106 |
| - thereof non-domestic |
71 | 1,027 | 0 | – | 1,098 |
Personnel expenses amounted to 1 132,060k in the reporting period of 2012 (prior year: 1 109,397k). At the end of June 2012, United Internet employed a total of 5,972 people, of which 1,331 were employed outside Germany. The number of employees at the end of June 2011 amounted to 5,204, of which 1,098 were employed outside Germany.
Depreciation and amortization of intangible assets and property, plant and equipment amounted to 1 37,608k (prior year: 1 33,625k).
Amortization of capitalized intangible assets resulting from business combinations amounted to 1 7,291k (prior year: 1 7,291k).
Total depreciation and amortization thus amounted to 1 44,899k in the reporting period of 2012 (prior year: 1 40,916k).
In fiscal year 2012, contrary to expectations, the trend toward a downturn in the Domain Parking business became firmer in the second quarter of 2012 in particular. As a consequence, the earnings forecast of the Sedo sub-group was downgraded for fiscal year 2012. In this connection, a non-scheduled impairment test was conducted on June 30, 2012 for the cash-generating unit "Domain Marketing". This impairment test concluded that goodwill was to be written down by 1 43,114k (prior year: 1 0k).
In addition, the Sedo sub-group detected a need to write down an amount of 1 3,154k (prior year: 1 0k) for affilinet France. The main reason for this impairment was a further deterioration in earnings of the cashgenerating unit "Affiliate Marketing".
The entire goodwill write-downs of the reporting period 2012 thus amounted to 1 46,268k (prior year: 1 0k). Please refer to Note 10.
In the previous year, other operating income was significantly affected by the disposal of shares held in Versatel AG amounting to 1 17,525k (disposal proceeds without call option) and 1 7,280k (fair value of call options granted).
Explanations are only given for those items which display notable changes in the amounts presented as compared with the last consolidated financial statements.
The following table gives an overview of the development of shares in associated companies:
| 2012 | |
|---|---|
| 3k | |
| Carrying amount at the beginning of fiscal year | 33,559 |
| Additions | 0 |
| Adjustments | |
| - Dividends | 0 |
| - Shares in result | -801 |
| - Impairments | -3,679 |
| - Other | 880 |
| Disposals | -6,937 |
| 23,022 |
Impairments relate to shares held in associated companies by EFF No. 2.
Other adjustments totaling 1 880k resulted from profit contributions to associated companies with an investment value of 1 0k (1 904k) and profit contributions recognized directly in equity of associated companies (1 -24k). The negative profit contributions of associated companies with an investment value of 1 0k were only considered if the associated companies were provided with long-term loans or if there were credit / liability commitments.
Disposals mainly result from the sale of shares in internetstores AG (1 6,525k) and from capital repayments of the investment EFF No. 1 (1 412k).
The development of these shares was as follows:
| Amortization of |
|---|
| revaluation reserve not |
| recognized in income |
| Reclassifi | |||||||
|---|---|---|---|---|---|---|---|
| Jan. 1, 2012 | Additions | Recycling | Addition | cation | Disposals | June 30, 2012 | |
| 3k | 3k | 3k | 3k | 3k | 3k | 3k | |
| Goldbach shares | 14,957 | 1,994 | 530 | 16,421 | |||
| Hi-media shares | 10,464 | -994 | 9,470 | ||||
| Afilias shares | 7,936 | 7,936 | |||||
| freenet shares | 38,143 | 5,607 | 43,750 | ||||
| Portfolio companies of EFF No. 3 |
11,205 | -960 | 10,245 | ||||
| Purchase price receivable | 9,519 | -166 | 9,353 | ||||
| Others | 10,370 | 8,024 | -904 | -105 | 17,385 | ||
| 102,594 | 8,024 | 0 | 6,607 | -904 | -1,761 | 114,560 |
Additions to other financial assets refer mainly to loans for which the market value coincides with the carrying value.
The subsequent valuation of listed shares in Goldbach, Hi-media and freenet to fair value as of the balance sheet date led to a net increase in the revaluation reserve without recognition in income.
A total of 1 20,943k (prior year: 1 19,855k) was invested in property, plant and equipment and intangible assets during the interim reporting period. Investments continued to focus mainly on the expansion of infrastructure and the data centers.
Goodwill of 1 358,269k disclosed as of June 30, 2012 consists solely of assets belonging to the "Applications" segment.
