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United Internet AGElgendorfer Straße 5756410 Montabaur GermanyPhone: +49 2602 96 - 1100Fax: +49 2602 96 - 1013E-Mail: [email protected]
2008 2007
Income Statement
Sales t millions 1,649m6 1,487m4EBITDA t millions 318m8 308m8Net Income t millions -121m5* 155m4
Balance Sheet Current assets t millions 235m0 243m7Non-current assets t millions 867m0 970m3Shareholders’ equity t millions 145m6 383m9Total assets t millions 1,102m0 1,214m0
EmployeesGermany number 3,618 3,127Abroad number 947 827Total number 4,565 3,954Personnel expenses t millions 171.8 145.8
ShareShare price at year end (Xetra) t 6m29 16m65Earnings per share t -0.52* 0m64
United Internet at a glance
United Internet comprises a family of strong and attractive internet brands. Each one stands for added value and success. These brands are tailored to our relevant target groups and fully utilize available market potential.
Annual Report 2008
www.united-internet.com
Uni
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Inte
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AG
A
nnua
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2008
Quarterly development Q1 2008t millions
Q2 2008t millions
Q3 2008t millions
Q4 2008t millions
Q4 2007t millions
Sales 402.0 412.4 407.4 427.8 414.3
EBITDA 83.2 88.6 77.7 69.3 73.3
Net income 45.1 45.2 -103.8* -108.0* 40.1
* The figures for 2008 include total negative, non-recurring and non-cash effects of C 275.4 million – of which C 145.6 million refer to Q3 and C 129.8 million to Q4.
Rückenstärke bitte anpassen!! Seite ist verkürzt auf 195 mmm
United Internet AGElgendorfer Straße 5756410 Montabaur GermanyPhone: +49 2602 96 - 1100Fax: +49 2602 96 - 1013E-Mail: [email protected]
2008 2007
Income Statement
Sales t millions 1,649m6 1,487m4EBITDA t millions 318m8 308m8Net Income t millions -121m5* 155m4
Balance Sheet Current assets t millions 235m0 243m7Non-current assets t millions 867m0 970m3Shareholders’ equity t millions 145m6 383m9Total assets t millions 1,102m0 1,214m0
EmployeesGermany number 3,618 3,127Abroad number 947 827Total number 4,565 3,954Personnel expenses t millions 171.8 145.8
ShareShare price at year end (Xetra) t 6m29 16m65Earnings per share t -0.52* 0m64
United Internet at a glance
United Internet comprises a family of strong and attractive internet brands. Each one stands for added value and success. These brands are tailored to our relevant target groups and fully utilize available market potential.
Annual Report 2008
www.united-internet.com
Uni
ted
Inte
rnet
AG
A
nnua
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ort
2008
Quarterly development Q1 2008t millions
Q2 2008t millions
Q3 2008t millions
Q4 2008t millions
Q4 2007t millions
Sales 402.0 412.4 407.4 427.8 414.3
EBITDA 83.2 88.6 77.7 69.3 73.3
Net income 45.1 45.2 -103.8* -108.0* 40.1
* The figures for 2008 include total negative, non-recurring and non-cash effects of C 275.4 million – of which C 145.6 million refer to Q3 and C 129.8 million to Q4.
Portal Information management
PortalInformation management
Webhosting, Internet access
Webhosting products as white label
Webhosting products as white label
Display marketing
Affiliate marketing
Domain marketingOnl
ine
Mar
ketin
gPr
oduc
ts
Consumers
Internet service providerin Germany
Advertisers
Discerning private users and small offices/home
offices (SoHos)
Segments and Brands
Portal Information management
Internet service providerin the United Kingdom
and USA
Brand Products / Services Target Group 2008 in Figures
GeneralInformation Management applications, Hosting solutions and Internet Access products for consumers, small offices/home offices. Portal marketing for e-commerce providers and advertisers
Customer contracts: 7.95 million of which 1.36 million in Information Management, 3.62 million in Hosting and 2.97 million in Internet Access Portals: No. 1 in Germany with 19.4 million unique visitors per month Webhosting: Global market leader with 3.62 million contracts, of which 1.93 million outside GermanyDSL: No. 3 in Germany with 2.82 million contracts
BrandsGMX: No. 5 among German portals with 8.5 million unique visitors WEB.DE: Second highest reach of all German websites with 12.9 million unique visitors 1&1: No. 3 in German DSL market and one of the largest hosting companiesInterNetX: No. 1 in German white-label business with over 19,000 resellersFasthosts: No. 1 in UK white-label business with over 5,700 resellers
GeneralSales and marketing solutions for advertisers Display marketing via AdLINK MediaAffiliate marketing via affilinet Domain marketing via Sedo
BrandsAdLINK Media: online advertising network with 10.3 billion ad impressions per month, thus Europe’s leading supplier of digital communication solutions affilinet: Over 470,000 registered affiliate websites and 1,500 affiliate programs, thus generating over 6.1 billion ad impressions per month Sedo: administers 15.3 million domains for sale and markets 6.2 million parked domains
2 Management
2 LetterfromtheManagementBoard
4 InterviewwithRalphDommermuth
7 UnitedInternetforUNICEF
8 Locations
10 CorporateGovernanceReport
14 ReportoftheSupervisoryBoard
17 QuarterlyIncomeStatement
18 OurHigh-performanceDataCenters
20 OurStrategy
22 ProductSegment
25 OnlineMarketing
26 TheShare
28 ManagementReport
57 FinancialStatementsacc.toIFRS
125 ResponsibilityStatement
126 GlossaryandFinancialcalendar
With more than 7.9 million customer contracts, United Internet is a leading Internet Service Provider. Drawing on over 15 years’ experience in the online business, we are well positioned on the market with brands in two business segments: Products and Online Marketing. We reached new record levels in our operating business once again in 2008 with sales of C 1.65 billion, an EBITDA of almost C 319 million and an EBIT of around C 257 million.
Table of Contents
Dear shareholders, employees and friends of United Internet!
Despitetheonsetoftheglobalfinancialandeconomiccrisisin2008,thepastfiscalyearwasasuccessfulperiodforUnitedInternetintermsofitsoperatingactivities.WeachievedorganicgrowthinourbusinessfieldsandcontinuedtostrengthenourmarketpositionsinGermanyandabroad.Allinall,weincreasedthenumberofcustomersinallproductlinesandimprovedthereachofouradvertisingnetworks.Thenumberofourfee-basedcustomercontractsgrewby800,000to7.95million.Weadded380,000newcontractsoutsideGermanyalone,takingthetotalto1.93millioncustomercontracts.
Althoughwereachednewrecordlevelsofsales(+10.9%)andEBIT(+8.3%)inouroperatingbusiness,consolidatednetincomewasburdenedbyC275.4mil-lionfornon-cashwrite-downsoninvestments.
DespiteoperatinggainsatGrouplevel,thedevelop-mentofourtwobusinesssegments“Products”and“OnlineMarketing”differedgreatlyinfiscalyear2008.
Thankstoabusinessmodelbasedmainlyonelectronicsubscriptions,ourdominant“Products”segment–withthebrands1&1,GMX,WEB.DE,FasthostsandInterNetX–enjoyedfurthergrowthinsalesandearnings.However,thereducedspendingofouradvertisingcustomersinthesecondhalfoftheyear,andespeciallythefourthquarter,wasnoticeableinourportalmarketingbusiness.
Inthe“OnlineMarketing”segment,salesandearningswerealreadyburdenedfromthebeginningofthesecondquarterbytheproblematicdevelopmentofourDomainMarketingbusiness.Changesinthepolicyandalgorithmsofourmostimportantpartnerinthefieldofsearchengineshavebeenslowingthedevelopmentofthisbusiness,whichstillboastedhighgrowthandmarginsin2007.Sectorsalesandearningswerealsoburdenedinthesecondhalfoftheyearbythemarkedglobaldeclineinadvertisingspending.This,inturn,ledtofallingpricesandmarginsasaresultoffiercecompetitionfortheremainingbudgets.
Intotal,consolidatedsalesofUnitedInternetAGgrewby10.9%infiscalyear2008,fromC1,487.4milliontoC1,649.6million(currencyadjusted:+12.4%toC1,671.6million).Earningsbeforeinterestandtaxes(EBIT)roseby8.3%,fromC236.9milliontoC256.6million.
Ralph DommermuthCEO
Ralph Dommermuth (45) laid the foundation for today’s United Internet AG with the formation in 1988 of 1&1 Marketing GmbH in Montabaur, Germany. He originally offered systemized marketing services for smaller software suppliers. This was followed by additional marketing services for major clients, such as IBM, Compaq and Deutsche Telekom. In 1998 the qualified banker took 1&1 to the stock exchange. It was the first IPO of an internet company in Germany. In 2000, Dommermuth restructured 1&1 as United Internet.
„We are already No. 1 in many of our target mar-kets in Germany, the rest of Europe and even world-wide in some cases. With the aid of new, innovative products and increased quality standards, we aim to achieve further growth in our existing markets in 2009, as well as in new markets and countries, and to strengthen customer loyalty even further.
2
Againstabackdropofgreatlyreducedstockmarketpricesin2008forourstrategicinvestmentsinfreenet(viaMSPHolding),Versatel,DrillischandGoldbachMedia,wemadenon-cashwritedownsonthecarryingvaluesoftheaforementionedcompaniestotheir
marketpricesasofDecember31,2008.Itwasalsodecidedtomakefurtherwritedownsonthevaluationsofournon-listedinvestments.Theresultingnon-recurringnegativeeffectofC275.4millionledtonetincomeofC-121.5millionandanEPSofC-0.52.InviewofthebalancesheetlossintheannualfinancialstatementsofourparentcompanyUnitedInternetAGresultingfromthesewritedowns,nodividendwillbedistributedforthefiscalyear2008.
ThankstooursuccessfulandstablepositioninginthegrowthmarketsofDSL,Webhosting,PortalsandOnlineMarketing,wecontinuetoexpectgoodopportunitiesinthemediumterm.Aspredictingthefutureeconomicdevelopmentisparticularlydifficultatpresent,however,allforecastsaresubjecttouncertainty.
FortheGroupasawhole,weexpectslightgrowthinsalesfor2009.AfterreachingnewrecordlevelsforEBITDAandEBITinfiscalyear2008,weaimtomaintainourkeyearningsratiosattheprior-yearlevelinfiscal2009–despitetheweaknessoftheonlineadvertisingsectorandfurtherhighinvest-mentsinthefuture.
Wetrustyouwillcontinuetoaccompanyusalongthispath.
Norbert LangCFO
Norbert Lang (47) has been a member of the Management Board of United Internet AG since 2000 and responsible for Finance, Con-trolling, Press/Investor Relations and Human Resources since 2002. He joined 1&1 in 1994. With the foundation of 1&1 Beteiligungen GmbH, Norbert Lang was appointed as Managing Director. In his role as Head of Finance, he accompanied the transformation and realignment of United Internet AG as a management holding com-pany for all Group investments.
“
2008 was marked by high writedowns on our investments but also by new record figures in our operating business. In 2009, we aim to raise sales slightly and to maintain our key earnings ratios EBITDA and EBIT at their prior-year level – despite the weakness of the online advertising sector.
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The Share
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Financial Statements
Lett
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Dommermuth:Despitetheonsetofthefinancialandeconomiccrisis,fiscal2008wasasuccessfulyearforUnitedInternetwithregardtoouroperations.Afterall,ourkeyoperatingratiosreachednewrecordlevels–eventhoughwewereunabletoescapethecrisisinonlineadvertising.Atthesametime,however,wemadewritedownsonourinvestmentsofaroundC275million,whichobviouslyhadadevastatingimpactonnetincome.
Dommermuth:Obviously,withthepowerofhindsightyou’realwayswiser.Knowingwhatwedotoday,wewouldprobablyhavesteppedbackfromoneortwoofourinvestments,asthepurchasepricewasobviouslytoohighfromthecurrentperspective.However,atthetimewehadgoodreasonstomaketheseinvestments,aswemakehealthyprofitsinourDSLbusinessandwantedtoachieveastrategicpositioningintheconsolidatingmarket.Atthesametime,however,wecurrentlydonotintendtopartwithourinvestments.
Mr.Dommermuth,in2008UnitedInternet’ssharepricefellsharply,theDSLmarketbecameincrea-singlydifficultandtheconsolidationoftheGermanDSLmarketmadelittleprogress.Howwouldyoujudgethepastfiscalyear2008?
Howdoyoucurrentlyviewyourinvestmentsinfreenet,VersatelandDrillisch?Howdoyouintendtocontinuethisinvestmentstrategy?
Interview with Ralph Dommermuth
4
Dommermuth:Comparedwithmanyothercompanies,ourbusinessmodelmakesusrelativelywellequippedtodealwithsuchasituation.Witharound8millionsubscription-basedcontracts,weenjoyconstantandstablerevenuestreamswhichmakeusrelativelyimmunetothecrisis.However,aglobalrecessionisboundtoleaveitsmarkevenonus–especiallyinthefieldofonlineadvertising–sothatourextremelyhighgrowthratesforsalesandearningsarenowathingofthepast,forthetimebeing.
Dommermuth:Inprinciple,webhostingisasoftwarebusinessinwhichweofferdomains,storagespace,e-mailsandmanyotherservicesforbusi-nessesandprivateusers.Bystandardizingourproducts,weenjoyeconomiesofscaleascustomerfiguresrise–nationallyandinter-nationally–whileofferingourcustomersconsiderableaddedvalueforarelativelysmallfee.Webelievewecanstillgrowstronglyinthissegment.Onereasonisthedevelopmentofso-called“cloudcomputing”,wherebyapplicationsanddataarenolongerkeptonlocalcomputersbutoninternetservers,theso-called“cloud”.Asoneoftheworld’slargestwebhosts,withhigh-securitydatacentersinEuropeandtheUSA,weseeexcellentgrowthopportunities.
Dommermuth:InourDSLbusiness,wewillcontinuetodrivetheconversionofexistingcustomerstocompletepackagesinordertoraisecustomerloyalty.Inwebhosting,wewilllaunchanewwebhostinggenera-tionandrollitoutsuccessivelyinourexistingmarkets.ViaGMX,wewillcontinuetointernationalizeoure-mailproductsinSwitzer-land,Austria,theUK,FranceandtheUSA.InourOnlineMarketingsegment,wewillfocusonexpandingouradvertisingtechnologiesandextendingthereachofouradvertisingnetworks.Andfinally,wewillonceagainintensifyourqualityandserviceeffortsin2009.
Theglobaleconomyiscurrentlyinseverecrisis.TowhatextentisUnitedInternetaffected?
Manyanalystsregardyourwebhostingbusinessasahavenofstability.Whatissospecialaboutthisbusiness?
WhichoperationalareaswillUnitedInternetfocusonin2009?
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Financial Statements
Inte
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Dommermuth:TherapidgrowthinDSLcontractsoverthepastfewyearsandthemigrationofcustomerstocompletpackages–forwhichwehaveusedservicesfrom4differentpartnerssince2008withdifferenttechnolo-gies,platformsandinterfaces–havemeantthatnotallproducts,pro-cessesandserviceswere100%technicallymatureandstable.Wehavethereforeintroducedanumberofmeasurestooptimizetheseareasandrealignedkeytargetparametersforourservices(e.g.connectiontimes,hotlineavailabilityandquality).Wearecurrentlygivinghighprioritytoimplementingthesemeasures.WearealsoinconstantdialoguewithpartnerssuchasDeutscheTelekomandtheGermanRegulatoryAuthorities,inordertoachievefurtherimprovementsinthepre-servicequality.
Dommermuth:Intotal,weexpecttoaddaround500,000customercontractsin2009.WhereasstronggrowthincontractfiguresisexpectedfortheproductlinesWebhostingandInformationManagement,weexpectonlyslowgrowthforourDSLcustomerbasein2009–asaresultoftheconsi-stentlyhighchurnrateinresalecontracts.InourDSLbusiness,theclearfocusthisyearwillbethefurthermigrationofourcustomerstocompletepackages.Weexpectgrowthinthisareaofaround800,000contracts.
Onthesubjectofservice:in2008thepressoftencriticizedtheserviceandqualityofyourDSLbusiness.Whatdoyouintendtoimproveinfuture?
Whatlevelofcustomergrowthdoyouexpectfor2009?
6
Economicsuccesssecuresourfuture–notonlyforthecompanyanditsemployees,butalsoforthemajorhumanideals.Successisnotanendinitselfbutawayofsafeguardingourexistence–andthusamoralobligation.
Wearemorethanhappytomeetthisobligationandtoshareoureconomicsuccesswiththosewhodesperate-lyneedhelp.TogetherwithUNICEF,theUnitedInter-
We’re sharing our success … ... and supporting UNICEF projects around the world.
The Foundation United Internet for UNICEF
netFoundationobviouslydonatesmoney–butmorethanthis,italsogivesusapurpose.Itletsothersshareinoursuccessinordertoofferafutureperspectiveforasmanypeopleaspossible.
Ouraimistopromotelong-termdevelopmentprojectswhichsecurethesupplyofcleandrinkingwater,offerbettereducationopportunitiesandprovidesupportforAIDSorphans.
Further information at www.united-internet-for-unicef.com
Foto: UNICEF/ Giacomo Pirozzi
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Our Strategy
The Share
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Financial Statements
Uni
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for U
NIC
EF
Locations
Germany MontabaurCologneDuesseldorfHamburgHanoverKarlsruheMunichRegensburgZweibruecken
United KingdomGloucesterLondonSlough
ItalyMailand
FranceParisSaargemuend
NetherlandsHaarlem
PhilippinesCebu City
BelgiumBrussels
8
RomaniaBukarest
SpainMadrid
SwitzerlandKuesnacht
AustriaWien
USAChesterbrookBoston
SloveniaLjubljana
CroatiaZagreb
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Management
Our Strategy
The Share
Management Report
Financial Statements
Loca
tions
UnitedInternet’scorporategovernanceisbasedoninternationallyandnationallyrecognizedstandardsofsoundandresponsiblemanagement.InaccordancewithSec.3.10oftheGermanCorporateGovernanceCode,theManagementBoardandSupervisoryBoardhavepreparedthefollowingjointreportconcerningthecorporategovernanceofUnitedInternet:
ManagementandCorporateStructure
Inaccordancewithitslegalstatus,UnitedInternetAGoperatesadualmanagementandmonitoringstruc-turecomprisingtwocorporatebodies:theManage-mentBoardandtheSupervisoryBoard.ThethirdbodyistheShareholders’Meeting.Allthreebodiesarecommittedtoservingthecompany’sinterests.TheSupervisoryBoardiselectedbytheShareholders’Meetingandcurrentlyconsistsofthreemembers.TheSupervisoryBoardisgenerallyelectedforaperiodoffiveyears.MembersoftheSupervisoryBoardandManagementBoardshouldgenerallynotbeolderthan70.TheSupervisoryBoardmonitorsandadvisestheManagementBoardinthemanagementofthecompany.TheSupervisoryBoardregularlydiscussesbusinessdevelopment,planning,strategyanditsimplementation.TogetherwiththeManagementBoard,itdiscussesthequarterlyandhalf-yearreportsbeforepublicationandapprovesannualbudgetsaswellastheannualfinancialstatementsoftheparentcompanyandthegroup.Indoingso,italsotakesthereportsofthecompany’sexternalauditorsintoaccount.ItsresponsibilitiesalsoincludeappointingmembersoftheManagementBoardaswellasdeter-miningandregularlymonitoringtheirremuneration.
TheManagementBoardisthebodychargedwithmanagingthegroup’soperationsandcurrentlyconsistsoftwopersons.ItmanagesoperationsinaccordancewithitslegalandstatutoryobligationsaswellastherulesofprocedureapprovedbytheSupervisoryBoard.Itisresponsibleforpreparingthequarterlyandannualfinancialstatementsaswellasforappointingkeymanagerswithinthecompany.DecisionsoffundamentalimportancerequiretheapprovaloftheSupervisoryBoard.
TheAnnualShareholders’Meetingisthebodywhichformulatesandexpressestheinterestsofthecompany’sshareholders.AttheAnnualShareholders’Meeting,theannualfinancialstatementsarepresen-tedtoourshareholders.Theshareholdersvoteontheappropriationofthebalancesheetprofitandother
statutorytopics.Eachshareentitlestheownertoonevote.AllshareholderswhoregisterintimeandarelistedintheShareRegisteronthedayoftheAnnualShareholders’Meetingareentitledtoattend.Share-holdersmayalsoexercisetheirrightsattheAnnualShareholders’Meetingbymeansofaproxyvote.
Financialdisclosures
UnitedInternetprovidesitsshareholderswithfourreportseachfiscalyearonthecompany’sbusinessdevelopmentanditsfinancialandearningsposition.Thepublicationdatesofthesereportsarestatedinabindingfinancialcalendar,whichthecompanypostsonitswebsiteandregularlyupdatesinaccordancewithlegalobligations.TheManagementBoardregu-larlyinformsinvestors,analystsandthepressaboutcurrentfinancialresults.Inaddition,anyinformationwhichmightaffectthesharepriceispublishedintheformofad-hocannouncements.
Aspartofourinvestorrelationsactivities,thecompany’smanagementteamregularlymeetswithanalystsandinstitutionalinvestors.Wealsoholdanalystandpressconferencesfollowingthepublica-tionofoursemi-annualandannualfigures.Accesstofinancialinformationandfurthereconomicallyrele-vantinformationabouttheUnitedInternetGroupisprovidedonourwebsite(www.united-internet.de).
Riskmanagement
TheManagementBoardisresponsiblefortheinternalmonitoringandriskmanagementsystemaswellasfordeterminingitsstructure.Principles,guidelines,processesandresponsibilitiesaredefinedandestablis-hedinsuchawaythattheyguaranteecorrectandpromptaccountingofallbusinesstransactions,facilitateearlyidentificationofrisksandsupplyacon-stantflowofreliableinformationaboutthecompany’sfinancialsituationforinternalandexternalpurposes.Thevariouscomponentsofourriskmanagementculturearedesignedtorecognizebusinessrisksatanearlystage,tocontrolsuchrisksandtosecurethecompany’sbusinessobjectives;theycannot,however,preventsuchriskscompletelyanddonotthereforeofferabsoluteprotectionagainstlossorfraudulentactions.
Corporate Governance Report
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AccountingandAuditing
Thegroup’saccountsaredrawnupaccordingtotheprinciplesoftheInternationalFinancialReportingStandards(IFRS),whereastheannualfinancialstatementsoftheparentcompany–relevantforalldividendandtaxmatters–aredrawnupaccordingtotherulesoftheGermanCommercialCode(HGB).Theannualfinancialstatementsfortheparentcompanyandthegroupareauditedbyindependentauditors.TherespectiveauditingcompanyisselectedbytheAnnualShareholders‘Meeting.Ernst&YoungAGWirtschaftsprüfungsgesellschaftSteuerberatungs-gesellschaftwaselectedtoaudittheannualfinancialstatementsforthefiscalyear2008.TheSupervisoryBoardissuestheauditingmandate,determinesauditingfocalpoints,approvestheauditingfeeandexaminestheindependenceoftheauditors.
RemunerationReport
ManagementBoard
TheSupervisoryBoardisresponsiblefordeterminingtheremunerationofManagementBoardmembers.TheremunerationreceivedbythemembersoftheManagementBoardofUnitedInternetAGisperfor-mance-orientedandconsistsoffixedandvariableelements.InthecaseofoneManagementBoardmember,thereisacomponentprovidinglong-termincentivesintheformofacompensationprogrambasedonvirtualshares(SARs).
Thesizeoftheremunerationcomponentsisregularlyreviewed.Thefixedremunerationcomponentispaidmonthlyasasalary.Thesizeofthevariableremune-rationcomponentdependsonreachingcertain,fixedfinancialtargetsagreedatthebeginningofthefiscalyear.Thesetargetsarebasedmainlyonsalesandear-ningsfigures.Thetargetattainmentcorridorisgene-rallybetween80%to120%.Nobonusispaidbelow80%oftheagreedtargetandthebonuscalculationendsat120%oftheagreedtarget.Thereisnoprovi-sionforsubsequentamendmentoftheperformancetargets.Thereisnominimumguaranteedbonus.TherearenoretirementcommitmentsfromtheCompanytomembersoftheManagementBoard.
Infiscalyear2008,remunerationofthetwomembersoftheManagementBoardamountedtoC1,000k(prior-year:C935k).Ofthistotal,C600kwasfixedandC400kvariableremuneration.
TheChiefExecutiveOfficer,Mr.RalphDommermuth,receivedtotalremunerationofC511k(prioryear:C442k).Ofthistotal,C300k(prioryear:C200k)wasfixedandC211k(prioryear:C242k)variable.TheChiefFinancialOfficer,Mr.NorbertLang,receivedtotalremunerationofC489k(prioryear:C493k).Ofthistotal,C300k(prioryear:C200k)wasfixedandC189k(prioryear:C293k)variable.
ManagementBoardremunerationin2008in C Fixed com-
ponentVariable component
Total
Management Board
Ralph Dommermuth 300,000 211,000 511,000
Norbert Lang 300,000 189,000 489,000
Total 600,000 400,000 1,000,000
Infiscalyear2008,Mr.NorbertLangwasgranted800,000virtualstockoptions(SARs)atanexercisepriceofC12.85.Theexercisehurdleis120%oftheshareprice.Paymentofvaluegrowthislimitedto100%ofthecalculatedshareprice.Whenthevirtualstockoptionsweregranted,theirfairvalueamountedtoC2,384k.TheSARprogramisdescribedinmoredetailbelow,inthesection“Stock-basedcompen-sation”.
SupervisoryBoardThemembersoftheSupervisoryBoardreceivecompensationconsistingofafixedelementandavariableelementwhichdependsontheCompany‘ssuccess.ThefixedremunerationforanordinarymemberoftheSupervisoryBoardamountstoC20kperfullfiscalyear.ThechairmanoftheSupervisoryBoardreceivestwicetheamountattributabletoanordinarymember.ThevariableelementforeachmemberoftheSupervisoryBoard,includingthechair-man,amountstoC2kforeverycentwhichexceedstheconsolidatedearningspersharevalueofC0.10forUnitedInternetAG,calculatedaccordingtoIFRS.
ThechairmanoftheSupervisoryBoard,Mr.KurtDobitsch,receivedtotalremunerationofC40k(prioryear:C112k).Ofthistotal,thefixedcomponentwasC40k(prioryear:C40k).Mr.MichaelScheerenreceivedtotalremunerationofC20k(prioryear:C92k).Ofthistotal,C20k(prioryear:C20k)wasfixed.Mr.Kai-UweRickereceivedtotalremunerationofC20k(prioryear:C0k).Ofthistotal,C20k(prioryear:C0k)wasfixed.
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DuetothenegativeEPSfigure,therewasnovariableremunerationin2008.
SupervisoryBoardremunerationin2008in C Fixed
componentVariable
componentTotal
Supervisory Board
Kurt Dobitsch (Chair) 40,000 - 40,000
Kai-Uwe Ricke 20,000 - 20,000
Michael Scheeren 20,000 - 20,000
Total 80,000 - 80,000
Stock-BasedCompensation
UnitedInternetAGoperatesvariousstock-basedcompensationprogramswhichenableitsmanagerstoparticipateinthecompany’ssuccessandareaimedatenhancingstaffloyalty.Theseprogramsareeitherbasedonconvertiblebondswhichcanbeexchangedforsharesoronvirtualstockoptions,whichmayentitletheholderalsotocashpaymentsinthecaseofacorrespondingincreaseintheshareprice.
Oneconvertiblebondcanbeexchangedforoneshare,orfollowingthesharesplitof1:3in2006,for4shares.Onissuanceoftheconvertiblebond,therespectiveemployeepaysthecompanythenominalvalueoftheconvertiblebond.Thisamountaccruesinterestduringtheperiodoftheprogram.Thestrikepriceisthesharepriceatthetimeofissuanceoftheconvertiblebond.Afterexpiryofcertainminimumretentionperiods,employeescanexchangetheirconvertiblebondsforcompanyshares.Shouldtheydecidetobuytheshare,theymustpaythedifferencebetweenthestrikepriceandnominalvalueoftheconvertiblebond.Thedifferencebetweenthestrikepriceandtheshare’sprevailingmarketpricerepresentsataxablegainforemployees.Theconvertiblebondshaveamaturityofnomorethan6years.
Virtualstockoptions(so-calledStockAppreciationRights–SARs)refertothecommitmentofUnitedInternetAGtopaythebeneficiaryacashamountequivalenttothedifferencebetweenthesharepriceonthedateofgrantingtheoptionandthesharepriceonexercisingtheoption.Theexercisehurdleis120%oftheshareprice,whichiscalculatedastheaverageclosingpriceinelectronictrading(Xetra)oftheFrankfurtStockExchangeoverthetendaysprecedingissuanceoftheoption.Paymentofvaluegrowthto
theentitledpersonislimitedto100%ofthecalculatedshareprice(cap).
AnSARcorrespondstoavirtualsubscriptionrightforoneshareofUnitedInternetAG.However,itisnotasharerightandthusnota(genuine)optiontoacquiresharesofUnitedInternetAG.UnitedInternetAGretainstheright,however,tofulfillitscommitmenttopaytheSARincashbyalsotransferringUnitedInternetAGsharesfromitsstockoftreasurysharestothebeneficiary,atitsowndiscretion.Employeesmayexercisetheiroptionrightsafterexpiryofcertainminimumretentionperiods.Theincreaseinvaluerepresentsataxablegainforemployees.TheSARshaveamaturityofnomorethanfiveyears.
Detailedinformationonthecompany’svariousstock-basedcompensationprogramsisprovidedinthenotestotheconsolidatedfinancialstatementsinthisannualreport.
Director’sDealings
AccordingtoSec.15aoftheGermanSecuritiesTradingAct(Wertpapierhandelsgesetz–WpHG),membersoftheManagementBoardofUnitedInternetAGandSupervisoryBoardarelegallyobligedtodeclaretheirpurchaseandsaleofsharesinUnitedInternetAGorrelatedfinancialinstrumentswheneverthetrans-actionconductedbyanexecutivebodyorrelatedpersonsreachesorexceedstheamountofC5,000withinonecalendaryear.Thesameappliestocertainemployeeswithmanagementresponsibilityandcloselyrelatedpersons.TransactionsreportedtotheCompanyinfiscalyear2008werepublishedthroughoutEurope.
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AsofDecember31,2008themembersoftheManage-mentBoardandSupervisoryBoardheldthefollowingsharevolumes:
ShareholdingsandSubscriptionRightsasofDec.31,2008
Shareholding (units)
Virtual stock options (SAR,
units)Management Board Ralph Dommermuth 92,000,000 -Norbert Lang 576,128 800,000
Supervisory Board Kurt Dobitsch (Chair) - -Kai-Uwe Ricke - -Michael Scheeren 700,000 -
AnnualDeclarationofConformityacc.toSec.161AktG
OnJune6,2008theseventhversionoftheGermanCorporateGovernanceCodewascompletedandpublishedbythegovernment’selectronicFederalGazetteonAugust8,2008.InMarch2009,theManagementBoardandSupervisoryBoardofUnitedInternetAGsubmittedtheircurrentdeclarationofconformityaccordingtoSec.161oftheGermanStockCorporationAct(AktG).Thedeclarationofconformitycanbeaccessedatwww.united-internet.de,InvestorRelations,CorporateGovernanceandwaspublishedinthegovernment’selectronicFederalGazetteonMarch26,2009.ThecorporategovernanceprinciplesofUni-tedInternetAGanchoredinthecompany’sstatutes(includingitsarticlesandrulesofprocedure),andthusourcurrentandexpectedfuturebehavior,complywiththerecommendationsoftheGermanCorporateGovernanceCodeintheversiondatedJune6,2008,withthefollowingexceptions:
D&ODeductiblesShouldacompanytakeoutaso-calledD&Oinsurancepolicy(directorsandofficers’liabilityinsurance)foritsManagementBoardandSupervisoryBoard,theGermanCorporateGovernanceCoderecommendsthatasuitabledeductiblebeagreed.TheD&OinsurancepolicyofUnitedInternetAGdoesnothaveanyarrangementfordeductibles.UnitedInternetdoesnotplantochangeitscurrentD&Opolicies.
CommitteesTheGermanCorporateGovernanceCoderecommendsthattheSupervisoryBoardsetupanAuditCommitteewhich,inparticular,shouldhandleissuesofaccoun-ting,riskmanagement,compliance,thenecessaryindependencerequiredoftheauditor,theissuingoftheauditmandatetotheauditor,thedeterminationofauditingfocalpointsandthefeeagreement.TheGer-manCorporateGovernanceCodealsorecommendsthattheSupervisoryBoardsetupaNominationCommittee,whichshouldcompriseonlyrepresenta-tivesoftheshareholdersandshouldsuggestsuitablecandidatestotheSupervisoryBoardforitselectionproposalsattheAnnualShareholders’Meeting.TheSupervisoryBoardofUnitedInternetAGcurrentlyconsistsofthreemembers:inadditiontotheirotherduties,themembersalsodealasagroupwiththeabove-mentionedtopics.TheSupervisoryBoard’srulesofprocedurestatethatcommitteesshouldonlybeformediftherearemorethanthreemembersoftheSupervisoryBoard.
SupervisoryBoardCompensationTheGermanCorporateGovernanceCoderecommendsthatthecompensationofSupervisoryBoardmembersshouldalsotakeintoaccounttheexercisingoftheChairandDeputyChairpositionsintheSupervisoryBoardaswellasthechairandmembershipincommit-tees.InthecaseofUnitedInternetonlytheChairposi-tionintheSupervisoryBoardisconsidered–aslongastheSupervisoryBoardconsistsofnomorethanthreemembersandnocommitteesareformed.
PublicationofreportsTheGermanCorporateGovernanceCoderecommendsthattheconsolidatedfinancialstatementsshouldbepublished90daysaftertheendofthereportingperiod.AsalreadyannouncedintheFinancialCalendar2008,UnitedInternetAGpublisheditsconsolidatedfinancialstatementsforfiscalyear2007onApril4,2008.
Montabaur,March2009
Forthe FortheManagementBoard SupervisoryBoardRalphDommermuth KurtDobitsch
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ThemembersoftheSupervisoryBoard(electeduntil2010)are:
KurtDobitsch,self-employedentrepreneur,54(chair) Kai-UweRicke,ManagingPartner,47 MichaelScheeren,qualifiedbanker,51
TheSupervisoryBoardofUnitedInternetAGfulfilleditslegalandstatutoryconsultationandcontroldutiesduringtheperiodunderreview.WeregularlyadvisedtheManagementBoardandmonitoredtheirmanage-mentoftheCompany.WeweredirectlyinvolvedinalldecisionsoffundamentalsignificancefortheCompany.TheManagementBoardprovideduswithregularandcomprehensivereports,bothwrittenandoral,aboutallrelevantquestionsconcerningcorpo-rateplanningandstrategicdevelopment,aswellastheprogressofbusiness,thestatusoftheCompany,itsexposuretorisk,theriskmanagementsystem,andissuesofcompliance.TheManagementBoarddiscussedtheCompany’sstrategicalignmentwithus.Moreover,theManagementBoardpresentedtheSupervisoryBoardwithacomprehensivereporteveryquarteraboutthestateofbusiness,thedevelopmentofsalesandearnings,andthepositionoftheCompanyanditsbusinesspolicy.ThesereportsweremadeavailabletoallmembersoftheSupervisoryBoard.OnthebasisofthesereportsonUnitedInternetAG,theSupervisoryBoardwasabletomonitorallimportantbusinesstransactionsandtoprovideadvicewherenecessary.ThechairmanoftheSupervisoryBoardwasalsokeptregularlyinformedbytheManagementBoardonallbusinessactivities,alsobetweenthemeetings,andgaveadviceonquestionsofbusinesspolicy.
TheSupervisoryBoardheldfivemeetingsduringfiscalyear2008,inwhichtheManagementBoardinformedusindetailaboutthebusinesssituationandthedevelopmentoftheCompanyandGroup,aswellasconcerningsignificantbusinessevents.Themee-tingswereeachattendedbyallmembers.Inaddition,furtherresolutionswereadoptedbymeansofcircularwrittenconsent.Forexample,onMay30,2008appro-valwasgiventotheissueof400,000virtualstockoptionstothemanagementboardmembersofGroupcompaniesaspartoftheSARPlan2008,onJuly16,2008approvalwasgivenforapromissorynoteloanamountingtoC150million,andonDecember12,2008theacquisitionofunited-domainsAG,Starnberg,wasapproved.TheSupervisoryBoardconsistsofthree
membersanddidnotformanycommittees.TheSupervisoryBoardisnotawareofanyconflictofinterestofoneofitsmembers. MeetingonJanuary29,2008:ThisSupervisoryBoardmeetingfocusedonGroupplanningforfiscalyear2008andthesalesandearningstargetsoftheGroup’ssubsidiaries.TogetherwiththeManagementBoard,variousinvestmentoptionswerediscussedandaninvestmentinthemediaholdingcompanyvirtualmindsAGandintheBW2GroupAGwasadopted.ItwasalsodecidedtoraisecontributionstotheEuropeanFoundersFundGmbH&Co.BeteiligungsKGNo.1and2andtoexpandthepartnershipwiththeSamwerbrothersbyjointlyfoundingEuropeanFoundersFundGmbH&Co.BeteiligungsKGNo.3.InconnectionwithacontractextensionfortheD&Oinsurancepolicy,theManage-mentBoardexplainedtousthenewlynegotiatedconditions.
