Quarterly Report • May 18, 2011
Quarterly Report
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| Jan. – March 2011 | Jan. – March 2010 | |
|---|---|---|
| Sales in 1 million | 498.6 | 462.8 |
| Earnings before interest, taxes, depreciation and amortization (EBITDA) in 1 million |
90.5 | 90.3 |
| Earnings before interest and taxes (EBIT) in 1 million | 70.3 | 70.7 |
| Earnings before taxes (EBT) in 1 million | 64.8 | 57.1 |
| Employees at end of March (number) | 5,131 | 4,626 |
| Share price at end of March (Xetra) in 1 | 12.70 | 11.23 |
| Earnings per share (EPS) in 1 | 0.20 | 0.17 |
| Q2/2010 | Q3/2010 | Q4/2010 | Q1/2011 | Q1/2010 | |
|---|---|---|---|---|---|
| Sales | 468.0 | 478.2 | 498.1 | 498.6 | 462.8 |
| EBITDA | 91.7 | 88.8 | 86.9 | 90.5 | 90.3 |
| EBIT | 71.5 | 68.4 | 60.9 | 70.3 | 70.7 |
| EBT | 60.2 | 64.3 | 34.2 | 64.8 | 57.1 |
United Internet got off to a successful start in 2011. We were able to expand our business and customer figures and are well on track to achieving the targets we set ourselves for 2011.
In the first quarter of 2011, we raised consolidated sales to the new record level of 1 498.6 million. This represents growth of 7.7% over the first quarter of 2010. We also achieved strong growth in customer contracts: with the addition of 210,000 new contracts, we easily exceeded the first quarter of 2010 (180,000 new customers) as well as all other quarters last year. Despite increased sales and marketing expenses in this connection of 1 10.3 million compared to the first quarter of 2010 and high costs for the development of new products, we achieved very good earnings. With EBITDA of 1 90.5 million (prior year: 1 90.3 million) and EBIT of 1 70.3 million (prior year: 1 70.7 million), earnings reached the same high level as last year. Earnings before taxes (EBT) grew by 13.5% from 1 57.1 million to 1 64.8 million. Earnings per share (EPS) improved by 17.6% from 1 0.17 to 1 0.20.
In our "Access" segment, the number of fee-based contracts grew by 80,000 to 3.71 million in the first quarter of 2011 – following stagnating customer figures in the first quarter of 2010. In our Mobile Internet business we activated 100,000 new customer contracts and thus raised the number of customers to 370,000. We also achieved growth in complete DSL contracts (of particular importance for us), adding a further 50,000 customer relationships to reach a total of 2.37 million. As expected, 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 were lost. As a result of this encouraging development in customer figures, sales of our "Access" segment grew strongly by 6.8% to 1 321.2 million in the first quarter of 2011. Due to increased costs for new customer acquisition and the additional marketing – compared to the first quarter of 2010 – of our Mobile Internet products, however, EBITDA and EBIT were slightly down on the previous year at 1 31.1 million (prior year: 1 31.7 million) and 1 23.8 million (prior year: 1 25.2 million), respectively.
We also invested heavily in customer growth in our "Applications" segment during the first quarter of 2011. The number of fee-based contracts world-wide grew by 130,000 to 6.26 million (of which 2.52 million abroad) as of March 31, 2011. This growth in contracts resulted from 100,000 new Business Applications contracts to 4.40 million and 30,000 new Consumer Application contracts to 1.86 million. At the same time, the number of ad-financed accounts grew from 28.0 million to over 28.3 million. In addition to this successful customer acquisition, we continued to drive our international expansion with the launch of fee-based products in Poland and entry into the Canadian and Argentinean markets. Thanks to stable global customer growth, sales in the "Applications" segment rose sharply by 9.6% to 1 177.3 million in the first quarter of 2011. Despite high expenditure for the development of new Cloud products, preparations for the De-Mail roll-out, international expansion, and greatly increased marketing
expenses, especially for the additional marketing – compared to the first quarter of 2010 – of our new Do-it-Yourself Homepage, segment EBITDA was only slightly down on the previous year at 1 58.9 million (prior year: 1 60.5 million) while segment EBIT reached 1 46.0 million (prior year: 1 47.4 million).
In view of the successful start to fiscal year 2011, we can confirm our forecasts and expect consolidated sales to break the 1 2 billion mark for the first time in our history. Sales growth is expected to reach around 5% in the Access segment and around 10% in the Applications segment. We expect to add 700,000 new fee-based customer contracts in total during 2011.
We shall continue to pursue our business strategy geared toward sustainable growth in the rest of fiscal year 2011 and invest heavily in new business fields and customer growth. One area of focus will be the development of new Business Applications and entry into new foreign markets. We also plan to expand our Mail.com service acquired in late 2010, in order to gain more users for our Consumer Applications on the US market. We also intend to drive our De-Mail project following the introduction of the respective De-Mail legislation, adopted by the German parliament in late February 2011. Despite the high start-up costs associated with these projects, EBITDA in 2011 is expected to reach the level of 2010 (1 357.7 million). EBT is likely to be around 1 250 million and EPS around 1 0.80.
We are excellently placed and look forward to the new fiscal year with confidence. In view of the success already enjoyed in the first few months of the year, 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, May 12, 2011
Ralph Dommermuth
Global economic upturn gaining in pace and scope
In its spring economic outlook for 2011, the International Monetary Fund (IMF) states that the global economic upturn has gained in both pace and scope over the course of the year so far. The IMF believes that the danger of a feared relapse into recession has now receded. However, the IMF also reports that the development so far this year indicates a global upturn of varying speeds, with strong growth and the danger of overheating in certain emerging nations and more modest growth rates in the traditional industrialized nations. Against this backdrop, the IMF made no changes to its global economic growth forecasts for 2011 and 2012.
Despite this optimistic economic outlook, the IMF called on Europe in particular to reduce its state debts. Although the EU nations had already taken steps to defuse the debt crisis, the IMF believes that further steps will be necessary to safeguard financial stability. Compared to its global economic outlook of January 2011, the IMF upgraded its growth forecasts for the EU nations by 0.1 percentage points to 1.6% and 1.8% for 2011 and 2012, respectively – although the Fund still expects significant regional differences.
In view of the development so far, the German economy is in a healthy condition. The IMF now forecasts growth of 2.5% for 2011 and 2.1% for 2012 – an increase of 0.3 percentage points for 2010 and 0.1 percentage points for 2011 compared to the January forecast. The German government is similarly optimistic about the current development and has also raised its forecasts by 0.3 percentage points.
With the growth of national economies and the associated increase in demand, the mood of the high-tech industry reached an all-time high in the first quarter of 2011. This is the conclusion of the most recent survey conducted by the German ICT association BITKOM. 78% of companies in the IT, telecommunications and consumer electronics industry reported increased sales in the first three months of the year, compared with the same period last year.