In the reporting period 2012, contrary to expectations, the trend toward a downturn in the Domain Parking business became firmer in the second quarter of 2012 in particular. In this connection, a non-scheduled impairment test was conducted on June 30, 2012 for the goodwill relating to the Sedo sub-group.
In order to test impairment of goodwill, the recoverable amounts of the cash-generating units are measured on the basis of a value-in-use calculation using cash flow forecasts. The value-in-use calculation was based on the respective three-year planning (2012 to 2014) of each cash-generating unit, as approved by management and revised as of the end of the first six months of 2012, as well as a management forecast for 2015. Cash flows of the cash-generating unit Affiliate Marketing expected after the planning period were extrapolated on the basis of a growth rate of 1.0% (balance sheet date December 31, 2011: 1.0%), while in the cash-generating unit Domain Marketing a growth rate of 0% was applied (balance sheet date December 31, 2011: 1.0%). Revenue growth in the planning period 2012 to 2015 was estimated to be within a range of -9% to 20% (balance sheet date December 31, 2011: 6% to 20%). Value-in-use was calculated using a discounted cash flow valuation. The pre-tax discount rates lay between 10% and 14%
(balance sheet date December 31, 2011: 10% to 12%). Calculation of the discount rate takes into account the Group's specific circumstances and is based on its weighted average cost of capital (WACC). WACC considers the cost of both debt and equity finance. The company-specific risk is included by using individual beta factors calculated annually on the basis of freely available market data.
The Sedo sub-group reported a further decline in the revenues and margins of its Domain Parking business. An acceleration of this development in the second quarter of 2012 led Sedo Holding AG to review its parking business, resulting in a significantly more pessimistic assessment of its prospects. The company does not expect any turnaround in future and intends to continue the business on a profitable basis by adapting its structures and using all remaining opportunities. In consideration of this development, planning for the subsequent years was downgraded accordingly. The carrying value of the cash-generating unit thus exceeded the recoverable amount and resulted in an impairment charge of 1 43,114k.
Contrary to original planning, affilinet France failed to achieve a turnaround in the first half of 2012. The results fell short of both planning and the prior-year figures. Revenues were down and there was a decline in the gross margin ratio. In consideration of the first half-year 2012 results and the uncertain market situation due to adverse economic conditions, planning was revised for the subsequent years. The carrying value of the cash-generating unit affilinet France exceeded the recoverable amount and resulted in an impairment charge of 1 3,154k. As on December 31, 2011, there was no impairment need for goodwill of affilinet Germany.
Non-controlling interests represent the additional goodwill carried on the level of United Internet AG. This goodwill was tested for impairment at sub-group level. Following the write-downs already made, the recoverable amount of the group of cash-generating units "Non-controlling interests" exceeded the carrying value and there is thus no further impairment need. The management of United Internet AG believes that, on the basis of reasonable judgment, no generally possible change in one of the basic assumptions used to determine the value-in-use of the cash-generating unit "non-controlling interests" could cause the carrying value to significantly exceed its recoverable value.
Goodwill of the Sedo sub-group is allocated to the following cash-generating units or groups of cashgenerating units as shown below:
| Before recognition of impairments 3k |
Impairments 3k |
After recognition of impairments 3k |
|
|---|---|---|---|
| Domain Marketing | 43,114 | -43,114 | 0 |
| Affiliate Marketing | 6,054 | -3,154 | 2,900 |
| Non-controlling interests | 25,254 | 0 | 25,254 |
| Total | 74,422 | -46,268 | 28,154 |
As the figures used in planning are based on numerous assumptions, the calculation of value-in-use depends on discretionary factors.
The impairment test resulted in total impairment charges of 1 46,268k. This item is disclosed separately in the income statement.
Bank liabilities result mainly from two syndicated loans (I and II).
Syndicated Loan I was signed on September 14, 2007 and is divided into a Tranche A amounting to 1 300 million and a Tranche B of originally 1 200 million. Tranche A has a term of five years and is to be redeemed from March 14, 2010 in six equal half-yearly installments. The fifth contractual repayment of 1 50 million was made in the first quarter of 2012. As of June 30, 2012, 1 50 million has thus been used from Tranche A, which will be redeemed in the third quarter of 2012. Tranche B was a revolving syndicated loan expiring on September 13, 2012, which was prematurely redeemed in connection with the conclusion of a new Syndicated Loan II with a total amount committed of 1 480 million.