MeetingonApril2,2008:ThisSupervisoryBoardmeetingfocusedonthepresentationoftheannualfinancialstatementsandtheconsolidatedfinancialstatementsforfiscal2007ofUnitedInternetAG,aswellasthejointmanagementreportforfiscal2007andtheauditreportsandexplanationsofthechiefauditor.Inthepresenceoftheappointedchiefauditor,Ernst&YoungAGWirtschaftsprüfungsgesellschaft,theauditedannualfinancialstatementsfor2007ofUnitedInternetAGandauditedconsolidatedfinancialaccountsaccordingtoIFRSwereapproved.Atthesamemeeting,theSupervisoryBoardandManagementBoardadoptedaresolutiontorecommendtotheAnnualShareholders’Meetingthepaymentofadividendof20centspershare.TheinvitationandagendafortheAnnualShareholders‘MeetinginMayandtheremunerationreportofthechairmanoftheSupervisoryBoardwasdiscussedwiththeManagementBoardandadopted.ThetargetachievementoftheManagementBoardinthepastyearwasadoptedandthepaymentofthevariableremunerationelementsapprovedbytheSupervisoryBoard.TheManagementBoardreportedonthecourseofbusinesssofarinfiscal2008,thecurrentbusinesssituationingeneral,andthestatusofstrategiccooperationtalks.TheManagementBoardthenreportedtotheSupervisoryBoardonthecurrentdevelopmentoftheUnitedInternetforUNICEFFoundation.
MeetingonMay27,2008:ThemeetingwashelddirectlyaftertheAnnualShare-
Report of the Supervisory Board for Fiscal Year 2008
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holders’MeetingofUnitedInternetAGinFrankfurtamMain.Atthemeeting,variousstrategicoptionsinthecorebusinessfieldsofUnitedInternetAGwerediscussedandevaluatedtogetherwiththeManage-mentBoard.Aspartofthefurtherinternationaliza-tionoftheGroup’shostingbusiness,itwasdecidedtoacquiretheBritishresellerDollamoreLtd.,Melbourne/UK,viaFasthostsLtd. MeetingonAugust12,2008:ThemaintopicofthismeetingwasadetaileddiscussionoftheinterimreportasofJune30,2008togetherwiththeManagementBoard.InconnectionwiththeforthcomingextensionoftheleasesfortheMontabaurfacilities,theManagementBoardpresentedthecurrentleasesandexplainedthecurrentrentalsituation.Duetotheindicatedneedforofficespace,theSupervisoryBoardapprovedanextensionofthecurrentleasesandtherentingoffurtherfloorspace.
MeetingonNovember13,2008:InadditiontotheManagementBoard’sreportonCompanyeventsasofSeptember30,2008andadiscussionofthe9-monthreport,theforecastforfiscalyear2008wasalsodiscussedindetail.TheManage-mentBoardtheninformedusaboutthecurrentfinancesituationandtheinteresthedgingstrategyithadprepared.AspartofthenewCorporateGover-nanceCode,thegovernmentcommissionadoptedseveralchangestotheCodeasofJune6,2008.TheManagementBoardexplainedtherelevantchangesfortheCompany.TheSupervisoryBoardwasinformedaboutthestatusofcurrentcooperationtalksofUnitedInternetAGanditssubsidiariesandthedevelopmentoftheEuropeanFoundersFunds.TheManagementBoardalsoreportedonthenewrevisedservicecon-tractsforManagementBoardmembersof1&1InternetAGandtheissueofSARs(StockAppreciationRights)toManagementBoardmembersof1&1InternetAGandGroupemployees.
CorporateGovernanceTherelevantchangesarisingfromtheCodereleasedonJune6,2008werediscussedtogetherwiththeManagementBoardinthemeetingofNovember13,2008.
TogetherwiththeManagementBoard,wesubmittedthecurrentdeclarationofconformitywithSec.161AktGregardingtherecommendationsoftheGovern-mentCommissionontheGermanCorporateGover-nanceCodeinMarch2009andmadeitpermanently
accessibletotheCompany’sshareholdersontheweb-siteandthegovernment’selectronicFederalGazette.Inthisconnection,wealsoconsideredthecompen-sationsystemfortheManagementBoard.TheManagementBoardreportsseparatelyonthecorporategovernancestrategyofUnitedInternetAG,alsoonbehalfoftheSupervisoryBoard,intheCorporateGovernanceReport.
Discussionoftheannualfinancialstatements2008fortheCompanyandtheGroupTheAnnualShareholders’MeetingofUnitedInternetAGonMay27,2008electedErnst&YoungAGWirt-schaftsprüfungsgesellschaft,basedinEschborn/FrankfurtamMain,asauditorsforthefiscalyear2008.Ernst&Youngauditedtheaccountingsystem,theannualfinancialstatementsofUnitedInternetAG,theconsolidatedfinancialstatementsaccordingtoIFRSandthecombinedmanagementreportforUnitedInternetAGandtheGroupforthefiscalyear2008.Aspartofitsauditoftheannualfinancialstatements,Ernst&YoungalsoauditedandanalyzedkeyaspectsoftheCompany’sriskmanagementsystem.Theaudi-torawardedanunqualifiedcertificateineachcase.
TheSupervisoryBoardsatisfieditselfastotheindependenceoftheauditorsandreceivedawrittendeclarationtothisend.
Theaforementionedannualfinancialstatementdocu-ments,theproposalfortheappropriationofprofitandtheauditor’sreportwerepresentedtoallmembersoftheSupervisoryBoardinduetime.ThechiefauditorattendedtherelevantmeetingoftheSupervisoryBoardonMarch25,2009,whereheansweredtheSupervisoryBoard’squestionsandgavefurtherexplanationswherenecessary.Followingitsowninspection,theSupervisoryBoardcametotheconclusionthattheannualfinancialstatements,thecombinedmanagementreport,theconsolidatedfinancialstatementsandtheauditor’sreportgavenocauseforobjections.WitharesolutiononMarch25,2009,theSupervisoryBoardapprovedtheannualfinancialstatementsofUnitedInternetAG,aspreparedbytheCompanyonMarch16,2009andtheconsolidatedannualfinancialstatementsaccordingtoIFRSforfiscal2008,alsopreparedbytheCompanyonMarch16,2009.TheannualfinancialstatementsarethereforeadoptedpursuanttoSec.172AktG.TheSupervisoryBoardsupportstheproposaloftheManagementBoardconcerningtheallocationofretainedearnings.
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TheSupervisoryBoardalsoexaminedthereportpreparedbytheManagementBoardaboutrelationswithaffiliatedcompanies(DependentCompanyReport),forwhichtheauditorsawardedthefollowingcertificate:
“Onthebasisofourstatutoryexaminationandevaluation,wecanconfirmthat
1. thedetailsmadeinthereportareaccurate,
2. thecompanywascompensatedadequatelyforeachtransactionmentionedinthereport,
3. inthecaseofthosemeasuresmentionedinthereport,thereisnoevidencetosuggestasignificantlydifferentassessmenttothatprovidedbytheManagementBoard.”
TheSupervisoryBoardexaminedtheDependentCompanyReportaspreparedbytheManagementBoardandapprovesitscontent.Wealsoconcurwiththeverdictofthechiefauditor’sexamination.Onthebasisofourfinalexamination,wehavenoobjectionstoraiseregardingtheManagementBoard’sdeclara-tionattheendoftheDependentCompanyReport.
ChangesintheSupervisoryBoardMr.BernhardDorn,amemberofourSupervisoryBoardsinceMay2000,diedonFebruary10,2008.Weowehimoursinceregratitudeandwillmisshimgreatly.
FollowingaproposalbytheSupervisoryBoardandManagementBoard,Mr.Kai-UweRickewasappointedbythedistrictcourtofMontabaurasafurthermem-beroftheCompany’sSupervisoryBoardonFebruary20,2008.ThecourtappointmentwascompletedbeforethenextAnnualShareholders’Meeting,whichwasheldonMay27,2008.TheshareholdersselectedMr.Kai-UweRicketotheSupervisoryBoardfortheperioduntiltheAnnualShareholders’Meeting2010.
Montabaur,March25,2009
FortheSupervisoryBoardKurtDobitsch
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Consolidated Income Statement Quarterly development in D millions*
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2007Sales 402.0 412.4 407.4 427.8 414.3
Cost of sales -242.5 -245.4 -249.6 -269.5 -256.9
Gross profit 159.5 167.0 157.8 158.3 157.4
Selling expenses
-66.8
-65.8
-73.2
-72.8
-70.3
General administrative expenses -19.8 -20.6 -19.1 -24.1 -21.0
Other operating income / expense 3.0 0.5 4.3 -1.0 -7.8
Amortization of intangible assets resulting from company acquisitions
-5.5
-5.5
-5.6
-4.7
-5.6
Amortization of goodwill 0.0 0.0 0.0 -9.2 0.0
Operating result 70.4 75.6 64.2 46.5 52.7
Financial result -5.4 -5.3 -7.3 -11.7 -2.1
Writedowns on investments 0.0 0.0 -22.5 -19.9 0.0
Result from at-equity companies -0.2 -4.8 -122.2 -107.0 1.9
Pre-tax result 64.8 65.5 -87.8 -92.1 52.5
Income taxes -19.7 -20.3 -16.0 -15.9 -12.4
Net income (from continued operations) 45.1 45.2 -103.8 -108.0 40.1
Result from discontinued operations
0.0
0.0
0.0
0.0
-0.2
Net income (after discontinued operations) 45.1 45.2 -103.8 -108.0 39.9
Attributabel to
minority interests 0.4 0.2 0.0 -1.8 1.1
shareholders of United Internet AG 44.7 45.0 -103.8 -106.2 38.8
*This schedule is not part of the Management Report and thus unaudited.
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Our High-performance Data Centers
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The expectations of our customers continue to grow: with the development
of innovative new products there is also a growing need for greater bandwidth,
above all for data-hungry multimedia applications. In order to be equipped to
meet future needs, we have once again expanded the bandwidths of our high-
performance data centers in Germany, Europe and the USA.
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The internet has firmly established itself as a universal medi-
um for information, communication, entertainment and e-busi-
ness. Broadband access is the motor driving the information and
knowledge society. The popularity of DSL telephony and the grow-
ing integration of varying services into a multi-functional, all-in-
one package including moving images (internet TV) are clear signs
of this development.
The internet is thus developing into a universal infrastructure
which can satisfy all information, entertainment and communica-
tion needs through a single household connection – and at the
same time act as an effective sales channel. Portals pool services
and content according to specific target group profiles and repre-
sent a universal home base within the internet.
This is exactly our vision: to supply private and commercial
users with market-oriented information, entertainment and com-
munication products from our “Internet Factory” via increasingly
powerful broadband connections.
Our Strategy
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United Internet is active in markets offering good growth potential. With over7.9 millioncustomercontracts,wearea leadingdomesticandglobalplayer.Wecanquickly launch innovative internet products at reasonable prices. Swiftly andflexibly.
In the Product Segment, our informationmanagement, webhosting and internetaccessproductsaredirectedatprivateusers,smallofficesandsmalltomid-sizeenter-prises.ThesegroupsareserveddirectlybythebrandsGMX,WEB.DEand1&1.Inearly2009,wealsoacquiredafurtherwell-knownbrandintheGermandomainandregistrybusiness:united-domains.Inadditiontoourdirectsalesactivities,wealsomarketourwebhostingproductsaswhite-labelpackagesviathebrandsInterNetX(inGermany)andFasthosts(intheUKandtheUSA).OtherISPsthenmarkettheseproductsundertheirownnameandfortheirownaccount.Wealsoofferourownhigh-reachportalsasasalesandmarketingplatformviatheUnitedInternetMediabrand.
WearerepresentedintheOnlineMarketingsegmentbythebrandsAdLINKMedia,affilinet and Sedo.Wemarket third-party domains andwebsites, offering them toadvertisersandagenciesasonlineplatformsfortheirsalesandmarketingactivities:the product portfolio ranges from Display Marketing (AdLINK Media) to AffiliateMarketing(affilinet)andDomainMarketing(Sedo).
United Internet’s growth opportunities are clearly apparent: increasingly powerfulbroadbandconnectionswillenablenewandmoresophisticatedvalue-addedservices.Thistrendisillustratedbynewinternet-basedapplicationsforendusersandcompanies– often referred to as Software as a Service (SaaS) or Cloud Computing. With over10yearsexperienceasawebhostandapplicationprovider,UnitedInternetisatthecuttingedgeofthisdevelopment.
Duetothealmostcompleteautomationofourbusinessprocesses,costsandcustomergrowthhavebeeneffectivelyseparated. Inotherwords,everynewcustomer incursproportionatelylowercosts.Thisenablesustoutilizeeconomiesofscaleandmakeourcompanyevenmoreefficient.ThegrowingspreadofbroadbandconnectionsandflatratetariffsalsomeansmorebusinessforourOnlineMarketingsegment.Asusersarenow online more frequently and for longer periods, the internet is becomingincreasinglyattractiveforadvertisers.Italsomeansourbrandscanuseincreasinglydata-intensiveformats,suchasvideoclips,forinternetcampaigns.
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BroadspectrumofproductsUnitedInternetoffersawiderangeofinnovativeinternetproducts.Ourcustomerssignmostlysubscriptioncontractswithusbasedonfixedmonthlyfeesandvariable,volume-basedcharges.Thisbusinessmodeldeliberatelydifferentiatesusfromthosesupplierswhichfocusoninternet-by-callorcustomizedsolutions.
Weofferthreeproductlines:InformationManagementwithe-mailsolutions,messaging,addressmanagement,PocketWeband0700numbers;Webhostingwithdomains,homepages,dedicatedandvirtualservers,ande-shops;aswellasInternetAccesswithDSL(includinginternettelephony,video-on-demandandmobilephonecalls),narrowbandandmobileinternet.TheseproductsaremainlymarketedviaourcorebrandsGMX,WEB.DEand1&1–andinfuturealsoviaourdomainspecialist“united-domains”acquiredinearlyMarch2009.Thesestrongbrandsenableustoreachamassmarketandtargetspecificcustomergroups.Inadditiontoourend-userbusiness,wealsomarketourwebhostingproductsviatheInterNetXandFasthostsbrandsaswhite-labelpackagestootherISPs,whichinturnmarketthemundertheirownnameandfortheirownaccount.
OurInternetFactoryAttheheartofourbusinessmodelisour“InternetFactory”,whereweapplythemechanismsofrationalizedproduction.Ourhighlyefficientdevelopmentdepart-mentsdesignproductswhichrepresentthebackboneoftheonlinebusiness.Our“InternetFactory”enablesustoextendourproductlinesalmostatwill,aswellastobundlethem,scalethem–andexportthem.Onesuccessfactorforourstronginternationalgrowth.
Afurtherrecipeforsuccessisourdepthofproduction.Whereveritmakesgoodbusinesssense,wecovertheentirevaluechain–fromthetechnologicalbasetoself-developedsoftwareproducts,effectivesalesandmarketingandactivecustomersupport.
UnitedInternet’sbusinessmodelofferstremendousbenefits:thecontractualbasisofoursubscriptionssecuresthelong-termstabilityofsalesandearnings.Andourownin-houseproductdevelopmentandmarketinghelpuslaunchinnovationsfasterthanmostcompetitors.Asaresult,wehavebecomeabywordthroughouttheworldforhigh-performanceandinnovativewebhostingproducts.Economiesofscalerepresentafurtherkeyconceptforus.Everynewcustomerenhancestheprofitabilityofour“InternetFactory”.Investmentsinourfactoryhave
Innovative products in growing markets
Product Segment22
GMXtargetsthemassmarketwithe-mailandmessagingproducts.Over8millionactiveuserspermonthmakeGMXalsotooneofGermany’sleadingportals.Inadditiontoitsfreee-mailaccounts,GMXalsooffersfee-based,value-addedservices.
Witharound13millionactiveinternetuserspermonth,WEB.DEistheNo.2ontheGermanportalmarket.WEB.DEalsooffersfreebasicservicesaswellasfee-basedproductsandservices,includingthepopularWEB.DEClub.
1&1istherightaddressfordiscerningprivateusersandbusinesscustomerslookingforInformationManagement,WebhostingandAccesssolutions.1&1isNo.3inGermany’sDSLsectorandtheworld’sleadinghostingcompany,activein6countries.
beenmadeandproductsdevelopedintheformofsoftware-based,value-addedinternetservices.Nowitisaquestionofutilizingthemasfullyaspossible.Thegreaterthenumberofcustomersusingproductsdevelopedandproducedatour“InternetFactory”,thegreaterourprofitwillbe.Afurtheradvantageisourtarget-group-guidedmarketing.EveryUnitedInternetcustomergetstheexactproductheneeds.Thisismadepossiblebyourestablishedbrandsand,insomecases,exclusivesaleschannels.Andfinally,exportabilityisafurthertrumpcardforus.OurproductscanoftenbeusedanywhereintheworldandworkonthesameprincipleinFrankfurtastheydoinLondon,ParisorNewYork.
Ourbrandsnotonlygeneraterevenuesfromsubscriptions;anincreasingproportionofincomealsoresultsfromouronlineadvertisingande-commerceactivities.UnitedInternetMedia,themarketingcompanyforourGMX,WEB.DEand1&1portalsandourshoppingportalSmartShopping.de,providesadvertisersandagenciesinGermanywitheverythingtheydesire.Thisincludesastillunmatchedreachofalmost50%amongGermaninternetusers,aswellashigh-quality,targetedmarketingandinnovativeadvertisinginstruments.OurfamilyofbrandsprovidesauniquelevelofmarketcoverageinGermany.
GrowthinstablemarketsAccordingtothestudy“LIFE–DigitalesLeben”,publishedinlateFebruary,thetrendtowardbroadbandconnectionswillcontinue.Theexpertsforecastgrowthto36millionbroadbandconnectionsinGermanyby2015anddatatransmissionspeedsofover100Mbit/sinsomecases.Theexpertsalsoexpectmobilebroadbandconnections(UMTS)toquadrupleto41millionby2015.
ThesectorassociationBITKOMforecaststhattheGermanmarketforfixed-lineinternetaccesswillgrowby4.2%toC13.8billionin2009,thusreachinganewrecordlevel.Despitetheeconomicslump,itforecaststhatsaleswithprivateinternetaccessalonewillgrowby7.5%toC8.8billionin2009.
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Marketresearchersalsopredictcontinuinggrowthforthewebhostingindustry.GartnerandIDCforecastannualgrowthratesof15%and16%until2010.IntheirEuropeanManagedWebhostingForecastofOctober2007,theexpertsofIDCpredictedgrowthof10.4%toUSD4.6billionin2009–intheB-to-Bhostingsectoralone.GoodgrowthopportunitiesareforecastforallEuropeanmarketsinwhichweoperate:Germany(+8.4%),theUK(+10.4%),France(+9.9%),Austria(+11.3%)andSpain(+12.4%).Newweb-basedservices–subsumedundertheterms“software-as-a-service”and“cloudcomputing”–willfurtherstrengthenthis“outsourcingtrend”(towardinternet-basedandawayfromPC-basedapplications).
Theonlineadvertisingmarketisalsoexpectedtocontinueitsstronggrowth–althoughatemporarybutsignifi-cantdownturnisexpectedin2009asaresultoftheglobaleconomicproblems.
Theoverallimportanceofonlineadvertisinginthetotaladvertisingmixwillcontinuetorise.The“Marketers‘InternetAdBarometer2008”reportshowsthateightoutoftenEuropeanadvertiserswillinvestmoreheavilyinonlineadvertisinginthecomingyears.AlmostthreequartersofalladvertisersquestionedinEurope(73%com-paredwith52%in2006)usetheinternetincreasinglyasanadvertisingmedium.Overonethirdofthesedeci-dersregardtheinternetasanessentialchannelfortheirmarketing.In2006thisproportionwasjust17%.82%ofthosecompanieswhichraisedtheironlineadvertisingbudgetin2008,movedpartoftheirmediabudgetfromprint(40%),TV(39%)anddirectmarketing(32%)totheinternet.
AlthoughonlineadvertisingwillcontinuetogrowinimportanceinGermany,itwillnotbeabletoescapetheeffectsofthegeneraleconomicsituation.TheOVK’sgrowthforecastfor2009isthusmuchmoreconservativethaninpreviousyears.Theonlineexpertstotalgrowthof10%tojustoverC4billion.
AsoneofGermany’slargestDSLproviders,astheleadingproviderofonlineadvertisinginGermany,andfinallyastheworld’sleadingsupplierofcomplexanddata-intensivehostingapplications,UnitedInternetthereforebenefitsfromthesemarkettrendsinseveralways.
Produktgeschäft
InterNetXandFasthostsrepresenttheresellingbusinessoftheUnitedInternetGroup.Thebrandsmarketourwebhostingproductsaswhite-labelpackagestootherISPs,whichmarketthemundertheirownnameandfortheirownaccount.
InterNetXoperatesinGermanyandFasthostsintheUKandtheUSA.Thecompaniesattendedmorethan25,000resellers.
UnitedInternetMediamarketstheportalsoftheUnitedInternetGroup.Withareachofover19millionuniqueusers–andthusalmost50%ofallGermansonline–UnitedInternetMediaisGermany’sleadermarketer.
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DigitalmarketingandsalessolutionsforadvertisersThecontinuingpopularityoftheinternethasprovidedmanyadvertiserswithanewandhighlyeffectiveplatformtodisplaytheirwares.Onlinemarketingisbecominganincreasinglyimportantmarket.UnitedInternetoffersavarietyofonlinemarketingandsalessolutionsinitsOnlineMarketingsegment:DisplayMarketingviaAdLINKMedia,AffiliateMarketingviaaffilinetandDomainMarketingviaSedo.Incontrasttothemarketingofourownportalsinthe“Product”segment,thissegmentfocusesmainlyonthemarketingofthird-partydomainsandwebsites–in13EuropeannationsandtheUSA.
AdLINKMediaisoneofEurope’slargestDisplayMarketingproviders.Thebackboneofthisbusinesssegmentisanonlineadvertisingnetwork,consistingofselectedandhighlyfrequentedwebsites.Withthisnetwork,AdLINKreachesover90millionusersinalltherelevantEuropeanmarkets.Around10.3billionadimpressionsaremarketedpermonth.Advertisingspaceisbookedbydomesticandinternationalclients,whouseitforbrandingpurposesordirectproductsales.
Underthemotto“SuccessfulTogether”,affilinetoperatesanaffiliatemarketingplatformonwhichsuppliersofaffiliateprogramsandwebsiteowners(=affiliates)canmeet.Thewebsiteoperatorscurrentlyoffersome6billionadimpressionspermonth.The1,500affiliateprogramoperatorsincludenumerousmajor-namecompanies,suchasebay,DocMorris,Debitel,Sixt,mobile.deandNeckermann.affilinethandlesthemarketing,administrationandbillingoftheprogramsandprofitsfromthecontactsinitiatedviathenetworkonapurelysuccess-orientedbasis.affilinetisrepresentedonEurope’smostimportante-commercemarkets:Germany,France,Spain,theUKandtheNetherlands.
Sedooperatestheglobaldomaintradingplatform“sedo.com”,whichcurrentlytradessome15milliondomains.Sedoisthustheglobalmarketleaderinthetradingof“second-hand”internetdomains.Sedoalsooffersthepossibilityto“park”unuseddomains,i.e.Sedomarketstheseaddressestoadvertisersonbehalfofthedomainowners.Sedotakesashareoftherevenuesgeneratedfrommarketing.Domainparkingisequallyinterestingfordomainownersandadvertisersastheautomatedprocessoffersownersaddedvalueintheformofadditionaladvertisingrevenue,whileadvertisersgenerallyonlypayforcontactsactuallygenerated.Sedoservescustomersinover200countriesfromitsofficesinGermany,theUSA,andtheUK.
GreatpotentialforonlinemarketingThemarketingofthird-partydomainsandwebsitesissubjecttothesameconditionsasthemarketingofourownportals:theonlineadvertisingmarkethasdevelopedintoadynamicgrowthmarketwithtremendousgrowthpotentialinthecomingyears.
WhiletheproportionofspendingonclassicmediaformatsstagnatedorfellinGermanyin2008,thegrowthofonlineadvertisingcontinued–despitetheadverseeconomicconditions.In2008,onlineadvertisingaccountedfor14.8%ofthetotaladvertisingmarket–anincreaseof2.7%over2007.Asanadvertisingmedium,theinternethasthusgainedover10percentagepointswithinthepastfouryears,attheexpenseofclassicadvertisingmedia.
Great prospects for Online Marketing
Online Marketing
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As for almost all listed companies, 2008 was also a difficult year on the stock exchange for United Internet AG. The stock markets were heavily influenced by the financial crisis and the global economic downturn it caused. The United Internet AG share was unable to escape this market turbulence and suffered strong losses, especially in the second half of 2008. The slump in online advertising, slower growth in our Product segment and the prospect of possible writedowns on our strategic invest-ments overshadowed the stable progress of our operating business. The United Internet AG share closed the year at C 6.29, compared with C 16.65 in the previous year.
The United Internet share was once again one of the most liquid in the TecDAX index in 2008. In fiscal 2008 an average of 1.08 million shares were traded daily (prior year: 0.97 milli-on) with an average value of C 11.5 million (prior year: C 13.9 million) via the XETRA electronic computer trading system.
Shareholder structure (as of Dec. 31, 2008)
in %
The Share
Freefloat 45.84
Kizoo AG8.83
Ralph Dommermuth36.58
Own shares8.75
Share type Registered common stock with a notional share of capital stock of C 1.00 each
ISIN DE0005089031
Ticker symbol Stock Exchange Frankfurt UTDI Reuters UTDI.DE Bloomberg UTDI GR
Segment Prime Standard
Index TecDAX Stoxx-600 GEX
Shareholdings and subscription rights of the Management Board and Supervisory Board as of December 31, 2008
Shareholding (in units)
Subscription rights (in units)
Management Board Ralph Dommermuth
92,000,000
-
Norbert Lang 576,128 800,000
Total 92,576,128 -
Supervisory Board Kurt Dobitsch (Chair)
0
-
Kai-Uwe Ricke 0 -
Michael Scheeren 700,000 -
Total 700,000 -
October
DecemberJuly
April
January
United Internet Aktie TecDAX
Development 2008 indexedin %
100
80
60
40
20
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AnnualShareholders’Meeting2008
TheAnnualShareholders‘MeetingofUnitedInternetAGwasheldinFrankfurtamMainonMay27,2008.64.03%ofcapitalstockwasrepresentedduringthevoting.Theshareholdersadoptedallresolutionsontheagendarequiringvotingwithmajoritiesofover99%.TheManagementBoardwasauthorizedbytheAnnualShareholders‘Meetingtobuybackupto10%oftheCompany’ssharesintheperioduptoNovember26,2009.
Dividend
TheAnnualShareholders’MeetingofUnitedInternetAG,heldonMay27,2008adoptedaresolutiontopayadividendof20centspershareforthefiscalyear2007.ThedividendpaymenttotalingC45.9millionwasmadeonthefollowingday.
Inviewofthebalancesheetlossintheannualfinan-cialstatementsoftheparentcompanyUnitedInternetAG–duetowritedownsonthecarryingvalueofourinvestments,especiallyinthefieldofourlistedstrategicinvestments,andtheformationofreservesfortreasuryshares–therewillbenodividendforfiscalyear2008.Thebalancesheetlosswillbecarriedforward.
CapitalstockAsofthebalancesheetdate,theCompany’scapitalstockamountstoC251,469,184dividedinto251,469,184no-parvalue,registeredshares.Thetotalnumberofvotingrightsasofthebalancesheetdateamountsto251,469,184.
Treasurysharesaccountfor8.75%ofcapitalstockTheManagementBoardwasauthorizedbytheAnnualShareholders‘MeetingofMay30,2007tobuybackupto10%oftheCompany’sshares.IntheperiodfromJuly24,2007toJanuary21,2008UnitedInternetAGboughtatotalof5,000,000treasurysharesandthusexhau-stedthesharebuybackprogramadoptedonJuly24,2007.AsofJanuary21,2008UnitedInternetAGthusheldatotalof20,000,000treasuryshares.OnJanuary22,2008theManagementBoardresolvedtolaunchanewsharebuybackprogram,duringwhichafurther2millionCompanysharesweretobeboughtbackviathestockexchange.AsofDecember31,2008theCompanyheld22.0milliontreasuryshares,corres-pondingtoaround8.75%ofcurrentcapitalstock.
InvestorRelations
Infiscal2008theManagementBoardandInvestorRelationsdepartment(IR)ofUnitedInternetAGprovidedinstitutionalandprivateinvestorswithregularandcomprehensiveinformation.Informationwasprovidedtothecapitalmarketviathequarterlyandannualreports,aswellasatpressandanalystconferences.Thecompany’smanagementandtheIRdepartmentheldnumerousone-on-onediscussionsatthecompany’sofficesinMontabaur,aswellasatroad-showsandinternationalcapitalmarketandanalystconferences,wheretheyinformedparticipantsaboutthecompany’sstrategyandfinancialresults.Over25investmentbanksinGermany,theUKandFranceareincontactwiththeIRdepartmentofUnitedInternetAGandpublishregularstudiesandcommentsonthecompany’sprogressandshareperformance.Apartfromsuchone-on-onemeetings,shareholdersandpotentialfutureinvestorscanalsoreceivethelatestnewsonthecompanyaroundtheclockviathecompany’swebsite(www.united-internet.de).
Award-winningIRactivitiesThomsonReuters,WirtschaftswocheandDIRK(TheGermanInvestorRelationsAssociation)regularlypresentawardsfortheInvestorRelationsactivitiesoflistedGermancompanies.Inthecourseofthe“ThomsonReutersExtelSurveys”,over900capitalmarketexpertsexpressedtheiropiniononthequalityoftheIRcommunicationsworkprovidedbycompaniesinvariousstockmarketindices.In2008UnitedInternetAGachievedanoutstandingresult:ourIRteamcamethirdoverallamongTecDaxcompanies.Share 2008 2007Year-high 16.83 C 16.79 C
Year-low 4.16 C 12.34 C
Year-end 6.29 C 16.65 C
Performance -62 % 33 %
Average daily turnover 11,540,697 C 13,924,220 C
Average daily turnover in units
1,082,791
969,528
Number of shares 251,469 million 251,434 million
Market value 1,582 billion C 4,186 billion C
Earnings per share (EPS) -0.52 C 0.93 C
Dividend payment – 45.9 million C
Dividend per share – 20 Cent
Share data
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Dynamic customer growth: the number of customer contracts grew by 800,000 to 7.95 million in 2008.
Strong demand for complete DSL packages: as well as increasing DSL contracts by 230,000 to 2.82 million, we also expanded the number of DSL customers with complete packages by 670,000 to 780,000.
Successful international expansion: we added 380,000 new web-hosting contracts outside Germany to reach a total of 1.93 million.
Growing user figures in portal business: the number of active e-mail users on our online portals GMX and WEB.DE grew by 3.68 million to 25.47 million.
Further operative growth: consolidated sales grew by 10.9% in 2008 to around D 1.65 billion, while EBITDA increased by 3.2% to around D 319 million.
High writedowns on investments: key earnings figures for 2008 are burdened by writedowns (impairment) on investments amounting to around D 275.4 million.
Management Report
29 Economicenvironment
32 Businessdevelopment
42 Resultsofoperation,financialpositionandnetassets
49 Subsequentevents
50 Riskreport
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53 Outlook
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Economic environmentFinancial crisis placing increasing burden on real economyAsthefinancialandbankingcrisisplacedanincreasingburdenontherealeconomyin2008,theInternationalMonetaryFund(IMF)wasforcedtomakeseveraldownwardcorrectionstoitsglobalgrowthforecastsinthecourseoftheyear.Afterpredictingglobalgrowthof4.1%for2008atthebeginningoftheyear,theIMFhadreduceditsforecastto3.4%byyear-end.Atthesametime,theIMFexpectsthattherealeconomiccrisiswillnotbefullynoticeableinindivi-dualcountriesnorgloballyuntil2009andforecastsglobalgrowthofaround0%.
Followingastrongfirstquarter,theEurozone’seco-nomyshrankinallsubsequentquartersduring2008(comparedwiththepreviousyear).At-1.5%and-1.2%,thefourthquarterinparticularwaswellbehindthepreviousquarterandprior-yearquarter,respectively.AccordingtotheEuropeanstatisticsagencyEurostat,annualgrowthin2008reachedjust0.7%–thanksabovealltothestrongfirstquarter.
Germangrowthwasalmosthalvedin2008.AccordingtoareportoftheFederalStatisticsAgency(Destatis)inFebruary2009,however,thestrongstartto2008helpedtheGermaneconomyreachgrowthof1.3%fortheyearasawhole.Thecorrespondingfigurefor2007was2.5%andasmuchas3%intheboomyear2006.Afterabuoyantfirstquarter,thedownwardtrendacceleratedtowardyear-end.Inthefourthquarter,grossdomesticproductwasdown2.1%onthepreviousquarter–followingsimilardeclinesinthesecondandthirdquarters.
Limited impact on ITC markets
TheeconomiccrisishassofaronlyhadalimitedimpactontheITCsegment(informationtechnology,telecommunicationsanddigitalconsumerelectronics)ofthehigh-techindustry.ThiswasconfirmedbyarepresentativesurveyoftheITCsector,whichtheGermanITCassociationBITKOM(BundesverbandInformationswirtschaft,TelekommunikationundneueMediene.V.)presentedontheeveoftheCeBIT2009fairinHanover.Accordingtothesurvey,55%ofcom-paniesquestionedhadsofarfeltnodirecteffectsofthecrisisontheirbusiness.Theothersreportedlowersalesorfewernewordersthanexpectedbeforethecrisis.Intotal,theGermanITCmarketgrewby1.2%in2008,frome 142.9billiontoC144.6billion.
WhereastheConsumerElectronics(+5.2%toC12.2billion)andInformationTechnology(+3.4%toC66.2billion)segmentsdisplayedrobustgrowthin2008,salesintheTelecommunicationsegmentweredown1.6%onthepreviousyeartoC66.3billion.BIT-KOMblamesthedifficultmarketsituationintheTele-communicationsegmentaboveallonfurtherpriceerosion.In2008,forexample,tariffsonaverageby3.3%.
United Internet’s target markets continue to grow
ApartfromtheITCmarketasawhole,themostimpor-tantmarketsforUnitedInternetaretheGermanDSLmarket,theGermanandEuropeanadvertisingmarketandtheglobalmarketforwebhostingservices.Alookatthesemarketsshowsthatallsegmentswereabletogrowin2008–althoughtheonlineadvertisingmarketsufferedheavilyfromreducedadvertiserspendingfrommid2008onwards,asaresultofthefinancialandeconomiccrisis.
Onthebasisofpublicationsreleasedbyactivecompa-niesintheGermanbroadbandmarket,wecalculatethatthenumberofbroadbandconnectionsgrewby3.2millionor16.1%toatotalof23.1millionin2008(includingcableinternet).TheFederalNetworkAgency’sofficialfigureswerenotavailableatthetimeofwriting.Atthesametime,thereisagrowingtrendtowardDSLcompletepackages.SuchpackagesnolongerrequireaDeutscheTelekomphoneconnection,insteadproviderssuchasUnitedInternetrent“thelast
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mile”frompre-serviceprovidersandoffereverythingfromasinglesource.AclearindicatorofthistrendistheincreaseinDeutscheTelekom’sTALconnectionsof1.95million,orover30%,to8.37millionandthedecre-aseinTelekomfixedlineconnectionsof2.49million,or8%,to28.56million.AccordingtocalculationsoftheindustryassociationBITKOM,revenuesgeneratedbyinternetconnectionsamountedtoaroundC13.2billionin2008.
Theleadingmarketresearchinstitutesallexpectedfurtherstronggrowthfortheglobalonlineadvertisingmarketandforecast–beforetheonsetoftheglobalfinancialcrisis–similarlyhighgrowthratesasinpre-viousyears.Asfearsofglobalrecessiongrew,however,advertisersbecameincreasinglycautiouswiththeirspendingandmarketresearcherswereforcedtodown-gradetheirgrowthforecastsforallmajoradvertisingmarkets.However,incontrasttothedevelopmentinmanyothereconomicsectors,onlineadvertisingwasabletocontinueitssuccessstoryofthepastfewyears.