The BITKOM sector index rose to 72 points – its highest ever level since the quarterly survey was launched ten years ago. According to BITKOM, this upbeat mood is to be found in virtually every segment of the high-tech industry. Companies are benefiting from the general economic upturn as well as from the continued boom in new products and solutions, such as tablet PCs, smartphones and cloud computing.
According to the survey's findings, companies are also optimistic about the year as a whole: 87% of those questioned expect their revenues to grow in 2011.
United Internet AG is the leading European internet specialist with around 10 million fee-based customer contracts and over 28 million ad-financed free accounts. The operating activities of United Internet AG are divided into the two segments "Access" and "Applications".
The "Access" segment comprises the company's fee-based fixed-line and mobile access products, including the respective applications (such as home networks, telephony and entertainment). We operate solely in Germany in this segment, where we are one of the leading providers. We remain 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 our own "Internet Factory" in order to differentiate ourselves from the competition. Access products are marketed by our strong brands GMX, WEB.DE and 1&1, which reach a mass market while also targeting specific customer groups.
The "Applications" segment comprises our application business – whether ad-financed or via fee-based subscriptions. These applications include websites 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 in our own "Internet Factory" or in cooperation with partner firms and run at our data centers. Applications are marketed to various target groups via our brands GMX, WEB.DE, 1&1, united-domains, Fasthosts and InterNetX. We also offer our customers performance-based advertising and sales possibilities via Sedo and affilinet.
Sales of the "Access" segment grew strongly by 6.8% to 1 321.2 million in the first quarter of 2011. Due to increased costs for new customer acquisition and the additional marketing – compared to the first quarter of 2010 – of our Mobile Internet products, however, EBITDA and EBIT were slightly down on the previous year at 1 31.1 million (prior year: 1 31.7 million) and 1 23.8 million (prior year: 1 25.2 million), respectively. Customer acquisition costs and costs for the migration of resale DSL connections to complete packages (ULL) continue to be charged directly as expenses.
| ACCESS | APPLICATIONS | ||
|---|---|---|---|
| Networks | Motivated team 5,100 employees, thereof 1,100 in and date centers |
product management, development | Content |
| Sales power 2 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 |
38 million accounts in 10 countries | Standard software |
management report
| Q2 2010 | Q3 2010 | Q4 2010 | Q1 2011 | Q1 2010 | |
|---|---|---|---|---|---|
| Sales | 301.4 | 310.8 | 317.1 | 321.2 | 300.8 |
| EBITDA | 34.5 | 36.4 | 20.0 | 31.1 | 31.7 |
| EBIT | 28.0 | 29.6 | 9.2 | 23.8 | 25.2 |
The number of contracts in this segment grew by 80,000 in the first quarter of 2011 to reach a total of 3.71 million as of March 31, 2011. In our Mobile Internet business we were able to activate 100,000 new customer contracts and thus raise the total number of customers to 370,000. We also achieved growth in complete DSL contracts (of particular importance for us), adding a further 50,000 customer relationships to reach a total of 2.37 million. As expected however, the number of customer contracts for those business models gradually being phased out (narrowband, T-DSL and R-DSL) fell – 70,000 customer relationships were lost in the first quarter 2011.
| "Access" customer contracts | Dec. 31, 2010 | March 31, 2011 | Change |
|---|---|---|---|
| Access, total | 3.63 million | 3.71 million | + 80,000 |
| of which DSL complete (ULL) | 2.32 million | 2.37 million | + 50,000 |
| of which Mobile Internet | 0.27 million | 0.37 million | + 100,000 |
| of which narrowband / T-DSL / R-DSL | 1.04 million | 0.97 million | - 70,000 |
| "Access" customer contracts | March 31, 2010 | March 31, 2011 | Change |
|---|---|---|---|
| Access, total | 3.50 million | 3.71 million | + 210,000 |
| of which DSL complete (ULL) | 1.91 million | 2.37 million | + 460,000 |
| of which Mobile Internet | 0.09 million | 0.37 million | + 280,000 |
| of which narrowband / T-DSL / R-DSL | 1.50 million | 0.97 million | - 530,000 |
In the first quarter of 2011, we focused mainly on upgraded DSL products in line with our quality drive and customer retention efforts, as well as on new end-user devices for our Mobile Internet business:
In the field of fixed-line products, we aim to enhance customer retention by migrating them to complete packages (ULL) with the aid of our personalized service as well as transparent and flexible products. Moreover, we aim to raise average revenue per contract and generate further growth by integrating additional features and new applications. Customer growth in this segment will be driven mainly by our Mobile Internet products.
Sales in the Access segment are expected to grow by around 5% in fiscal year 2011.
Sales of the "Applications" segment grew strongly by 9.6% to 1 177.3 million in the first quarter of 2011. Despite high expenditure for the development of new Cloud products, preparations for the De-Mail rollout, international expansion, and greatly increased marketing expenses, especially for the additional marketing – compared to the first quarter of 2010 – of our new Do-it-Yourself Homepage, segment EBITDA was only slightly down on the previous year at 1 58.9 million (prior year: 1 60.5 million) while segment EBIT reached 1 46.0 million (prior year: 1 47.4 million). Our foreign business grew by 22.5% and contributed a total of 1 54.5 million (prior year: 1 44.5 million) to segment sales.
3M 2011 3M 2010
| Q2 2010 | Q3 2010 | Q4 2010 | Q1 2011 | Q1 2010 | |
|---|---|---|---|---|---|
| Sales | 166.4 | 167.3 | 181.0 | 177.3 | 161.8 |
| EBITDA | 58.4 | 53.9 | 59.9 | 58.9 | 60.5 |
| EBIT | 44.9 | 40.2 | 44.8 | 46.0 | 47.4 |
We also invested heavily in customer growth in the "Applications" segment during the first quarter of 2011. The number of fee-based contracts world-wide grew by 130,000 to 6.26 million (of which 2.52 million abroad). This growth in contracts resulted from 100,000 new Business Applications contracts to 4.40 million and 30,000 new Consumer Application contracts to 1.86 million. At the same time, the number of ad-financed accounts grew from 28.0 million to 28.3 million. In addition to this successful customer acquisition, we continued to drive our international expansion with the launch of fee-based products in Poland and entry into the Canadian and Argentinean markets.
| "Applications" customer contracts | Dec. 31, 2010 | March 31, 2011 | Change |
|---|---|---|---|
| Total fee-based contracts | 6.13 million | 6.26 million | + 130,000 |
| of which "domestic" | 3.68 million | 3.74 million | + 60,000 |
| of which "foreign" | 2.45 million | 2.52 million | + 70,000 |
| Ad-financed accounts | 28.0 million | 28.3 million | + 300,000 |
| "Applications" customer contracts | March 31, 2010 | March 31, 2011 | Change |
|---|---|---|---|
| Total fee-based contracts | 5.83 million | 6.26 million | + 430,000 |
| of which "domestic" | 3.53 million | 3.74 million | + 210,000 |
| of which "foreign" | 2.30 million | 2.52 million | + 220,000 |
| Ad-financed accounts | 27.0 million | 28.3 million | + 1,300,000 |
In the first quarter of 2011, activities focused on the expansion of our sales activities for Business Applications and the launch of new Consumer Applications:
numerous languages. WEB.DE Online Office applications can access both local hard drives on the respective computer and the virtual WEB.DE SmartDrive. Users who store their documents online on the WEB.DE SmartDrive can also securely view, save, edit and mail them from any PC with an internet connection.