Syndicated Loan II was concluded on June 7, 2011. The credit line II is divided into a Tranche A amounting to 1 120 million and a Tranche B of 1 360 million. Tranche A is a bullet loan with a term of five years. Tranche B is a revolving syndicated loan which is also used to refinance Tranche B of the syndicated loan of September 14, 2007. Syndicated Loan II expires on June 7, 2016. As of June 30, 2012, 1 120 million have been used from Tranche A and 1 210 million from Tranche B.
A promissory note loan ("Schuldscheindarlehen") of 1 150.0 million was negotiated on July 23, 2008. The loan was redeemable on maturity and divided into a Tranche A of 1 78.0 million with a term until July 23, 2011 and a Tranche B of 1 72.0 million with a term until July 23, 2013. Tranche A was redeemed in the third quarter of 2011.
Current financial liabilities consist mainly of marketing and selling expenses, salary liabilities, and liabilities resulting from interest hedging transactions.
Non-current financial liabilities result largely from non-controlling interests of the partnerships European Founders Fund No. 2 and European Founders Fund No. 3, liabilities from interest hedging transactions, and the option agreement (put option) for the remaining shares in united-domains AG.
As of June 30, 2012, fully paid capital stock amounted to 1 215,000,000 divided into 215,000,000 registered shares each having a theoretical share in the capital stock of 1 1.
In the period under review, a total of 210,495 treasury shares were issued to employees as part of United Internet AG's employee stock ownership plans.
As of June 30, 2012, the Company held a total of 21,014,663 treasury shares or 9.77% of current capital stock. Treasury shares reduce equity capital and are not entitled to dividend payments.
The change in revaluation reserves resulted mainly from the subsequent valuation of shares in Goldbach, Hi-media and freenet. Profits and losses from subsequent valuation to fair value are recognized directly in equity capital at net value, i.e. less deferred taxes. Please see Note 8 for details.
Changes in the fair value of interest swaps concluded as part of cash flow hedges, as well as the opposing deferred taxes on these fair value changes, were recognized in the hedging reserve.
The employee stock ownership plans of the United Internet Group employ virtual stock options (so-called Stock Appreciation Rights – SARs). The changes in the virtual stock options granted and outstanding are shown in the following table:
| United Internet AG | Sedo Holding AG | ||||
|---|---|---|---|---|---|
| SAR | Average strike price (1) |
SAR | Average strike price (1) |
||
| Outstanding as of December 31, 2011 | 6,997,250 | 9.77 | 90,000 | 10.49 | |
| issued | 10,000 | 13.65 | - | - | |
| issued | 150,000 | 13.96 | - | - | |
| exercised | -539,350 | 5.52 | - | - | |
| Outstanding as of June 30, 2012 | 6,617,900 | 10.22 | 90,000 | 10.49 |
United Internet AG is subject to significant influence, as defined by IAS 24, from Mr. Ralph Dommermuth, the major shareholder, as well as from the members of the Management Board and Supervisory Board.
There is no change in the circle of related parties as compared with the consolidated financial statements as at December 31, 2011.
The number of shares and subscription rights in United Internet AG held directly or indirectly by members of the Management Board and Supervisory Board is shown in the following table:
| June 30, 2012 | |||
|---|---|---|---|
| Shares (number) | Subscription rights (number) |
||
| Management Board | |||
| Ralph Dommermuth | 90,000,000 | – | |
| Norbert Lang | 524,232 | 1,200,000 | |
| Total | 90,524,232 | 1,200,000 | |
| Supervisory Board | |||
| Kurt Dobitsch (Chairman) | – | – | |
| Kai-Uwe Ricke | – | – | |
| Michael Scheeren | 700,000 | – | |
| Total | 700,000 | – |
In connection with the employee stock ownership plan of United Internet AG, Mr. Norbert Lang exercised 200,000 subscription rights in the reporting period 2012. The number of shares held directly or indirectly increased by 81,355 compared to December 31, 2011.
United Internet's premises in Montabaur are leased from Mr. Ralph Dommermuth. The resulting rent expenses are customary and amounted to 1 1,413k in the reporting period of 2012 (prior year: 1 1,195k).
The United Internet Group can also exert a material influence on its associated companies.
No significant transactions took place.