AccordingtotheInteractiveAdvertisingBureau(IAB)andPricewaterhouseCoopers(InternetAdvertisingRevenueReportQ3/2008),onlineadvertisingrevenuescontinuetogrowintheUSA.However,therewasanoticeableslowdowninthepaceofgrowthduring2008asaresultofthefinancialandeconomiccrisis–from18.2%inthefirstquarterto12.8%inthesecondand11.0%inthethird.Atthetimeofwriting,thefiguresforthefourthquarterof2008werenotyetavailable.
AccordingtocalculationspreparedbyNielsenMediaResearch,grossonlineadvertisingrevenuesinGer-many–generatedwithgraphicadvertising–grewby26.9%in2008toC1.5billion.NielsenMediaResearchalsoreportedthattherewasamarkedslowdowninthepaceofgrowthinGermanyoverthelastquarters.TheOnlineMarketingGroup(Online-Vermarkterkreis–OVK)oftheGermanDigitalEconomyAssociation(BundesverbandDigitaleWirtschaft–BVDW)comestosimilarfigures:withgrowthof25%,OVKstatesthatonlineadvertisinginGermanyboaststhehighestgrowthratebyfarcomparedwithothermedia.Grossadvertisingrevenuesfromclassiconlineadvertising,searchwordmarketingandaffiliatenetworkstotaledC3.65billion.Classiconlineadvertisingdisplayedthestrongestgrowthin2008(+27%),generatingrevenuesofaroundC1.9billion.Searchwordmarketingachie-vedyear-on-yeargrowthof24%andclimbedtoaroundC1.48billion.Theaffiliatemarketingsegmentgrewby25%toC268million.
Despitetheadverseeconomicconditions,theGermanonlineadvertisingmarketthusonceagainconfirmedthepositivetrendoftheprecedingyearsin2008.Whiletheproportionofspendingonclassicmediaformatscontinuestostagnateorsteadilydecline,onlineadvertisingcontinuestogrowandgainfurtherground.Onlineadvertising’sshareofthetotaladverti-singmarkethasgrownfrom4.4%to14.4%inthelastfouryears.Atthesametime,mediaformatssuchasgeneral-interestmagazines(-3.3%),newspapers(-3.0%)andTV(-3.2%)havealllostmarketshare.
Althoughonlineadvertisingcontinuestogrowinsignificance–aspartoftheoverallmarketingmix–itwasnotabletoescapetheeffectsofthegeneralecono-micsituation.Thesameisstilltruetoday.Asaconse-quence,theOVK’sgrowthforecastofaround10%for2009ismuchmoreconservativethaninpreviousyears.
WhencomparingmarketgrowthascalculatedbyNielsenortheOVKwithactualmarketgrowthofcom-paniesoperatinginthemarket,itshouldbenotedthatbothNielsenMediaResearchandtheOVKonly“measure”grossspendings,andthustheofficiallistprices.Discountsgrantedontheselistprices–whichbecameincreasinglyin2008inthefaceoffiercecom-petition–arenotconsideredinthesefigures.Againstthisbackdrop,weexpectthatthegrowthinrealsalesoftheonlineadvertisingmarket–basedonspending–willfallsignificantlyintotalasaresultofstrongpressureonpricesanddiscounts.
Theinternationalwebhostingmarketalsocontinuestoenjoystronggrowth.AccordingtocalculationsofRegistrarSTATS.com,thenumberofregisteredgenerictop-leveldomainsaroundtheworld(suchas.com,.net,.org)grewby9.8millionin2008toreachatotalof107.3million–anincreaseofaround10%overDecem-ber31,2007.TheGermantop-leveldomain“.de”alsoenjoyedstrongdemandin2008–despiteacompara-tivelyhighonlinepresencealreadyachievedamongconsumersandbusinesses–andgrewby780,000(+6.7%)to12.45milliondomainsbytheendofDecem-ber.Thispurelyquantitativemarketgrowthisalsoconfirmedbyforecasts,suchasthoseofGartnerandIDCwhoexpectannualgrowthratesof15%and16%until2010.IntheirEuropeanManagedWebhostingForecastofOctober2007,theexpertsofIDCforecastgrowthof11.3%toUSD4.2billionforwesternEuropein2008–intheB-to-Bwebhostingsectoralone.GoodgrowthopportunitiesareforecastforallEuropeanmarketsinwhichweoperate:Germany(+9.4%),the
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UK(+11.3%),France(+11.0%),Austria(+12.3%)andSpain(+13.4%).
Thiswide-scalemarketgrowthisdrivenprimarilybytheglobaldemandforeverfasterinternetaccess.AccordingtofiguresoftheDeutschlandOnlinereport,maximumspeedswerestillaround3Mbits/sin2004,roseto6Mbits/sin2005andhadalreadyreached16Mbits/sin2006.For2015,expertsforecastthatover30%ofallinternetconnectionswillbebroadbandandwellbeyondthecurrent“16-Mbits/sbarrier”.ThesectorassociationBITKOMforecaststhattotalonlinedatatrafficisalreadygrowingby50-60%–wherebythedatavolumeofprivateinternetusersisgrowingparticularlyfast,asevermorephotos,videosandfilmsinhigh-resolutionqualityaretransmitted.
Thegrowingpenetrationofprivatehouseholdswitheverfasterbroadbandconnectionsenablesinternetserviceproviders(ISPs),suchasUnitedInternet,toofferincreasinglydata-intensiveandinnovativeproductsandservices,suchasvideo-on-demandorinfutureinternetTV,andcomplex,web-basedapplica-tionspreviouslyonlyknownasPCsoftware–oftenreferredtoasSoftwareasaService(SaaS)orCloudComputing–whichendcustomersorcompaniescanusewithoutanyfallinperformance.Widespreadbroadbandaccessalsoopensupnewopportunitiesforinternetadvertising,afieldinwhichwearerepresen-tedbyourportalsGMX,WEB.DEand1&1,aswellasbyourOnlineMarketingsegment.Advertisersarenowabletouseevermoredata-intensiveadvertisingformats,suchashigh-resolutionvideoclips,fortheironlinecampaigns.AccordingtotheOVK,theuseofvideoadvertisingformatsalreadygrewby236%inGermanyduring2008.
Withitswidemarketcoverage,UnitedInternetbene-fitsfromthismarketdevelopmentonseverallevels:asoneofGermany’slargestDSLproviders,astheleadingproviderofonlineadvertisinginGermany,asoneoftheleadingEuropeanmarketersofthird-partyonlineadvertisingspaceandasoneoftheworld’sleadingwebhostsofcomplex,value-addedapplicationsatourdatacenters.
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Business developmentSuccessful development of Group’s operating businessWith7.95millionfee-basedcustomercontracts,UnitedInternetAGisaleadinginternationalISP.UnitedInternet’soperationsareprimarilythroughitssub-sidiaries1&1InternetAG,includingWEB.DEGmbH,GMXGmbH,GMXInternetServicesGmbH,UnitedInternetMediaAG,FasthostsInternetLtd.,viaInterNetXGmbHandviaAdLINKInternetMediaAG,includingSedoGmbHandaffilinetGmbH.
Ourbrandsarecurrentlyactiveintwobusinessseg-ments: IntheProductsegment,ourinformationmanage-mentapplications,webhostingsolutionsandinternetaccessproductsaredirectedatprivateusers,small/homeoffices(SoHos)andsmalltomid-sizeenterprises(SMBs).Inourdirectsalesbusiness,thesegroupsareservedbythebrandsGMX,WEB.DEand1&1.OurInterNetXandFast-hostsbrandsalsoofferwebhostingproductsaswhite-labelsolutions–indirectly–viaresellers,whileUnitedInternetMediamarketsourportalstoe-commercemerchantsandadvertisers.
InourOnlineMarketingsegment,wearemainlyrepresentedbythebrandsAdLINKMedia,affilinetandSedo.Weofferadvertisersavarietyofmarke-tingandsalessolutionsinthissegment:DisplayMarketingviaAdLINKMedia,AffiliateMarketingviaaffilinetandDomainMarketingviaSedo.IncontrasttothemarketingofourownportalsintheProductsegment,weprimarilymarketthird-partydomainsandwebsitesinthissegment.
Quantitativeperformanceindicators
Inlinewithourpositioninginthe“Product”and“OnlineMarketing”segments,wemeasureourbusi-nesssuccessaboveallviathekeyindicators:sales,grossmargin,EBITDAandEBTontheonehand,andcustomercontracts,reach/activeusersandmarketabledomainsandwebsitesontheother.
Successfulinternationalexpansion
Wecontinuetomakestrongprogressinourinter-nationalexpansion.In2008,ourGroupcompanieswereactivein14differentnationsthroughtheirownlocaloffices.DespiteaverystrongEuro(especiallyagainsttheUSdollarandBritishpound),non-Germansalesgrewby4.1%duringtheperiodunderreviewandcontributedC216.2million(prioryear:C207.7million)tototalconsolidatedsalesofC1,649.6million.Adjustedforcurrencyfluctuations,foreignsalesamountedtoapproximatelyC238.2million,corres-pondingtogrowthof14.7%.IntheProductsegment,weoperateour“Webhosting”businessinGermany,France,theUK,Austria,SpainandtheUSA.WealsoservecustomersinnumerousothercountriesviaourinternationalUSwebsite.In2008,weraisedthetotalnumberofnon-Germancustomercontractsby380,000–from1.55millionasofDecember31,2007to1.93milliononDecember31,2008.AfterbeingrepresentedontheUSend-usermarketsince2004bythe1&1brand,ourresellerbrandFast-hostsalsostartedactivitiesthereinthethirdquarterof2008.Tomarkthebrand’sUSlaunch,Fasthostsofferedresellersafreehigh-qualityreseller-hostingpackagewithunlimitedstoragespaceanddatavolumeforoneyear.AsintheUK,resellersintheUSAcannowalsouseFastshosts’white-labelproductstooffertheircustomerscompletelyindependentwebhostingpackagesorpre-confectionedall-in-onepackagesundertheirownname.AlloffersarehostedatourdatafarminLenexa,Kansas.
TheinternationalpresencewehavealreadyachievedintheOnlineMarketingsegmentisakeyelementofouroverallconcept.InadditiontotheUSA,ourbrandsarerepresentedin13Europeancountries(Belgium,Germany,France,theUK,Italy,Croatia,theNether-lands,Norway,Austria,Sweden,Switzerland,SloveniaandSpain).InDisplayMarketing,weexpandedintoSouth-EastEuropeinearly2008viaourinvestmentGoldbachMedia.ThisinvolvedtheacquisitionofonlinemarketersinCroatiaandSlovenia.InAffiliateMarketing,weaddedSpainandtheNetherlandstoourinternationalplatformin2008.InourDomainMarketingbusiness,SedohasalsobeenrepresentedinLondon(UK)sincemid2008–inadditiontoCologneandBoston(USA)–viaacooperationwithAdLINKMedia.
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QualitativegrowthinDSL
IncomparisonwithDecember31,2007wesucceededinactivating230,000newDSLcontracts(net),bringingthetotaltoapproximately2.82millionDSLcustomersasofDecember31,2008.Approx.60,000furtherDSLorderswerebeingprocessedasofthisdate.Inadditiontotheacquisitionofnewcustomers,themainfocusofourDSLbusinessduringtheperiodunderreviewwastoraisecustomerloyaltyandexpandbusinesswithourcurrentclientbase.Withnowfourpre-serviceproviders(Arcor,DeutscheTelekom,QSCandTelefónica)wesucceededinconvertingalargenumberofexistingcustomerstoourcompletepackagesin2008,thusmaximizingcustomerretention.ComparedwithDecember31,2007,wewereabletoraisethenumberofourcompletepackages–whichnolongerrequireaTelekomphoneconnection–by670,000to780,000.
StrategicinvestmentsinVersatelandfreenet
VersatelUnitedInternetacquiredfurthersharesinVersatelAGduringtheperiodunderreviewandheldatotalstakeof25.21%inVersatelAGasofDecember31,2008.
freenetUnitedInternetandDrillischalsoincreasedtheirshareholdinginfreenetAGto24.52%inJanuary2008,viathejointlyheldcompanyMSPHoldingGmbH.InthecourseofthecapitalincreaseoffreenetAG,inconnectionwithitsacquisitionofDebitel,thesharesheldbyMSPHoldingGmbHinfreenetAGweredilutedfrom24.52%to18.39%asofJuly5,2008.OnDecember29,2008,UnitedInternetacquired10,798,817sharesinfreenetAGfromMSPHoldingGmbH,equivalentto8.43%ofvotingrights.TheproceedswereusedtoreducethefinancialliabilitiesofMSPHoldingGmbH.Afterexecutingthissharetransfer,MSPHoldingGmbHstillholds12,751,183sharesinfreenetAG,or9.96%ofvotingrights.DrillischAGcontinuestohold7.52%ofthevotingrightsinfreenetAG.Duetothecon-tractualvotingcommitmentbetweenUnitedInternetandDrillisch,thereisnodifferenceintheshareofvotingrightsinfreenetAGheldbyUnitedInternetAG,togetherwithDrillischandMSPHolding,whichstilltotals25.91%–asbeforethesharetransfer.
InvestmentfundwiththeSamwerbrothers
TogetherwiththeSamwerbrothers,UnitedInternethasbeeninvestingsincemid2007infundswithavarietyoffocusareas.UnitedInternethasheldastakeintheEuropeanFoundersFundGmbH&Co.Beteili-gungsKGNo.1(UnitedInternetshareholding:66.67%),afundforearly-phasefinancing,sincethemiddleof2007.Asof2008,UnitedInternetalsoholdsastakeinafurtherjointfundsetupinlate2007forso-called“later-stageinvestments”,theEuropeanFoundersFundGmbH&Co.BeteiligungsKGNo.2(UnitedInternetshareholding:90.00%).InacontractdatedMarch5,2008,UnitedInternetalsoacquiredan80.00%stakeintheEuropeanFoundersFundGmbH&Co.BeteiligungsKGNo.3.Thisfundspecializesinsmallpercentageinvestmentsin“later-stagecompanies”.In2008,UnitedInternetinvestedC24.4millioninEFFNo.1forshareholdingsinyounginternetandtechnologycompanies(portfoliocompanies).Viathefullycon-solidatedEFFNo.2andEFFNo.3funds,atotalofC24.5millionandC50.1million,respectively,wasinvestedinportfoliocompanies.ProceedsfromthesaleofportfoliocompaniestotaledC20.0millionin2008.
Newinvestmentsin2008
OnFebruary8,2008,UnitedInternetacquireda48.65%stakeinthemediaholdingcompanyvirtualmindsAGandthusalsoinADITIONtechnologiesAG.ADITIONisthethird-largestadservingsupplierontheGermanonlinemarket,afterDoubleClickandAdTech.UnitedInternet’sstrategicinvestmentisaimedatsecuringthecontinuedindependenceandcompetitiveneutra-lityofADITIONviaaminorityholding.ThiswillhelptostrengthenADITION’sroleasaneutralserviceproviderfollowingthetakeoverofDoubleClickandAdTechbyGoogleandAOL,respectively,andtheirintegrationintothecompanies’respectivemarketingsystems.
OnMarch7,2008,UnitedInternetacquired33.36%ofsharesintheSwissBW2GroupAG.BW2offersprofessionalCRMandERPbusinesssolutions.
ProSiebenSat.1MediaAGandUnitedInternetplacedtheircooperationinthefieldofvideo-on-demandonanewbasisin2008.Ajointlycontrolledcompany,maxdomeGmbH&Co.KG,wasfoundedinwhichProSiebenSat.1andUnitedInternet(via1&1InternetAG)eachhold50%ofshares.TherespectivecontractsweresignedonFebruary22,2008.Thetransactionwas
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approvedbytheanti-trustauthoritiesoftheEuropeanCommissiononApril29,2008.
OnMay30,2008,UnitedInternetacquiredallsharesintheBritishFasthostsresellerDollamoreLtd.,includingits130,000customerrelationships,viatheGroupsubsidiaryFasthostsInternetLtd.
OnJuly1,2008UnitedInternetacquireda30%stakeinJimdoGmbH.Withits“Jimdo”websitetools,thecompanyoffersaservicefortheeasycreationofprivateorcommercialhomepages.
Segment development
Productsegmentposts13.5%salesgrowth
TheUnitedInternetGroup’sdominantbusinessremaineditsProductsegmentin2008,withthebrandsGMX,WEB.DE,1&1,InterNetXandFasthosts,whichtogetheraccountfor86.9%oftotalsales.
Infiscalyear2008,salesinthissegmentgrewby13.5%,fromC1,261.9milliontoC1,432.8million(currencyadjusted:+14.7%toC1,447.3million).Earningsbeforeinterest,taxes,depreciationandamortization(EBITDA)improvedby6.9%,fromC279.4milliontoC298.6mil-lion.Earningsbeforetaxes(EBT)reachedC249.2mil-lion,representinggrowthof13.3%comparedwithC219.9millioninthepreviousyear.Despitehighexpensesforcustomeracquisitionandretention(con-versiontocompletepackages),theEBTmarginonceagainreached17.4%.Customeracquisitioncostsconti-nuetobechargeddirectlyasexpenses.Thenumberofemployeesinthissegmentgrewby16.3%to4,020(prioryear:3,456).
Ourveryhealthykeyfinancialsinthissegmentarecloselylinkedwiththedynamicgrowthofourcusto-merbase.AsofDecember31,2008wehad7.95millionfee-basedcustomercontracts(year-end2007:7.15mil-lion).ThesearedividedamongthethreeproductlinesofourProductsegment:
Information Management withprofessionale-mailsolutions,messaging,addressmanagement,PocketWeband0700number
Webhosting withdomains,homepages,dedicatedandvirtualserversande-shops
Internet Access withDSLconnections(includingtelephonyandvideo-on-demand),aswellasmobileandnarrowbandinternetaccess
Customercontractsupbyover11%Dividedaccordingtoproductlines,thecontractfigurescomprise1.36millioncustomercontractsinthefieldofInformationManagement,3.62millioninWebhosting(ofwhich1.93millionoutsideGermany)and2.97mil-lioninInternetAccess(ofwhich2.82millionDSL).ThemarketingofourDSLcompletepackages,whichnolon-gerrequireaTelekomphoneconnection,madeverygoodprogressin2008.Thenumberofcompletecusto-mersgrewby670,000in2008tostandat780,000byyear-end.
LeadingsupplierofinternetadvertisinginGermanyWitharound19.8millionactiveusers,theUnitedInternetAGportals(GMX,WEB.DEand1&1)areusedbymorethan47%ofallGermaninternetusers.Accor-dingtothecurrent“internetfacts2008-III”oftheonlineresearchworkinggroupAGOF,themarketingcompanyforourportals“UnitedInternetMedia”onceagainrepresentsthelargestsupplierofinternetadvertisinginGermany,intermsofbothreachandadvertisingspacevolume.UnitedInternet’sportalsrank2nd(WEB.DE),5th(GMX)and34th(1&1)amongthe500onlinemediameasuredinGermany.
KeyplayeringlobalwebhostingbusinessWith3.62millionwebhostingcustomersaroundtheworld,over65,000servers,andmorethan13milliondomains,UnitedInternetAGanditswebhostingbrandsisoneoftheworld’sleadingsharedanddedicatedhostsandaleadingglobaldomainregistry.Wesucceededinfurtherenhancingourpositionandwinningnewcustomersinallourforeignmarketsduring2008.Inadditiontoorganicgrowth,wealsoacquiredourUKresellerDollamoreandits130,000customerrelationshipsinthepastyear.
HanaunuclearpowerplanttobecomegreenserverfarmUnitedInternetisbuildingoneofEurope’sbiggestdatacentersonthesiteoftheSiemensTechnoparkinHanau,Germany.Inthebuildingoftheformer“NeueMOX”fuelelementfactory,UnitedInternetwillsetupaninternetdatacenteron10,000squaremetersofbuildingspacewhichwillbegraduallyexpandedaccordingtoneedsandwillultimatelyofferspaceforupto100,000servers.Byplacingthenewfacilityfarawayfromthecompany’sexistingdatacentersintheKarlsruheregion,thecompanycanguaranteethe
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availabilityofitsservicesinthecaseofcatastrophes.Sincelate2008,thebuilding–originallyplannedasanuclearplant–hasbeengraduallyconvertedintoa“green”datacenter,asitsenergyneedswillbesuppliedinfutureexclusivelyfromregenerativesources,aswithallotherdatacenters.ThefirststageoftheHanau-baseddatacenterisexpectedtogointooperationinlate2009.
No.3ontheGermanDSLmarketInitsGermanDSLbusiness,UnitedInternetisthemarket’sthirdlargestproviderafterDeutscheTelekomandVodafone/Arcor.Intheperiodunderreview,weactivated230,000newcustomercontracts(net)andhadaround2.82millioncontractsasofthebalancesheetdate.Approx.60,000furthercontractswerestillbeingprocessedonthisdate.
Inadditiontotheacquisitionofnewcustomers,themainfocusofourDSLbusinessin2008wastoraisecustomerloyaltyandexpandbusinesswithourcurrentclientbase.Withnowfourpre-serviceprovi-ders(Arcor,DeutscheTelekom,QSCandTelefonica)we
succeededinconvertingalargenumberofexistingcustomerstoourall-inclusivepackagesin2008,thusmaximizingcustomerretention.ComparedwithDecember31,2007,wewereabletoraisethenumberofourcompletepackages–whichnolongerrequireaseparatephoneconnection–by670,000to780,000.
Quarterly development in C millions
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q4 2007Sales 346.0 356.6 359.1 371.1 346.4
EBITDA 77.2 85.1 73.5 62.8 75.0
EBT 64.9 73.0 60.9 50.4 56.7
Customer contracts by product line in millions – without DSL backlog
Customer contract 31.12.2007 31.12.2008 Growth
Information Management
1.21
1.36
+0.15
Webhosting 3.21 3.62 +0.41
of which abroad 1.55 1.93 +0.38
Internet Access 2.73 2.97 +0.24
of which DSL 2.59 2.82 +0.23 of which Resale- /T-DSL 2.48 2.04 -0.44
of which complete DSL 0.11 0.78 +0.67
Total 7.15 7.95 +0.802006 2007 2008
6,31
7,15
7,95
Costumer contractsin millions – without DSL backlog
279.4219.9
20071.261.9
298.6249.2
Sales EBITDA EBT
in D millions
2008Financial figures Product segment
1.432.8
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InadditiontoUnitedInternetMedia,theonlinemar-keterofourportals,wearerepresentedby5brandsinourProductsegment:
GMXisoneoftheleadingsuppliersofcommunicationserviceGMXtargetsprivateuserswithitsInformationManagementproducts.With8.7millionuniqueuserspermonth,GMXisoneofGermany’sleadingsuppliersofmail,messagingandcommunicationsolutions.Inadditiontoitsfreee-mailaccounts,GMXalsooffersfee-based,added-valueservicesandinparticularprofessional,web-basede-mailsolutions.
Highlights2008: GMXroll-outinUKandUSA.Followingextensivepreparations,GMXlauncheditse-mailproductsintheUSAandUKatthebeginningof2008.
LaunchofGMX.atandGMX.ch.Followingtheroll-outofGMX.atandGMX.ch,e-mailusersinAustriaandSwitzerlandnowalsohaveaccesstohigh-quality,country-specificcontentandserviceareas.
ExpansionofMultiMessenger.TheGMXMultiMessengerwasfurtherdevelopedintoacommunicationscenterin2008,combiningvariouscommunicationchannelsandaggregatedthematacentralplace.
WEB.DE,Germany’sNo.2portalWEB.DEisGermany’ssecondlargestportalwith12.8millioninternetuserspermonth.Inadditiontoitsfreebasicservices,WEB.DEalsooffersfee-basedproducts–includingthepopularWEB.DEClub.
Highlights2008: Softwareandfreewaredownloads.InJanuary2008WEB.DEexpandeditsrangeofportalserviceswiththeadditionofaplatformforthelegaldown-loadofaround800fee-basedand10,000freecomputerprograms.
ExpansionofUnifiedMessagingServices.Withthechangeto032numbers,WEB.DEaddedconvenientfaxandanswerphonefunctionalitytoitsUnifiedMessagingService.
HomebankingwithWEB.DE.IncooperationwiththemarketleaderStarFinanzGmbH,WEB.DElaunchedthesafeandconvenientonlinebankingsoftwareStarMoneyinSeptember2008.
1&1,aleadingISPinGermanyandaroundtheworld1&1offersawiderangeofreliableonlineapplicationsforconsumersandsmallbusinesses.Servicesrangefromwebhosting(websites,domains,webshops,pay-mentsystems,servers)tofastDSLconnections(withDSLtelephony,video-on-demandandmobiletele-phony),mobileandnarrowbandinternetaccessandpersonalinformationmanagement(PIM)viatheinter-net(e.g.PocketWebandProfessional-e-Mailaccounts).1&1isGermany’sthird-largestDSLsupplierandoneoftheworld’slargestwebhostingcompanies,withoperationsin6countries.
Highlights2008: Expansionofdatanetwork.Withtheexpansionofitsnetworkin2008,1&1’sdatacentersinGermanyandtheUSAnowenjoyinternetconnectionswithbandwidthsofover120Gigabit/s.
Roll-outof1&1MediaCenter.TheMediaCentercentrallyaggregatespersonalmedia(photos,videoandmusicfiles)andinternetofferings(e.g.max-domeorZDFMediathek)foruseviatheTVorhi-fisystem.
1&1introducesHomeserver.TheHomeservercombinessixdevices(networkserver,router,mediaserver,telephonesystem,DECTbasisstationandDSLmodem)forjointlyusedapplicationsthroughoutthehouse.
Expansionofmobiledataservices.Inthefieldof“MobileInternet”,1&1launchedanumberofnewtariffoptions(includingflatrates)andend-userdevices(suchasUMTS)forconsumersandprofessionalsin2008.
Webhosting customers by country in millions
31.12.2007 31.12.2008 GrowthGermany / Austria
1.66
1.69
+0.03
UK 0.74 0.94 +0.20
France 0.17 0.21 +0.04
USA 0.64 0.74 +0.10
Spain - 0.04 +0.04
Total 3.21 3.62 +0.41
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InterNetX–theprovider’sproviderinGermanyInterNetXcomprisesallUnitedInternet’sresellingactivitiesinGermany.InterNetXmarketswebhostingproductstoISPsandmultimediaagencies(resellers),whointurnmarketthemundertheirownnameandfortheirownaccount.
Highlights2008: Expansionofresellernetwork.In2008,InterNetXsucceededingainingfurthernewsalespartners.Thecompanynowservessome19,100resellers(prioryear:17,700),forwhichithosts2.4milliondomainsand1,100servers.
Portfolioexpanded.Apartfromexpandingitsportfolioofdomains(.cz,.vn,.pe,.cn,.me,.telandothers),InterNetXalsolaunchedatrusteeservicein2008formanytop-leveldomains,suchas.de,.eu,.frand.nl.
Fasthosts–theprovider’sproviderintheUKandUSAFasthostsisourresellerbrandintheUKandUSA.LikeInterNetX,Fasthostsmarketswebhostingproductstoover5,700ISPsandmultimediaagencies,whointurnmarketthemundertheirownname.Fasthostsalsooperatesitsowndirectbusinesswithconsumersandcompanies.
Highlights2008: AcquisitionofDollamore.In2008Fasthostsacquiredapprox.130,000customerrelationshipsofitsformerresellerDollamoreLtd.,aswellastheStreamline.netbrand.
USroll-out.Fasthostslauncheditsresellerpro-ductsintheUSAduringthethirdquarterof2008.Inthecourseofthemarketlaunch,salespartnerswereallowedanunlimitedandfreetestoftheproductsforaperiodofoneyear.
Difficultyearforonlinemarketing
InourOnlineMarketingsegment,weofferadvertisersavarietyofmarketingandsalessolutions:DisplayMarketingviaAdLINKMedia,AffiliateMarketingviaaffilinetandDomainMarketingviaSedo.IncontrasttothemarketingofourownportalsintheProductseg-ment,wemarketthird-partydomainsandwebsitesinthissegment–in13EuropeancountriesandtheUSA.
InadditiontotheproblematicdevelopmentoftheDomainMarketingsegmentsincethesecondquarter
of2008,thestrongfallindemandforDisplayAdverti-singespeciallyinthethirdandfourthquartershadasignificantnegativeimpactonkeysalesandearningsfiguresintheOnlineMarketingsegmentin2008.Thereluctanceofourcustomerstospendonadvertisingledtofallingsalesvolumesaswellasfiercecompeti-tionfortheremainingbudgets,whichinturnincrea-sedthepressureonpricesandmargins.IncontrasttothesalesandearningsfiguresinourDomainandDis-playbusiness,whichfellwellshortofexpectations,ourAffiliateMarketingbusinessperformedasexpected.
Againstthisbackdrop,salesintheOnlineMarketingsegmentfellby3.9%,fromC224.8millioninthepreviousyeartoC216.1million.Adjustedforcurrencyfluctuations,segmentsalesremainedvirtuallystableatC223.6million–despitetheadversemarketcondi-tions.Withoutadjustment,theOnlineMarketingsegmentaccountedfor13.1%oftheUnitedInternetGroup’stotalsalesintheperiodunderreview.EBITDAfellby70.2%,fromC43.3millioninthepreviousyeartoC12.9million–wherebytheprior-yearfigurecon-tainspositivenon-recurringeffectsofC16.8millionfromthecontributionofoursharesinAdLINKSwitzer-landandAdLINKAustriatoGoldbachMediaAG.EBTdecreasedfromC29.6milliontoC-7.9million–wherebyprior-yearEBTcontainspositivenon-recur-ringeffectsofC7.4million(C16.8millionincomefromthecontributionofcompanysharestoGoldbachandC9.4millionexpensesforgoodimpairmentcharges),whileEBTin2008wasburdenedbynegativespecialitemstotalingC17.1million(C7.9millionwritedownonourGoldbachinvestmentandC9.2mil-liongoodimpairmentchargesinGermanyandFrance).AsofDecember31,2008thesegmentemployed516people(prioryear:472).
AdLINKMedia–independentonlinemarketerinEuropeAdLINKMediaisoneofEurope’slargestindependentonlinemarketers.Thecompany‘sbusinessmodelisbasedonanonlineadvertisingnetworkconsistingofhigh-reachwebsitesgeneratingover10billionAdImpressionspermonth,whichitmarketstoadvertisersforDisplayMarketing(brandingpurposesordirectproductsales).PaymentiseitheronaCPMbasis(costperthousandcontacts)and/orperformance-basedpay-per-clickbasis.
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Highlights2008: ExpansionintoSouth-EastEurope.In2008,AdLINKcontinueditsexpansionintoSouth-EastEurope–viaitsinvestmentinGoldbachMedia–withtheacquisitionofonlinemarketersinCroatiaandSlovenia.
LaunchofTGPopen.Inthesecondhalfof2008,thetargetingstandardTGPopenofsistercompanyUnitedInternetMediawasintroducedinthecompany’sGermanDisplayMarketingbusiness.
Portfolioexpanded.Anumberoftop-qualitywebsitesweregainedformarketingduringtheyear,includingCinemaxXandZattoointhefieldofentertainment,andeBayBelgiuminthefieldofe-commerce.
Reachextended.Intheperiodunderreview,thenumberofAdImpressionsgeneratedviathenetworkgrewfrom8.5billion(averageinQ4/2007)toover10.3billion(averageinQ4/2008).
Sedo–World’sleadingdomainmarketingcompanySedooperatestheglobaldomaintradingplatformsedo.com,wheresome15.3milliondomainsarecurrentlytraded.Initsdomainparkingbusiness,Sedomarketssomeofthesedomainstoadvertisersfordomainmarke-tingpurposesonbehalfofthedomainowners.Sedotakesashareoftherevenuesgeneratedfrommarketingonapay-per-clickbasis.
Highlights2008 Portfolioexpanded.Intheperiodunderreview,thecompany’sportfolioofmarketabledomainsgrewfrom5.1millionatyear-end2007to6.2milliondomainsattheendof2008.
InvestmentinDomainsBotS.r.l.EffectiveJanuary1,2008,Sedoacquireda40%stakeintheItaliancompanyDomainsBotS.r.l.,aspecialistforinnovativedomainsearchtechnology.
Platformoptimized.Certificationsforcustomersandbidderswereintroducedin2008,inordertoenhancethequalityoftheadvertisingofferontheonehandandguaranteeasafemarketplaceforsellersontheother.
Furtherinternationalization.SedohasbeenrepresentedbyanofficeinLondon(UK)sincemid2008–inadditiontoitsofficesinCologneandBoston(USA)–viaacooperationwithAdLINKMedia.
Affilinet–KeyplayerincoreEuropeanmarketsaffilinetisactiveinthefieldofAffiliateMarketingandoperatesanetworkforsuppliersofaffiliateprogramsandwebsiteownerswishingtointegratesuchpro-gramsintotheirwebsites.affilinetprofitsfromthecontactsandsalesinitiatedviathenetworkonapurelyperformance-orientedbasis.
Highlights2008 Roll-outintheNetherlandsandSpain.In2008,affilinetcontinueditsinternationalexpansionpolicywithitsentryintotwofurtherEuropeannations–theNetherlandsandSpain.
PublisherCommunicationCenter.ThenewPublisherCommunicationCenterenablesmoreefficientadministrationforadvertisersandoptimumcommunicationwiththeironlinesalespartners.
Quarterly development in C millions
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q4 2007Sales 55.8 55.6 48.1 56.6 67.8
EBITDA 5.3 4.7 1.2 1.7 8.4
EBT 4.3 4.2 0.1 -16.5** 7.3* EBITDA and EBT 2007 include a non-recurring positive effect of C 16.8 million
(EBITDA) and C 7.4 million (EBT)
** EBT 2008 and EBT Q4 2008 include a non-recurring negative effect of C 17.1 million
Financial figures Online Marketing segment
224.8
43.3*29.6*
216.1
12.9-7.9**
Sales EBITDA EBT
2007in C millions
2008
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InternationalDeveloperPortal.InSeptember,affilinetlaunchedanInternationalDeveloperPortal.Theaimoftheportalistodevelopinnova-tivewebapplicationsandthusraiseprogramrevenues.
Theoverwhelmingmajorityofourproductdevelop-mentsandimplementationsin2008wereforourPro-ductsegment.Thesefocusedinparticularonexpan-dinglineandcomputingcapacitiesaswellasonthefieldsofinternetentertainmentandmobileinternet.
Datanetworkexpanded
TheexpansionofourWideAreaNetwork(WAN)hasprovidedourhigh-performancedatacentersinGermanyandtheUSAwithinternetconnectionsofover120Gigabit/s.Wealsomadeourfirstdirectcon-nectionwithamajorexchangenodeoutsideEurope–EquinixinChicago.Asaresult,ourexternalband-widthtripledwithinjusttwelvemonths.Atthesametime,theEuroparing,whichconnectsourKarlsruhe-baseddatacenterswiththemostimportantinternetnodesinFrankfurt,LondonandAmsterdam,wasexpandedtoastandardlevelofatleast10Gigabit/s.TheexpansionofinternetbandwidthensuresthatthecontentandapplicationsofourwebhostingcustomersinEuropeandtheUSAcancontinuetobedeliveredreliablyandathighspeedandthatwearepreparedalreadyforthedemandforgreaterbandwidth,dueabovealltomultimediaapplicationssuchasvideostreams.
AtthesametimeastheexpansionofourWideAreaNetwork,wealsochangedtheunderlyingtechnology.InsteadofSDH(SynchronousDigitalHierarchy),wenowuseEthernettechnology–asknownfromuseincompaniesandhomes.Thisalsoenablesustoachievecostsavingsbyusingmorepowerfulrouters.Improvedexternalconnectionsalsosavesfurthercosts,asthedatastreamscanbedistributedoptimallywiththeaidofnewpeeringsandroutingalternatives.
TGP®becomesseparateproductunderTGPopenbrand
OurmediatargetingtoolTGP®,withwhichadvertiserscantailortheircampaignstospecifictargetgroupsthroughouttheentireUnitedInternetMediaportfolio,wasexpandedandrefinedagainin2008.TGP®ena-blesdirectandefficientcustomertargeting,withouttheneedforaids,suchastopicenvironments,andwithoutanyrestrictionsregardingadvertisingformatortargets.TargetingwithTGP®isbasedonahugedatabaseusingfourdatasources:socio-demographics,surfingbehavior,psychographicsandalsoreal-lifepurchasebehaviordatafromGfK’sConsumerScan.