With our strong brands and existing customer relations with millions of private users, freelancers and small businesses, we are also excellently positioned in this business segment.
In the field of Business Applications, we will continue our international expansion and target further growth with the aid of new, higher-priced cloud applications which will open up new business opportunities on the internet for our customers and help them digitize their corporate processes. In our Consumer Applications business, we believe that our increasingly wide range of products will enable us to convert ever more ad-financed users into paying customers. As Germany's leading email provider, we also intend to enter the field of legally secure email communication (De-Mail) in fiscal year 2011 and drive the internationalization of our Consumer Applications on the US market via Mail.com.
Sales in the Applications segment are expected to grow by around 10% in fiscal year 2011.
United Internet can look back on a successful first three months of 2011. Consolidated sales of United Internet AG grew by 7.7% in the period under review, from 1 462.8 million last year to 1 498.6 million. In the "Access" segment, sales rose 6.8% from 1 300.8 million last year to 1 321.2 million, and in the "Applications" segment sales increased by 9.6% from 1 161.8 million last year to 1 177.3 million.
Consolidated gross margin fell from 37.0% in the same period last year to 34.4%. The main reason was increased purchases of pre-services (despite improved pre-service conditions) due to our strong customer growth, as well as the recognition of increased hardware subsidies for our Mobile Internet business with a corresponding effect on earnings. We launched our Mobile Internet business in July 2010. There were no similar costs in the first quarter of 2010.
Sales and marketing expenses rose from 1 70.0 million (15.1% of sales) in the previous year to 1 80.3 million (16.1% of sales) in the period under review. This increase was mainly due to the additional marketing – compared to the first quarter of 2010 – of our new access and cloud products, especially Mobile Internet and the Do-it-Yourself Homepage. Administrative expenses fell to 1 21.6 million in the period under review (4.3% of sales), compared to 1 22.4 million (4.8% of sales) in the previous year.
Despite higher cost of sales and marketing expenses, earnings before interest, taxes, depreciation and amortization (EBITDA) were 0.2% up on the previous year at 1 90.5 million. Earnings before interest and taxes (EBIT) fell 0.6% short of the prior-year figure at 1 70.3 million.
Thanks to an improved financial result and the reduced losses from associated companies, earnings before taxes (EBT) grew by 13.5% to 1 64.8 million and consolidated net income by 14.3% to 1 44.0 million. As a consequence, earnings per share (EPS) improved from 1 0.17 last year to 1 0.20 in the first quarter of 2011. This increase was aided by the cancellation of 15 million treasury shares in February 2011.
| Q2 2010 | Q3 2010 | Q4 2010 | Q1 2011 | Q1 2010 | |
|---|---|---|---|---|---|
| Sales | 468.0 | 478.2 | 498.1 | 498.6 | 462.8 |
| EBITDA | 91.7 | 88.8 | 86.9 | 90.5 | 90.3 |
| EBIT | 71.5 | 68.4 | 60.9 | 70.3 | 70.7 |
Despite considerably higher cost of sales and marketing expenses – due to stronger customer growth and additional marketing of our new Access and Cloud products compared to the first quarter of 2010 – operative cash flow fell by just 1 6.1 million to 1 65.6 million (prior year: 1 71.7 million).
Net cash flow for investing activities fell much more strongly from 1 86.6 million in the previous year to 1 39.2 million in the period under review. This was mainly due to changes in trade payables viewed as of the balance sheet date (1 -45.0 million compared to 1 +7.9 million in the previous year).
Net cash flow for investing activities amounted to 1 0.6 million in the period under review. Cash outflows of 1 6.8 million for investments in intangible assets and property, plant and equipment faced cash inflows of 1 5.7 million from the sale of financial assets (sales of EFF Fund investments) and 1 1.6 million from the disposal of assets. In the previous year, net cash flow for investing activities amounted to 1 -14.4 million, of which investments in intangible assets and property, plant and equipment accounted for 1 -14.0 million.
Net cash flow for financing activities in the first quarter of 2011 was dominated by a cash outflow of 1 84.8 million for the purchase of treasury shares (prior year: 1 54.6 million) and a cash inflow of 1 20.2 million from the assumption of loans (prior year: cash outflow of 1 1.2 million for the redemption of loans).
Compared with December 31, 2010, the Group's balance sheet total fell from 1 1,271.3 million to 1 1,204.1 million as of March 31, 2011. Goodwill of the highly profitable Applications segment remained virtually unchanged at 1 401.2 million (1 402.9 million as at December 31, 2010). Due to the purchase of treasury shares, cash and cash equivalents fell from 1 96.1 million to 1 70.6 million, despite the reduction of other assets with an effect on liquidity. At the same time, net bank liabilities rose from 1 273.3 million to 1 319.0 million, mainly due to share buybacks. The number of treasury shares held by United Internet AG as of March 31, 2011 – and thus after the cancellation of 15,000,000 shares from the company's holdings – amounted to 12,452,643 (compared to 20,563,522 as of December 31, 2010). After deduction of these treasury shares, the Group's equity ratio amounted to 28.0% as of March 31, 2011 (compared to 30.1% as of December 31, 2010).
The United Internet AG share closed on March 31, 2011 at 1 12.70 and thus 4.4% up on December 31, 2010 (1 12.17). Our share outperformed the blue-chip DAX index (1.8%) in the first three months of 2011 but lagged behind the comparative TecDAX index, which grew by 9.4%.
The Management Board and Supervisory Board propose a dividend of 1 0.20 per share for fiscal year 2010 (prior year: 1 0.20 for fiscal year 2009 plus a bonus dividend of a further 1 0.20 for the lack of dividend paid for fiscal year 2008). The Annual Shareholders' Meeting planned for May 26, 2011 will vote on whether to accept this proposal of the Management Board and Supervisory Board.