On July 3, 2012, 100% of shares in Cleafs B.V., Groningen (Netherlands), a company involved in Affiliate Marketing, were acquired. The market value of the compensation (purchase price) is expected to amount to 1 500k, whereby 1 375k has been paid in cash. The conditional amount dependent on the achievement of agreed operating targets is expected to amount to 1 125k.
There were no other significant events subsequent to the balance sheet date which may have resulted in a different representation of the Company's assets, financial position and earnings.
Montabaur, August 14, 2012
The Management Board
Ralph Dommermuth Norbert Lang
To the best of our knowledge, and in accordance with the applicable interim reporting principles, the consolidated interim financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the Group interim management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group in the remaining fiscal year.
Montabaur, August 14, 2012
The Management Board
Ralph Dommermuth Norbert Lang
Quarterly development in 5 million
| Q3 2011 | Q4 2011 | Q1 2012 | Q2 2012 | Q2 2011 | |
|---|---|---|---|---|---|
| Sales | 527.7 | 557.0 | 576.9 | 586.6 | 510.8 |
| Cost of sales | -344.2 | -357.2 | -380.6 | -391.2 | -347.2 |
| Gross profit | 183.5 | 199.8 | 196.3 | 195.4 | 163.6 |
| Selling expenses | -90.0 | -116.5 | -119.4 | -112.8 | -70.0 |
| General administrative expenses | -24.9 | -31.5 | -24.6 | -27.9 | -24.9 |
| Other operating income / expense | -1.4 | 7.8 | -0.3 | 4.4 | 24.6 |
| Amortization of intangible assets resulting from company acquisitions |
-3.6 | -3.7 | -3.7 | -3.6 | -3.6 |
| Amortization of goodwill | 0.0 | -3.5 | 0.0 | -46.3 | 0.0 |
| Operating result | 63.6 | 52.4 | 48.3 | 9.2 | 89.7 |
| Financial result | 1.6 | -8.8 | -3.9 | 0.4 | -2.8 |
| Amortization of investments | 0.0 | -6.3 | 0.0 | 0.0 | 0.0 |
| Result from at-equity companies | 0.8 | 3.1 | 0.0 | -4.5 | -7.5 |
| Pre-tax result | 66.0 | 40.4 | 44.4 | 5.1 | 79.4 |
| Income taxes | -21.9 | -24.4 | -15.2 | -18.8 | -21.2 |
| Net income | 44.1 | 16.0 | 29.2 | -13.7 | 58.2 |
| Attributable to | |||||
| - minority interests | 0.3 | -0.7 | 0.3 | 0.0 | 0.2 |
| - shareholders of United Internet AG | 43.8 | 16.7 | 28.9 | -13.7 | 58.0 |
| Result per share of shareholders of United Internet AG (in e) |
|||||
| - basic | 0.21 | 0.10 | 0.15 | -0.07 | 0.28 |
| - diluted | 0.21 | 0.09 | 0.15 | -0.07 | 0.28 |
Publisher and copyright © 2012 United Internet AG Elgendorfer Straße 57 D-56410 Montabaur Germany www.united-internet.com
Investor Relations Phone: +49(0) 2602 96-1631 Fax: +49(0) 2602 96-1013 E-mail: [email protected]
August 2012 Registry court: Montabaur HRB 5762
This report is available in German and English. Both versions can be downloaded from www.united-internet.com. In all cases of doubt, the German version shall prevail.
Possible addition differences due to rounding effects.
This report contains certain forward-looking statements which reflect the current views of United Internet AG's management with regard to future events. These forward looking statements are based on our currently valid plans, estimates and expectations. The forward-looking statements made in this report are only based on those facts valid at the time when the statements were made. Such statements are subject to certain risks and uncertainties, as well as other factors which United Internet often cannot influence but which might cause our actual results to be materially different from any future results expressed or implied by these statements. Such risks, uncertainties and other factors are described in detail in the Risk Report section of the Annual Reports of United Internet AG. United Internet does not intend to revise or update any forward-looking statements set out in this report.
| March 16, 2012 | Preliminary results 2011 |
|---|---|
| March 29, 2012 | Annual financial statements for fiscal year 2011 |
| May 10, 2012 | 3-Month Report 2012 |
| May 31, 2012 | Annual Shareholders' Meeting, Alte Oper Frankfurt/Main |
| August 14, 2012 | 6-Month Report 2012 |
| November 22, 2012 | 9-Month Report 2012 |
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