Research and development
R&Dresultsquicklytranslatedintomarketableproducts
UnitedInternetisnotonlyasupplierofinternetser-vices,butalsostandsforinnovationsdevelopedbyitsownteamofspecialists.Oursuccessisrootedinanabilitytodeveloporadaptinnovativeproductsandservicesandlaunchthemonmajormarkets.Inthefuture-orientedinternetmarket,itisparticularlyimportanttoimplementmarketableideasasswiftlyaspossible.Withourowndevelopmentteams,weareabletoquicklytranslateideasintomarketablepro-ductsandcontinuallyenhanceproductsalreadyonthemarket.Ourexpertiseinproductdevelopmentandmarketroll-outminimizesourrelianceonthirdpartydevelopmentsandsuppliesinmanyareasandthusgivesusadecisivecompetitiveedgeonthemarket.AtourdevelopmentcentersinKarlsruheandBucharest,over450developersusemainlyopensourcecode(Linux).Wealsousethird-partyprogrammingservicesinordertoswiftlyandefficientlyimplementspecificprojects.Wecanthusquicklychangeexistingbasicapplicationsofourproductsandadaptthemtochan-gingcustomerneeds.Themodulesofthissystemcanbeeasilycombinedandprovidedwithproduct-specificorcountry-specificuserinterfacesinordertocreateawidevarietyofpowerfulsolutions.
Duetooursteadygrowthincustomerfigures,thedemandsplacedonourproductswithregardtoreliabi-lityandavailabilityarealsoconstantlyrising.WemeetthesedemandswithITsolutionswhichwedeve-lopourselvesorpurchasefrompartners,andthenmodifyandintegrateintooursystems.Inadditiontothedevelopmentofnewproducts,wealsofocusoncontinuallyenhancingexistingprocessesinordertoraisecustomersatisfaction.Forexample,weareper-manentlyworkingonimprovementstotheinterfaceswithourpre-serviceproviders.
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Thisvarietyofdatasourcesallowsdetailedtargetgroupprofilingandanalysis.TheTGP®adsystemshowseachpersonofatargetgroup,wherevertheyareonourportals,theadvertisingwhichisexactlyrele-vanttothemwhentheycallupawebsite.Thismeansthattargetgroupscanbecontactedprecisely,irrespec-tiveoftheirmomentarysurfingenvironment.Adver-tisingisthusnolongerregardedasannoying.Thisenhancestheimpactandthustheefficiencyoftheadvertiser’scampaign.Inadditiontocontinualdevelopmentofthesystem,workonTGP®in2008focusedinparticularondevelopingthesystemasaseparateproduct“TGPopen”,whichcanalsobeprovi-dedtoothermarketerswiththeaidofalicensingmodel.OursistercompanyAdLINKMediabecamethefirstpartnerforTGPopeninthesecondhalfof2008.
mediaCenterlinksinternetandTV
Withthenew1&1MediaCenterbox,internetentertain-mentcannowbeenjoyedtogetherwithotherpersonalmediainthecomfortoftheconsumer’slivingroom.TheMediaCenterprovidesaconnectionbetweentheconsumer’sTVandhi-fiequipmentandtheinternet.Usingtheremotecontrol,userscanaccesswebcontent–suchasvideos,breakingnews,songs,audioandvideopodcastsandGermany’slargestonlinevideorentalservicemaxdome–aswellasprivatephotosandvideos,andtheirownMP3filesstoredontheirhomePC.
The1&1MediaCenterisalsothefirstdevicetoenableviewerstowatchthe7-daycatch-upserviceofGermany’sZDFMediathekontheirTV.Thiswasprevi-ouslyonlypossibleonPCs.Theprogramsonofferalsoincludenews,businessmagazines,talkshows,sportsbroadcastsandselectedseries.ThenewsandservicesofN24canalsobeaccessedasafreeandup-to-datesourceofinteractiveinformationfromthefieldofpolitics,businessandsport.Inaddition,thelatestregionalandnationalweatherforecastsareprovidedbywetter.com.
1&1MailXchangeforSymbiancellphones
1&1expandeditsprofessionale-mailsolution1&1MailXchangesothatitisnowalsoavailablewithfreeclientsoftwareforSymbiancellphones.Thesoftwareenablesuserstoorganizepersonale-mail,dates,contactsandtaskswithextensivefunctionsforefficientteamworkandfileadministration,andto
synchronizetheminrealtime.Symbianisthemostwidelyusedoperatingsystemforso-calledsmart-phones.WithWindowsMobileandSymbian,1&1MailXchangenowsupportstheoverwhelmingmajo-rityofallinternet-capablecellphonesandexpandsthetargetgroupforthereasonablypricedmobilecommu-nicationsolution1&1MailXchange,especiallywithregardtofreelancers,smallfirmsandsalesrepresenta-tives.
InternationalizationofGMXe-mailproduct
Withtheroll-outofthee-mailservicesgmx.com,gmx.co.ukandgmx.fr,GMXlaidthefoundationfortheexpansionofitsinternationalpresencein2008,parti-cularlywithregardtotheUSA,theUKandFrance.Thee-mailproductforthesecountriesincludesanewtypeofe-mailclient.Thenewclientwasdevelopedwiththeaidofqooxdoo,aframeworkbasedonAjaxpro-grammingtechnology,whichwasinitiatedandisbeingdrivenby1&1andGMXasanopen-sourcepro-ject.Theclientprovidesprivateandprofessionale-mailuserswithaninnovativeandconvenientinter-face,whichisadaptedtothefunctionsofdesktopapplications.Theproductalsoincludesastate-of-the-artorganizer,offeringfullOutlookcompatibility,aswellasafilestorewith5GBofstoragespaceforfiling,archivingandbackingupfiles.
Employees
AsofDecember312008,theUnitedInternetGroupemployedatotalof4,565people–anincreaseof15%overthepreviousyear(3,954).Therewere4,020emplo-yeesintheProductsegment,516intheOnlineMarke-tingsegmentand29employedattheGroup’shead-quarters.Ournon-Germansubsidiariesemployed947people(prioryear:827).Personnelexpensesroseby17.8%,fromC145.8milliontoC171.8million.
Principles of the remuneration system for the Management Board and Supervisory Board
TheSupervisoryBoardisresponsiblefordeterminingtheremunerationoftheManagementBoard.ThemembersoftheManagementBoardofUnitedInternet
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AGarecompensatedaccordingtoperformance.Thiscompensationconsistsofafixedandavariableele-ment.InthecaseofoneManagementBoardmember,thereisacomponentprovidinglong-termincentivesintheformofStockAppreciationRights(SARs).Theexer-cisehurdleforthisprogramis120%ofthestrikeprice.Paymentofvaluegrowthislimitedto100%ofthecal-culatedshareprice.
Theamountoftheseremunerationcomponentsisregularlyreviewed.Thefixedremunerationcompo-nentispaidmonthlyasasalary.Thesizeofthevaria-blecomponentdependsonreachingcertain,fixedfinancialtargetsagreedatthebeginningofthefiscalyear.Thesetargetsarebasedmainlyonsalesandear-ningsfigures.Thetargetattainmentcorridorisgene-rallybetween80%and120%.Nobonusispaidbelow80%oftheagreedtargetandthebonuscalculationendsat120%oftheagreedtarget.Subsequentamend-mentoftheperformancetargetsisnotprovidedfor.Thereisnominimumguaranteedbonus.In2008,thefixedcomponentaccountedfor60%andthevariablecomponentfor40%ofManagementBoardremunera-tion.TherearenoretirementcommitmentsfromtheCompanytomembersoftheManagementBoard.
ThemembersoftheSupervisoryBoardreceivecom-pensationconsistingofafixedelementandavariableelementwhichdependsontheCompany‘ssuccess.ThefixedremunerationforanordinarymemberoftheSupervisoryBoardamountstoC20kperfullfiscalyear.ThechairmanoftheSupervisoryBoardreceivestwicetheamountattributabletoanordinarymember.ThevariableelementforeachmemberoftheSupervi-soryBoard,includingthechairman,amountstoC2kforeverycentwhichexceedstheconsolidatedearningspersharevalueofC0.10forUnitedInternetAG,calcu-latedaccordingtoIFRS.Therearenostockoptionpro-gramsformembersoftheSupervisoryBoard.Therewasonlyfixedremunerationin2008.
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Result of operations, financial position and net assets Growth in operating business; ear-nings burdened by high impairment charges for strategic investments DespitethestrengthoftheeuroagainsttheUSdollarandUKpound,andthegrowingweaknessoftheonlineadvertisingmarketduring2008,consolidatedsalesofUnitedInternetAGgrewby10.9%,fromC1,487.4millioninthepreviousyeartoC1,649.6millionin2008.Adjustedforcurrencyfluctuations,consolidatedsalesgrewby12.4%toC1,671.6million.
Asexpected,thesubscription-basedbusinessofthedominant“Products”segment–withthebrands1&1,
GMX,WEB.DE,FasthostsandInterNetX–notonlypro-vedstablebutenjoyedfurthergrowth.However,salesinthe“OnlineMarketing”segment–withthebrandsAdLINKMedia,affilinetandSedo–wereburdenedini-tiallybyproblemsinthefieldofDomainMarketingand,especiallyinthesecondhalfoftheyear,bythereducedspendingofadvertisersinourmediabusinessinthewakeoftheglobalfinancialandeconomiccrisis,aswellbyfallingpricesduetofiercecompetitionforremainingadvertisingbudgets.
InourProductbusiness,webenefitedfromrisingcustomerfiguresinallproductlines(+800,000custo-mercontractsin2008)andwereabletoconvertthisgrowthintoincreasingsalesandearningsfigures.However,thereducedspendingofouradvertisingcustomersinthesecondhalfoftheyear,andespeciallythefourthquarter,wasalsonoticeableinthissegment–forthemarketingofourportals.Withregardtoexpenses,weinvestedingainingnewcustomersforourDSLbusiness(+230,000contracts),butaboveallalsoinstrengtheningcustomerloyalty.WemadeverystrongprogressinthemarketingofourDSLcompletepackagesin2008.Thesepackages,forwhichcustomersnolongerrequireaseparatephoneconnection,areofgreatimportanceforcustomerretention.Thenumberofcompletecustomersgrewby670,000in2008toatotalof780,000atyear-end.
Consolidated financial figures
1,649.6
318.8
-49.6 -121.5 -121.5
Sales EBITDA EBT* Netincome*fromcontinuedoperations
Netincome*fromdiscontinued
operations
1,487.4
308.8234.5
155.4223.5
2007in D millions
2008
* The figures for 2008 include total negative, non-recurring and non-cash effects of C 275.4 million.
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InOnlineMarketing,salesandearningswerealreadyburdenedfromthebeginningofthesecondquarterbytheproblematicdevelopmentinthefieldofDomainMarketing.Changesinthepolicyandalgorithmsofourmostimportantpartnerinthefieldofsearchengineshavesincebeenslowingdownthedevelop-mentofthisbusiness,whichstillboastedhighgrowthandmarginsin2007.SalesandearningsintheOnlineMarketingsegmentwerealsoburdenedbytheincrea-singweaknessoftheonlineadvertisingmarketinthesecondhalfoftheyear,whichdeterioratednoticeablyfromquartertoquarter.TheweaknessoftheUKpoundandUSdollaragainsttheeuroalsohadanadverseeffect.
Allinall,consolidatedgrossmarginfellfrom39.8%inthepreviousyearto39.0%intheperiodunderreview.ThemainreasonwasthestrongergrowthofourDSLbusinessandtherelatedchangeintheproductmix.Comparedwithotherproducts,suchaswebhostingandinformationmanagement,theDSLbusinesshashighersalesbutalowergrossmargin.
Duetohighcostsforcustomeracquisitionandincrea-sedspendingoncustomerretention,salesandmarke-tingexpensesgrewfromC248.2million(16.7%ofsales)toC278.6million(16.9%ofsales).Thankstoeco-nomiesofscale,administrativeexpensesgrewmoreslowlythansales,fromC82.5million(5.5%ofsales)in2007toC83.7million(5.1%ofsales)intheperiodunderreview.
Earningsbeforeinterest,taxes,depreciationandamor-tization(EBITDA)roseby3.2%toC318.8million,com-paredwithC308.8millioninthepreviousyear.ItshouldbenotedthatEBITDAinthepreviousyearcon-tainedapositivespecialitemofC16.8millionintheOnlineMarketingsegment,whichresultedfromthecontributionofAdLINKSwitzerlandandAustriatoGoldbachMedia.
Quarterly development in C millions
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q4 2007Sales 402.0 412.4 407.4 427.8 414.3
EBITDA 83.2 88.6 77.7 69.3 73.3
Net income 45.1 45.2 -103.8* -108.0* 40.1* The figures for 2008 include total negative, non-recurring and
non-cash effects of C 275.4 million – of which C 145.6 million refer to Q3 and C 129.8 million to Q4.
Againstabackdropofgreatlyreducedstockmarketpricesin2008forourstrategicinvestmentsfreenet(alsoviaMSPHolding),Versatel,DrillischandGoldbachMedia,theManagementBoardandSuper-visoryBoardresolvedtowritedownthecarryingvaluesoftheaforementionedcompaniestotheirmarketpricesasofDecember31,2008andtomakefurtherwritedownsonthevaluationofnon-listedinvestments.Thesewritedownsareincludedinparti-cularintheitems“Resultfromassociatedcompanies”(C-234.2million)and“Writedownsoninvestments”(C-42.4million).Theseimpairmentchargesresultedintotalnon-cash,andnon-tax-effectivespecialitemstotalingC-275.4million,whichinturnledtonetincomeofC–121.5millionandearningspershare(EPS)ofC-0.52.Adjustedforthesenegativespecialitems,netincomeremainedvirtuallystableatC153.9million,comparedwiththepreviousyear.
Cashflow,investmentandfinance
Despitehighexpensesforcustomeracquisitionandretention,operativecashflowwasslightlyabovetheprior-levelatC210.5million(prioryear:C209.8mil-lion).ThedeclineincashflowfromoperatingactivitiesfromC291.9millioninthepreviousyeartoC153.0wasprimarilyduetotheincreaseintradepayablesofC73.3millioninthepreviousyear,duetothebalancesheetdate,comparedwithadecreaseintradepayablesofC62.1millionin2008.
Intermsofcapitalexpenditures,theGroupinvestedatotalofC237.2millionin2008(prioryear:C343.4million).Asinthepreviousyear,themainitemwasthepurchaseofsharesinassociatedcompanies/jointventuresamountingtoC160.7million(prioryear:C309.3million).Thisresultedmainlyfromtheacquisi-tionofsharesinVersatelandfreenetaswellascontri-butionstoEFFFundsNo.1andNo.2.Thesaleoftwen-ty4helpin2007resultedinproceedsofC85.2million.
InvestmentsintangibleandintangibleassetsamountingtoC42.0million(prioryear:C58.8million)focusedmainlyontheProductsegment,andinparticularonthescheduledexpansionofdatacenters,infrastructureandservercapacities.AnamountofC50.9millionwasinvestedinotherfinancialassetsin2008(mainlyforinvestmentsaspartofEFFFundNo.3).ThiswasopposedbycapitalrepaymentsfromEFFFundNo.1andproceedsfromthesaleofourinvestmentBigpointamountingtoC32.3million.ThedisbursementofC31.5millioninthepreviousyear
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resultedmainlyfromtheacquisitionofsharesinDrillischAG.
Withregardtocashflowfromfinancingactivities,proceedsfromnewloanstotalingC172.5million(prioryear:C250.7million)wereoffsetmainlybydisburse-mentsfortheacquisitionoftreasurysharesamountingtoC51.6million(prioryear:C133.8million)anddividendpaymentsofC45.9million(prioryear:C42.5million)
Assetsandequity
In2008,theGroup’soverallassetstructurewasinflu-encedinparticularbythedecreaseinsharesheldinassociatedcompaniesandjointventuresfromC309.0millioninthepreviousyeartoC221.7million–asaresultofimpairmentchargesonthecarryingvaluesofthesecompanies.Thesharesheldinassociatedcompa-niesconsistmainlyofourstakeinVersatelAG(C116.4million)andfreenetAG(C44.8million)aswellastheinvestmentinMSPHoldingGmbH(freenetAG)amountingtoC16.8million.Cashandcashequiva-lentsamountedtoC55.4millionasofthebalancesheetdate(prioryear:C59.8million).Totalconsolida-tedassetsdecreasedfromC1,214.0millioninthepreviousyeartoC1,102.0million,ofwhichgoodwillaccountedforC388.8millionatyear-end2007andC378.9millionatyear-end2008.
FurtherdetailsonfinancialinstrumentsusedbytheGroupareprovidedinsection41ofthenotestotheconsolidatedfinancialstatements.
NetborrowinggrewfromC311.3millionin2007toC489.0millionin2008.Thiswasmainlytheresultoflargelydebt-financedacquisitionsandthepurchaseoftreasuryshares.BankliabilitiesgrewfromC371.1mil-liontoC544.4million.Duetothedeductionoftrea-surysharesfromshareholders’equity,andhighimpairmentchargesonthecarryingvaluesofourinvestments,theconsolidatedequityratiofellfrom31.6%to13.2%.Mainlyasaresultofwritedowns,theGroup’saccumulatedprofitfellfromC171.7millionin2007toC5.6million.
FurtherdetailsontheobjectivesandmethodsoftheGroup’sfinancialriskmanagementareprovidedinsection43ofthenotestotheconsolidatedfinancialstatements.
AnnualfinancialstatementsoftheparentcompanyUnitedInternetAG
EarningsofUnitedInternetAG
Intheperiodunderreview,salesofUnitedInternetAGamountedtoC3.8million(prioryear:C9.2million)andmainlycompriseservicesprovidedtotheGroup’ssubsidiaries.Inthepreviousyear,salesalsoincludedcostallocationswithintheGroupforsponsoringactivitiesinconnectionwiththeAmerica’sCup.
Otheroperatingincomeinthepreviousyearamoun-tingtoC77.2millionresultedmainlyfromthecontri-butionofAdLINKsharestoa100%subsidiaryofUnitedInternetAG(C69.7million)andfromthesaleofsharesinNTplus(C6.2million).
Duemainlytoincreasedinvestmentincomefromtheoperatingsubsidiary1&1InternetAG,incomefromprofittransferagreementsincreasedtoC250.9million.ThiswasopposedbythelosstransferfromUnitedInternetBeteiligungenofC93.4milliondueabovealltowritedownsonfinancialassets.
AsaresultofthenegativesharepriceperformanceofourlistedinvestmentsinfreenetAG(viaMSPHolding)andVersatelAG,aswellasthetreasurysharesheldbyUnitedInternetAG,therewritedownsonfinancialassetsandmarketablesecuritiesofC342.6millionintheperiodunderreview.
AsaresultofthesewritedownsonfinancialassetsandmarketablesecuritiesofC342.6million(prioryear:C0),pre-taxearningsoftheparentcompanyamountedtoC-218.4million(prioryear:C249.7million).Theparentcompany’snetlossamountedtoC279.3million–comparedwithanetprofitofC182.0millioninthepreviousyear.
AssetsandfinancialpositionofUnitedInternetAG
Theparentcompany’sbalancesheetismainlyinflu-encedbysharesinaffiliatedcompaniesamountingtoC403.1million(prioryear:C393.6million)aswellasbyinvestmentsofC169.6million(prioryear:C291.8million).Thedeclineininvestmentsresultsmainlyfromwritedownsonthecarryingvaluesofinvest-mentsamountingC216.0million.Themainadditionstoinvestmentsin2008weretheinvestmentinVersatelAG(C57.3million)andfreenetAG(C36.5million).AsofDecember31,2008,UnitedInternetheld22,000,000
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treasuryshares(prioryear:18,000,000).Asaresultofthesharepricevalueonthebalancesheetdate,trea-suryshareswerewrittendownbyC126.6million.
BankliabilitiesofUnitedInternetAGresultfromarevolvingsyndicatedloan,C380millionofwhichhadbeendrawnasofthebalancesheetdate(prioryear:C370million),aswellasapromissorynoteloanofC150millionplacedin2008.Theequityratiofellto31.0%asofDecember31,2008(prioryear:58.4%),dueinparticulartopartiallydebt-financedinvestmentsandhighwritedowns.
TheAnnualShareholders’MeetingofUnitedInternetAGfollowedtherecommendationoftheManagementBoardandSupervisoryBoardofUnitedInternetAGandresolvedonMay27,2008topayadividendof20centspershare(prioryear:18cents).Thetotaldividendpay-mentofC45.9millionwasmadeonMay28,2008.Nodividendpaymentisplannedforthefiscalyear2008.
Additionaldisclosuresonfinancialinstrumentsandfinancialriskmanagementoftheparentcompany
Themainfinancialliabilitiesincurredbytheparentcompanytofinanceitsactivitiesincludebankloans,promissorynotes,overdraftfacilities,convertiblebondsandotherfinancialliabilities.
UnitedInternetAGholdsvariousfinancialassetswhichresultdirectlyfromitsbusinessactivities.Theyconsistmainlyofsharesinaffiliatedcompaniesandinvestments,aswellasreceivablesfromaffiliatedcompanies.Asofthebalancesheetdate,theCompanyheldderivativefinancialinstrumentsresultingmainlyfromanobligationtodeliversharesinlistedcompa-niesandinterest-hedgingagreements.
Theaimoffinancialriskmanagementistolimittheserisksthroughongoingoperatingandfinancialactivi-ties.TheCompanyisherebyexposedtocertainriskswithregardtoitsassets,liabilitiesandplannedtrans-actions,especiallyliquidityrisksandmarketrisks,asdescribedbelow.
Liquidityrisk
ThegeneralliquidityriskofUnitedInternetconsistsofthepossibilitythattheCompanymaynotbeableto
meetitsfinancialobligations,suchastheredemptionoffinancialdebts.TheCompany’sobjectiveistomaintaincontinualcoverageofitsfinancialneedswhilesecuringflexibilitybyusingoverdraftfacilitiesandloans.
Ourglobalcashrequirementsandsurplusesaremanagedcentrallybyourcashmanagementsystem.BynettingthesecashrequirementsandsurpluseswithintheGroup,wecanminimizetheamountofexternalbanktransactions.Nettingismanagedviaourcashpoolingprocess.TheCompanyhasestablishedstandardizedprocessesandsystemstomanageitsbankaccountsandinternalnettingaccountsaswellasfortheexecutionofautomatedpaymenttransactions.
Inadditiontooperatingliquidity,UnitedInternetalsoholdsotherliquidityreserveswhichareavailableatshortnotice.Theseliquidityreservesconsistofsyndi-catedcreditlineswithvaryingterms.
TheCompanyhasnosignificantconcentrationofliqui-dityrisks.
Marketrisk
TheactivitiesofUnitedInternetaremainlyexposedtofinancialrisksfromchangesininterestrates,exchangeratesandstockexchangeprices.
Interest riskTheCompanyisexposedtointerestrisksasthemajorshareofitsborrowingasofthebalancesheetdatebearsvariableinterestrateswithvaryingterms.Aspartofliquidityplanningweconstantlymonitorthevariousinvestmentpossibilitiesandborrowingterms.Borrowingrequirementsaremetbyusingsuitableinstrumentstomanageliquidity,whilesurpluscashisinvestedonthemoneymarkettoachievethebestpossiblereturn.Duetodevelopmentsontheglobalfinancemarkets,theinterestriskhasincreasedsincethepreviousyear.
Marketinterestratechangesmighthaveanadverseeffectontheinterestresultandareincludedinourcalculationofsensitivefactorsaffectingearnings.Inordertopresentmarketrisks,UnitedInternethasdevelopedasensitivityanalysiswhichshowstheimpactofhypotheticalchangestorelevantriskvariablesonpre-taxearnings.Thereportingperiodeffectsareillustratedbyapplyingthesehypothetical
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changesinriskvariablestothestockoffinancialinstrumentsasofthebalancesheetdate.
TwointeresthedgingagreementstotalingC200mil-lionwereconcludedintheperiodunderreviewtocovertheriskfrominterestratechanges.
Currency riskThecurrencyriskofUnitedInternetresultsmainlyfromoperatingactivities(ifrevenuesand/orexpensesareinadifferentcurrencythantheGroup’sfunctionalcurrency)andnetinvestmentsinforeignsubsidiaries.Therewerenoforeignexchangeriskswithasignifi-cantimpactoncashflowintheperiodunderreview.
Stock exchange risk (valuation risk)Astockexchangeriskresultsmainlyfrominvestmentsinlistedcompanies.Theseinvestmentsarevaluedatcost.Assoonasthe(prorata)stockexchangevalueofaninvestmentliespermanentlybelowitsacquisitioncost,theCompanyrecognizestheimpairmentofthisfinancialinstrumentinitsresultfortheperiod.
Capitalmanagement
Inadditiontothelegalprovisionsforstockcorpora-tions,theCompanyhasnofurtherobligationstomaintaincapitalaccordingtoitsstatutesorotheragreements.ThekeyfinancialindicatorsusedbytheCompany(sales,grossprofit,EBITDAandEBT)aremainlyperformance-oriented.Thetargets,methodsandprocessesofcapitalmanagementarethussub-ordinatetotheseperformance-orientedfinancialindicators.
Inordertomaintainandadaptitscapitalstructure,theCompanycanadjustdividendpaymentsorpaycapitalbacktoitsshareholders,canissuenewsharesorpurchasetreasuryshares.AsofDecember31,2008andDecember31,2007,nochangesweremadetotheCompany’stargets,methodsandprocesses.
Dividend
AttheAnnualShareholders‘MeetingonMay27,2008,itwasvotedtoaccepttheproposaloftheManagementBoardandSupervisoryBoardofUnitedInternetAGconcerningthepaymentofadividendof20centspershare(prioryear:18cents).ThepaymentofC45.9mil-lionintotalwaseffectedonMay28,2008.Inviewofthebalancesheetlossintheannualfinancialstate-
mentsoftheparentcompanyUnitedInternetAG,nodividendwillbepaidforthefiscalyear2008.
InvestmentsasofDecember31,2008
Inadditiontoitscorebrands,UnitedInternetalsoholdsinvestmentsinanumberofothercompanies.
funcommunicationsGmbH(UnitedInternetstake:49.00%)postedapositiveoperatingresultintheperiodunderreview.
TogetherwiththeSamwerbrothers,UnitedInternethasbeeninvestingsincemid2007infundswithavarietyoffocusareas.In2008,UnitedInternetinve-stedinaround60companiesviathethreefunds.Wri-tedowns/impairmentsweremadeonthecarryingvaluesofcertainportfoliocompaniesasattheendof2008.
OnFebruary8,2008,weacquireda48.65%stakeinthemediaholdingcompanyvirtualmindsAG.virtualmindspostedapositiveoperatingresultin2008.
OnMarch7,2008,UnitedInternetacquired33.36%ofsharesinBW2GroupAG.BW2offersprofessionalCRMandERPbusinesssolutions.Thecompanyiscurrentlyintheprocessofrealigningitsbusinessmodel.
OnJuly1,2008UnitedInternetacquireda30%stakeinJimdoGmbH.Withits“Jimdo”websitetools,thecom-panyoffersaservicefortheeasycreationofprivateorcommercialhomepages.Thecompanyisstillintheprocessofestablishingitsbusiness.
ThecellphoneproviderDrillischAG,inwhichwehavehelda9.68%stakesinceNovember2007,postedasignificantlossforitsfiscalyear2008astheresultofhighimpairmentcharges.
UnitedInternetacquiredfurthersharesinVersatelAGduringthefirsthalfof2008andheldatotalstakeof25.21%inVersatelAGasofDecember31,2008.Thecom-panyisexpectedtopostasignificantlossforitsfiscalyear2008.
InJanuary2008,UnitedInternetandDrillischraisedtheirshareholdinginfreenetAGto24.52%viatheirjointlyheldcompanyMSPHolding,inwhicheachcom-panyholdsa50%stake.InthecourseofthecapitalincreaseoffreenetAG,inconnectionwithitsacquisi-tionofDebitel,thesharesheldbyMSPHoldingGmbH
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infreenetAGweredilutedfrom24.52%to18.39%asofJuly5,2008.OnDecember29,2008,UnitedInternetacquired10,798,817sharesinfreenetAGfromMSPHol-dingGmbH,equivalentto8.43%ofvotingrights.TheproceedswereusedtoreducethefinancialliabilitiesofMSPHoldingGmbH.Afterexecutingthissharetrans-fer,MSPHoldingGmbHstillholds12,751,183sharesinfreenetAG,or9.96%ofvotingrights.DrilischAGconti-nuestohold7.52%ofthevotingrightsinfreenetAG.DuetothecontractualvotingcommitmentbetweenUnitedInternetAGandDrillischAG,thereisnodiffe-renceintheshareofvotingrightsinfreenetAGheldbyUnitedInternetAG,togetherwithDrillischandMSPHolding,whichstilltotals25.91%–asbeforethesharetransfer.Asaresultofhighimpairmentchargesonthecarryingvalueofthefreenetshares,MSPHoldingpostedasignificantlossforitsfiscalyear2008.
Explanation of disclosures acc. to Secs. 289 (4), 315 (4) German Commercial Code (HGB)
CompositionofcapitalThesubscribedcapitalofUnitedInternetAGasofDecember31,2008,amountstoC251,469,184dividedinto251,469,184no-parvalue,registeredshares.Eachshareentitlestheownertoonevote.Therearenoothersharecategories.Inthecaseofacapitalincrease,thecommencementofdividendentitlementfornewsharesmaybedeterminedseparatelyfromthemomentofcon-tribution.
TheManagementBoardisnotawareofanylimitationsaffectingvotingrightsorthetransferofshares.
Directandindirectparticipationsincapital,specialrightsTheCompany’sCEO,Mr.RalphDommermuth,Monta-baur,owns92,000,000sharesor36.58%oftotalsharesinUnitedInternetAG.Mr.DommermuthispersonallyentitledtonominateamemberoftheSupervisoryBoard.ThisrightisexercisedbynamingapersonfortheSupervisoryBoardtotheCompany’sManagementBoard.ThenominationbecomeseffectiveassoonasthenominatedpersondeclareshisacceptanceoftheSuper-visoryBoardseattotheManagementBoard.Arequire-
mentfortheaforementionednominationrightisthatMr.RalphDommermuthholdsshareshimselforviacompaniesaffiliatedwithhimpursuanttoSec.15ff.GermanStockCorporationLaw(AktG)representingatleast25%oftheCompany’svotingcapitalandcanproveasmuchtotheManagementBoardonnomina-tionoftheSupervisoryBoardmemberbyprovidingdepositoryaccountstatementsorsimilardocuments.Mr.Dommermuthhassofarnotmadeuseofthisnominationright.TheManagementBoardisnotawareofanyfurthershareholdingsinexcessof10%ofvotingrights,orofanyshareswithspecialrights.
AppointmentanddismissalofManagementBoardmembers,amendmentstoCompanyarticles
TheappointmentanddismissalofManagementBoardmembersisdeterminedbySecs.84,85AktGincon-junctionwithsection1oftherulesofprocedurefortheSupervisoryBoard.AccordingtoSec.6(1)oftheCompany’sarticles,theManagementBoardconsistsofatleastoneperson.TheSupervisoryBoardappointsanddismissesthemembersoftheManagementBoard,determinestheirnumberandcanappointonememberoftheManagementBoardasChairman.Eachamend-mentoftheCompany’sarticlesrequirestheadoptionofashareholders’meetingresolutionwithamajorityofatleastthreequartersofcapitalrepresentedatthevote.PursuanttoSec.22oftheCompany’sarticlesinconjunctionwithSec.179(1)Sentence2AktG(Changesincapitalstockandnumberofshares),theSupervisoryBoardisauthorizedtomakeamendmentstotheCompany’sarticlesinsofarastheyonlyconcernformulation.
PowersoftheManagementBoardtoissueshares
TheManagementBoardisentitledtoissuenewsharesunderthefollowingcircumstances:
TheManagementBoardisauthorized,subjecttoappro-valbytheCompany’sSupervisoryBoard,toincreasetheCompany’scapitalstockononeormoreoccasionsbeforeJune12,2011byatotalofC124,550,402.00byissuingnewno-parsharesforcashand/ornon-cashcontributions.TheManagementBoardisalsoautho-rized,incertaincasesstatedinSec.5.4oftheCompany’sarticles,toexcludethestatutoryrightofshareholderstosubscribetonewshares.Thisappliesinparticularinthecaseoffractionalamountsandwhengrantingsubscriptionrightsfornewsharestobearers
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ofwarrants,convertiblebondsorwarrantbonds.TheManagementBoardisalsoauthorized,subjecttotheapprovaloftheSupervisoryBoard,torestrictsubscrip-tionrightsinthecasethattheissuepriceofthenewsharesisnotsubstantiallylowerthanthequotedmar-ketpriceandtheissuedsharesdonotexceedintotal10%ofcapitalstock.
TheManagementBoardisauthorized,subjecttotheapprovaloftheSupervisoryBoard,toexcludesubscrip-tionrightsinthecaseofacapitalincreaseinreturnfornon-cashcontributions,especiallyinconnectionwiththeacquisitionofcompanies,investmentsorassets.
CapitalstockhasbeenconditionallyincreasedbyuptoafurtherC92,000,000.00,dividedinto92,000,000no-parshares.Theconditionalcapitalincreaseisearmar-kedforsharestobegrantedtobearersorholdersofwarrantorconvertiblebonds,whichtheshareholders’meetingonMay18,2005authorizedtheCompanyorasubordinatedGroupcompanytoissuebyMay17,2010,providingtheissueisinreturnforcashandthewar-rantorconvertiblebondsarenotservicedfromthestockoftreasurysharesorapprovedcapital.
CapitalstockhasbeenincreasedconditionallybyuptoC4,868,364.00,dividedinto4,868,364no-parregisteredshares.Theconditionalcapitalincreaseservestograntconversionoptionstobearersofconvertiblebonds,fortheissueofwhichanauthorizationresolutionwaspassedbytheshareholders’meetingonMay16,2003.
CapitalstockhasbeenincreasedconditionallybyuptoC3,000,000.00,dividedinto3,000,000no-parshares.Theconditionalcapitalincreaseservestograntconver-sionoptionstobearersofconvertiblebonds,fortheissueofwhichanauthorizationresolutionwaspassedbytheshareholders’meetingonMay18,2005.
PowersoftheManagementBoardtobuybackshares
InaccordancewithSec.71(1)No.8AktG,theAnnualShareholders‘MeetingofMay27,2008authorizedtheManagementBoardtoacquire,sellorcanceltreasurysharesofuptotenpercentofitscapitalstockintheperiodendingNovember26,2009.Thepricefortheacquisitionofthesesharesmaynotbemorethan10%lowerorhigherthanthestockmarketprice.Theautho-rizationmaybeexercisedbytheCompanywhollyorininstallments,onceorseveraltimesforthepursuitofoneormorepurposes;itcan,however,alsobeexer-
cisedbydependentormajority-ownedcorporationsoftheCompanyorbythirdpartiesfortheCompany’sortheirownaccount.TheauthorizationmaynotbeusedforthepurposesoftradingwithCompanyshares.
TheManagementBoardisauthorized,subjecttotheapprovaloftheSupervisoryBoard,tousetheseacquiredsharesforalllegallypermissiblepurposes,inparticularasaleoftreasurysharesotherthanviathestockexchangeorbyofferingtoallshareholdersorforcashcompensation.Thisauthorizationisreducedbythatproportionofcapitalstockattributabletosharesexcludedfromsubscriptionrightsindirectorcorre-spondingapplicationofSec.186(3)Sentence4AktG.
Moreover,theManagementBoardisauthorizedtousetheacquiredtreasuryshares,subjecttotheapprovaloftheSupervisoryBoard,tograntsharestomembersoftheManagementBoardandotherCompanyemplo-yees,shouldsuchpersonsbeentitledtosubscriptiononthebasisofemployeestockownershipplans.Inso-farastreasurysharesaretobetransferredtomembersoftheCompany’sManagementBoard,thedecisionshallbeincumbentupontheCompany’sSupervisoryBoard.
TheManagementBoardisfurtherauthorizedtousetheacquiredtreasuryshares,subjecttotheapprovaloftheSupervisoryBoard,tofulfillconversionandwar-rantrightsorconversionobligations.
TheManagementBoardisalsoauthorizedtoretireandcanceltreasuryshares,subjecttotheapprovaloftheSupervisoryBoard,withoutanyfurtherresolutionoftheAnnualShareholders‘Meeting.
Therightofshareholderstosubscribetotreasurysharesshallbeexcludedtotheextentthatthesesharesareusedinaccordancewiththeaforementionedaut-horizations.
AttheAnnualShareholders’MeetingofMay27,2008,theManagementBoardwasalsoauthorizedtousebidsandequityderivativesinthepurchasingoftreasurystockinaccordancewithSec.71(1)No.8AktGandtoexcludesubscriptionandtenderrights.
TheManagementBoardisauthorized,subjecttotheapprovaloftheSupervisoryBoard,toconductbuy-backsbymeansofbids,and/ortoconductbuybacksbyusingequityderivatives,andtoselloptionswhichobligetheCompanytopurchaseUnitedInternetshareswhensuchoptionsareexercised(“putoptions”),to
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acquireoptionswhichgranttheCompanytherighttobuyUnitedInternetshareswhensuchoptionsareexercised(“calloptions”)andtobuyUnitedInternetsharesbyusingacombinationofputandcalloptions.