At the end of March 2011, United Internet employed a total of 5,131 people (December 31, 2010: 5,018), of which 1,049 were employed outside Germany (December 31, 2010: 999).
Over and above the statutory requirements, United Internet AG attaches great importance to its comprehensive risk management system. Our standardized monitoring system throughout the Group identifies, classifies and evaluates risks, while defining clear responsibilities. We not only regard efficient and forward-looking risk management as an important tool to anticipate dangerous developments, but as an important and value-adding responsibility.
In the first quarter of 2011, the overall risk situation remained mostly stable compared with the risk report provided in the annual financial statements 2010. The major operating risks for the company's current and future assets, liabilities, financial position and profit or loss continue to focus on the threat potential of the internet, market regulation, competition, the use of hardware and software systems, and acquisitions. By continually expanding our risk management system, we attempt to counter these risks proactively and to limit them to a minimum by implementing specific measures, wherever sensible. Depending on the further share price performance of our listed investments, there may be (non-cash) burdens in our non-operating business from write-downs/impairment.
There were no risks which directly jeopardized the continued existence of United Internet in the period under review, neither from individual risks nor from the overall risk situation.
On April 11, 2011, the Management Board of United Internet AG resolved to launch a further share buyback program. In the course of this new share buyback program, up to 4,500,000 company shares (corresponding to 2% of capital stock) are to be bought back via the stock exchange. The resolution follows the authorization of the Annual Shareholders' Meeting of June 2, 2010 to buy back shares representing up to 10% of the company's capital stock. The authorization was issued for the period up to May 25, 2012. The repurchased shares can be used for all purposes stated in the authorization of the Annual Shareholders' Meeting of June 2, 2010, in particular for current and future employee stock ownership plans and/or as an acquisition currency, but may also be cancelled.
There were no other major events subsequent to the reporting period which had a significant impact on the business development of United Internet.
In its updated global economic outlook of April 2011, the International Monetary Fund (IMF) states that it expects the current healthy economic growth to continue – viewed globally – and forecasts an increase in global economic output of 4.4% in 2011 and 4.5% in 2012. The IMF expects the upturn in the emerging nations (6.5% in 2011 and 2012) to easily outpace growth in the classic industrialized nations (2.5% in 2011 and 2012). The Fund believes this is due to the "ongoing burdens" which crisis-hit Euro nations, such as Greece and Portugal, are still suffering, in addition to consistently high unemployment rates in the industrialized nations.
Despite the ongoing debt problems of the Euro zone, the IMF upgraded its growth forecasts slightly for the EU nations in its spring outlook by 0.1 percentage points to 1.6% and 1.8% for 2011 and 2012, respectively – although the Fund still expects significant regional differences.
In Germany, the IMF now forecasts growth of 2.5% for 2011 and 2.1% for 2012 – an increase of 0.3 percentage points for 2010 and 0.1 percentage points for 2011 compared to its January forecast. Although its forecast for 2011 is slightly below the expectations of Germany's leading economic research institutes, which predict GDP growth of up to 3.0% this year, the IMF forecast roughly matches that of the German government. The latter raised its growth forecast in April 2011 to 2.6% for the current year (from 2.3% in fall 2010). The German government expects a slowdown in growth to 1.8% in 2012.
Following the turnaround of the global and German ICT market in 2010, the German ICT association BITKOM is optimistic about the sector's future prospects. Specifically, the association expects the global ICT market to grow by 4.5% in 2011 and by as much as 5.3% in 2012. BITKOM is not quite as upbeat about the overall ICT market in Germany, but still expects solid growth of 2.0% in both 2011 and 2012.
In the field of information technology, BITKOM expects growth of 4.4% to 1 68.8 billion in 2011. The hardware segment, demand for software and IT services are all expected to benefit strongly from the ongoing economic upswing. BITKOM believes that software and IT services will also benefit from cloud services with annual growth of over 50%.
In the field of telecommunications, BITKOM expects only slight growth of 0.3% to 1 64.3 billion. This barely visible increase conceals some significant changes in individual segments: revenue from fixed line phone calls has been falling steadily for years – due in part to the rising share of VoIP calls. Revenue from mobile voice services is also falling. According to BITKOM, this is mainly due to the restrictions of the regulation authorities. This loss of revenue in voice services is in stark contrast to the high growth rates of fixed line and especially mobile data transmission. The success of the mobile internet is clearly illustrated by the massive growth in data volumes (100% in 2010) transmitted via the mobile phone networks. A key factor for this growth is the boom in smartphones.
For the third major ICT market segment, digital entertainment electronics, BITKOM expects a modest decline of 1.6% to 1 12.5 billion in 2011. Flat-screen TVs account for almost half of this market. Following brisk trade in the year of the FIFA World Cup, sales of flat-screen TVs are likely to remain stable at 1 6.5 billion in 2011. In addition to this lack of momentum from TV sets, there is also a further negative effect: classic products from the two other segments, such as tablet PCs and smartphones, are capturing market share from consumer entertainment devices (such as MP3 players, mobile games consoles or navigation devices).
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".
In view of the comparatively high level of household coverage of over 67% already achieved, only moderate growth is expected for the German broadband market. Much stronger growth, however, is expected for applications used via such broadband connections. Around 11.2 million users in Germany are expected to make regular phone calls via the web in 2011. This corresponds to growth of 13.5% compared to 2010, according to sector association BITKOM and based on current data of the European Information Technology Observatory (EITO).
All experts continue to predict dynamic growth for the mobile internet market. Following market growth of 18.2% to 1 6.5 billion in 2010, BITKOM also expects growth of 14.0% and 10.4% in 2011 and 2012, respectively. 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 the respective applications (or apps). BITKOM forecasts additional sales of 39% to 10 million sold smartphones in 2011 (following 7.2 million in 2010), as well as related sales growth of 35% to 1 2.2 billion (compared to 1 1.6 billion in 2010).
| 2010 | 2011e | 2012e | |
|---|---|---|---|
| Growth | 18.2% | 14.0% | 10.4% |
| Sales (in 1 billion) | 6.5 | 7.4 | 8.2 |
Source: BITKOM
Due to the modest increase in online advertising during the crisis year 2009, the strong online presence of advertisers in 2010 led to higher-than-average growth in this segment. In view of the very high level of gross advertising spending already achieved (over 1 5.3 billion), the Online Marketing Group (Online-Vermarkterkreis – OVK) forecasts further growth for 2011, albeit at a slightly more moderate pace. With an assumed growth rate of 16%, gross ad spending in 2011 would break the 6-billion-euro mark for the first time and thus underline the growing relevance of online advertising.