ThepriceforthepurchaseofUnitedInternetsharesbymeansofbidscanbesettledbyacashpaymentorbytransferofsharesinalistedcompanypursuanttoSec.3(2)AktG(“exchangeshares”).
Allsharepurchasesusingequityderivativesarelimi-tedtonomorethanfivepercentofcapitalstock.ThetermoftheoptionsmustbeselectedinsuchawaythatthepurchaseofUnitedInternetshareswhenexerci-singtheoptionsdoesnotoccurbeforeNovember26,2009.
Ifsharesareacquiredusingequityderivativesincom-pliancewiththeaboveregulations,therightsofshare-holderstoconcludesuchoptiontransactionswiththeCompanyareexcluded,underthecorrespondingappli-cationofSec.186(3)Sentence4AktG.Shareholdersalsohavenorighttoconcludeoptiontransactionsinsofarasfortheconclusionofoptiontransactionsthereisapreferentialofferfortheconclusionofoptiontransac-tionswithregardtosmalllotsofshares.ShareholdersonlyhavearighttotendertheirUnitedInternetsharesiftheCompanyhasanobligationtowardthemfromoptiontransactionstopurchasetheshares.Anyfur-thertenderrightsareexcluded.
Theuseoftreasurysharesacquiredbymeansofbidsand/orequityderivativesissubjecttotheregulationsandsubscriptionrightexclusionsdeterminedforthepurchaseoftreasurysharespursuanttoSec.71(1)N0.8AktG.
Subsequent eventsAccordingtoleadingmarketanalysts,thepredomi-nantlypositiveconditionsforthosetargetmarketsofrelevancetoUnitedInternetremainunchangedin2009–despiteglobalrecessionarytendencies.
OnFebruary25,2009,UnitedInternet’ssubsidiarySedoacquiredallsharesinitsUScompetitorRevenueDirect.Atthesametime,Sedoagreedaclosestrategicalliancewiththepreviousowner,Dotster.TheacquisitionofRevenueDirectwillenableSedoGmbHtosignificantlyexpanditsshareoftheNorthAmericanmarket.SedoexpectsitsalliancewithDotster–oneofthe“heavy-weights”ontheUSdomainregistrymarketwithoverthreemillionregistereddomains–toofferfurtherstra-tegicbenefitswithregardtoitsfurtherexpansiononthefiercelycompetitiveUSdomainparkingmarket.
Subjecttoapprovalfromtherespectiveanti-trustauthorities,UnitedInternetsignedanagreementonDecember12,2008withtheownerofunited-domainsAG,LYCOSEuropeNV,concerningUnitedInternet’sacquisitionofunited-domains.Followingapprovalfromtheanti-trustauthorities,theacquisitionwasconcludedonFebruary27,2009.united-domainsisaspecialistforthefastandsimpleregistrationofdomainnameswithover150internationaldomainendings.Theprofitablecompanywasfoundedbyayoungteamofsoftwaredevelopers,businessspecia-listsandlawyersinAugust2000andhassincebecomeoneofEurope’sleadingdomainregistries.united-domainscurrentlyadministersover1.1milliondomainsofaround180,000customers.ThecompanyisstillrunbythefoundersFlorianHuber(CEO),AlexanderHelmandMarkusEggensperger,whowillretainashareholdingofaround15%aftertheacquisi-tion.Intherun-uptothetransaction,thevalueofunited-domainsAGwassetataroundC34million.Thefinalpurchasepricewillbedeterminedafteruni-teddomainsAGhasposteditsannualfinancialstate-mentsforfiscalyear2008andanaccrualaccountbasedonthedateofcompletion.Thepurchasepricewassettledfullyincash–wherebyC7millionwillbeheldinescrowasasecurityguaranteeforUnitedInternet.
Therehavebeennofurthersubsequenteventssinceyear-endwhichhavesignificantlyalteredthebusinesssituationofUnitedInternet.
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Risk reportRisk management system
Theaimofriskmanagementistosystematicallydealwithpotentialrisksaswellastopromotearisk-orien-tedapproachthroughouttheentireorganization.Thiscontrolledapproachtorisksisaimedatutilizingexis-tingopportunitiestothefullandenhancingthecompany‘ssuccess.Theconcept,organizationandtaskofEnterpriseRiskManagementwasdefinedbytheManagementBoardandSupervisoryBoardofUnitedInternetAGanddocumentedaspartofariskmanualavailabletoallmembersoftheGroup.Theserequire-mentsarecontinuallycomparedwiththechanginglegalconditionsandadaptedordevelopedfurtherasrequired.
TheriskmanagementsystemisbasedontheCOSOERMframework,whichwehaveadaptedtotheneedsofUnitedInternetAG.Aspartofourriskmanagementprocess,weidentify,classifyandevaluatecompanyrisksinastandardizedgroup-widesystemwithclearallocationofresponsibilities.WeuseEnterpriseRiskManagementnotonlytoidentifyriskswhichmayendangertheGroup’scontinuedexistence,butalsotoidentifyandmonitorthoseriskswhichdonotjeopar-dizeourexistencebutwhichmayhaveasignificantnegativeimpactontheGroup’snetassets,financialsituationandresultsofoperations.
TheidentifiedrisksofUnitedInternetAGaregivenamonetaryratingwherepossibleandassessedaccor-dingtotheprobabilityoftheiroccurrence.Whereversensible,risk-limitingmeasuresweredefinedforeachsignificantrisk.Thecurrentriskstatusiscommunica-tedtotheManagementBoardandSupervisoryBoardonaquarterlybasis.Suddenriskoccurrencesorsignifi-cantchangesintherisksituationtriggeranad-hocreportingobligation.Therespectiveriskiscommunica-tedimmediatelytotheManagementBoard,andwherenecessarybythemtotheSupervisoryBoard.
Risks for future business development
ThemostsignificantrisksanduncertaintiestowhichtheUnitedInternetGroupisexposedarepresentedbelow.
Externalrisks
ThreatpotentialoftheinternetUnitedInternetAGgeneratesitscommercialsuccesslargelywithintheenvironmentoftheinternet.Ourproductportfoliocompriseshigh-qualityinternetandtelecommunicationapplications,aswellastechnicallycomplexvalue-addedproducts.Inordertoprovideourproductsandservices,weuseinformationandtelecommunicationtechnologies(datacenters,trans-missionsystems,connectionnodesetc.)inourbusinessprocesseswhicharecloselynetworkedwiththeinternet.
Thereisageneralriskofhackerattackswiththeaimofstealing,deletingcustomerdataorusingservicesfraudulently.Wecounterthisriskwiththeaidofvirusscanners,firewallingconceptsandvarioustechnicalmonitoringmechanisms.UnitedInternetAGiscommittedtocontinuallyenhancingandupdatingitssecurityconceptwiththeaidofitsITSecurityManage-mentsystem.However,despiteourITsecuritymea-sures,thepossibilityofhackersgainingaccesstocom-panynetworks,orcustomeraccounts,andfraudulentlyusingservices(e.g.internettelephony)cannotberuledoutcompletely.Tothisend,emergencyconceptshavebeendevelopedaimedatminimizingpossibledamageandprotectingtheinterestsofourcustomers.
Overthepastyearstherehasbeenasteadyincreaseintheamountofspame-mailsontheinternet.ForthemailingsystemsofUnitedInternetAG,thishasresultedinasignificantriseinourcapacityutilizationwiththeeffectthatprocessesmaybeimpeded.Wecontinuallymonitormailtrafficandtakeprecautionstokeepspamtoaminimum.Ouractiveparticipationincross-borderworkinggroupsenablesustoplayaroleinthedefinitionofmailsecuritystandards,forexample.
Shouldanyoftheaboverisksoccur,thiscouldhaveanegativeimpactonourimageandreducethetrustplacedinUnitedInternetAG.Inaddition,thefraudu-lentuseofourservicescancauseconsiderabledamage.
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MarketregulationInthefieldofinternetaccess,thedecisionsoftheFederalNetworkAgencyandFederalCartelOfficeinGermanyhaveaninfluenceonthepricingofinternetaccesstariffsintheProductsegment.PriceincreasesofnetworkprovidersfromwhomUnitedInternetpurchasespre-servicesforitsowncustomerscanhaveanegativeimpactontheprofitabilityofthesetariffs.Ontheotherhand,thereisalsothepossibilitythatalackofregulationmayleadtoadeteriorationofmar-ketcircumstancesforUnitedInternetAGundercertaincircumstances.UnitedInternetattemptstocounterthisregulationriskbycooperatingwithseveralsupplypartnersinourDSLbusiness.DecisionstakenbytheFederalNetworkAgencyinthefieldofinternettelephony(VoIP)alsohaveanimpactonourbusinessprocesses.Externalrequirementsofexistingprocessesandnewregulatoryconditionscouldresultinhighercosts,whichmighthaveanegativeimpactonthecompetitivenessofUnitedInternetandthusalsoonitsprofitability.
CompetitionTheGermanDSLmarketisinaphaseofmarketshareallocation,duringwhichitsformerstronggrowthissubsiding.Weassumethatfiscalyear2009willconti-nuetobemarkedbytakeoversandcompanymergersalongthevaluechain.Inadditiontoourmajorcompe-titors,localtownnetworkoperators,cablenetworkoperatorsandothernetworkoperatorswiththeirowninfrastructureareactiveonthemarket.Thereisariskthattheachievablelevelofend-userpricesmayconti-nuetofalland/orthatcustomeracquisitioncostsmayrisefurther.Increasingcompetitionand/orfallingpricesmightnegativelyimpactourtargetedmarketshareofnewcustomersand/orournetassets,financialsituationandresultsofoperations.UnitedInternetattemptstocountertheserisksby,forexample,develo-pinginnovativeandhigh-valueproducts,usingexclu-sivesaleschannels,andcreatinghighcustomerwithcompletepackagesandavarietyofaddedvalues.
Dependencyoncustomers/businesspartnersTheadvertisingbudgetsofadvertisersarehighlydependentontheeconomicdevelopment,whichiscurrentlysubjecttomanyuncertainties.Moreover,advertisingbudgetsareoftenawardedonlyforasinglecampaign.IntheOnlineMarketingsegment,aconsi-derableproportionofsalesisgeneratedwithindivi-dualkeyaccounts.Businessrelationsareonceagaindueforrenegotiationinfiscalyear2009.Shouldthesebusinesspartnerslimitorcanceltheirrelationswithus,thiswouldleadtoasignificantdeteriorationofour
netassets,financialpositionandearningsintheOnlineMarketingsegment.Oursub-groupOnlineMarketingattemptstoreducethisriskbyusingexpe-riencedkeyaccountmanagers,bymaintainingclosecooperationwithourbusinesspartners,bywideningourcustomerbase,andinparticularbyofferingacompellingrangeofproductsandservices.
Operatingrisks
ProductdevelopmentAsignificantsuccessfactorofUnitedInternetAGisthedevelopmentofnewproductsandservicesforourcorebrandsinordertoprovidenewandexistingcustomerswithtop-qualityandinnovativevalue-addedinternetservicesandthusraisethetotalnumberofcustomercontracts.Thereisalwaysarisk,however,thatnewdevelopmentsmightbelaunchedtoolateonthemarketornotaccepted.UnitedInternetAGattemptstominimizesuchrisksbycloselyobservingmarkettrendsandundertakingextensiveproductdevelop-ment.IncooperationwiththeSamwerbrothersandthejointlyheld“EuropeanFoundersFund”,UnitedInternetAGalsosupportsEuropeaninternetandtechnologycompaniesinordertoprofitinfuturefromtheirinnovations.
UseofhardwareandsoftwareOurproductsandrelatedbusinessprocessesarebasedonacomplextechnicalinfrastructureandanumberofsuccess-criticalsoftwaresystems(servers,customerrelationshipdatabasesandstatisticssystemsetc.).Thisinfrastructureissubjecttovariousmalfunctionrisks,e.g.fromoverloadingortechnicaldefects.ThereisalsotheriskoftargetedattacksfrominsideandoutsidetheCompany,e.g.fromhackersorwillfulmanipulationbystaff.Theintegrationofpurchasedbusinesssystemsintotheexistingsystemlandscapealsobearstherisksofinterruptionsandmalfunctionsduetotheinherentcomplexityofoursystems.Non-availabilityordeteriorationofourservicescouldhaveasustainednegativeimpactontheimageandthustheoperatingbusinessofUnitedInternetAG.Awidevarietyofsoft-ware-andhardware-basedsafetyprecautionshavethereforebeentakentoprotectourinfrastructureanditsavailability.Bydividingresponsibilities,wehavemadesurethatactivitiesorbusinesstransactionsinvolvingrisksarenotcarriedoutbysingleemployees.Accessrestrictionsalsoensurethatemployeesmayonlyoperatewithintheirparticulararea.Asaprecau-tionarymeasure,alldataareregularlybackedupandhostedinseparatedatacenters.
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PropertyrightsBothUnitedInternetAGanditscompetitorsattempttoprotecttheirpropertyrightsandproprietarytechno-logiesbymeansofpatents,trademarksandcopyrights.Aninfringementofourpatents,trademarksandcopy-rightsbycompetitors,however,cannotbeexcluded.Thismayreducethecompetitiveadvantagewehaveachieved.Inthesameway,UnitedInternetAGmayalsofacedamageclaimsforinfringingrightsorpatentsofwhichwehadnoknowledge.
DataprotectionUnitedInternetAGhoststhedataofseveralmillioncustomersonitsservers.Thesedataaresubjecttocertainlegalregulations.Weareawareofthisrespon-sibilityandattachgreatimportancetodataprotection,whichisgivenparticularlyhighprioritythroughouttheCompany.Byusingstate-of-the-arttechnologyandcontinuallymonitoringalldata-protectionregulations,weendeavortoguaranteeahighstandardofsecurity.Shouldemployeesorthirdpartiessucceed,however,inwillfullybreakingthroughthevarioussecuritymea-suresandstealingpersonaldata,UnitedInternetAGmightbemadeliableforanyabuse.
Otherrisks
AcquisitionsOurlong-termgrowthstrategyalsoinvolvestheoptionofquicklyachievingcriticalmassincertainmarketsbymeansofacquisitionorutilizingfavorablemarketopportunities.Shouldtheacquiredcompaniesnotful-filltheexpectationsweplacedinthem,orshouldtheintegrationprocessestoleveragesynergiesprovemoredifficultthanplanned,thismayhaveanegativeimpactontheprofitabilityandfinancialpositionofUnitedInternetAG.Wegenerallycounterthisriskbymeansofextensiveduediligenceauditspriortoacqui-sitions,butcannotexcludesuchrisks.
Writedowns/impairmentThesameappliesfor–generallystrategic–invest-mentsinlistedcompanies.Achangeinthevaluationbasiscausedbyfallingglobalshareprices–asin2008–mayrequireextensivewritedownsonexistinginvestments.Dependingonthefurthersharepricedevelopmentofourlistedinvestments,theremaybefurthernon-cash-effectiveburdensonouroperatingbusinessfromwritedowns/impairment.
Assessment of the overall level of risk
ThemainrisksfortheCompany’scurrentandfuturenetassets,financialsituationandresultsofoperationsfocusontheareasofpotentialthreatsviatheinternet,marketregulation,competition,theuseofhardwareandsoftware,andacquisitions.Thefurtherexpansionofourriskmanagementsystemenablesustoproac-tivelycountersuchrisksandtolimitthemtoamini-mum,wheresensible,byintroducingvariousmea-sures.Wejudgetheprobabilityofsuchoccurrencesasverylowtolimited.TherewerenoriskswhichdirectlyjeopardizedthecontinuedexistenceofUnitedInternetAGinthefiscalyear2008,neitherfromindividualriskpositionsnorfromtheoverallrisksituationfortheUnitedInternetGroup.
Dependent Company Report IncompliancewithSec.312(1)AktG,theManagementBoardofUnitedInternetAGpresentedtheSupervisoryBoardwithaDependentCompanyReportdealingwiththeCompany’spossibledependenceonitsCEOandmajorshareholderMr.RalphDommermuth.ItcloseswiththedeclarationthattheCompanyreceivedade-quatecompensation(quidproquo)foreachlegaltrans-actioninaccordancewiththecircumstancesknownatthetimewhensuchtransactionswerecarriedout,orthemeasureinvolvedwasexecutedoromitted,andthattheCompanywasnotdisadvantagedbysuchmeasuresbeingexecutedoromitted.
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lowersalesorfewernewordersthanexpectedbeforethecrisis.
Accordingtothelatestsurvey,46%ofcompaniesexpectaturnaroundintheirsectoralreadyin2009.42%expectamarkedimprovementin2010andonly5%notuntil2011.
Despitethedifficulteconomicconditions,theassocia-tionhasconfirmeditssalesforecastfor2009.Inotherwords,itexpectsthetotalGermanmarketforinfor-mationtechnology,telecommunicationsanddigitalconsumerelectronicstomaintainitsprior-yearlevelofaroundC144.6billion.Inviewoftheuncertainecono-micsituation,however,theassociationannouncedthatitwouldreviewitsforecastsafterthefirstquarter.
BITKOMexpectssalesgrowthof1.5%toaroundC67billionfortheinformationtechnologysegmentin2009.Theoutsourcingmarketinparticularisexpectedtobuckthetrendwithgrowthof7%toC14.6billion,asmorecompaniesoutsourceITtaskstoexternalserviceproviderstosavecostsandgainliquidity.Inthefieldoftelecommunication,BITKOMexpectssalestofallby1.2%toaroundC65billionin2009.However,theassociationbelievesthatthisfallinsaleswillbeduelesstotheeconomiccrisisandmoretofailedEUinterventionandfiercepricecompetition.In2008,forexample,tariffsfellbyanaverageof3.3%.However.therearealsosegmentswhicharestilldisplayingstronggrowth,suchasfixed-linedataservicesandmobiletelephony.Inthedigitalconsumerelectronicssegment,themarketisexpectedtodeclinein2009,aftermanyyearsofstronggrowth.Totalsalesareexpectedtoshrinkby2.5%toaroundC12billionin2009.AccordingtoBITKOM,aninnovationcyclewillcometoanendforconsumerelectronicsin2009.However,withinternetTV(IP-TV)andthenewmega-trendtowardhomenetworking,therearealreadynewtechnologieswaitingfortheirmass-marketbreak-through.
Boominbroadbandconnectionscontinues
Accordingtothestudy“LIFE-DigitalesLeben”,publishedinlateFebruary,thetrendtowardbroadbandconnectionswillcontinue.Theexpertsforecastgrowthto36millionbroadbandconnectionsinGermanyby2015anddatatransmissionspeedsofover100Mbit/sinsomecases.Theexpertsalsoexpectmobilebroadbandconnections(UMTS)toquadrupleto41millionby2015.
OutlookGlobal economy 2009 near to zero growth
TheInternationalMonetaryFund(IMF)hasreduceditseconomicforecastfor2009onceagain.TheIMFnowexpectstheglobaleconomytogrowbyjust0.5%inthecurrentyear.ThatwouldbethelowestgrowthratesincetheendofWorldWarTwo,accordingtotheupdated“WorldEconomicOutlook”reportpublishedinlateJanuary2009.InNovember2008theIMFwasstillexpectinggrowthof2.2%:itthereforereduceditsownforecastby1.7percentagepointswithinjusttwomonths–wherebyIMFManagingDirectorDominiqueStrauss-Kahndidnotexcludefurtherreductionstoward“zero”inmidFebruary2008.For2010,theIMFexpectsglobalgrowthof3.0%.
Thefinancialproblemsremainacuteandwillalsoaffecttherealeconomy–statestheIMFreport.Accor-dingtotheIMF,asustainedeconomicrecoverywillnotbepossibleuntilthefinancesectorisfullyfunctionalagainandthecreditcrunchhasbeenresolved.
EvenworsethantheIMF’sforecastfortheUSA(-1.6%)isitsexpectationfortheEurozone(-2.0%).
AllleadinginstitutesalsoforecastasteepdownturnfortheGermaneconomyin2009.Thegeneralviewisthateconomicoutputwillfallbyaround2%.Atthesametime,Germanyfacesaconsiderableincreaseinborrow-ingin2009,dueinparttothedirectconsequencesoftheeconomiccrisisandinparttothecostofthegovernment’srecoverypackages.TheGermangovern-menthopestosupportindustryandconsumerswithinvestments,economicaidandtaxbreaksinordertodampentheeffectsoftheexpectedrecession.
ProspectsforITCmarketsremainhealthy
Theeconomiccrisishassofaronlyhadalimitedimpactonthehigh-techindustry.ThiswasconfirmedbyarepresentativesurveyoftheITCsector,whichthesectorassociationBITKOMpresentedontheeveoftheCeBITfairinHanover.Accordingtothesurvey,55%ofcompaniesquestionedhadsofarfeltnodirecteffectsofthecrisisontheirbusiness.Theothersreported
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Broadbandmeanseconomicstrength!InnovativebroadbandinternetapplicationswillcontinuetodrivethedevelopmentoftheWorldWideWebinfuture.Broadbandinternetthereforeplaysanextremelyimportantroleforoureconomy.Inthestudy“GermanyOnline”,expertspredictthatinformationtechnologiesandtelecommunicationapplicationswillgrowsignifi-cantlyoverthecomingyears.Theirshareofgrossdomesticproductisexpectedtoalmostdoubletoaround12%by2015.
BasedonthelatestfiguresofmarketresearchinstituteEITO,BITKOMforecastinlateFebruarythattheGer-manmarketforfixed-lineinternetaccesswouldgrowby4.2%toC13.8billionin2009,thusreachinganewrecordlevel.Despitetheeconomicslump,itforecastthatsaleswithprivateinternetaccessalonewouldgrowby7.5%toC8.8billionin2009.
Aboveall,thisrapidgrowthmeansincreasingband-widthsandthusanimprovedperformanceofthebroadbandnetwork.Withoutthisdevelopment,attrac-tiveapplicationslikeinternettelephony,internetTVorvideo-on-demandwouldsimplynotbepossible.Thecustomerequatesincreasedspeedwithgreaterconve-nienceandnewapplicationpossibilities.Thismarketdriverwillcontinuetoplayakeyroleforweb-basedapplications–suchassoftware-as-a-serviceandcloudcomputing.Bandwidthsmust,andwill,continuetogrow.Already,theinternet’sglobaldatavolumeisgrowingatanannualrateof50-60%–statesBITKOM.
Whereasbroadbandconnectionsofover16Mbit/sarestillrestrictedtoveryfewhouseholds,suchspeedsareexpectedtobeavailabletoover30%ofallhouseholdsby2015.Incontrast,themarketshareofthemostwidespreadbandwidthsunder6Mbit/swillfallinthecomingyears.Thetrendisthusclear:thestrongdeclineinlower-speedinternetconnectionswillgohand-in-handwithanincreaseinultra-highbandwidthconnec-tions.
Theongoingboominbroadbandconnectionswillalsopositivelyimpactmanyothermarketsinwhichweoperate.Withgrowinghouseholdpenetrationofbroad-bandinternet,wecanoffernewandinnovativepro-ductsandserviceswhichuserscanaccesswithoutanydropinperformance.Atthesametime,ouronlinepor-talsGMX,WEB.DEund1&1andmarketingbrandsAdLINKMedia,Sedoandaffilinetwillbeabletouseincreasinglydata-intensiveadvertisingformats.
FurthergrowthforwebhostingandonlineadvertisingMarketresearchersalsopredictcontinuinggrowthforthewebhostingindustry.GartnerandIDCforecastannualgrowthratesof15%and16%until2010.IntheirEuropeanManagedWebhostingForecastofOctober2007,theexpertsofIDCpredictedgrowthof10.4%toUSD4.6billionin2009–intheB-to-Bhostingsectoralone.GoodgrowthopportunitiesareforecastforallEuropeanmarketsinwhichweoperate:Germany(+8.4%),theUK(+10.4%),France(+9.9%),Austria(+11.3%)andSpain(+12.4%).Newweb-basedservices–subsumedundertheterms“software-as-a-service”and“cloudcomputing”–willfurtherstrengthenthis“out-sourcingtrend”(towardinternet-basedandawayfromPC-basedapplications).
Theonlineadvertisingmarketisalsoexpectedtocon-tinueitsstronggrowth–althoughatemporarybutsignificantdownturnisexpectedin2009asaresultoftheglobaleconomicproblems.
Theoverallimportanceofonlineadvertisinginthetotaladvertisingmixwillcontinuetorise.The“Marke-ters‘InternetAdBarometer2008”reportshowsthateightoutoftenEuropeanadvertiserswillinvestmoreheavilyinonlineadvertisinginthecomingyears.ThestudycommissionedbytheEuropeanInteractiveAdvertisingAssociation,theassociationofpan-Euro-peanonlinemarketersandtechnologyserviceprovi-ders,questionedmarketingexecutivesofleadingEuro-peancompanies.Accordingtothereport,almostthreequartersofalladvertisersquestionedinEurope(2008:73%;2006:52%)usedtheinternetincreasinglyasanadvertisingmedium.Overonethirdofthesedecidersregardtheinternetasanessentialchannelfortheirmarketing.In2006thisproportionwasjust17%.82%ofthosecompanieswhichraisedtheironlineadverti-singbudgetin2008,movedpartoftheirmediabudgetfromprint(40%),TV(39%)anddirectmarketing(32%)totheinternet.
AlthoughonlineadvertisingwillcontinuetogrowinimportanceinGermany,itwillnotbeabletoescapetheeffectsofthegeneraleconomicsituation.TheOVK’sgrowthforecastfor2009isthusmuchmorecon-servativethaninpreviousyears.Theonlineexpertstotalgrowthof10%.Thiscorrespondstosegmentgrowthof10%inbothclassiconlineadvertisingandsearchwordmarketing,and15%intheaffiliatenet-works.TheOVKforecastsanincreaseintotaltojustoverC4billion.
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OpportunitiesforUnitedInternetdespitelessencouragingenvironment
ThankstooursuccessfulpositioninginthegrowthmarketsofDSL,Webhosting,PortalsandOnlineMarketing,weexpectgoodgrowthopportunitiesinthemediumterm.Duetodifficultyofforecastingthefutureeconomicdevelopment,however,allsuchfore-castsaresubjecttouncertainty.
Inviewofthecontinuedslumpinadvertisingspen-ding,andtheresultingpressureonpricesandmargins,aswellasthesignificantreductionsintheforecastsofmarketresearchers,weexpectadifficultyearforourOnlineMarketingbusinessin2009.
InourProductsegment,weareconfidentthatourinternationalexpansionstrategyinthefieldofweb-hostingwillcontinuetomakegoodprogressinthecomingyearsandthatwecanmaintainourdynamicgrowth–thanksinparttofurtherproductinnovationssuchasthe1&1SectorHomePage,andentryintofurthermarkets.
Inviewofourinnovativeproducts,such1&1DSLHomeNet,andattractiveprice-performanceratio,wealsoseegoodopportunitiesforourDSLbusiness.Inparticular,weexpectfurthersuccessfulgrowthfromthemigrationofourcustomerstocompletepackages–ofgreatimportancetouswithregardtocustomerretention.
Allinall,weexpectfurthergrowthinthenumberofcustomercontractsinallproductlines,asthetrendcontinuestowardbroadbandconnectionsandtheresultingstrongincreaseinweb-basedapplicationsofferedbyourdatacenters.
TheprospectsforfurthergrowtharealsoencouragingforthemarketingofourportalsGMX,WEB.DEand1&1–albeitataslowerpaceduetothecurrentcyclicalweaknessofthemarket.
Allinall,weexpectslightgrowthinconsolidatedsalesfor2009.AfterreachingnewrecordlevelsforEBITDAandEBITin2008,weaimtoholdEBITDAandEBITattheprior-yearlevelinfiscalyear2009despitetheweaknessoftheonlineadvertisingmarket.
Montabaur,March16,2009
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RalphDommermuth,CEONorbertLang,CFO
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58 BalanceSheet
59 IncomeStatement
60 DevelopmentofSegments
62 CashFlowStatement
64 DevelopmentofFixedAssets
66 ChangesinShareholders’Equity
68 Notes
124 AuditOpinionoftheIndependentAuditor
Consolidated Financial Statement acc. to IFRS
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Consolidated Balance Sheetas of December 31, 2008 in Ek
ASSETS
Notes
December 31, 2008
December 31, 2007
Current assets Cash and cash equivalents 20 55,372 59,770Accounts receivable and other assets 21 119,066 123,788Inventories 22 19,048 16,785Prepaid expenses 23 28,791 23,020Loans to joint ventures 42 0 4,007Other assets 24 12,737 16,371
235,014 243,741Non-current assets Shares in associated companies / joint ventures 25 221,684 309,023Other financial assets 26 72,785 67,867Property, plant and equipment 27 86,494 77,105Intangible assets 28 97,512 120,031Goodwill 29 378,876 388,822Deferred tax asset 16 9,632 7,437
866,983 970,285Total assets 1,101,997 1,214,026
LIABILITIES AND EQUITY Liabilities Current liabilities Trade accounts payable 31 170,743 232,421Liabilities due to banks 32 16,069 2,056Advance payments received 6,453 6,069Accrued taxes 33 33,855 30,172Deferred revenue 34 106,401 102,200Other accrued liabilities 35 4,513 7,683Other liabilities 36 , 42 61,765 60,243
399,799 440,844Non-current liabilities Convertible bonds 37 74 245Liabilities due to banks 32 528,301 369,049Deferred tax liabilities 38 17,351 19,061Other liabilities 36 10,892 886
556,618 389,241Total liabilities 956,417 830,085
Equity Capital stock 39 251,469 251,434Additional paid-in capital 40 163,896 160,095Accumulated profit 5,619 171,688Treasury stock 39 -264,987 -213,338Revaluation reserves 40 10,002 9,411Currency translation adjustment -28,692 -7,726Equity attributable to shareholders of the parent company 137,307 371,564
Minority interests 8,273 12,377Total equity 145,580 383,941Total liabilities and equity 1,101,997 1,214,026
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Consolidated Income Statement from January 1, 2008 to December 31, 2008 in Ek
2008 2007Notes January - December January - December
Sales 4 1,649,571 1,487,429
Cost of sales 5 , 9 , 11 -1,006,951 -896,001Gross profit 642,620 591,428
Selling expenses
6 , 9 , 11
-278,564
-248,234
General administrative expenses 7, 9 , 11 -83,652 -82,470Other operating expenses 8 -39,879 -34,380Other operating income 8 46,567 42,386
Amortization of intangible assets resulting from company acquisitions
9
-21,283
-22,494
Amortization of goodwill 10 -9,244 -9,373Operating result 256,565 236,863
Interest and similar expenses
12
-33,498
-6,674
Interest and similar income 13 3,928 2,049Result from associated companies 14 -42,379 0Result from at-equity companies 15 -234,193 2,284Pre-tax result -49,577 234,522
Income taxes
16
-71,886
-79,119
Net income before minority interests (from continued operations)
-121,463
155,403
Result from discontinued operations
17
-
68,098
Net income before minority interests (after discontinued operations)
-121,463
223,501
Attributabel to - minority interests - shareholders of United Internet AG
-1,280-120,183
3,283220,218
Result per share of shareholders of United Internet AG (in D) - basic 18 -0.52 0.93- diluted 18 -0.52 0.93 thereof result per share (in C) from continued operations - basic 18 -0.52 0.64- diluted 18 -0.52 0.64 thereof result per share (in C) from discontinued operations- basic 18 - 0.29- diluted 18 - 0.29 Weighted average shares (in million units)- basic 18 229.79 235.76- diluted 18 229.79 236.63
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Reconciliation
United Internet Group
Dk Dk Dk Dk DkTotal revenues 1,446,323 222,472 5,033 - -
- thereof internal revenues 13,497 6,400 4,360 - -
External revenues 1,432,826 216,072 673 - 1,649,571
- thereof domestic 1,308,074 124,594 673 - 1,433,341
- thereof non-domestic 124,752 91,478 0 - 216,230
EBITDA 298,575 12,912 7,281 - 318,768
Result from at-equity companies -1,626 -60 -232,507 - -234,193
Segment result 249,224 -7,913 -290,888 - -49,577
Tax expense
-71,886
-71,886
Net income (from continued operations)
-121,463
Result from discontinued operations - -
Net income (after discontinued operations)
-121,463
Operative segment assets 632,491 167,632 453,695 -161,453 1,092,365
- thereof domestic 503,571 110,510 408,312 -161,453 860,940
- thereof non-domestic 128,920 57,122 45,383 231,425
Deferred tax claims 9,632 9,632
Total assets 1,101,997
Proportion from at-equity companies / joint ventures
0
1,153
220,531
221,684
Operative segment liabilities 376,264 101,149 589,066 -161,268 905,211
Accrued taxes 33,855 33,855
Deferred tax liabilities 17,351 17,351
Total liabilities 956,417
Investments in tangible and intangible assets
40,474
1,353
215
42,042
- thereof domestic 29,178 971 215 30,364
- thereof non-domestic 11,296 382 0 11,678
Amortization/depreciation of tangible and intangible assets
50,508
2,220
232
52,960
Amortization of goodwill 0 9,244 0 9,244
Write-downs on investments 0 7,894 34,485 42,379
Number of employees 4,020 516 29 4,565
- thereof domestic 3,304 285 29 3,618
- thereof non-domestic 716 231 0 947
Development of Segments
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2007 Product segment
Online Marke-ting segment
Head Office / Investments
Reconciliation
United Internet Group
Dk Dk Dk Dk DkTotal revenues 1,274,326 229,191 10,514 - -
- thereof internal revenues 12,469 4,299 9,834 - -
External revenues 1,261,857 224,892 680 - 1,487,429
- thereof domestic 1,156,204 122,885 680 - 1,279,769
- thereof non-domestic 105,653 102,007 0 - 207,660
EBITDA 279,287 43,301 -13,761 - 308,827
Result from at-equity companies - 173 2,111 - 2,284
Segment result 219,966 29,602 -15,046 - 234,522
Tax expense
-79,119
-79,119
Net income (from continued operations)
155,403
Result from discontinued operations 68,098 68,098
Net income (after discontinued operations)
223,501
Operative segment assets 637,465 192,279 463,293 -86,443 1,206,594
- thereof domestic 498,065 94,732 463,293 -86,443 969,647
- thereof non-domestic 139,400 97,547 0 236,947
Deferred tax claims 7,437 7,437
Total assets 1,214,031
Proportion from at-equity companies / joint ventures
-
-
309,023
309,023
Operative segment liabilities 347,835 111,683 407,394 -86,060 780,852
Accrued taxes 30,172 30,172
Deferred tax liabilities 19,061 19,061
Total liabilities 830,085
Investments in tangible and intangible assets
55,201
3,150
426
58,777
- thereof domestic 33,441 1,912 426 35,779
- thereof non-domestic 21,760 1,238 0 22,998
Amortization/depreciation of tangible and intangible assets
60,334
1,885
372
62,591
Amortization of goodwill 0 9,373 0 9,373
Number of employees 3,456 472 26 3,954
- thereof domestic 2,849 252 26 3,127
- thereof non-domestic 607 220 0 827
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Notes
2008 January - December
2007 January - December
Cash flow from operating activities
Net income (from continued operations) -121,463 155,403
Net income (from discontinued operations) 0 68,098
Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization of intangible assets and property, plant and equipment
9
31,677
40,097Amortization of intangible assets resulting from company acquisitions
9
21,283
22,494
Amortization of other financial assets 14 42,379 0Amortization of goodwill 10 9,244 9,373Compensation expenses from employee stock option plans 37 4,020 1,605Results of at-equity companies 25 234,193 -2,284Distributed profit of associated companies 25 392 950Income from deconsolidation of affiliated companies 17 0 -65,746Income from deconsolidation of associated companies 25 -3,894 -4,591Non-cash result from contribution aof assets 3 0 -16,808Change in deferred taxes -4,882 -742Non-cash expenses / income -2,448 1,928Operative cash flow 210,501 209,777
Change in assets and liabilities Change in receivables and other assets 9,621 -20,144Change in inventories -2,264 -593Change in deferred expenses -5,148 -4,695Change in trade accounts payable -62,061 73,296Change in advance payments received 384 629Change in other accrued liabilities -4,381 5,984Change in accrued taxes 3,470 5,688Change in other liabilities -5,910 10,626Change in deferred income 8,774 11,347Change in assets and liabilities, total -57,515 82,138Cash flow from operating activities 152,986 291,915
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Notes
2008 January - December
2007 January - December
Cash flow from investing activities
Capital expenditure for intangible assets and property, plant and equipment
-42,042
-58,777
Purchase of further shares in affiliated companies 3 -9,538 -37,949
Purchase of shares in affiliated companies 3 -10,323 0
Payments for additional refunding company acquisition costs
3
0
3,436
Payments from deconsolidation of affiliated companies 17 0 85,248
Purchase of shares in associated companies 25 -160,696 -309,299
Payments from deconsolidation of associated companies 25 12,268 6,881
Investments in other financial assets 26 -50,937 -31,465
Payments of loans granted to joint ventures 42 4,007 -4,000
Payments of loans granted -400 -58
Disposal of assets 423 2,580
Repayments of associated companies 20,037 0
Cash flow from investment activities -237,201 -343,403
Cash flow from financing activities
Purchase of treasury stock 39 -51,649 -133,777
Change in bank liabilities 32 172,465 250,688
Repayed loans to associated companies 42 -2,800 2,800
Dividend payments 19 -45,886 -42,516
Minority interests 12,987 0
Payments to minorities -66 -149
Capital increase 144 3,509
Payment of convertible bonds -155 -230
Cash flow from financing activities 85,040 80,325
Net increase in cash and cash equivalents 825 28,837
Cash and cash equivalents at beginning of fiscal year 59,770 32,723
Currency translation adjustments of cash and cash equivalents
-5,223
-1,790
Cash and cash equivalents at end of fiscal year 55,372 59,770
Deposit of interests
2,036
1,206
Payments for interests -27,632 -7,246
Deposit of taxes 16 830
Payments for taxes -74,062 -71,389
Dividend payments received 1,768 623
63
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Our Strategy
The Share
Management Report
Financial Statements
Cash
Flo
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tate
men
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Development of Consolidated Fixed Assetsin Fiscal Year 2008 and 2007 in Ek
2007 ACQUISITION AND PRODUCTION COSTS ACCUMULATED DEPRECIATION NET BOOK VALUE
Jan. 1, 2007
Additions from
initial consoli-
dation
Additions
Disposals
Reclassi-fications
Currency trans-lation
Disposals
from decon-
solidation
Dec. 31, 2007
Jan. 1, 2007
Additions from
initial consoli-
dation
Additions
Dispo-sals
Reclas-si-fica-
tions
Currency trans-lation
Disposals
from deconso-
lidation
Dec. 31, 2007
Jan. 1, 2007
Dec. 31, 2007
Intangible assets Licenses 33,781 0 2,399 197 -371 0 -8,150 27,462 21,953 0 7,630 384 -5 -7 -6,782 22,405 11,828 5,057Order backlog 2,141 0 0 0 0 0 0 2,141 1,128 0 552 0 0 0 0 1,680 1,013 461Software 31,585 0 8,227 474 9 -99 -4,881 34,367 20,780 0 9,673 436 5 -63 -4,535 25,424 10,805 8,943Trademark 22,282 0 0 0 0 -378 0 21,904 0 0 0 0 0 0 0 0 22,282 21,904Customer base 47,098 0 0 0 0 -1,573 0 45,525 7,361 0 7,491 0 0 -318 0 14,534 39,737 30,991Portal 72,240 0 0 0 0 0 0 72,240 10,535 0 9,030 0 0 0 0 19,565 61,705 52,675Goodwill 375,366 0 33,927 3,623 0 -5,168 -628 399,874 1,679 0 9,373 0 0 0 0 11,052 373,687 388,822Total (I) 584,493 0 44,553 4,294 -362 -7,218 -13,659 603,513 63,436 0 43,749 820 0 -388 -11,317 94,660 521,057 508,853
Property, plant and equipment Land and buildings 6,986 0 0 0 0 0 0 6,986 3,609 0 268 0 0 0 0 3,877 3,377 3,109Operational equipment 149,782 0 41,291 8,490 4,426 -3,018 -27,086 156,905 95,119 0 27,947 7,831 0 -1,525 -20,574 93,136 54,663 63,769Payments in advance 8,256 0 6,860 0 -4,405 -484 0 10,227 0 0 0 0 0 0 0 0 8,256 10,227Total (II) 165,024 0 48,151 8,490 21 -3,502 -27,086 174,118 98,728 0 28,215 7,831 0 -1,525 -20,574 97,013 66,296 77,105Total 749,517 0 92,704 12,784 -341 -10,720 -40,745 777,631 162,164 0 71,964 8,651 0 -1,913 -31,891 191,673 587,353 585,958
2008 ACQUISITION AND PRODUCTION COSTS ACCUMULATED DEPRECIATION NET BOOK VALUE
Jan. 1, 2008
Additions from
initial consoli-
dation
Additions
Disposals
Reclassi-fications
Currency trans-lation
Disposals
from decon-
solidation
Dec. 31, 2008
Jan. 1, 2008
Additions from
initial consoli-
dation
Additions
Dispo-sals
Reclas-sifica-tions
Currency trans-lation
Disposals
from deconso-
lidation
Dec. 31, 2008
Jan. 1, 2008
Dec. 31, 2008
Intangible assets Licenses 27,462 0 701 0 133 41 0 28,337 22,405 0 2,770 0 29 7 0 25,211 5,057 3,126Order backlog 2,141 0 0 0 0 0 0 2,141 1,680 0 461 0 0 0 0 2,141 461 0Software 34,367 0 3,633 10 -12 -283 0 37,695 25,424 0 5,496 8 15 -252 0 30,675 8,943 7,020Trademark 21,904 820 0 0 0 -1,301 0 21,423 0 0 44 0 0 0 0 44 21,904 21,379Customer base 45,525 2,661 0 0 1 -5,260 0 42,927 14,534 0 7,354 0 0 -1,303 0 20,585 30,991 22,342Portal 72,240 0 0 0 0 0 0 72,240 19,565 0 9,030 0 0 0 0 28,595 52,675 43,645
Goodwill 399,874 9,302 7,399 0 0 -17,403 0 399,172 11,052 0 9,244 0 0 0 0 20,296 388,822 378,876Total (I) 603,513 12,783 11,733 10 122 -24,206 0 603,935 94,660 0 34,399 8 44 -1,548 0 127,547 508,853 476,388
Property, plant and equipment Land and buildings 6,986 0 1,061 0 0 0 0 8,047 3,877 0 151 0 0 0 0 4,028 3,109 4,019Operational equipment 156,905 53 36,537 1,032 6,912 -2,730 0 196,645 93,136 26 27,654 925 -44 -2,213 0 117,634 63,769 79,011Payments in advance 10,227 0 110 0 -6,966 93 0 3,464 0 0 0 0 0 0 0 0 10,227 3,464Total (II) 174,118 53 37,708 1,032 -54 -2,637 0 208,156 97,013 26 27,805 925 -44 -2,213 0 121,662 77,105 86,494Total 777,631 12,836 49,441 1,042 68 -26,843 0 812,091 191,673 26 62,204 933 0 -3,761 0 249,209 585,958 562,882
64
2007 ACQUISITION AND PRODUCTION COSTS ACCUMULATED DEPRECIATION NET BOOK VALUE
Jan. 1, 2007
Additions from
initial consoli-
dation
Additions
Disposals
Reclassi-fications
Currency trans-lation
Disposals
from decon-
solidation
Dec. 31, 2007
Jan. 1, 2007
Additions from
initial consoli-
dation
Additions
Dispo-sals
Reclas-si-fica-
tions
Currency trans-lation
Disposals
from deconso-
lidation
Dec. 31, 2007
Jan. 1, 2007
Dec. 31, 2007
Intangible assets Licenses 33,781 0 2,399 197 -371 0 -8,150 27,462 21,953 0 7,630 384 -5 -7 -6,782 22,405 11,828 5,057Order backlog 2,141 0 0 0 0 0 0 2,141 1,128 0 552 0 0 0 0 1,680 1,013 461Software 31,585 0 8,227 474 9 -99 -4,881 34,367 20,780 0 9,673 436 5 -63 -4,535 25,424 10,805 8,943Trademark 22,282 0 0 0 0 -378 0 21,904 0 0 0 0 0 0 0 0 22,282 21,904Customer base 47,098 0 0 0 0 -1,573 0 45,525 7,361 0 7,491 0 0 -318 0 14,534 39,737 30,991Portal 72,240 0 0 0 0 0 0 72,240 10,535 0 9,030 0 0 0 0 19,565 61,705 52,675Goodwill 375,366 0 33,927 3,623 0 -5,168 -628 399,874 1,679 0 9,373 0 0 0 0 11,052 373,687 388,822Total (I) 584,493 0 44,553 4,294 -362 -7,218 -13,659 603,513 63,436 0 43,749 820 0 -388 -11,317 94,660 521,057 508,853
Property, plant and equipment Land and buildings 6,986 0 0 0 0 0 0 6,986 3,609 0 268 0 0 0 0 3,877 3,377 3,109Operational equipment 149,782 0 41,291 8,490 4,426 -3,018 -27,086 156,905 95,119 0 27,947 7,831 0 -1,525 -20,574 93,136 54,663 63,769Payments in advance 8,256 0 6,860 0 -4,405 -484 0 10,227 0 0 0 0 0 0 0 0 8,256 10,227Total (II) 165,024 0 48,151 8,490 21 -3,502 -27,086 174,118 98,728 0 28,215 7,831 0 -1,525 -20,574 97,013 66,296 77,105Total 749,517 0 92,704 12,784 -341 -10,720 -40,745 777,631 162,164 0 71,964 8,651 0 -1,913 -31,891 191,673 587,353 585,958
2008 ACQUISITION AND PRODUCTION COSTS ACCUMULATED DEPRECIATION NET BOOK VALUE
Jan. 1, 2008
Additions from
initial consoli-
dation
Additions
Disposals
Reclassi-fications
Currency trans-lation
Disposals
from decon-
solidation
Dec. 31, 2008
Jan. 1, 2008
Additions from
initial consoli-
dation
Additions
Dispo-sals
Reclas-sifica-tions
Currency trans-lation
Disposals
from deconso-
lidation
Dec. 31, 2008
Jan. 1, 2008
Dec. 31, 2008
Intangible assets Licenses 27,462 0 701 0 133 41 0 28,337 22,405 0 2,770 0 29 7 0 25,211 5,057 3,126Order backlog 2,141 0 0 0 0 0 0 2,141 1,680 0 461 0 0 0 0 2,141 461 0Software 34,367 0 3,633 10 -12 -283 0 37,695 25,424 0 5,496 8 15 -252 0 30,675 8,943 7,020Trademark 21,904 820 0 0 0 -1,301 0 21,423 0 0 44 0 0 0 0 44 21,904 21,379Customer base 45,525 2,661 0 0 1 -5,260 0 42,927 14,534 0 7,354 0 0 -1,303 0 20,585 30,991 22,342Portal 72,240 0 0 0 0 0 0 72,240 19,565 0 9,030 0 0 0 0 28,595 52,675 43,645
Goodwill 399,874 9,302 7,399 0 0 -17,403 0 399,172 11,052 0 9,244 0 0 0 0 20,296 388,822 378,876Total (I) 603,513 12,783 11,733 10 122 -24,206 0 603,935 94,660 0 34,399 8 44 -1,548 0 127,547 508,853 476,388
Property, plant and equipment Land and buildings 6,986 0 1,061 0 0 0 0 8,047 3,877 0 151 0 0 0 0 4,028 3,109 4,019Operational equipment 156,905 53 36,537 1,032 6,912 -2,730 0 196,645 93,136 26 27,654 925 -44 -2,213 0 117,634 63,769 79,011Payments in advance 10,227 0 110 0 -6,966 93 0 3,464 0 0 0 0 0 0 0 0 10,227 3,464Total (II) 174,118 53 37,708 1,032 -54 -2,637 0 208,156 97,013 26 27,805 925 -44 -2,213 0 121,662 77,105 86,494Total 777,631 12,836 49,441 1,042 68 -26,843 0 812,091 191,673 26 62,204 933 0 -3,761 0 249,209 585,958 562,882
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The Share
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Financial Statements
Dev
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men
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ixed
Ass
ets
Consolidated Statement of Changes in Shareholders’ Equityfrom January 1, 2007 to December 31, 2008 in Ek
Total net income
Capital stock
Additional paid-in capital
Accumulated profit
Capital stock
Revaluationreserves
Currency translation
Equity attributable to
shareholders of the parent
company
Minority interests
Total equity
attributable to share-
holders of United
Internet AG
Minorityinterests
Share Dk Dk Dk Share Dk Dk Dk Dk Dk Dk Dk Dk
Balance as of January 1, 2007 250,235,176 250,235 156,447 -6,014 8,226,072 -79,561 1,373 930 323,410 11,605 335,015 113,575 6,954
Exercise of convertibles 1,198,796 1,199 2,043 3,242 3,242Employee stock ownership programme AdLINK
311
311
311
Employee stock ownership programme United Internet
1,294
1,294
1,294
Market value changes of available for sale securities after taxes
8,038
8,038
1,149
9,187
8,038
1,149
Withdrawal of treasury shares 9,773,928 -133,777 -133,777 -133,777Dividend payments -42,516 -42,516 -42,516Currency translation adjustment -8,656 -8,656 -35 -8,691 -8,656 -35Net income 2007 220,218 220,218 3,283 223,501 220,218 3,283Dividend payments 0 -75 -75Change amount of holding 0 -3,550 -3,550Balance as of December 31, 2007 251,433,972 251,434 160,095 171,688 18,000,000 -213,338 9,411 -7,726 371,564 12,377 383,941 219,600 4,397 thereof result directly included in equity
-618
1,114
Balance as of January 1, 2008 251,433,972 251,434 160,095 171,688 18,000,000 -213,338 9,411 -7,726 371,564 12,377 383,941 220,749 4,397Exercise of convertibles 35 118 153 153Employee stock ownership programme AdLINK
1,269
1,269
153
1,422
Employee stock ownership programme United Internet
2,598
2,598
2,598
Market value changes of available for sale securities after taxes
591
591
-1,053
-462
591
-1,053
Others -184 -184 -184Withdrawal of treasury shares 4,000,000 -51,649 -51,649 -51,649Dividend payments -45,886 -45,886 -45,886
Currency translation adjustment -20,966 -20,966 93 -20,873 -20,966 93Net income 2008 -120,183 -120,183 -1,280 -121,463 -120,183 -1,280Dividend payments 0 -66 -66Change amount of holding 0 -1,951 -1,951Balance as of December 31, 2008 251,433,972 251,469 163,896 5,619 22,000,000 -264,987 10,002 -28,692 137,307 8,273 145,580 -140,558 -2,240 thereof result directly included in equity
-20,375
-960
66
Total net income
Capital stock
Additional paid-in capital
Accumulated profit
Capital stock
Revaluationreserves
Currency translation
Equity attributable to
shareholders of the parent
company
Minority interests
Total equity
attributable to share-
holders of United
Internet AG
Minorityinterests
Share Dk Dk Dk Share Dk Dk Dk Dk Dk Dk Dk Dk
Balance as of January 1, 2007 250,235,176 250,235 156,447 -6,014 8,226,072 -79,561 1,373 930 323,410 11,605 335,015 113,575 6,954
Exercise of convertibles 1,198,796 1,199 2,043 3,242 3,242Employee stock ownership programme AdLINK
311
311
311
Employee stock ownership programme United Internet
1,294
1,294
1,294
Market value changes of available for sale securities after taxes
8,038
8,038
1,149
9,187
8,038
1,149
Withdrawal of treasury shares 9,773,928 -133,777 -133,777 -133,777Dividend payments -42,516 -42,516 -42,516Currency translation adjustment -8,656 -8,656 -35 -8,691 -8,656 -35Net income 2007 220,218 220,218 3,283 223,501 220,218 3,283Dividend payments 0 -75 -75Change amount of holding 0 -3,550 -3,550Balance as of December 31, 2007 251,433,972 251,434 160,095 171,688 18,000,000 -213,338 9,411 -7,726 371,564 12,377 383,941 219,600 4,397 thereof result directly included in equity
-618
1,114
Balance as of January 1, 2008 251,433,972 251,434 160,095 171,688 18,000,000 -213,338 9,411 -7,726 371,564 12,377 383,941 220,749 4,397Exercise of convertibles 35 118 153 153Employee stock ownership programme AdLINK
1,269
1,269
153
1,422
Employee stock ownership programme United Internet
2,598
2,598
2,598
Market value changes of available for sale securities after taxes
591
591
-1,053
-462
591
-1,053
Others -184 -184 -184Withdrawal of treasury shares 4,000,000 -51,649 -51,649 -51,649Dividend payments -45,886 -45,886 -45,886
Currency translation adjustment -20,966 -20,966 93 -20,873 -20,966 93Net income 2008 -120,183 -120,183 -1,280 -121,463 -120,183 -1,280Dividend payments 0 -66 -66Change amount of holding 0 -1,951 -1,951Balance as of December 31, 2008 251,433,972 251,469 163,896 5,619 22,000,000 -264,987 10,002 -28,692 137,307 8,273 145,580 -140,558 -2,240 thereof result directly included in equity
-20,375
-960
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Management Report
Financial Statements
Chan
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in S
hare
hold
ers’
Equ
ity
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSas of December 31, 2008
1 Information on the company
Natureofthebusiness
Accordingtoitsarticlesofincorporation,thebusinessofUnitedInternetAG(herein-afterreferredtoas“UnitedInternetAG”,the“UnitedInternetGroup”orthe“Company”)istoprovidemarketing,salesorotherservices,especiallyinthefieldsoftelecommunica-tions,informationtechnology,includingtheinternet,anddataprocessingorrelatedareas.TheCompany’spurposealsoincludestheacquisition,holdingandmanagementofinvestmentsinothercompanies,especiallythoseoperatingintheaforementionedbusinesssegments.TheCompanyisentitledtobringcompaniesinwhichitholdsaninvestmentunderitscommoncontrolandmayrestrictitselftothemanage-mentoradministrationofitsinvestments.
TheCompanyisauthorizedtoacquireorholdinvest-mentsinalltypesofcompaniesinGermanyandothercountriesandtotransactallbusinessthatisconducivetoitspurpose.TheCompanyisalsoauthorizedtocon-ductitsbusinessthroughsubsidiaries,associatedcom-paniesandjointventures.Itmayoutsourceortransferallorpartofitsoperationstoaffiliatedcompanies.
Inthelastfewyears,UnitedInternetAGhaschangeditsstrategicalignment,evolvingfromapureproviderofinternetandITmarketingservicestoanoperatingmanagementholdingcompanyforinvestmentsinvariousinternettargetsegments,inparticularinthefieldofinternetserviceprovision.
TheCompanyisregisteredin56410Montabaur,Elgen-dorferStrasse57,Germany,andhasbranchesorsub-sidiariesinDüsseldorf,Hanover,Karlsruhe,Cologne,Munich,Regensburg,Zweibrücken,Boston,Brussels,CebuCity,Chesterbrook,Gloucester,Haarlem,LasVegas,Melbourne,Levallois-Perret,London,Madrid,Milan,Saargemünd,Slough,ViennaandZug.WiththeexceptionofthebuildingatZweibrücken,alloftheCompany’sbuildingsareleased.
Thereportingcompany
Theparentcompany,UnitedInternetAG,wasfoundedonJanuary29,1998as1&1Aktiengesellschaft&Co.KGaA.Asaholdingcompany,itassumedthefunctionsof1&1HoldingGmbH,whichwasmergedinto1&1Akti-engesellschaft&Co.KGaAwitheffectfromJanuary1,
1998.UntilitsgeneralmeetingofshareholdersonFebruary22,2000,ittradedunderthenameof1&1Aktiengesellschaft&Co.KGaA.AtthisgeneralmeetingitwasdecidedtochangetheCompany’snametoUnitedInternetAktiengesellschaft&Co.KGaAandthentotransformtheCompanyintoastockcorporationnamedUnitedInternetAG.UnitedInternetAGisregisteredatthedistrictcourtofMontabaurunderHRB5762.
2 Accounting and valuation principles
2.1 Basisofpreparation
InaccordancewithArticle4oftheso-calledIASOrdi-nance(Ordinance(EU)No.1606/2002oftheEuropeanParliamentandCouncilofJuly19,2002concerningtheapplicationofinternationalaccountingstandards,ABl.EUNo.L243p.1),theUnitedInternetGrouppreparesitsconsolidatedannualfinancialstatementsaccordingtoIFRS(InternationalFinancialReportingStandards).TheCompanyalsoobservedandappliedthesupple-mentaryregulationsofSection315a(1)GermanCom-mercialCode(HGB).AllIFRSstandardsvalidonthebalancesheetdateandasappliedwithintheEuropeanUnionwereobserved.
Thereportingcurrencyiseuro(C).Amountsstatedinthenotestothefinancialstatementsareineuro(C),thousandeuro(Ck)ormillioneuro(Cm).Theconsoli-datedfinancialstatementsarealwaysdrawnuponthebasisofhistoricalcosts.Theexceptiontothisrulearederivativefinancialinstrumentsandavailable-for-salefinancialinvestments,whicharestatedatfairvalue.
ThebalancesheetdateisDecember31,2008.
TheSupervisoryBoardapprovedtheconsolidatedfinancialstatementsfor2007atitsmeetingonApril2,2008.TheconsolidatedannualfinancialstatementswerepublishedintheGermanFederalGazette(“Bundesanzeiger”)onApril9,2008.
Theconsolidatedfinancialstatementsfor2008werepreparedbytheCompany’sManagementBoardonMarch16,2009andsubsequentlysubmittedtotheSupervisoryBoard.Theconsolidatedfinancialstate-mentswillbepresentedtotheSupervisoryBoardforapprovalonMarch25,2009.
68
2.2 Consolidationprinciples
TheconsolidatedgroupcomprisesUnitedInternetAGandalldomesticandforeignsubsidiaries(majorityshareholdings)controlledbyit.Acompanyisdeemedtobecontrolled,iftheCompanycandetermineitsfinancialandbusinesspoliciesinordertogainaneconomicbenefit.Theannualfinancialstatementsofsubsidiariesarepre-paredastothesamebalancesheetdateandusingthesamestandardizedaccountingandvaluationmethodsasthoseappliedbytheparentcompany.
Allintercompanybalances,transactions,income,expenses,profitsandlossesfromintercompanytrans-actionscontainedinthecarryingvalueofassetsarefullyeliminated.
Subsidiariesarefullyconsolidatedfromthepointofacquisition,i.e.fromthedateonwhichtheCompanygainedcontrol.Consolidationendsassoonastheparentcompanynolongerhascontroloverthesub-sidiary.
MinorityinterestsrepresenttheproportionoftheresultandnetassetswhichisnotattributabletotheGroup.Minorityinterestsaredisclosedseparatelyintheconsolidatedbalancesheet.Minorityinterestsaredisclosedintheconsolidatedbalancesheetaspartofshareholders’equity,butseparatetotheequitycapitalattributabletotheshareholdersoftheparentcompany.Theacquisitionofminorityshareholdingsisaccountedforusingtheso-called“parent entity extension method”.Thedifferencebetweenpurchasepriceandbookvalueoftheproportionofnetassetsacquirediscarriedasgoodwill.
TheGroupincludesthefollowingsubsidiariesinwhichUnitedInternetAGholdsadirectorindirectmajorityinterest(asindicatedbytheshareholdingsinbrackets).Unlessotherwisestated,theshareholdingcorrespondstotheproportionofvotingrights:1&1Internet: 1&1InternetAG,Montabaur(100.00%) 1&1InternetInc.,Chesterbrook/USA(100.00%)– A1MediaLLC,Chesterbrook/USA(100.00%)
1&1InternetLtd.,Slough/UK(100.00%) 1&1InternetS.A.R.L.,Saargemünd/France(100.00%)
1&1InternetEspanaS.L.U.,Madrid/Spain(100.00%)
1&1InternetServiceGmbH,Montabaur(100.00%) – 1&1InternetServiceGmbH,Zweibrücken
(100.00%) 1&1InternetServices(Philippines)Inc.,CebuCity,Phillipines(100.00%)
1&1UKHoldingsLtd.,Slough/UK(100.00%) – FasthostsInternetLtd.,Gloucester/UK
(100.00%)• DollamoreLtd,Melbourne/UK(100.00%)• FasthostsInternetInc.,Chesterbrook/
USA(100.00%) A1MarketingKommunikationundneueMedienGmbH,Montabaur(100.00%)
GMXGmbH,Munich(100.00%) GMXInternetServicesInc.,Chesterbrook/USA(100.00%)
GMXInternetServicesGmbH,Munich(100.00%)
ImmobilienverwaltungABGmbH,Montabaur(100.00%)
ImmobilienverwaltungNMHGmbH,Montabaur(100.00%)
UnitedInternetMediaAG,Munich(100.00%) UIMUnitedInternetMediaAustriaGmbH,Vienna/Austria(100.00%)
WEB.DEGmbH,Montabaur(100.00%)
UnitedInternetBeteiligungen: UnitedInternetBeteiligungenGmbH,Montabaur(100.00%) UnitedInternetBeteiligungenInternationalGmbH,Montabaur(100.00%)
InterNetXGmbH,Regensburg(95.56%)– SchlundTechnologiesGmbH,Regensburg
(100.00%)– PSIUSAInc.,LasVegas/USA(100.00%)
AdLINK: AdLINKInternetMediaAG,Montabaur(90.71%) AdLINKInternetMediaS.A.,Levallois-Perret/France(100.00%)
AdLINKInternetMediaN.V.,Brussels/Belgium(100.00%)
AdLINKInternetMediaS.L.U.,Madrid/Spain(100.00%)
AdLINKInternetMediaLtd.,London/UK(100.00%)
AdLINKInternetMediaB.V.,Haarlem/Nether-lands(100.00%)
AdLINKInternetMediaSrl.,Milan/Italy(100.00%)
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Our Strategy
The Share
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Financial Statements
Not
es
AdLINKInternetMediaGmbHDeutschland,Düsseldorf(100.00%)– net:dialogsGmbH,Montabaur(100.00%)– SedoGmbH,Cologne(75.94%)• Sedo.comLLC,Cambridge(Boston)/USA(100.00%)• DomCollectWorldwideIntellectualPropertyAG,Zug/Switzerland(100.00%)• IntellectualPropertyManagementCompanyInc.,Dover/USA(100.0%)
affilinetGmbH,Munich(100.00%)– affilinetLtd.,London/UK(100.00%)– CibleClickPerformancesS.A.,Levallois
Perret/France(100.00%)• affilinetSAS,LevalloisPerret/France(100.00%)
Sonstige: MIPMultimediaInternetParkGmbH,Zweibrücken(100.00%)
InsonHOLDINGGmbH,Montabaur(100.00%) EuropeanFoundersFundNr.2VerwaltungsGmbH,Munich(90.00%)
EuropeanFoundersFundNr.2GeschäftsführungsGmbH,Munich(90.00%)
EuropeanFoundersFundGmbH&Co.BeteiligungsKGNr.2,Munich(90.00%)
EuropeanFoundersFundNr.3VerwaltungsGmbH,Munich(80.00%)
EuropeanFoundersFundNr.3ManagementGmbH,Munich(80.00%)
EuropeanFoundersFundGmbH&Co.BeteiligungsKGNr.3,Munich(80.00%) EuropeanFoundersFundNr.3BeteiligungsGmbH,Munich(100.00%)
Duetothecontractuallyagreedunanimityofvotingonallshareholderresolutions,theGroupcannotexertacontrollinginfluenceonEFFNo.2andEFFNo.3com-paniesbasedonitsvotingmajorityalone.However,astheGroupexertscontrolaccordingtotheindicatorsstatedinSIC12Consolidation – Special Purpose Entities,thesecompaniesareconsolidated.
Shareholdingsinjointventuresarerecognizedusingtheequitymethodandcomprisethefollowingcompanies:
MaxdomeGmbH&Co.KG,Unterföhring(50.00%) MSPHoldingGmbH,Maintal(50.00%)
AllinvestmentsforwhichtheCompanycanhaveasignificantinfluenceontheirfinancialandbusiness
policiesarerecognizedasassociatedcompaniesaccor-dingtoIAS28usingtheequitymethod.Theyconsistofthefollowingmaincompanies:
EuropeanFoundersFundVerwaltungsGmbH,Munich(66.67%)
EuropeanFoundersFundManagementGmbH,Munich(66.67%)
EuropeanFoundersFundGmbH&Co.BeteiligungsKGNr.1,Munich(66.67%)
funcommunicationsGmbH,Karlsruhe(49.00%) VirtualMindsAG,Freiburg(48.65%) DomainsBotSrl,Rom/Italy(40.00%) BW2GroupAG,Lachen/Switzerland(33.36%) EuropeanFoundersFundInvestmentGmbH,Munich(33.33%)
JimdoGmbH,Hamburg(30.00%) VersatelAG,Berlin(25.21%) Travel-TrexGmbH,Cologne(25.00%) getAbstractAG,Luzern/Switzerland(22.00%) internetstoresAG,Esslingen(20.00%) freenetAG,Büdelsdorf(8.43%)
Duetothecontractuallyagreedunanimityofvotingonallshareholderresolutions,theGroupcannotexertacontrollinginfluenceonEFFNo.1companies,butonlyasignificantinfluence.Incontrasttoitsshareincapitalof66.67%,theGroup’sparticipationinannualnetprofitisbetween33.33%and66.67%ofEFFNo.1,dependingonthefund’sinternalrateofreturn.
Despiteholding8.63%ofvotingrightsinfreenetAG,theCompanybelievesitexertsasignificantinfluenceonthebusinesspolicyoffreenetAGduetoavotingcommitmentagreedwithDrillischAGandMSPHoldingGmbH.
CompaniesinwhichtheCompanyhasinvestedandoverwhosefinancialandbusinesspoliciesithasnosignificantinfluence(<20%ofvotingshares)areincludedasfinancialinstrumentspursuanttoIAS39andheldasavailable-for-salefinancialassets:
GoldbachMediaAG,Küsnacht-Zürich/Switzerland(14.99%)
AfiliasLtd,Dublin/Ireland(10.37%) DrillischAG,Maintal(9.68%) SilverpopSystemsInc.,Atlanta/USA(5.91%) XactlyCorporation,SanJose/USA(5.26%) BecomeInc.,Sunnyvale/USA(5.06%)
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2.3 Changesinaccountingandvaluationmethods
Initialapplicationofnewaccountingstandardsintheperiodunderreview
InOctober2008theIASBreleasedamendmentstoIAS39Financial Instruments: Recognition and Measure-mentandIFRS7Financial Instruments: Disclosures.TheamendmentsReclassification of Financial AssetswereintegratedbytheEuropeanUnionintoEUlawinOcto-ber2008.TheamendmenttoIAS39allowsthereclassi-ficationofcertainoriginatedfinancialassetsatfairvalueintoadifferentvaluationcategory.Inthecaseofreclassification,additionaldisclosuresarerequiredviatheamendmenttoIFRS7.TheamendmentsbecameeffectiveretroactivelyasofJuly1,2008.Intheperiodunderreview,theUnitedInternetGrouphadnofinan-cialassetswhichcouldbereclassifiedviatheamend-menttoIAS39.TheapplicationoftheamendmentstoIAS39andIFRS7thereforehasnoeffectonthepresen-tationoftheUnitedInternetGroup’snetassets,finan-cialsituationandresultsofoperationsnoronitscashflows.
Therewerenootherchangestotheaccountingandvaluationmethodscomparedwiththepreviousyear.
Newaccountingstandardswithnoearlyadoptionintheperiodunderreview
TheIASBandIFRIChavealsoreleasedthefollowingstandardsandinterpretationswhoseadoptionwasnotmandatoryinfiscalyear2008andwhichwerenotvoluntarilyappliedbytheCompany.
AlreadyadoptedasEUlawunderthecomitologyprocedure:
IFRS8–OperatingSegments IAS23–BorrowingCosts IAS1–PresentationofFinancialStatements AmendmentstoIFRS1andIAS27–AcquisitionCostsofanInvestmentinaSubsidiary,JointlyControlledEntityorAssociatedCompany
AmendmentstoIFRS2–VestingConditionsandCancellations
AmendmentstoIAS32andIAS11–PuttableFinancialInstrumentsandObligationsArisingonLiquidation
ThemaineffectsoftheseamendmentsfortheUnitedInternetGroupwereasfollows:
IFRS8–OperatingSegmentsIFRS8wasreleasedinNovember2006andistobeappliedforthefirsttimeinthereportingperiodbegin-ningonorafterJanuary1,2009.IFRS8requiresthedisclosureofinformationaboutacompany’soperatingsegmentsandreplacestheobligationofIAS14tospe-cifyprimaryandsecondarysegmentreportformatsforacompany.IFRS8followstheso-calledmanagementapproachaccordingtowhichsegmentreportingonlyconformstothefinancialinformationthecompany’sexecutivesusefortheinternalmanagementofthecompany.Decisivearetheinternalreportingandorga-nizationalstructuresaswellassuchfinancialvaluesconsideredwhendecidingontheallocationofresour-cesandtheevaluationofprofitability.
ThenewstandardwillinfluencethemodeofthepresentationoffinancialinformationontheGroup’sbusinesssegmentsbutwillnotaffecttheinclusionandvaluationofassetsandliabilitiesintheconso-lidatedfinancialstatements.
IAS23–BorrowingCostsRevisedstandardIAS23wasreleasedinMarch2007andisapplicableinthereportingperiodbeginningonorafterJanuary1,2009.Thestandardendstheformeroptionrightandrequiresborrowingcoststhatcanbeattributedtoaqualifiedassettobecapitalized.Anassetisdefinedasaqualifiedassetifaconsiderableperiodoftimeisnecessarytoputtheassetinitsinten-dedconditionforuseorsale.Thetransitionalprovisi-onsprovidefortherevisiontobeappliedprospectively.
AstheGroupdoesnotholdanyqualifiedassets,theapplicationofthisstandardhasnoeffectontheconsolidatedfinancialstatements.
IAS1–PresentationofFinancialStatementsTherevisedstandardIAS1wasreleasedinSeptember2007andisapplicableforthereportingperiodbegin-ningonorafterJanuary1,2009.Therevisedversionofthestandardincludesmaterialchangestothepresen-tationanddisclosureoffinancialinformationinthefinancialstatements.Infuture,onlytransactionswithshareholdersintheircapacityasprovidersofequitycapitalmaybedisclosedinthestatementofchangesinequity.Otherchangesinequityaretobedisclosedinthepresentationof“comprehensiveincome”fortheperiod,whichcanbepresentedeitherinonesinglestatementorintheformoftwostatements:aprofit
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andlossstatementandacomprehensiveincomestate-ment.Furthermore,thestandardrequiresthatacom-panyincludesabalancesheetinitsannualfinancialstatementsoftheearliestcomparisonperiodifitretroactivelyappliesanaccountingmethod,orretroac-tivelycorrectsorreclassifiesanitem.
ThenewstandardwillhaveaneffectonthemodeofpublicationoftheGroup’sfinancialinformation,yetitwillnotaffecttheinclusionandvaluationofassetsandliabilitiesintheconsolidatedfinancialstatements.
AmendmentstoIFRS1andIAS27–Acquisitioncostsofaninvestmentinasubsidiary,jointlycontrolledentityorassociatedcompany
TheamendmentstoIFRS1andIAS27werereleasedinMay2008andarefirstapplicableinthereportingperiodbeginningonorafterJanuary1,2009.TheamendmentstoIFRS1allowacompanytodeterminetheacquisitioncostofaninvestmentinasubsidiary,jointlycontrolledentityorassociatedcompanyinitsIFRSopeningbalancesheetalsobyusingthecarryingamountsorfairvaluesofthepreviousGAAPasasub-stituteforacquisitioncost(deemedcost).Theamend-mentstoIAS27onlyaffecttheseparateannualfinan-cialstatementsofaparentcompanyandrequireinparticularthatalldividendsofsubsidiaries,jointlycontrolledentitiesorassociatedcompaniesaretoberecognizedinprofitandlossoftheseparateannualfinancialstatements.Thetransitionalprovisionsprovidefortherevisiontobeappliedprospectively.
AstheregulationsconcerninginitialadoptionofIFRSandtheregulationsforseparateannualfinancialstatementsofaparentcompanyarenotpertinentfortheGroup,thisrevisionwillhavenoimpactontheconsolidatedfinancialstatements
AmendmentstoIFRS2–VestingConditions andCancellationsTheamendmentofIFRS2wasreleasedinJanuary2008andisfirstapplicableforthereportingperiodbegin-ningonorafterJanuary1,2009.Therevisionclarifiestheterm“vestingconditions”andalsoregulatesaccountingproceduresontheterminationofshare-basedcompensationplansbyemployees.Thetransi-tionalprovisionsprovideforretrospectiveapplicationoftherevision.
DuetotheGroup’sinsignificantamountofshare-basedcompensation,theinitialapplicationofthisrevisioninfuturewillhavenosignificanteffectontheconso-lidatedfinancialstatements.
AmendmentstoIAS32andIAS1–PuttableFinancialInstrumentsandObligationsArisingonLiquidation
TheamendmentsofIAS32andIAS1werereleasedinFebruary2008andareapplicableinthereportingperiodbeginningonorafterJanuary1,2009.Therevi-sionintroducesanexceptionwhichallowsputtablefinancialinstrumentstobeclassifiedasequityiftheymeetcertaincriteria.Disclosuresaboutthesefinancialinstrumentsarestillmandatory.
TheamendmentstothesestandardsarenotexpectedtoaffecttheGroup’snetassets,financialsituationandearnings,astheparentcompanyhasnotissuedsuchinstruments.