| 2010 | 2011e | Growth | |
|---|---|---|---|
| Classic online advertising | 3.151 | 3.781 | 20.0% |
| Search word marketing | 1.867 | 2.076 | 11.2% |
| Affiliate networks | 0.339 | 0.373 | 10.0% |
| Total gross advertising spend | 5.357 | 6.230 | 16.3% |
Source: BVDW
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 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 55% to 1 3.5 billion in 2011 and reach 1 13 billion by 2015. This means that cloud technologies will account for around 10% of total IT expenditure in Germany (compared to 1.5% in 2010). Double-digit growth is expected during the entire period, and in 2012 will still be over 50%.
| 2011e | 2012e | 2013e | |
|---|---|---|---|
| Growth | 55% | 51% | 40% |
| Sales (in 3 billion) | 3.5 | 5.3 | 7.4 |
| of which consumers | 1.6 | 2.2 | 3.0 |
| of which business | 1.9 | 3.1 | 4.4 |
Source: BITKOM
We shall continue to pursue our business strategy geared toward sustainable growth in the rest of fiscal year 2011 and invest heavily in new business fields. In addition to a further increase in our customer acquisition efforts, the main focus areas will be the development of new applications, entry into the new foreign markets for our Business Applications and – for Consumer Applications – the expansion of our newly acquired Mail.com service and the roll-out of De-Mail.
We aim to add 700,000 new fee-based customer contracts in total in 2011.
Despite the high start-up costs associated with these projects, EBITDA in 2011 is expected to reach the level of 2010 (1 357.7 million). EBT is likely to be around 1 250 million and EPS around 1 0.80.
We also expect sales to exceed 1 2 billion for the first time. Sales growth in 2011 is expected to reach around 5% in the Access segment and around 10% in the Applications segment.
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 not to be construed as guarantees of the future developments and results stated within. Such future developments and results are dependent on numerous factors. They involve various risks and uncertainties and are based upon assumptions as to future events that may not prove to be accurate. United Internet does not assume any obligation to adjust or update the forwardlooking statements contained in this report.
Balance Sheet
Income Statement
24 Cash Flow
Changes in Shareholder's Equity
Notes
as of March 31, 2011 in 5k
| March 31, 2011 | December 31, 2010 | |
|---|---|---|
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | 70,574 | 96,091 |
| Accounts receivable and other assets | 94,374 | 97,987 |
| Inventories | 14,597 | 16,912 |
| Prepaid expenses | 38,507 | 36,536 |
| Other assets | 18,862 | 28,297 |
| 236,914 | 275,823 | |
| Non-current assets | ||
| Shares in associated companies / joint ventures | 80,896 | 84,079 |
| Other financial assets | 139,886 | 145,274 |
| Property, plant and equipment | 101,569 | 108,675 |
| Intangible assets | 210,243 | 221,415 |
| Goodwill | 401,190 | 402,868 |
| Deferred tax asset | 33,379 | 33,194 |
| 967,163 | 995,505 | |
| Total assets | 1,204,077 | 1,271,328 |
| 21 |
|---|
| March 31, 2011 | December 31, 2010 | |
|---|---|---|
| LIABILITIES AND EQUITY | ||
| Liabilities | ||
| Current liabilities | ||
| Trade accounts payable | 168,433 | 213,509 |
| Liabilities due to banks | 178,224 | 178,167 |
| Advance payments received | 7,370 | 7,146 |
| Accrued taxes | 39,560 | 43,071 |
| Deferred revenue | 141,965 | 138,209 |
| Other accrued liabilities | 5,096 | 5,836 |
| Other liabilities | 61,384 | 59,603 |
| 602,032 | 645,541 | |
| Non-current liabilities | ||
| Liabilities due to banks | 211,349 | 191,233 |
| Deferred tax liabilities | 28,619 | 28,483 |
| Other liabilities | 24,750 | 23,648 |
| 264,718 | 243,364 | |
| Total liabilities | 866,750 | 888,905 |
| Equity | ||
| Capital stock | 225,000 | 240,000 |
| Additional paid-in capital | 18,862 | 41,649 |
| Accumulated profit | 232,126 | 326,663 |
| Treasury stock | -148,934 | -240,977 |
| Revaluation reserves | 23,867 | 25,442 |
| Currency translation adjustment | -23,541 | -20,038 |
| Equity attributable to shareholders of the parent company | 327,380 | 372,739 |
| Non-controlling interests | 9,947 | 9,684 |
| Total equity | 337,327 | 382,423 |
| Total liabilities and equity | 1,204,077 | 1,271,328 |
from January 1 to March 31, 2011 in 5k
| 2011 January – March |
2010 January – March |
|
|---|---|---|
| Sales | 498,605 | 462,790 |
| Cost of sales | -327,081 | -291,678 |
| Gross profit | 171,524 | 171,112 |
| Selling expenses | -80,333 | -70,006 |
| General administrative expenses | -21,556 | -22,409 |
| Other operating income / expenses | 4,294 | -3,252 |
| Amortization of intangible assets resulting from company acquisitions | -3,668 | -4,777 |
| Operating result | 70,261 | 70,668 |
| Financial result | -2,519 | -6,138 |
| Results from associated companies | -2,970 | -7,457 |
| Pre-tax result | 64,772 | 57,073 |
| Income taxes | -20,730 | -18,573 |
| Net income before minority interests (from continued operations) | 44,042 | 38,500 |
| Result from discontinued operations | 0 | 35 |
| Net income before minority interests (after discontinued operations) | 44,042 | 38,535 |
| Attributable to | ||
| - non-controlling interests | 245 | 244 |
| - shareholders of United Internet AG | 43,797 | 38,291 |
2011
2010
| January – March | January – March | |
|---|---|---|
| Result per share of shareholders of United Internet AG (in D) | ||
| - basic | 0.20 | 0.17 |
| - diluted | 0.20 | 0.17 |
| thereof result per share (in C) – from continued operations | ||
| - basic | 0.20 | 0.17 |
| - diluted | 0.20 | 0.17 |
| thereof result per share (in C) – from discontinued operations | ||
| - basic | 0.00 | 0.00 |
| - diluted | 0.00 | 0.00 |
| Weighted average shares (in million units) | ||
| - basic | 216.86 | 227.93 |
| - diluted | 219.01 | 230.02 |
| Statement of comprehensive income | ||
| Net income | 44,042 | 38,535 |
| Results directly included in equity | ||
| - currency translation adjustment | -3,491 | 1,382 |
| - Market value changes of available-for-sale financial instruments after taxes financial instruments after taxes |
-1,542 | 5,364 |
| - Changes in associated companies after taxes not affecting net income |
-33 | 0 |
| -5,066 | 6,746 | |
| Total net income | 38,976 | 45,281 |