ImprovementstoIFRS2008TheamendmentsfromtheImprovementProject2008werereleasedinMay2008and–withtheexceptionofIFRS5(herefromJuly1,2009)–arefirstapplicableforfiscalyearsbeginningonorafterJanuary1,2009.InthecourseoftheImprovementProject2008,anumberofmaterialamendmentswerereleasedwhichaffectaccountingandmeasurementmethods,aswellaspurelyeditorialamendments.Thelatterconcern,forexample,individualdefinitionsandformulationsaimedatmaintainingconsistencywithotherIFRSstandards.TheCompanyhasnotyetadoptedthefollowingamendments:
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
Itwasclarifiedthatallassetsandliabilitiesofasubsidiarywhosesalewouldresultinalossofcontrolofthissubsidiaryarealsotobeclassifiedasavailable-for-saleifthecompanymaintainsanon-controllinginterestinitsformersubsidiaryafterthesale.
IAS 1 Presentation of Financial Statements Itwasclarifiedthatfinancialinstrumentsclassi-
fiedasheld-for-tradingarenotnecessarilytobeclassifiedascurrentassetsorliabilitiesinthebalancesheet.Theterm“current”isbasedsolelyontheaccrualcriteriacontainedinIAS1.
IAS 10 Events after the Reporting Period Itwasclarifiedthatdividendsdecidedaftertheend
ofthereportingperiod,butbeforeapprovaltopublishtheannualfinancialstatements,donotrepresentanobligationasofthebalancesheetdateandshouldthereforenotberecognizedintheannualfinancialstatementsasaliability.
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IAS 16 Property, Plant and Equipment Revenuefromproperty,plantandequipmentheld
forlettingpurposeswhicharenormallysoldafterlettingaspartofordinaryoperations,istobedisclosedundersalesrevenue.
IAS 19 Employee Benefits Inadditiontotherevisionofseveraldefinitions,it
wasclarifiedthatplanchangeswhichresultinareductionofbenefitsforservicestoberenderedinfutureperiods,aretoberecognizedasaplancurtailment.Planchangesforwhichthecurtail-mentreferstoservicesalreadyrendered,however,aretoberecognizedasapastservicecost.
IAS 20 Accounting for Government Grants and Disclosure of Government Assistance
Inthecaseoflow-orzero-interestloans,companiesmustcalculatetheinterestbenefitinfuture.Thedifferencebetweentheamountreceivedandthediscountedamountistobecarriedasagovern-mentgrant.
IAS 23 Borrowing Costs Thedefinitionofborrowingcostswasrevised
insofarastheguidelinesinIAS39regardingtheeffectiveinterestratewereadopted.
IAS 27 Consolidated and Separate Financial Statements acc. to IFRS
ItwasclarifiedthattheaccountingofasubsidiaryatfairvaluepursuanttoIAS39intheseparateannualfinancialstatementsofaparentcompanymustalsobemaintainedifthesubsidiaryisclassifiedasanassetheldforsale.
IAS 28 Investments in Associates Asthegoodwillcontainedinthecarryingvalueof
aninvestmentinanassociatedcompanyisnotseparatelydisclosed,itisnotseparatelytestedforanyimpairment.Instead,theentirecarryingvalueoftheinvestmentistestedforimpairmentasasingleassetandwrittendownasnecessary.Itwasnowclarifiedthatalsothereversalofanimpair-mentlossrecognizedforaninvestmentinanassociatedcompanyinanearlierreportingperiodistoberecognizedasanincreaseinvaleofthisinvestmentasawholeandnotallocatedtothegoodwillitcontains.Afurtheramendmentconcernsthedisclosureobligationsforsuchinvestmentsinassociates,whicharecarriedatfairvalueinaccordancewithIAS39.Infuture,onlytherequirementsofIAS28areappliedwhichstipulate
thatthetypeandscopeofsignificantrestrictionsintheabilityoftheassociatetotransferfinancetothecompanyintheformofcashorloanredemp-tionaretobespecified.
IAS 29 Financial Reporting in Hyperinflationary Economies
Itwasclarifiedthatinannualfinancialstatementspreparedonthebasisofhistoriccost,assetsandliabilitieswhichareorcanbemeasuredatfairvaluearenotnecessarilyrestrictedtoproperty,plantandequipmentandfinancialinvestments.
IAS 31 Interests In Joint Ventures Theamendmentonlyconcernsdisclosureobliga-
tionsforthoseinterestsinjointventurescarriedatfairvalueinaccordancewithIAS39.Infuture,onlythoserequirementsofIAS31areappliedtotheseinterestsinwhichtheobligationsofthepartnercompanyandofthejointventurearetobestatedtogetherwithasummaryoffinancialinformationconcerningtheassets,liabilities,incomeandexpenditure.
IAS 34 Interim Financial Reporting Itwasclarifiedthatdilutedandundilutedearnings
persharemustonlybestatedintheinterimfinancialreportifthecompanyissubjecttotheapplicationareaofIAS33.
IAS 36 Impairment of Assets Thedisclosurerequirementsweresimplifiedforthe
determinationof“valueinuse”and“fairvaluelesstransactioncosts”,calculatedonthebasisofadiscountedcashflowmodel.
IAS 38 Intangible Assets Expenditureforgoodsandservicesusedfor
advertisingcampaignsandsalespromotionactivities(includingmailordercatalogs)arerecognizedasanexpenseinfutureiftheGrouphasreceivedtherighttoaccessthegoodsorservices.Theapplicationoftheperformance-relateddepreciationmethodforintangibleassetsisstillallowedwithoutrestriction.
IAS 39 Financial Instruments: Recognition and Measurement
Afterinitialrecognition,derivativescanbedesignatedas“atfairvaluethroughprofitorloss”orremovedfromthiscategoryduetoachangeincircumstances,asthisdoesnotqualifyasareclassificationasdefinedbyIAS39.Thereference
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toa“segment”,regardingwhetheraninstrumentfulfilledthecriteriaforahedgeinstrument,wasalsocancelled.Itwasalsoclarifiedthatthenewlycalculatedeffectiveinterestrateistobeusedforthevaluationofadebtinstrumentwhenthehedgingrelationshipisnolongercarriedinthebalancesheettohedgeagainstfairvalue.
IAS 40 Investment Property Propertyunderconstruction,whichisproducedor
developedforuseasaninvestment,isnottobeclassifiedasproperty,plantandequipmentinfuturebutasan“investmentproperty”measuredatcostorfairvalue.Ifthecompanyusesthefairvaluemodel,andiffairvaluecannotbereliablymeasured,thepropertyunderconstructionisvaluedatcostuntilfairvaluecanbemeasuredorconstructioniscompleted.
IAS 41 Agriculture Thelimitationontheuseofadiscountratebefore
taxformeasuringfairvaluewascancelled.Moreover,theprohibitiontoconsidercashflowsfromadditionalbiologicaltransformationsandotherfuturecompanytransactionswhenestimatingfairvaluewasalsocancelled.
TheUnitedInternetGroupexpectsthattheamend-mentsfromtheImprovementProjectwillhavenosignificanteffectsontheconsolidatedfinancialstatements.
IFRIC 13 Customer Loyalty Programs IFRICInterpretation13wasreleasedinJune2007
andisinitiallyapplicableinthereportingperiodbeginningonorafterJuly1,2008.Accordingtothisinterpretation,benefitsgrantedtocustomersaretoberecognizedasaseparateelementoftherevenueactivityinwhichtheyweregranted.Partofthefairvalueoftheproceedsreceivedisthereforeallocatedtocustomerbenefitsanddeferredasaliability.Revenueisrecognizedintheperiodinwhichthecustomerbenefitsgrantedareexercisedorexpire.
AstheGroupdoesnotcurrentlyoperatesuchcustomerloyaltyprograms,thisinterpretationhasnoeffectontheconsolidatedfinancialstatements.
IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interac-tion
IFRICInterpretation14wasreleasedinJuly2007andistobeappliednolaterthaninthefirstfiscal
yearbeginningafterDecember31,2008.Thisinterpretationprovidesguidelinesforthedetermi-nationofthelimitontheamountofthesurplusfromadefinedbenefitplanthatcanbecapitalizedasanassetaccordingtoIAS19:Employeebenefits.
AstheGrouphasnotestablishedanydefinedbenefitplans,noeffectontheconsolidatedfinancialstatementsisexpectedfromthisinter-pretation.
NotyetadoptedasEUlawunderthecomitologyprocedure:
IFRS1–First-timeAdoptionofIFRS IFRS3–BusinessCombinations IAS27–ConsolidatedandSeparateFinancialStatementsacc.toIFRS
AmendmenttoIAS39–EligibleHedgedItems IFRIC12–ServiceConcessionArrangements IFRIC15–AgreementsfortheConstructionofRealEstate
IFRIC16–HedgesofaNetInvestmentinaForeignOperation
IFRIC17–DistributionsofNon-cashAssetstoOwners
IFRIC18–TransfersofAssetsfromCustomers
Themaineffectsofthesechangeswereasfollows:
IFRS1–First-timeAdoptionofIFRSTherevisedstandardIFRS1wasreleasedinNovember2008andistobeappliedforthefirsttimeforfiscalyearsstartingonorafterJanuary1,2009.Therevisionofthestandardonlyincludededitorialamendmentsandarestructuringofthestandard.Therearenoamendmentstoaccountingandvaluationregulationsforthefirst-timeadoptionofIFRSresultingfromtherevision.
IFRS3–BusinessCombinationsTheamendedstandardIFRS3wasreleasedinJanuary2008andisapplicableforthefiscalyearsbeginningonorafterJuly1,2009.Withinthecontextofaconver-genceprojectofIASBandFASB,thisstandardwassub-jectedtoathoroughrevision.Theessentialchangesparticularlyconcerntheintroductionofarighttochooseforthevaluationofminorityinterestbetweenaccountingoftheproportionateidentifiablenetasset(so-calledpurchased goodwillmethod)andtheso-calledfull goodwillmethod,accordingtowhichfullgoodwillisrecognized,includingtheportionattributa-bletominorityequityholders.Furthermore,thereva-
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luationofexistinginvestmentsuponfirst-timeobtain-mentofcontrolintheincomestatement(successivebusinessacquisition),themandatoryaccountingofaconsiderationtiedtotheoccurrenceoffutureeventsatthetimeofacquisition,andthetreatmentoftransac-tioncostsasin-come-effectiveareparticularlyworthmentioning.Thetransitionalprovisionsprovidefortherevision’sprospectiveapplication.Nochangesariseforassetandliabilitiesresultingfrombusinesscombina-tionspriortothefirst-timeapplicationofthenewstandard.
AstheCompanywillprobablycontinuetoapplythepurchasedgoodwillmethodforfuturebusinesscombi-nations,therewillbenoeffectsfromthenewregula-tion.Re-valuationinthecourseofsuccessivecompanyacquisitionsandthemandatoryrecognitionofcondi-tionalcompensationatthetimeofpurchasemayleadtohighergoodwillvalues.Thetreatmentoftrans-actioncostsasincome-effectivewillhaveaneffectonfutureresults.
IAS27–ConsolidatedandSeparateFinancial Statementsacc.toIFRSRevisedstandardIAS27wasreleasedinJanuary2008.Thechangesareapplicableforthefiscalyearsbegin-ningonorafterJuly1,2009.ThechangesresultfromajointprojectofIASBandFASBfortherevisionofaccoun-tingregulationsforbusinesscombinations.Thechangesprimarilyconcerntheaccountingofinvestmentswithnocontrolovertheentity(minorityinterest),participa-tingintheGroup’slossestothefullamountinthefuture,andoftransactionsthatleadtoalossofcontroloverasubsidiaryandwhoseconsequencesshallberecognizedintheincomestatement.Theconsequencesofthesaleofinvestmentsnotresultinginalossofcontrolshallberecognizedinequity,notaffectingnetincome.Thetransitionalprovisions,generallyrequiringaretrospectiveapplicationofrealizedchanges,provideforaprospectiveapplicationwithrespecttotheabove-mentionedcases.Thereforenochangesariseforassetsandliabilitiesresultingfromsuchtransactionspriortothefirst-timeapplicationofthenewstandard.
Inthecaseoffutureacquisitions,aswellastransactionsandsalesofminorityshareholdingsresultinginthelossofacontrollinginterest,thenewregulationswillhaveacorrespondingeffectonfutureresultsandthesizeofequitycapital.
AmendmentstoIAS39–EligibleHedgedItemsTheamendmentstoIAS39werereleasedinJuly2008andareapplicableretrospectivelyforfiscalyears
beginningonorafterJuly1,2009.TheamendmentspecifieshowtheprinciplescontainedinIAS39regar-dingthedesignationofhedginginstrumentsofaone-sidedriskinahedgeditemandthedesignationofinflationrisksasahedgeditemaretobeapplied.Theamendmentclarifiesthatitispermissibletodesignateonlypartofthechangesinfairvalueorofcashflowfluctuationsofafinancialinstrumentasahedgeditem.
TheGroup’saccountingofhedginginstrumentsisnotaffectedbythisamendment.
IFRIC12–ServiceConcessionArrangementsIFRICInterpretation12wasreleasedinNovember2006andisgenerallyapplicableforfiscalyearsbeginningonorafterJanuary1,2008.ThisinterpretationhasnotyetbeenadoptedasEUlaw.Theinterpretationgovernstheaccountingofobligationsassumedandrightsgran-tedwithinthecontextofserviceconcessionarrange-mentsinthelessee’sfinancialstatements.
ThecompaniesincludedintheconsolidatedfinancialstatementsarenotlesseesofconcessionspursuanttoIFRIC12.ThisinterpretationwillthereforehavenoeffectontheGroup.
IFRIC15–AgreementfortheConstruction ofRealEstateIFRICInterpretation15wasreleasedinJuly2008andisapplicableforthefiscalyearsbeginningonorafterJanuary1,2009.Thisinterpretationprovidesguide-linesaboutthetimeandscopeofincomerecognitionfromprojectstoconstructrealestate.
IFRIC15willnotaffecttheconsolidatedfinancialstate-mentsasIFRIC15isnotapplicabletotheGroup.
IFRIC16–HedgesofaNetInvestmentinaForeignOperationIFRICInterpretation16wasreleasedinJuly2008andisapplicableforthefiscalyearsbeginningonorafterOctober1,2008.IFRIC16providesguidelinesforreco-gnizinghedgesofanetinvestment.Theinterpretationprovidesguidelinesforidentifyingforeignexchangeriskswhichcanbehedgedagainstaspartofahedgeofanetinvestment,whichGroupcompaniescanholdthehedginginstrumentsofthenetinvestment,andhowacompanyshouldmeasureforeigncurrencygainsorlosseswhichistobereclassifiedfromequitytoprofitandlosswhensellingthehedgedforeignoperation.Thisinterpretationistobeappliedprospectively.
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IFRIC16willnothaveanysignificantimpactontheconsolidatedfinancialstatements.
IFRIC17–DistributionsofNon-cashAssets toOwnersIFRICInterpretation17wasreleasedinNovember2008andisapplicableforthefiscalyearsbeginningonorafterJuly1,2009.Thisinterpretationgivesguidelinesontheaccountingandmeasurementofobligationswhichprovideforthedistributionofnon-cashassetstotheowners.Inparticular,theinterpretationclarifiesthetime,valuationanddisclosureofsuchobligations.Itstipulatesthatsuchanobligationistobecarriedandmeasuredatfairvalueifthecompanycannolongeravoidsuchobligations.Themeasurementoftheobligationandanychangesinfairvalueoftheassetconcernedaretobecarriedinequity.Aneffectonprofitorlossintheamountofthedifferencebetweenfairvalueandtheasset’scarryingvalueonlyoccursatthetimewhenthisassetistransferredtotheowner.Thisinterpretationistobeappliedprospectively.
IFRIC17willhavenoeffectontheconsolidatedfinan-cialstatements,asnodistributionofnon-cashassetswithintheGroupisexpected.
IFRIC18–TransfersofAssetsfromCustomersIFRICInterpretation18wasreleasedinJanuary2009andisapplicableforthefiscalyearsbeginningonorafterJuly1,2009.Thisinterpretationgivesguidelinesontheaccountingofagreementsinwhichanentityreceivesfromacustomeranitemofproperty,plant,andequipmentorcashwhichtheentitymustthenusetoconnectthecustomertoanetworkand/ortoprovidethecustomerwithongoingaccesstoasupplyofgoodsorservices.Inparticular,theinterpretationprovidesguidanceonhowtoaccountforcustomercontributionsaswellasthetimeandscopeofincomerecognitionfromsuchbusinesstransactions.Thisinterpretationistobeappliedprospectively.
IFRIC18willhavenoeffectontheconsolidatedfinan-cialstatements,astheGroupdoesnotconductsuchbusinesstransactions.
2.4 Significantaccountingjudgments, estimatesandassumptions
Theapplicationofaccountingandvaluationmethodsinpreparingtheconsolidatedfinancialstatementsrequiresmanagementtomakecertainaccountingjudgments,estimatesandassumptions.Thesehavean
effectonthedisclosedamountsofearnings,expen-diture,assetsandliabilities,aswellascontingentliabilities,asofthebalancesheetdate.Actualamountsmaydifferfromtheseestimatesandassumptions,whichmayleadinfuturetosignificantadjustmentstothecarryingvaluesoftheassetsandliabilitiesconcerned.
Accountingjudgments
Intheapplicationofaccountingandvaluationmethods,managementmadethefollowingaccountingjudgmentswhichsignificantlyaffectamountsintheannualfinancialstatements.
Special-purposeentitiestheGroupacquiredsharesinthespecial-purposeentitiesEuropeanFoundersFundNo.1toNo.3.OnanalysisofthecontractualtermsofthebylawsunderconsiderationofSIC-12Consolidation – Special Purpose Entities,itwasnotedthat: UnitedInternetAGdoesnotcontrolEuropeanFoundersFundNo.1,but
UnitedInternetAGcontrolsEuropeanFoundersFundNo.2and
UnitedInternetAGcontrolsEuropeanFoundersFundNo.3
EuropeanFoundersFundNo.2andNo.3werethusincludedintheconsolidatedfinancialstatementsasasubsidiarywhileEuropeanFoundersFundNo.1istreatedasanassociatedcompany,duetothesignifi-cantinfluencewhichUnitedInternetAGcanexert.
Estimatesandassumptions
Themostimportantforward-lookingassumptionsandothermajorsourcesofuncertaintyasofthebalancesheetdate,whichinvolvetheriskofsignificantadjust-mentstothecarryingvaluesofassetsandliabilitiesinthecomingfiscalyear,areexplainedbelow.
Impairmentofnon-financialassetsTheCompanyassessesoneverybalancesheetdatewhetherthereisanyindicationofimpairmentofitsnon-financialassets.Goodwillandotherintangibleassetswithundefinedusefullivesareassessedatleastonceayearoronindicationofimpairment.Othernon-financialassetsaretestedforimpairmentifthereisanyindicationthatthecarryingvalueexceedstherecoverableamount.
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Inordertoestimatevalue-in-use,managementmustestimateexpectedfuturecashflowsoftheassetorcash-generatingunitandselectasuitablediscountratetoassessthepresentvalueofthesecashflows.Furtherdetails,includingasensitivityanalysisofsignificantassumptions,arepresentedintheNote“Impairmentofgoodwillandintangibleassetswithunlimitedusefullives”.
Impairmentofavailable-for-salefinancial investmentsTheCompanyclassifiescertainassetsasavailable-for-saleandrecognizeschangesintheirfairvaluedirectlyinequity.Ifthefairvaluefalls,managementmakesassumptionsaboutthelossinvalueinordertodeter-minewhetheritconstitutesanimpairmentwhichmustbeexpensedintheincomestatement.Asignifi-cantorpersistentdecreaseinthefairvalueofanequityinstrumentbelowitsacquisitioncostmayconstituteanobjectiveindicationofimpairment.Thecarryingvalueofavailable-for-salefinancialinvest-mentsamountedtoC70,498k(prioryear:C62,472k)asofDecember31,2008.
Calculatingtheprofitcontributionofassociated companiesandjointventuresInvestmentsinassociatedcompaniesandjointven-turesarevaluedaccordingtotheequity methodandcarriedintheconsolidatedfinancialstatements.Asthefinancialinformationfromassociatedcompaniesandjointventuresisinpartincompleteasofthebalancesheetdate,theproratedtransferofresultsconsidersinpartassumptionsmadebythemanagementoftheUnitedInternetGroup.Theseassumptionsconcern,forexample,adaptationstostandardaccountingandvalu-ationmethods(IAS28.26),effectsfrompurchasepriceallocationstobeconducted(IAS28.23)andtheunder-lyingperiodresults.Inthecourseofsuchestimationsthereareareasofdiscretionanduncertainty.
Estimationsoftheprofitcontributionoflistedassocia-tedcompaniesandjointventuresaresubjectinparttotheprofitforecastsofexternalfinancialanalysts.ThecarryingvalueofinvestmentsinassociatedcompaniesandjointventuresamountedtoC221,684k(prioryear:C309,023k)asofDecember31,2008.
Impairmenttestforinvestmentsinassociated companiesandjointventuresAsofthebalancesheetdate,theUnitedInternetGroupholdsinvestmentsinvariousassociatedcompaniesandjointventures.InaccordancewithIAS28.31,theCompanyexaminesonthebalancesheetdatewhether
thenetinvestmentoftheUnitedInternetGroupintherespectiveassociatedcompanyorjointventurerequiresanadditionalimpairmentcharge.
Inthecaseofcapitalmarket-orientedcompanies,thecalculationoftherecoverableamountsisbasedmainlyontherespectivesharespriceonthebalancesheetdate.Therecoverableamountsofnon-listedcompaniesisbasedbothonavailablepastexperiencefortherespectivecompanyandexpectationsofitsfuturedevelopment.Astheseexpectationsarebasedonnumerousassumptions,thecalculationofrecoverableamountsdependsondiscretionaryfactors.AsofDecember31,2008,thefairvalueofinvestmentsinassociatedcompaniesandjointventuresamountedtoC221,684k(prioryear:C309,023k).
Share-basedpaymentsTheGroupmeasuresthecostofgrantingequityinstru-mentstoemployeesbyusingthefairvalueoftheseequityinstrumentsatthemomenttheyweregranted.Asuitablevaluationmodelmustbeusedtoestimatefairvaluewhengrantingequityinstruments;thisdependsonthecontractualterms.Suitabledatamustalsobechosenforthevaluationprocess,includingtheexpectedoptionterm,volatilityanddividendyield,aswellasthecorrespondingassumptions.
DeferredtaxassetsDeferredtaxassetsarerecognizedforallunusedtaxlosscarryforwards,totheex-tentforwhichitisproba-blethatfuturetaxableprofitwillbeavailable.Inordertoassesstheamountofdeferredtaxassets,manage-mentmustmakesignificantjudgmentsbasedonthelikelytimingandleveloffuturetaxableincomeaswellasfuturetaxplanningstrategies.AsofDecember31,2008,thecarryingvalueofdeferredtaxassetsfortaxlossesconsideredamountedtoC2,712k(prioryear:C6,097k).FurtherdetailsareprovidedinNote16.
TradeaccountsreceivableTradereceivablesarecarriedinthebalancesheetlessimpairmentchargesmade.Allowancesfordoubtfulclaimsaremadeonthebasisofasystematicreviewaswellasvaluationsconductedaspartofcreditmonito-ring.Assumptionsconcerningthepaymentbehaviorandcreditworthinessofcustomersaresubjecttosignificantuncertainties.ThecarryingvalueoftradereceivablesamountedtoC119,066k(prioryear:C123,788k)asofDecember31,2008.
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TangibleandintangibleassetsProperty,plantandequipmentandintangibleassetsarevaluedatcostoninitialrecognition.Property,plantandequipmentandintangibleassetswithlimitedusefullivesarethendepreciatedovertheirexpectedeconomicusefullivesusingthestraight-linemethod.Expectedusefullivesarebasedonhistoricalexperienceandthussubjecttosignificantuncertain-ties,especiallywithregardtounforeseentechnologicaldevelopments.ThecarryingvalueoftangibleandintangibleassetsamountedtoC162,627k(prioryear:C175,232k)asofDecember31,2008.
ProvisionsProvisionsareformediftheGrouphasalegaloractualobligationresultingfromapasteventwhichwillpro-bablygiverisetotheoutflowofresourceswithaneco-nomicbenefittofulfilltheobligation,providedthattheleveloftheobligationcanbereliablyestimated.Suchestimatesaresubjecttosignificantuncertainties.ThecarryingvalueofprovisionsamountedtoC4,513k(prioryear:C7,683k)asofDecember31,2008.
2.5 Summaryofsignificantaccountingand valuationmethodsRevenuerecognition
RevenueisrecognizedseparatelyforeachoftheGroup’sdifferentsegments(seeNote4).
RevenueisrecognizedwhenitisprobablethattheGroupwillreceiveaneconomicbenefitandtheamountofrevenuecanbereliablydetermined.Reve-nueismeasuredatthefairvalueofthecompensationreceived.Discounts,rebates,salestaxorotherchargesarenotconsidered.Therecognitionofrevenuemustalsofulfillthefollowingmeasurementcriteria.
Revenuesintheseparatesegmentsarerecognizedaccordingtothefollowingprinciples:
ProductsegmentTheProductbusinessmainlycomprisestheproductlinesInternetAccess(narrowband,mobileinternetaccessandDSLproductswithinternettelephony,video-on-demandandmobiletelephony),sharedanddedicatedwebhostingandtheportalbusinesswithadvertisingande-commercerevenuesaswellaspaidmainlyportal-basedvalue-addedservices.
Internet access IntheInternetAccessproductline,theCompany
generatesrevenuemainlyfromtheprovisionofnarrowbandandmobileinternetconnectionsandDSLaccess,bundledwithinternettelephony,video-on-demandandmobiletelephony.Revenueconsistsoffixedmonthlybasicfees,aswellasvariableusagefeesforinternetconnectionsandaccess,provisionfeesandmarketdevelopmentcostsubsidiesfornewcustomers,proceedsfromthesaleoftherespectivehardwareandsoftware,fixedmonthlybasicfeesforsubscriptionstovideo-on-demandpackages,aswellasvariableusagecharges,e.g.fortheindividualprovisionofvideosorforeignandmobilephoneconnectionsaspartofourinternetandmobiletelephonyoffers.
Revenueisrecognizedaccordingtoserviceprovi-sion,whichgenerallycorrespondstothereceiptofmonthlyfeespaidbycustomers(usagechargesandbasicfees).Revenuefromthesaleofhardwareisrecognizedontransferofrisk.Paymentismainlybydirectdebit.
Web hosting solutions Inthefieldofwebhostingfordiscerningprivate
customersandsmalltomedium-sizedcompanies,revenueismainlyrecognizedfromthehostingofwebsites.Thisprimarilyinvolvesfixedmonthlyrevenuefromtheadministrationandstorageofcustomercontentonsharedordedicatedservers,ore-shops,revenuefromthebrokerageandadminis-trationofdomainsandchargesforprofessionalinternet-basedcommunicationsolutions.Inadditiontofixedmonthlyfeesforstorageandtheprovisionoffunctionalities,one-offfeesarealsochargedforset-upservicesorsoftwareproducts(e.g.forwebsitecreation).
WebhostingcustomersgenerallypayinadvancefortheservicesprovidedbytheCompanyforafixedtimeperiod.Customerpre-paymentsarecarriedasdeferredrevenue.Revenueisrecognizedprorataovertheperiodofserviceprovision.Paymentisgenerallymadebydirectdebit.
Portal/club business RevenuesfromtheportalbusinessofWEB.DE,1&1,
GMXandsmartshoppingconsistmainlyofadvertisingincome,e-commercecommissionsandrevenuesforso-called“paidservices”.Theseincludeincomefromsponsoredlinksduringinternetsearches,SMSandfreephonecharges,
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brokeragecommissionforDSLconnections,ande-commercecommissions.Inthefieldofonlineadvertising,spaceisofferedonthewebsitesofportals.Realizedrevenuesdependontheplacingandnumberofscreeningsoraccordingtoclickrates.Paidservicesconsistmainlyoffee-basede-mailproducts,suchastheWEB.DECluborGMX-ProMail,forwhichrevenuesaregeneratedfromcontinuousmonthlysubscriptionfees.
Revenuesarerealizedaccordingtoservicesrendered.Advancecustomerpaymentsarecarriedasdeferredincome.Paidservicesaregenerallypaidforbydirectdebit.
InaccordancewithSIC31,revenuefromtheexchangeofadvertisingservicesisonlyrecognizediftheadvertisingservicesexchangeddifferintypeandvalue.Revenueisrecognizedatthemarketvalueofthesubmittedassetorrenderedserviceandadjustedwherenecessaryforadditionalcashpayment.UnitedInternetmarketsadvertisingspaceonitsportalstoasmallextentinexchangeforadvertisingtimeinotheradvertisingmedia.
OnlineMarketingsegmentInitsOnlineMarketingsegment,theCompanyoffersadvertisingcustomersavarietyofonlinemarketingandsalessolutionsinthefieldofdisplay,affiliate,domain,e-mail,directanddialogue-basedmarketing.
AdLINK Media AdLINKMediacomprisesthefieldsofdisplay
marketing,e-mailmarketing(viatheCompositebrand)andonlinedirectanddialogue-basedmarketingviathebrandnet:dialogs.AdLINKMediaassumestheindependentmarketingofthird-partywebsitesande-maildatabases.Dependingonthetypeofcampaignandtheadvertiser’scampaignobjectives,revenueisgeneratedonthebasisofcostperthousandcontacts(CPM)oracost-per-clickbasis.Inthecaseofdirectanddialogue-basedmarketingbillingisalsoonacost-per-lead/salebasis.
Customersaremostlybilledonamonthlybasis.Revenueisrecognizedaccordingtothedegreeofcompletion.Amountsinvoicedinadvancearerecognizedasadvancepaymentsreceived.
Domain Marketing Sedooperatesatradingplatformforthesecondary
domainmarket.Inaddition,thecompanyoffersdomainownersthepossibilitytomarketunuseddomainsforadvertisingpurposes(domainparking).Thecompanyalsoholdsitsownportfolioofmarketableandsalabledomains.Sedogeneratessalescommissionfromthesuccessfulsaleofdomainsviatheplatformandrevenueforservicesrelatingtodomainvalueassessmentsanddomaintransfers.Thesalescommissionsandservicesaregenerallybasedonapercentageofthesalespriceachieved,whereasfixedpricesarechargedfortheotherservices.Inthefieldofdomainparking,domainsaremarketedviacooperationagreementswithsearchengines,mainlyusingtextlinks,i.e.linksontheparkeddomainstooffersoftheadvertisers.TheCompanyreceivesperformance-basedpaymentonamonthlybasisfromthecooperationpartneronapay-per-clickbasis,accordingtothenumberofclickscountedbythecooperationpartner.TheCompanyalsooperatesaportfolioofitsowndomains.Theseareavailableforsaleandmarketedinthemeantimeaspartofdomainparking.
TheCompanyrecognizessalescommissionsasrevenueoninvoicing.Revenueisthusrecognizedoncompletionofthetransactionorprovisionoftheservice.Inthecaseofdomainparking,themonthlypaymentscreditedbycooperationpartnersarerecognizedasrevenue.
Affiliate Marketing Affiliatemarketingisaperformance-basedonline
salessolutionbywhichadvertisersormerchantscangain,controlandpaytheirsalespartners,inthiscasewebsiteoperators,viaajointplatform.Aspartoftheaffiliateprogramofthemerchant(advertiser),availableviatheplatform,thewebsiteoperator(affiliate)incorporatestheadvertiser’smessagetopromotesalesofgoodsandservicesonhiswebsiteandgenerallyreceivesacommissionforthesuccessfulbrokerageofcustomersorcontacts.Theaimoftheplatformistocreateanefficientlinkandcommunicationbetweenadvertisersandwebsiteoperators.TheCompanyiscompensatedbythemerchantsfortheuseofadministrationandmanagementtoolswithintheaffiliateprograms,aswellasforthecalculationoftransactionsandthemonthlypaymentstowebsiteoperators.Invoicingisbasedontheamounttobe
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paidtotheaffiliate.Thiscanbeonacost-per-click,cost-per-actionorcost-per-salebasis,oramixtureofthesethree.
Invoicingiseitherinadvanceoronamonthlybasisfollowingcompletionofperformance.Revenueisrecognizedoncompletionofperformance.Amountsinvoicedinadvancearerecognizedlessperformancecompletedasadvancepaymentsreceived.Inthosecasesinwhichperformanceisnotbilledmonthly,performancecompletediscalculatedandrecognizedasrevenueatthepricesagreedwiththecustomer.
Foreigncurrencytranslation
Theconsolidatedfinancialstatementsarepreparedineuro,theCompany’sfunctionalandpresentationcurrency.EachcompanywithintheGroupdeterminesitsownfunctionalcurrency.Theitemsintheannualfinancialstatementsoftherespectivecompanyarevaluedusingthisfunctionalcurrency.Foreigncurrencytransactionsareinitiallytranslatedtothefunctionalcurrencyattheprevailingspotrateonthedayoftransaction.Monetaryassetsandliabilitiesinaforeigncurrencyaretranslatedtothefunctionalcurrencyoneverybalancesheetdateusingtheclosingrate.Allcurrencydifferencesareexpensedintheincomestatement.Theexceptiontothisrulearecurrencydifferencesresultingfromforeigncurrencyloans,providingtheyareusedtohedgeagainstanetinvestmentinaforeignoperation.Thesearereco-gnizeddirectlyinequityuntilthenetinvestmentissoldandonlyrecognizedinprofitorlossondisposal.Deferredtaxesarisingfromsuchcurrencydifferencesarealsorecognizeddirectlyinequity.Non-monetaryitemsvaluedathistoricalcostinaforeigncurrency,aretranslatedattheexchangerateprevailingonthedayofthetransaction.Non-monetaryitemsstatedatfairvalueinaforeigncurrencyaretranslatedattheexchangerateprevailingatthetimefairvaluewasassessed.Allgoodwillitemsresultingfromtheacqui-sitionofaforeignoperationandalladjustmentstofairvalueofthecarryingvaluesofassetsandliabilitiesresultingfromtheacquisitionofthisforeignopera-tion,arecarriedasassetsandliabilitiesoftheforeignoperationandtranslatedattheclosingrate.
Theassetsandliabilitiesofforeignoperationsaretranslatedintoeuroattheclosingrate.Incomeandexpenditureistranslatedattheexchangerateprevailingonthedateofthetransaction(forpractical
considerations,aweightedaveragerateisusedfortranslation).Theresultingtranslationdifferencesarerecognizedseparatelyinequity.Thecumulativeamountforaforeignoperationwhichisstatedinequityisreversedwithaneffectontheincomestatementwhentheforeignoperationissold.
Property,plantandequipment
Property,plantandequipmentiscarriedatcostlesscumulativescheduleddepreciation.Inthecaseofmajormaintenancework,costsarerecognizedinthecarryingvalueasreplacement,providingthemeasure-mentcriteriaaremet.
Landandbuildingsarecarriedatcostlessscheduleddepreciationforbuildingsandimpairment.
Itemsofproperty,plantandequipmentareeliminatedeitherontheirdisposalorwhennofurthereconomicuseisexpectedfromthecontinueduseorsaleoftheasset.Gainsandlossesfromthedisposalofanassetareassessedasthedifferencebetweennetsalesproceedsandtheasset’scarryingvalue.Theyarerecognizedintheincomestatementintheperiodinwhichtheassetiseliminated.
Theresidualvalues,usefullivesanddepreciationmethodsarereviewedattheendofeachfiscalyearandadjustedwherenecessary.
Property,plantandequipmentassetsaredepreciatedovertheirexpectedeconomicusefullifeusingthestraight-linemethod.Inthecaseofoperationalandofficeequipment,serversusedforwebhostingaredepreciatedoverausefullifeof3years.OtherserversusedbytheCompanyaredepreciatedover5years,duetotheircomparativelylowerusage.
Theusefullifeperiodscanbefoundinthefollowingsummary:
Property, plant and equipment Useful life in yearsLeasehold improvements Up to 10 (depending on
lease period)
Buildings 10 or 50
Vehicles 5 to 6
Other operational and office equipment
3 to 10
Office furniture and fixtures 5 to 13
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Borrowingcosts
Borrowingcostsareexpensedintheperiodincurred.
Businesscombinationsandgoodwill
Businesscombinationsareaccountedforusingthepurchasemethod.Thisinvolvestherecognitionofallidentifiableassetsandliabilitiesoftheacquiredoperationatfairvalue.
Goodwillarisingfromabusinesscombinationisini-tiallymeasuredatcost,beingtheexcessoftheacqui-sitioncostoftheoperationoverthefairvalueoftheidentifiableassets,liabilitiesandcontingentliabilitiesacquired.Followinginitialrecognition,goodwillisvaluedatamortizedcost.Goodwillissubjectedtoanimpairmenttestatleastonceannuallyorwheneverthereisanyeventorchangeincircumstanceswhichmightindicateimpairment.