| Attributable to | ||
| - non-controlling interests | 257 | 244 |
from January 1 to March 31, 2011 in 5k
| 2011 January – March |
2010 January – March |
|
|---|---|---|
| Cash flow from operating activities | ||
| Net income (from continued operations) | 44,042 | 38,500 |
| Net income (from discontinued operations) | 0 | 35 |
| 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 |
16,528 | 14,850 |
| Amortization of intangible assets resulting from company acquisitions |
3,668 | 4,777 |
| Compensation expenses from employee stock option plans | 721 | 1,845 |
| Results of at-equity companies | 2,970 | 7,457 |
| Distributed profit of associated companies | 181 | 245 |
| Profit from disposal of other financial assets | -1,995 | 245 |
| Change in deferred taxes | -46 | 949 |
| Non-cash expenses / income | -496 | 3,047 |
| Operative cash flow | 65,573 | 71,705 |
| Change in assets and liabilities | ||
| Change in receivables and other assets | 13,048 | 4,783 |
| Change in inventories | 2,315 | 468 |
| Change in deferred expenses | -1,971 | -2,956 |
| Change in trade accounts payable | -44,990 | 7,920 |
| Change in advance payments received | 224 | -33 |
| Change in other accrued liabilities | -740 | -4,605 |
| Change in accrued taxes | -3,510 | 2,887 |
| Change in other liabilities | 3,370 | 849 |
| Change in deferred income | 5,881 | 5,587 |
| Change in assets and liabilities, total | -26,373 | 14,900 |
| Cash flow from operating activities | 39,200 | 86,605 |
| 25 | |||
|---|---|---|---|
| 2011 January – March |
2010 January – March |
|
|---|---|---|
| Cash flow from investing activities | ||
| Capital expenditure for intangible assets and property, plant and equipment | -6,762 | -13,990 |
| Purchase of shares in affiliated companies less cash received | 0 | 12 |
| Purchase of shares in associated companies / joint ventures | 0 | -534 |
| Payments from deconsolidation of financial assets | 5,740 | 0 |
| Investments in other financial assets | -11 | -125 |
| Payments from disposal of assets | 1,584 | 267 |
| Cash flow from investment activities | 551 | -14,370 |
| Cash flow from financing activities | ||
| Purchase of treasury stock | -84,793 | -54,554 |
| Change in bank liabilities | 20,174 | -1,230 |
| Repayment from convertible bonds | 0 | -3 |
| Cash flow from financing activities | -64,619 | -55,787 |
| Net increase/decrease in cash and cash equivalents | -24,868 | 16,448 |
| Cash and cash equivalents at beginning of fiscal year | 96,091 | 116,812 |
| Currency translation adjustments of cash and cash equivalents | -649 | 437 |
| Cash and cash equivalents at end of fiscal year | 70,574 | 133,697 |
from January 1 to March 31, 2011 in 5k
| Capital stock | Additional paid-in capital |
Accumulated profit |
Capital stock | |||
|---|---|---|---|---|---|---|
| Share | 3k | 3k | 3k | Share | 3k | |
| Balance as of January 1, 2010 | 240,000,000 | 240,000 | 39,971 | 285,546 | 10,272,371 | -123,786 |
| Net income | 38,291 | |||||
| Other net income | ||||||
| Total net income | 38,291 | |||||
| Issue of treasury shares | -60 | -81,525 | 982 | |||
| Purchase of treasury shares | 4,809,154 | -54,554 | ||||
| Employee stock ownership program Sedo |
47 | |||||
| Employee stock ownership program United Internet |
863 | |||||
| Other | -21 | |||||
| Balance as of March 31, 2010 | 240,000,000 | 240,000 | 40,800 | 323,837 | 15,000,000 | -177,358 |
| Balance as of January 1, 2011 | 240,000,000 | 240,000 | 41,649 | 326,663 | 20,563,522 | -240,977 |
| Net income | 43,797 | |||||
| Other net income | ||||||
| Total net income | 43,797 | |||||
| Cancellation of treasury shares | -15,000,000 | -15,000 | -23,502 | -138,334 | -15,000,000 | 176,836 |
| Purchase of treasury shares | 6,889,121 | -84,793 | ||||
| Employee stock ownership program Sedo |
23 | |||||
| Employee stock ownership program United Internet |
692 | |||||
| Balance as of March 31, 2011 | 225,000,000 | 225,000 | 18,862 | 232,126 | 12,452,643 | -148,934 |
| equity | interests | of the parent company | translation | reserves |
|---|---|---|---|---|
| 3k | 3k | 3k | 3k | |
| 439,762 | 9,640 | 430,122 | -24,326 | 12,717 |
| 38,535 | 244 | 38,291 | ||
| 6,746 | 0 | 6,746 | 1,382 | 5,364 |
| 45,281 | 244 | 45,037 | 1,382 | 5,364 |
| 922 | ||||
| 922 -54,554 |
-54,554 | |||
| 13 | 47 | |||
| 863 | ||||
| -21 | ||||
| 432,313 | 9,897 | 422,416 | -22,944 | 18,081 |
| 382,423 | 9,684 | 372,739 | -20,038 | 25,442 |
| 44,042 | 245 | 43,797 | ||
| -5,066 | 12 | -5,078 | -3,503 | -1,575 |
| 38,976 | 257 | 38,719 | -3,503 | -1,575 |
| 0 | ||||
| -84,793 | -84,793 | |||
| 6 | 23 | |||
| 692 |
Equity attributable to shareholders
Minority
Total
Currency
Revaluation
Balance as of March 31, 2011 225,000,000 225,000 18,862 232,126 12,452,643 -148,934 23,867 -23,541 327,380 9,947 337,327
United Internet AG is a service company operating in the telecommunication and in-formation 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, 2010, the interim report of United Internet AG as of March 31, 2011 complies with the International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) and adopted by the EU.
The condensed consolidated interim report for the period from January 1, 2011 to March 31, 2011 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, 2010. With the exception of the mandatory new standards described below, the accounting and valuation principles applied in the condensed consolidated interim report generally comply with the methods applied in the previous year.
There were no significant amendments to the accounting and valuation methods applied in the Group's reporting from the initial adoption of amended standards from the Annual Improvement Project 2010 (AIP 2010) nor from IAS 24 Related Party Disclosures, IAS 32 Financial Instruments: Presentation (February 10, 2010), IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction and IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (July 1, 2010).
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.
This consolidated interim report was not audited according to Sec. 317 HGB nor re-viewed by an auditor.
The consolidated interim report includes all subsidiaries and associated companies.
The consolidated group remained unchanged from that stated in the consolidated financial statements of December 31, 2010.
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 | 321,459 | 177,944 | 889 | - | - | |
| - thereof internal revenues | 259 | 612 | 816 | - | - | |
| External revenues | 321,200 | 177,332 | 73 | - | 498,605 | |
| - thereof domestic | 321,200 | 122,854 | 73 | - | 444,127 | |
| - thereof non-domestic | 0 | 54,478 | 0 | - | 54,478 | |
| EBITDA | 31,076 | 58,893 | 488 | 0 | 90,457 | |
| EBIT | 23,823 | 45,992 | 446 | 0 | 70,261 | |
| Financial result | -1,577 | -942 | -2,519 | |||
| Result from at-equity companies | -2,990 | 20 | -2,970 | |||
| EBT | -4,121 | 66,408 | 64,772 | |||
| Tax expense | -19,985 | -20,730 | ||||
| Result from discontinued companies | 0 | 0 | ||||
| Net income (after discontinued operations) | 44,042 | |||||
| Investments in intangible assets, property, plant and equipment |
1,820 | 4,909 | 33 | - | 6,762 | |
| Amortization/depreciation | 7,253 | 12,901 | 42 | - | 20,196 | |
| - thereof intangible assets, property, plant and equipment |
7,253 | 9,233 | 42 | - | 16,528 | |
| - thereof intangible assets capitalized during company acquisitions |
0 | 3,668 | 0 | - | 3,668 | |
| Number of employees | 1,699 | 3,402 | 30 | - | 5,131 | |
| - thereof domestic | 1,635 | 2,417 | 30 | - | 4,082 | |
| - thereof non-domestic | 64 | 985 | 0 | - | 1,049 |
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 stated for information purposes is allocated to the country in which the company is domiciled.
Segment reporting of United Internet AG in the reporting period of 2011 was as is shown in the table on the previous page. The figures of 2010 are shown in the table below.
The reconciliation of earnings before taxes (EBT) represents the corresponding EBT contribution of the "Access" and "Applications" segments.
| January – March 2010 | "Access" | "Applications" | Head Office/ | United Internet | |
|---|---|---|---|---|---|
| Segment | Segment | Investments | Reconciliation | Group | |
| 3k | 3k | 3k | 3k | 3k | |
| Total revenues | 301,184 | 163,087 | 1,170 | - | - |
| - thereof internal revenues | 408 | 1,251 | 992 | - | - |
| External revenues | 300,776 | 161,836 | 178 | - | 462,790 |
| - thereof domestic | 300,776 | 117,350 | 178 | - | 418,304 |
| - thereof non-domestic | 0 | 44,486 | 0 | - | 44,486 |
| EBITDA | 31,708 | 60,479 | -1,892 | 0 | 90,295 |
| EBIT | 25,243 | 47,355 | -1,930 | 0 | 70,668 |
| Financial result | -5,352 | -786 | -6,138 | ||
| Result from at-equity companies | -5,000 | -2,457 | -7,457 | ||
| EBT | -12,282 | 69,355 | 57,073 | ||
| Tax expense | -18,573 | -18,573 | |||
| Result from discontinued companies | 35 | 35 | |||
| Net income (after discontinued operations) Investments in intangible assets, property, plant and equipment |
5,420 | 8,547 | 23 | - | 38,535 13,990 |
| Amortization/depreciation | 6,465 | 13,124 | 38 | - | 19,627 |
| - thereof intangible assets, property, plant and equipment |
6,465 | 8,347 | 38 | - | 14,850 |
| - thereof intangible assets capitalized during company acquisitions |
0 | 4,777 | 0 | - | 4,777 |
| Number of employees | 1,659 | 2,941 | 26 | - | 4,626 |
| - thereof domestic | 1,592 | 2,112 | 26 | - | 3,730 |
| - thereof non-domestic | 67 | 829 | 0 | - | 896 |
Personnel expenses amounted to 1 53,473k (prior year: 1 48,010k) in the reporting period of 2011. At the end of March 2011, United Internet employed a total of 5,131 people, of which 1,050 were employed outside Germany. The number of employees at the end of March 2010 amounted to 4,626, of which 896 were employed outside Germany.
Depreciation and amortization of intangible assets and property, plant and equipment amounted to 1 16,528k (prior year: 1 14,850k).
Amortization of capitalized intangible assets resulting from business combinations amounted to 1 3,668k (prior year: 1 4,777k).
Total depreciation and amortization thus amounted to 1 20,196k in the reporting period of 2011 (prior year: 1 19,627k).
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:
| 2011 | |
|---|---|
| 3k | |
| Carrying amount at the beginning of the fiscal year | 84,079 |
| Additions | 0 |
| Adjustments | |
| - Dividends | -181 |
| - Shares in result | -2,970 |
| - Others | -32 |
| Disposals | 0 |
| 80,896 |
The shares in results refer to the corresponding profit contributions of associated companies.
The development of these shares was as follows:
| revaluation reserve not recognized in income |
|||||||
|---|---|---|---|---|---|---|---|
| Jan. 1, 2011 3k |
Additions 3k |
Recycling 3k |
Addition 3k |
Disposal 3k |
March 31, 2011 3k |
||
| Goldbach shares | 28,120 | -719 | 27,401 | ||||
| Hi-media shares | 16,762 | 95 | 16,857 | ||||
| Afilias shares | 6,755 | 6,755 | |||||
| freenet shares | 50,367 | 1,083 | 51,450 | ||||
| Portfolio companies of EFF Nr. 3 |
26,630 | -1,995 | -3,745 | 20,890 | |||
| Hi-media (Vendor Loan) | 9,163 | 9,163 | |||||
| Others | 7,477 | 11 | -118 | 7,370 | |||
| 145,274 | 11 | -1,995 | 459 | -3,863 | 139,886 |
Amortization of
The decline results from the sale of shares held by EFF No. 3. 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 6,762k (prior year: 1 13,990k) was invested in property, plant and equipment and intangible assets during the interim reporting period. Investments focused mainly on the expansion of infrastructure and the data centers.
Goodwill of 1 401,190k consists solely of assets belonging to the "Applications" segment.
Liabilities due to banks result mainly from a syndicated loan with a total credit line of 1 500.0 million. The syndicated loan agreement was signed on September 14, 2007. The entire credit line is divided into a Tranche A amounting to 1 300.0 million and a Tranche B of 1 200.0 million.
Tranche A has a term of five years and is to be redeemed from March 14, 2010 in six equal half-yearly installments. As of December 30, 2009 the first partial amount of Tranche A amounting to 1 50.0 million was repaid prematurely. The second and third contractual repayments of 1 50.0 million each were made in the third quarter of 2010 and the first quarter of 2011. As of March 31, 2011, 1 150.0 million has thus been used from Tranche A, of which 1 100.0 million is disclosed under current liabilities due to banks. Tranche B is a revolving syndicated loan expiring on September 13, 2012, 1 90 million of which had been used as of March 31, 2011.
A promissory note loan ("Schuldscheindarlehen") of 1 150.0 million was negotiated on July 23, 2008. The loan is 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 is disclosed under current liabilities due to banks.
Other current liabilities consist mainly of liabilities due to the tax office, as well as salary and social security liabilities.
Non-current liabilities result mainly from minority interests of the partnerships Euro-pean Founders No. 2 and European Founders No. 3, from an interest hedging trans-action, and from the option agreement (put option) from the purchase of remaining shares in united-domains AG.
As of March 31, 2011, fully paid capital stock amounted to 1 225,000,000 divided into 225,000,000 registered shares each having a theoretical share in the capital stock of 1 1.
Based on the authorization granted by the Annual Shareholders' Meeting of United Internet AG on June 2, 2010 regarding the acquisition and use of treasury shares, and with the approval of the Supervisory Board, the Executive Board resolved on February 22, 2011 to cancel a total of 15,000,000 shares from the company's stock of treasury shares, purchased in the course of share buyback programs, and thus reduce the company's capital stock by 1 15,000,000.00, from 1 240,000,000.00 to 1 225,000,000.00. In execution of this resolution, 15,000,000 registered no-par value shares with a notional share of capital stock of 1 1 each were cancelled.
The cancellation was charged to capital reserves and accumulated consolidated profit.
As of March 31, 2011, the Company held a total of 12,452,643 treasury shares or 5.53% of current capital stock. Treasury shares reduce equity capital and are not en-titled 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 valua-tion to fair value are recognized directly in equity capital at net value, i.e. less de-ferred taxes. Please see Note 7 for details.
The current employee stock ownership plan of the United Internet AG Group employs 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 exercise price (1) |
SAR | Average exercise price (1) |
||
| Outstanding as of December 31, 2010 | 8,420,000 | 8.93 | 490,000 | 11.48 | |
| Issued | 80,000 | 12.12 | - | - | |
| Issued | 500,000 | 12.03 | - | - | |
| Expired | -150,000 | 5.52 | -30,000 | 18.15 | |
| Outstanding as of March 31, 2011 | 8,850,000 | 9.19 | 460,000 | 11.05 |
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, 2010.
The number of shares or subscription rights in United Internet AG held by members of the Management Board and Supervisory Board is shown in the following table:
| March 31, 2011 | ||||
|---|---|---|---|---|
| Shares (units) | Subscription rights(units) | |||
| Management Board | ||||
| Ralph Dommermuth | 92,000,000 | – | ||
| Norbert Lang | 402,248 | 1,600,000 | ||
| Total | 92,402,248 | 1,600,000 | ||
| Supervisory Board | ||||
| Kurt Dobitsch (Chair) | – | – | ||
| Kai-Uwe Ricke | – | – | ||
| Michael Scheeren | 700,000 | – | ||
| Total | 700,000 | – | ||
United Internet's premises in Montabaur are leased from Mr. Ralph Dommermuth. The resulting rent expenses are customary and amounted to 1 605k in the reporting period of 2011 (prior year: 1 502k).
The United Internet Group can also exert a material influence on its associated companies and joint ventures.
No significant transactions took place.
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.
Montabaur, May 12, 2011
The Management Board
Ralph Dommermuth Norbert Lang
Quarterly development in 5 million
| Q2 2010 | Q3 2010 | Q4 2010 | Q1 2011 | Q1 2010 | |
|---|---|---|---|---|---|
| Sales | 468.0 | 478.2 | 498.1 | 498.6 | 462.8 |
| Cost of sales | -292.9 | -296.7 | -344.8 | -327.1 | -291.7 |
| Gross profit | 175.1 | 181.5 | 153.3 | 171.5 | 171.1 |
| Selling expenses | -71.7 | -85.3 | -79.2 | -80.3 | -70.0 |
| General administrative expenses | -22.6 | -22.9 | -26.8 | -21.5 | -22.4 |
| Other operating income / expense | -4.3 | 0.0 | 18.7 | 4.3 | -3.2 |
| Amortization of intangible assets resulting from company acquisitions |
-5.0 | -4.9 | -4.9 | -3.7 | -4.8 |
| Amortization of goodwill | 0.0 | 0.0 | -0.2 | 0.0 | 0.0 |
| Operating result | 71.5 | 68.4 | 60.9 | 70.3 | 70.7 |
| Financial result | -2.9 | -0.2 | -0.9 | -2.5 | -6.1 |
| Results from associated companies | 0.0 | 0.0 | -13.8 | 0.0 | 0.0 |
| Result from at-equity companies | -8.4 | -3.9 | -12.0 | -3.0 | -7.5 |
| Pre-tax result | 60.2 | 64.3 | 34.2 | 64.8 | 57.1 |
| Income taxes | -21.9 | -23.5 | -24.1 | -20.8 | -18.6 |
| Net income (from continued operations) | 38.3 | 40.8 | 10.1 | 44.0 | 38.5 |
| Result from discontinued operations | 0.8 | 0.2 | 0.8 | 0.0 | 0.0 |
| Net income (after discontinued operations) | 39.1 | 41.0 | 10.9 | 44.0 | 38.5 |
| Attributable to | |||||
| minority interests | 0.3 | 0.1 | -0.2 | 0.2 | 0.2 |
| shareholders of United Internet AG | 38.8 | 40.9 | 11.1 | 43.8 | 38.3 |
| Result per share of shareholders of United Internet AG (in e) |
|||||
| - basic | 0.17 | 0.19 | 0.05 | 0.20 | 0.17 |
| - diluted | 0.17 | 0.18 | 0.05 | 0.20 | 0.17 |
| thereof result per share (in e) – from continued operations |
|||||
| - basic | 0.17 | 0.19 | 0.04 | 0.20 | 0.17 |
| - diluted | 0.17 | 0.18 | 0.04 | 0.20 | 0.17 |
| thereof result per share (in e) – from discontinued operations |
|||||
| - basic | 0.00 | 0.00 | 0.01 | 0.00 | 0.00 |
| - diluted | 0.00 | 0.00 | 0.01 | 0.00 | 0.00 |
| March 24, 2011 | Annual financial statements for fiscal year 2010 |
|---|---|
| March 24, 2011 | Press and analyst's conference |
| May 12, 2011 | 3-Month Report 2011 |
| May 26, 2011 | Annual Shareholders' Meeting, Alte Oper Frankfurt/Main |
| August 16, 2011 | 6-Month Report 2011 |
| August 16, 2011 | Press and analyst's conference |
| November 10, 2011 | 9-Month Report 2011 |
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]
May 2011 Registry court: Montabaur HRB 5762
This report is available in German and English. Both versions can be downloaded from www.united-internet.de. In all cases of doubt, the German version shall prevail.
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 Annual 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 Annual Report.
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