Inordertotestwhetherthereisanyimpairment,good-willacquiredinthecourseofabusinesscombinationmustbeallocatedfromthedateofacquisitiontoeachofthecash-generatingunitsoftheGroupwhicharetoprofitfromthesynergyeffectsofthecombination.ThisdoesnotdependonwhetherotherassetsandliabilitiesoftheGrouparealreadyallocatedtothesecash-generatingunits.Theimpairmentneedisdeterminedonthebasisoftherecoverableamountofthecash-generatingunitstowhichgoodwillrefers.Therecoverableamountofanassetisthehigheroffairvalueoftheassetorcash-generatingunitlesstransactioncostsanditsvalue-in-use.Ifthecarryingamountofanassetexceedsitsrecoverableamount,theassetisregardedasimpairedandiswrittendowntoitsrecoverableamount.
Intangibleassets
Individuallyacquiredintangibleassetsarecarriedatcostoninitialrecognition.Theacquisitioncostofintangibleassetsresultingfromthebusinesscombi-nationcorrespondstoitsfairvalueatthetimeofacqui-sition.Inthefollowingperiods,intangibleassetsarevaluedatcostlesscumulativeamortizationandcumu-lativeimpairmentcharges.Withtheexceptionofthosedevelopmentcostswhichcanbecapitalized,costsforinternallygeneratedintangibleassetsareexpensedintheperiodincurred.
Adifferenceismadebetweenintangibleassetswithlimitedandthosewithunlimitedusefullives.
Intangibleassetswithlimitedusefullivesareamor-tizedovertheireconomicusefullifeandtestedforpossibleimpairmentifthereisanyindicationthattheassetmaybeimpaired.Theusefullivesandamortiza-tionmethodsofintangibleassetswithlimitedusefullivesarereviewedatleastattheendofeachfiscalyear.Necessarychangestothedepreciationmethodanduse-fullifearetreatedaschangestoassumptions.Amorti-zationofintangibleassetswithlimitedusefullivesarerecognizedintheincomestatementundertheexpensecategorycorrespondingtothefunctionoftheintangi-bleassetintheCompany.
Inthecaseofintangibleassetswithunlimitedusefullives,animpairmenttestisperformedatleastonceannuallyfortheindividualassetoronthelevelofthecash-generatingunit.Suchintangibleassetsarenotamortizedinscheduledamounts.Theusefullifeofanintangibleassetwithanunlimitedusefullifeisreviewedannuallytoascertainwhethertheassump-tionofanunlimitedusefullifeisstilljustified.Ifthisisnotthecase,aprospectivechangeismadefromunlimitedusefullifetolimitedusefullife.
Theusefullifeperiodscanbefoundinthefollowingsummary:
Intangible assets Useful life in yearsTrademarks Unlimited
Portals 8
Customer base 5 to 13
Licenses and other rights 3 to 6
Software 3
Investmentsinassociatedcompanies
Investmentsinassociatedcompaniesarevaluedaccordingtotheequity method.AnassociatedcompanyisanentityoverwhichtheGrouphassignificantinfluenceandthatisneitherasubsidiarynoraninterestinajointventure.
Usingtheequity method,investmentsinassociatedcompaniesarecarriedinthebalancesheetatcostasadjustedforpost-acquisitionchangesintheCompany’sshareofthenetassetsoftheassociatedcompany.Goodwillconnectedwithanassociatedcompanyis
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includedinthecarryingvalueoftheinvestmentandnotsubjectedtoscheduledamortization.TheincomestatementincludestheCompany’sportionofthesuccessoftheassociatedcompany.Changesrecognizeddirectlyintheequitycapitaloftheassociatedcom-panyarerecognizedbytheCompanyinproportiontoitsshareholdingand–whereapplicable–reportedin“Changesinshareholders’equity”.ProfitsandlossesfromtransactionsbetweentheCompanyandtheassociatedcompanyareeliminatedinproportiontotheshareholdingintheassociatedcompany.
Theannualfinancialstatementsoftheassociatedcompanyaregenerallypreparedastothesamebalancesheetdateasthoseoftheparentcompany.Wherenecessary,adjustmentsaremadetobringthemethodsinlinewithstandardgroup-wideaccountingandvaluationmethods.
Sharesinjointventures
TheCompanyholdsinvestmentsintwojointventurecompanies.Thereisacontractualagreementbetweenthepartnercompaniestojointlymanagethebusinessactivitiesofthecompany.TheGrouprecognizesitsinvestmentsinthejointventuresusingtheequity method.Theannualfinancialstatementsofthejointventuresarepreparedastothesamebalancesheetdateasthoseoftheparentcompany.Wherenecessary,adjustmentsaremadetobringthemethodsinlinewithstandardgroup-wideaccountingandvaluationmethods.
Impairmentofnon-financialassets
Ateachbalancesheetdate,theCompanyreviewsthecarryingamountsofitsassetstodeterminewhetherthereisanyindicationthatthoseassetshavesufferedanimpairmentloss.Ifanysuchindicationexists,orifanannualimpairmenttestisnecessary,therecover-ableamountoftheassetisestimated.Therecoverableamountofanassetisthehigheroffairvalueoftheassetorcash-generatingunitlesstransactioncostsanditsvalue-in-use.Therecoverableamountofeachassetmustbedetermined,unlessanassetdoesnotgeneratecashflowswhicharelargelyindependentofotherassetsorothergroupsofassets.Ifthecarryingamountofanassetexceedsitsrecoverableamount,theassetisregardedasimpairedandiswrittendowntoitsrecoverableamount.Inordertodeterminethevalue-in-use,expectedfuturecashflowsarediscountedto
theirpresentvalueusingapre-taxdiscountratewhichreflectscurrentmarketexpectationsregardingtheinteresteffectandthespecificrisksoftheasset.Asuitablevaluationmodelisusedtodeterminefairvaluelesssalescosts.Thisisbasedonvaluationmulti-pliers,thesharepricesoflistedsubsidiariesorotheravailableindicatorsforfairvalue.
Impairmentchargesofcontinuedoperationsarerecognizedaccordingtotheexpensecategorycorres-pondingtothefunctionoftheimpairedassetintheCompany.
Areviewismadeofassets,withtheexceptionofgood-will,oneachbalancesheetdatetodeterminewhetherthereisanyindicationthatapreviouslyrecognizedimpairmentlossnolongerexistsorhasdecreasedinsize.Inthecaseofsuchanindication,theCompanymakesanestimateoftherecoverableamount.Aprevi-ouslyrecognizedimpairmentlossisonlyreversediftherehasbeenachangeintheassumptionusedtodeterminetherecoverableamountsincerecognitionofthelastimpairmentloss.Ifthisisthecase,theasset’scarryingvalueisraisedtoitsrecoverableamount.Thisamountmaynotexceedthecarryingamount,lessdepreciation,thatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognizedfortheassetinprioryears.
Thefollowingadditionalcriteriaaretobeconsideredforcertainassets:
GoodwillAteachbalancesheetdate,theCompanyreviewswhetherthereisanyindicationthatanassetmightbeimpaired.Impairmentofgoodwillisreviewedatleastonceayear.Atestisalsoperformedifeventsorcircumstancesindicatethatthevaluemaybediminis-hed.Impairmentisdeterminedbyassessingthereco-verableamountofthecash-generatingunittowhichgoodwillhasbeenallocated.Iftherecoverableamountofthecash-generatingunitislessthanthecarryingamountofthisunit,animpairmentlossisexpensed.Animpairmentlossrecognizedforgoodwillmaynotbereversedinthefollowingreportingperiods.TheGroupperformsitsannualimpairmenttestforgood-willonthebalancesheetdate.
IntangibleassetsAnimpairmenttestofintangibleassetswithunlimi-tedusefullivesismadeatleastonceperyearonthebalancesheetdate.Dependingontheindividualcase,
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thereviewisperformedforasingleassetoronthelevelofthecash-generatingunit.
AssociatedcompaniesOnapplicationoftheequitymethod,theCompanyascertainswhetheritisnecessarytorecognizeanaddi-tionalimpairmentlossfortheCompany’sinvestmentsinassociatedcompanies.Oneachbalancesheetdate,theCompanyassesseswhetherthereareobjectiveindicationsfortheimpairmentofaninvestmentinanassociatedcompany.Ifthisisthecase,thedifferencebetweenthefairvalueoftheassociatedcompanyandtheacquisitioncostisrecognizedasanimpairmentloss.
Financialinvestmentsandotherfinancialassets
FinancialinvestmentsandotherfinancialassetsasdefinedbyIAS39areclassifiedasfollows: Financialassetsheldatfairvaluethroughprofitorloss
Held-to-maturityfinancialinvestments Loansandreceivables Available-for-salefinancialinvestments
TheGroup’sfinancialassetscomprisecashandshort-termdeposits,tradereceivables,receivablesfromloansandotherreceivables,listedandnon-listedfinancialinstrumentsandderivativefinancialinstruments.
Financialassetsarecarriedatfairvalueoninitialrecognition.Inthecaseofotherfinancialinvestmentsthanthoseclassifiedasheldatfairvaluethroughprofitorloss,transactioncostsdirectlyattributabletotheacquisitionoftheassetarealsoconsidered.
Financialassetsareclassifiedaccordingtovaluationcategoriesatthemomentofinitialrecognition.Wherenecessaryandpermissible,reclassificationsaremadeattheendofeachfiscalyear.
Allstandardmarketpurchasesandsalesoffinancialassetsarerecognizedonthetradingday,i.e.onthedayonwhichtheCompanyenteredintotheobligationtopurchasetheasset.Standardmarketpurchasesandsalesarepurchasesandsalesoffinancialassetswhichprescribethedeliveryoftheassetswithinaperiodspecifiedbymarketregulationsorconventions.
Financialassetsheldatfairvaluethrough profitorlossThecategoryoffinancialassetsheldatfairvaluethroughprofitorlossincludesheld-for-tradingfinan-cialassetsandfinancialassetswhichareclassifiedasfinancialassetsheldatfairvaluethroughprofitorlossoninitialrecognition.Financialassetsareclassifiedasheld-for-tradingiftheywereacquiredwiththeinten-tionofsellingtheminthenearfuture.ThiscategorycomprisesderivativefinancialinstrumentsarrangedbytheCompanywhichdonotmeettheaccountingcriteriaforhedgingtransactionspursuanttoIAS39.Derivatives,includingseparatelyrecognizedembeddedderivatives,arealsoclassifiedasheld-for-trading,withtheexceptionofderivativesdesignatedasahedginginstrumentandeffectiveassuch.
Financialassetsheldatfairvaluethroughprofitorlossarestatedinthebalancesheetatfairvalue,wherebyprofitorlossesarerecognizedintheincomestatement.TheGrouphasonlyclassifieditsderivativefinancialinstrumentsasheldatfairvaluethroughprofitorloss.
LoansandreceivablesLoansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepayments,whicharenotquotedinanactivemarket.Followinginitialrecognition,loansandreceivablesarecarriedatamortizedcostusingtheeffectiveinterestmethodlessallowancesforimpairment.Profitsandlossesarerecognizedintheperiodwhentheloansandreceiv-ablesoreliminatedorimpairedoraspartofamorti-zation.
Available-for-salefinancialinvestmentsAvailable-for-salefinancialassetsarenon-derivativefinancialassetswhichareclassifiedasbeingavailableforsaleandwhichhavenotbeenassignedtoanyofthethreecategoriesabove.Afterinitialrecognition,available-for-salefinancialassetsarecarriedatfairvalue,wherebynon-realizedprofitsorlossesarerecognizeddirectlyinequityinthereservefornon-realizedprofit.Ondisposaloffinancialinvestments,thecumulativeprofitorlosspreviouslyrecognizedinequityisreclassifiedtotheincomestatement.
FairvalueThefairvalueoffinancialinvestmentstradedonorga-nizedmarketsisdeterminedbythequotedmarketprice(buyingrate)onthebalancesheetdate.Thefairvalueoffinancialinvestmentsforwhichthereisnoorganizedmarketisdeterminedusingvaluationmethods.Thesevaluationmethodsincludetheuseof
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recenttransactionsbetweencompetent,willingandindependentbusinesspartners,acomparisonwiththefairvalueofanother,generallyidenticalfinancialinstrument,ananalysisofdiscountedcashflowsandtheuseofothervaluationmethods.
AmortizedcostHeld-to-maturityfinancialinvestments,aswellasloansandreceivables,arecarriedatamortizedcost.Thisiscalculatedusingtheeffectiveinterestmethodlessallowancesforimpairmentandunderconsidera-tionofdiscountsandpremiumsonpurchaseandincludesallfeeswhichareanintegralpartoftheeffectiveinterestrate.
Impairmentoffinancialassets
Oneachbalancesheetdate,theCompanyassesseswhethertherehasbeenanyimpairmentofafinancialassetorgroupoffinancialassets.
FinancialassetscarriedatamortizedcostIfthereisanobjectiveindicationthatloansandreceivablescarriedatamortizedcostareimpaired,thelossiscalculatedasthedifferencebetweentheasset’scarryingvalueandthepresentvalueoftheexpectedfuturecashflows(withtheexceptionofexpectedfuturecreditlossesnotyetoccurred),discountedwiththeoriginaleffectiveinterestrateofthefinancialasset(i.e.theeffectiveinterestrateoninitialrecognition).Theasset’scarryingvalueisreducedusinganimpair-mentaccount.Theimpairmentlossisrecognizedintheincomestatement.
Ifthescaleoftheimpairmentisreducedinoneofthefollowingreportingperiodsandthisreductioncanbeobjectivelyattributedtoaneventoccurringafterrecognitionofimpairment,theallowanceisreversed.Thiswrite-backislimitedinscaletoamortizedcostatthetimeofthewrite-back.Thewrite-backisrecognizedintheincomestatement.
Inthecaseoftradereceivables,ifthereareobjectiveindications(e.g.theprobabilityofinsolvencyorsigni-ficantfinancialdifficultiesofthedebtor)thatnotalldueamountswillbereceivedaccordingtotheorigi-nallyagreedinvoiceterms,awrite-downismadeusingtheappropriateallowanceaccount.Thewrite-downamountsareeliminatedwhentheyareclassifiedasuncollectible.Allowancesaremadeonthebasisofexperiencevaluesbyclassifyingreceivablesaccording
toageandonthebasisofotherinformationregardingtheimpairmentofcustomer-specificreceivables.
Available-for-salefinancialinvestmentsIfthevalueofanavailable-for-salefinancialassetisimpaired,anamountrecognizedinequityamountingtothedifferencebetweenacquisitioncost(lessanyredemptionandamortization)andcurrentfairvalue,lessanypreviousallowancesexpensedforthisfinan-cialasset,isreclassifiedtotheincomestatement.Write-backsofequityinstrumentsclassifiedasavailable-for-sale,arenotrecognizedintheincomestatement.
Inordertoascertainimpairmentrequiringrecogni-tion,informationconcerningalladversechangesinthetechnological,market-related,economicorlegalenvironmentisconsidered.Asignificantorpersistentdecreaseinthefairvalueofequityinstrumentbelowitsacquisitioncostisalsoanobjectiveindicationofimpairment.
Write-backsofdebtinstrumentsclassifiedasavailable-for-sale,arerecognizedintheincomestatementiftheincreaseintheinstrument’sfairvalueobjectivelyresultsfromaneventwhichoccurredafterrecognizinganimpairmentcharge.
Inventories
Inventoriesarevaluedatthelowerofcostandnetrealizablevalue.Netrealizablevaluecomprisestheestimatedsalesproceedslessestimatednecessarysellingcosts.Adequatevaluationallowancesforexcessinventoriesaremadetoprovideforinventoryrisks.
Write-downsforslow-movingproductsareusedwhencalculatingthenetrealizablevaluesofdomainsheldforresale.Alongerholdingperiodindicatesalessattractive/marketabledomain.Thereducedmarket-abilityofadomainisinterpretedasadecliningsalesprospect,whichreducesthenetrecoverablesalesreve-nueasaresultofhighercostsuptothetimeofsaleinconjunctionwithlowersalespriceexpectations.Thewrite-downsarefirstmadeattheendofthefiscalyearfollowingpurchase.Afteraholdingperiodofsevenyears,theCompanyregardstheprobabilityofsaleasalmostzeroandthuszeroisassumedforthesakeofsimplicity.Inadditiontosuchwrite-downsforslow-movingproducts,theCompanyalsoteststhedomainportfoliooneachbalancesheetdateforsignsofasharperfallinthenetrealizablevaluethanwhich
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indicatedbytheunderlyingwrite-downsforslow-movingproducts.
Treasuryshares
Treasurysharesaredeductedfromshareholders’equity.Thepurchase,sale,issueorretirementoftrea-surysharesisnotrecognizedintheincomestatement.
Cashandcashequivalents
Cashandcashequivalentsconsistofbankbalances,otherinvestments,checksandcashinhand,whichallhaveahighdegreeofliquidityandmaturitiesoflessthan3months–calculatedfromthedateofpurchase.
Financialliabilities
Loansarerecognizedinitiallyatthefairvalueoftheperformancereceivedlesstransactioncostsinvolvedwithborrowing.Followinginitialrecognition,interest-bearingloansarevaluedusingtheeffectiveinterestmethodatamortizedcost.Profitsandlossesarereco-gnizedwhenthedebtsareeliminatedandinthecourseofamortization.
Financialliabilitiescarriedatfairvaluethroughprofitorlossincludeheld-for-tradingfinancialliabilitiesandotherfinancialliabilitiesclassifiedoninitialrecogni-tionasfinancialliabilitiescarriedatfairvaluethroughprofitorloss.
Financialliabilitiesareclassifiedasheld-for-tradingiftheywereacquiredwiththeintentionofsellingtheminthenearfuture.Derivatives,includingseparatelyrecognizedembeddedderivatives,arealsoclassifiedasheld-for-trading,withtheexceptionofderivativesdesignatedasahedginginstrumentandeffectiveassuch.Profitorlossfromheld-for-tradingfinancialliabilitiesarerecognizedintheincomestatement.
Derecognitionoffinancialassetsandfinancialliabilities
FinancialassetsAfinancialasset(orpartofafinancialassetorpartofagroupofsimilarfinancialassets)isderecognizedwhenoneofthethreefollowingconditionsaremet:
Thecontractualrightstoreceivecashflowsfromafinancialassethaveexpired.
TheCompanyreservestherightstoreceivecashflowsfromafinancialasset,butassumesacontractualobligationtoimmediatelypaythecashflowstoathirdpartyaspartofanagreementwhichfulfillstheconditionsofIAS39.19(pass-through arrangement).
TheCompanytransfersitsrightstoreceivecashflowsfromafinancialassetandeither(a)transfersvirtuallyallopportunitiesandrisksconnectedwithowningthefinancialassetor(b)retainsauthoritytodisposeoftheasseteventhoughithasneithertransferrednorretainedvirtuallyallopportunitiesandrisksconnectedwithowningthefinancialasset.
FinancialliabilitiesAfinancialliabilityisderecognizedwhentheunder-lyingcommitmentofthisliabilityhasbeenfulfilledorterminatedorexpired.
Ifanexistingfinancialliabilityisreplacedbyadifferentfinancialliabilityofthesamelenderwithsubstantiallydifferentcontractualtermsorifthetermsofanexistingliabilityaresignificantlychanged,suchanexchangeorchangeistreatedasderecognitionoftheoriginalliabilityandrecognitionofanewliabi-lity.Thedifferencebetweentherespectivecarryingvaluesisrecognizedintheincomestatement.
Provisions
ProvisionsareformediftheCompanyhasalegaloractualobligationresultingfromapasteventwhichwillprobablygiverisetotheoutflowofresourceswithaneconomicbenefittofulfilltheobligation,providedthattheleveloftheobligationcanbereliablyestima-ted.Suchestimatesaresubjecttosignificantuncer-tainties.IftheGroupexpectsatleastpartialcompen-sationforarecognizedprovision,thiscompensationisonlyrecognizedasaseparateassetifthereimburse-mentisvirtuallycertain.Theexpensetoformtheprovisionisonlyrecognizedintheincomestatementafterdeductionofthereimbursement.Iftheinteresteffectfromdiscountingissignificant,provisionsarediscountedatapre-taxinterestratewhichreflectsthespecificriskofthedebt,ifsorequiredbytheindividualcase.Intheeventofadiscount,theincreaseinprovisi-onscausedbythepassageoftimeisrecognizedasafinancialexpense.
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micsubstance(e.g.becausethecompanyislegallyforbiddentoissueshares),orcashsettlementwascommonbusinesspracticeorthedeclaredcompanyguidelineinthepast,orthecompanygenerallysettlesincashifthebeneficiarysodesires.Thistransactionisaccountedforinaccordancewiththeregulationsforequity-settledpaymenttransactions.
Thedilutiveeffectofoutstandingequity-settledtrans-actionsandthosetransactionssettledincashorviaequityinstrumentsisreflectedasanadditionalsharedilutioninthecalculationofearningspershare.
Earningspershare
“Undiluted”orbasic earnings per sharearecalculatedbydividingtheresultattributabletotheholdersofregisteredsharesbytheweightedaveragenumberofsharesoutstandingduringtheperiod.
Diluted earnings per sharearecalculatedsimilarlytobasicearningspersharewiththeexceptionthattheaveragenumberofsharesoutstandingincreasesbytheportionwhichwouldresultiftheexercisableconver-sionrightsofconvertiblebondsissuedhadbeenexer-cised.Netincomeisalsoadjustedforinterestexpensesaftertaxes,payableonpotentiallyexchangedconvert-iblebonds.
Leases
Thedeterminationofwhetheranarrangementcon-tainsaleaseisbasedontheeconomicsubstanceofthearrangementatthetimeofsigningandrequiresanassessmentofwhetherthefulfillmentofthearrange-mentisdependentontheuseofaspecificassetorassetsandthearrangementconveysarighttousetheasset.
Financeleases,whichtransfertotheCompanysub-stantiallyalltherisksandbenefitsincidentaltoownershipoftheleaseditem,arecapitalizedattheinceptionoftheleaseperiod.Theleasedpropertyiscarriedatfairvalueor,iflower,atthepresentvalueoftheminimumleasepayments.Leasepaymentsareapportionedbetweenthefinancechargesandreductionoftheleaseliabilitysoastoachieveaconstantrateofinterestontheremainingbalanceoftheliability.Financeexpensesarechargeddirectlyagainstincome.
Share-basedpayment
Groupemployeesreceiveshare-basedpaymentsasremunerationfortheirworkintheformofequityinstrumentsandthegrantingofvaluegrowthrights,whichmaybesettledincashorviaequityinstrumentsattheCompany’sdiscretion.
Equity-settledtransactionsThecostofgrantingequityinstrumentsissuedafterNovember7,2002ismeasuredusingthefairvalueofsuchequityinstrumentsonthedateofgranting.Fairvalueismeasuredusingasuitableoptionpricemodel.Withtheaidoftherespectivevaluationprocess,thevaluecomponentisdeterminedatthetimeofgran-ting,alsoforsubsequentvaluationuntiltheendoftheterm.Oneveryvaluationdate,however,theexpectedexercisevolumeistobereassessedwithacorrespon-dingadjustmentoftheadditionalamountunderconsi-derationofadditionsalreadymade.Anynecessaryadjustmentbookingsaretobemadeintheperiodinwhichnewinformationabouttheexercisevolumebecomesavailable.
Themeasurementofcostfromthegrantingofequityinstrumentsandthecorrespondingincreaseinequityoccursovertheperiodinwhichthevestingorperfor-manceconditionshavetobesatisfied(theso-calledvestingperiod).Thisperiodendsafterthevestingdate,i.e.thedateonwhichtheemployeeconcernedhasgainedirrevocableentitlement.Thecumulativeexpensesrecognizedoneachbalancesheetdateforequity-settledtransactionsuntilthevestingdatereflecttheextenttowhichthevestingperiodhasexpiredandthenumberofequityinstrumentswhich,accordingtotheGroup’sbest-possibleestimate,willactuallybevestedafterthevestingperiod.Theincomeorexpenserecognizedintheincomestatementrepre-sentsthedevelopmentofcumulativeexpensesreco-gnizedatthebeginningandendofthereportingperiod.Noexpenseisrecognizedforpaymentrightswhicharenotvested.
Transactionswithsettlementincashorvia equityinstrumentsattheCompany’sdiscretionInthecaseofshare-basedremunerationplanswhichgranttheCompanythecontractualchoiceofsettlingincashorissuingequityinstruments,theCompanymustdeterminewhetherthereisacurrentcashsettle-mentcommitmentanddisclosethestock-basedrem-unerationtransactioncorrespondingly.Thereisacur-rentcashsettlementcommitmentifthepossibilitytosettlebymeansofequityinstrumentshasnoecono-
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Capitalizedleasedassetsarefullydepreciatedovertheshorteroftheestimatedusefullifeoftheassetandtheleaseterm,ifthereisnoreasonablecertaintythattheCompanywillobtainownershipbytheendoftheleaseterm.
Operatingleasepaymentsarerecognizedasanexpenseintheincomestatementonastraight-linebasisovertheleaseterm.
TheCompanycurrentlyclassifiesallleasingcontractsasoperatingleases,wherebytheCompanyactsexclusivelyaslessee.
Financialincome
Interestincomeisrecognizedasinterestaccrues(usingtheeffectiveinterestrate,i.e.theratewhichdiscountsestimatedfuturecashreceiptsthroughtheexpectedlifeofthefinancialinstrumenttothenetcarryingamountofthefinancialasset).Dividendincomeisrecognizedwiththeinceptionofthelegalrighttopay-ment.
Governmentgrants
GovernmentgrantsarerecognizedwherethereisreasonablecertaintythatthegrantwillbereceivedandtheCompanywillsatisfyallattachingconditions.Wherethegrantsrelatetoanexpenseitem,theyarerecognizedasincomeinscheduledamountsovertheperiodnecessarytomatchthegrantstothecoststheyareintendedtocompensate.Grantsrelatingtoanassetitemreducethecarryingvalueofthatitem.
Taxes
Actualclaimstoincometaxrefundsand incometaxdueActualclaimstotaxrefundsandtaxdueforthecurrentperiodandforpreviousperiodsarevaluedattheamountatwhicharefundfromthetaxauthoritiesorapaymenttothetaxauthoritiesisexpected.Theamountiscalculatedonthebasisofthetaxratesandtaxlawsapplicableonthereportingdate.
Actualtaxesrelatingtoitemsdirectlyrecognizedinequityarenotrecordedintheincomestatement,butinshareholders’equity.
DeferredtaxesTheliabilitymethodisusedtocreatedeferredtaxesonalltemporarydifferencesexistingonthereportingdatebetweenthecarryingvalueofanassetoraliabi-lityinthebalancesheetandthefiscalcarryingvalue.
Deferredtaxesarerecognizedforalltaxabletemporarydifferences,except: wherethedeferredtaxliabilityfrominitialrecognitionofgoodwillorofanassetorliabilityinatransactionthatisnotabusinesscombinationand,atthetimeofthetransaction,affectsneithertheaccountingprofitnortaxableprofitorloss,and
inrespectoftaxabletemporarydifferencesassociatedwithinvestmentsinsubsidiaries,associatedcompaniesandinterestsinjointventures,wherethetimingofthereversalofthetemporarydifferencescanbecontrolledanditisprobablethatthetemporarydifferenceswillnotreverseintheforeseeablefuture.
Deferredtaxassetsarerecognizedforalldeductibletemporarydifferences,carryforwardofunusedtaxcreditsandunusedtaxlosses,totheextentthatitisprobablethattaxableprofitwillbeavailableagainstwhichthedeductibletemporarydifferences,andthecarryforwardofunusedtaxcreditsandunusedtaxlossescanbeutilized,except: wherethedeferredtaxassetrelatingtothedeductibletemporarydifferencearisesfromtheinitialrecognitionofanassetorliabilityinatransactionthatisnotabusinesscombinationand,atthetimeofthetransaction,affectsneithertheaccountingprofitnortaxableprofitorloss,and
inrespectoftaxabletemporarydifferencesassociatedwithinvestmentsinsubsidiaries,associatedcompaniesandinterestsinjointventures,deferredtaxassetsarerecognizedonlytotheextentthatitisprobablethatthetemporarydifferenceswillreverseintheforeseeablefutureandtaxableprofitwillbeavailableagainstwhichthetemporarydifferencescanbeutilized.
Thecarryingamountofdeferredtaxassetsisreviewedateachbalancesheetdateandreducedtotheextentthatitisnolongerprobablethatsufficienttaxablepro-fitwillbeavailabletoallowallorpartofthedeferredtaxassettobeutilized.Unrecognizeddeferredtaxassetsarereassessedateachbalancesheetdateandarerecognizedtotheextentthatithasbecomeprobablethatfuturetaxableprofitwillallowthedeferredtaxassettoberecovered.
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Deferredtaxassetsandliabilitiesaremeasuredatthetaxratesthatareexpectedtoapplytotheyearwhentheassetisrealizedortheliabilityissettled,basedontaxrates(andtaxlaws)thathavebeenenactedasofthebalancesheetdate.Futurechangesintaxratesaretobeconsideredonthebalancesheetdate,providingmaterialeffectivenessconditionsaremetaspartofthelegislativeprocess.
Deferredtaxrelatingtoitemsrecognizeddirectlyinequityisrecognizedinequityandnotintheincomestatement.
Deferredtaxassetsanddeferredtaxliabilitiesareoffset,ifalegallyenforceablerightexiststosetoffcurrenttaxassetsagainstcurrenttaxliabilitiesandthedeferredtaxesrelatetothesametaxableentityandthesametaxationauthority.
SalestaxRevenues,expensesandassetsarerecognizednetoftheamountofsalestax,except: wherethesalestaxincurredonapurchaseofassetsorservicesisnotrecoverablefromthetaxationauthority,inwhichcasethesalestaxisrecognizedaspartofthecostofacquisitionoftheassetoraspartoftheexpenseitemasapplicable,and
receivablesandpayablesthatarestatedwiththeamountofsalestaxincluded.
Thenetamountofsalestaxrecoverablefrom,orpay-ableto,thetaxationauthorityisincludedunder“Othercurrentassets”or“Otherliabilities”intheconsolidatedbalancesheet.
Derivativefinancialinstrumentsandhedgingrelationships
TheGroupusesderivativefinancialinstrumentsintheformofinterestswaps,inordertohedgeagainstinterestrisks.Derivativefinancialinstrumentsarerecognizedatfairvalueonthedateoftheagreementandcarriedatfairvalueinthesubsequentperiods.Derivativefinancialinstrumentsarerecognizedasassetsiftheirfairvalueispositiveandasliabilitiesiftheirfairvalueisnegative.
Profitorlossresultingfromchangesinthefairvalueofderivativefinancialinstrumentswhichdonotmeet
thecriteriaforrecognitionashedgingrelationshipsarerecognizedimmediatelyintheincomestatement.
Thefairvalueofderivativefinancialinstrumentsismeasuredusingacceptedvaluationmethods.
3 Investments and business combinations
EffectiveJanuary1,2008,SedoGmbHacquiredashare-holdingof40%inDomainsBotS.r.l.,Rome/Italy.Acalloptionwasalsoagreedforthepurchaseofafurther20%ofsharesnosoonerthan2010.TheacquisitioncostsamountedtoatotalofC839kandcompriseddirectlyassignablecostsofC89k.
InacontractdatedFebruary8,2008,UnitedInternetBeteiligungenGmbHacquiredashareholdingof48.65%inVirtualMindsAG,FreiburgimBreisgau.Theacquisitionwasmadeinpartinthecourseofacapitalincrease.TheacquisitioncostsamountedtoatotalofC9,131kandcompriseddirectlyassignablecostsofC132k.
InacontractdatedMarch5,2008,UnitedInternetBeteiligungenGmbHacquired80%ofsharesinthenewlyfoundedEuropeanFoundersFundGmbH&Co.BeteiligungsKGNo.3.ThecompanywillbeincludedintheGroup’sannualfinancialstatementsasafullycon-solidatedsubsidiary.Infiscalyear2008,EuropeanFoundersFundGmbH&Co.BeteiligungsKGNr.3inturnacquiredinterestsinanumberofcompanies.TheacquisitioncostsforinvestmentsintheseportfoliocompaniesamountedtoC50,071k.
OnMarch7,2008,UnitedInternetBeteiligungenGmbHacquired33.36%ofsharesinBW2GroupAG,Lachen/Switzerland,inthecourseofacapitalincre-ase.TheacquisitioncostsamountedtoC5,826k.
ProSiebenSat.1MediaAGand1&1InternetAGplacedtheircooperationonanewbasisbyfoundingthejointlycontrolledjointventuremaxdomeGmbH&Co.KG,Unterföhring.TherespectivecontractsweresignedonFebruary22,2008.Thetransactionwasapprovedbytherespectiveanti-trustauthoritiesonApril29,2008.ThecooperationwithProSiebenSat.1MediaAGhasbeencarriedsofarasajointactivityasdefinedbyIAS31.
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InacontractdatedMay30,2008,FasthostsLtd.acquireda100%interestinDollamoreLtd.,Melbourne/UK.TheacquisitionofthesharesinDollamoreLtd.wasaccountedforusingthepurchasemethod.Thepurchasepricewassettledincash;thepreliminaryacquisitioncostsamounttoC10,477kandcomprisedirectlyassignablecostsofC274k.Thepreliminaryfairvaluesofidentifiableassetsandliabilitiesasofthedateofacquisitionareasfollows:
DkPurchase price 10,203
Ancillary acquisition costs 274
Preliminary acquisition costs 10,477
Fair values
Dk
Carrying values
DkBrand 820 0
Customer base 2,662 0
Property, plant and equipment 23 23
Cash and cash equivalents 154 154
Other assets 839 839
Customer receivables 426 426
Prepaid expenses 623 623
Deferred tax liabilities -975 0
Deferred revenue -2,564 -2,564
Trade payables -328 -328
Other liabilities -292 -292
Accrued taxes -213 -213
1,175 -1,332
Goodwill
9,302
Preliminary acquisition costs 10,477
GoodwillofC9,302kresultsfromexpectedsynergiesfromthecompanyacquisition.
Cashdisbursementsresultingfromthecompanyacquisitionareasfollows:
DkCash disbursements 10,477
Assumed cash and cash equivalents 154
Actual cash disbursements 10,323
TheprofitofDollamoresincethetimeofacquisitionrecognizedintheannualresultamountedtoC227kinfiscalyear2008.
Undertheassumptionthatthecompanyacquisitionhadalreadybeenmadeatthebeginningoffiscalyear2008,consolidatedsaleswouldhaveincreasedbyC1,623kandnetincomebyC632k.
InanagreementdatedJuly1,2008,UnitedInternetBeteiligungenGmbHacquired30%ofsharesinJimdoGmbH,Hamburg.Thesharepurchasewaseffectedinpartinthecourseofacapitalincrease.TheacquisitioncostsamountedtoatotalofC985kandalsocompriseddirectlyassignablecostsofC20k.Initialrecognitionwasmadeonaprovisionalbasis.
OnDecember29,2008UnitedInternetAGacquired10,798,817sharesinfreenetAGfromMSPHoldingGmbH,correspondingto8.43%ofvotingrights,atapriceofC3.38pershare.TheacquisitioncostsonthebasisoffairvalueasoftheacquisitiondateamountedtoC46,111k.Initialrecognitionwasmadeonaprovisio-nalbasis.WerefertoNote42forfurtherdetails.
Attheendoffiscalyear2007,UnitedInternetAGacquired50%ofsharesinMSPHoldingGmbH,Maintal.TheacquisitioncostamountedtoC165,428kandalsocompriseddirectlyassignablecostsofC26k.Theacqui-sitioncostwassettledincash.OnJanuary23,2008,UnitedInternetAGandDrillischAGincreasedtheirshareholdinginfreenetAGto24.52%viathejointlyheldcompanyMSPHoldingGmbH.FollowingacapitalincreaseoffreenetAGinconnectionwithitstakeoverofDebitel,theshareholdingofMSPHoldingGmbHinfreenetAGwasdilutedfrom24.52%to18.39%asofJuly5,2008.
Attheendoffiscalyear2007,UnitedInternetAGacquired19.5%ofsharesinVersatelAG,Berlin.Thisshareholdingwasincreasedduringfiscalyear2008to25.21%.Theacquisitionoftheadditionalshareswasdependentontheapprovaloftheanti-trustauthori-ties.ThisapprovalwasgrantedonDecember20,2007.TotalacquisitioncostsamountedtoC183,639kandalsocompriseddirectlyassignablecostsofC2,823k.
Attheendoffiscalyear2007,UnitedInternetBeteili-gungenGmbHacquired90%ofsharesinthenewlyfoundedEuropeanFoundersFundGmbH&Co.Beteili-gungsKGNo.2.ThecompanywillbeincludedintheGroup’sannualfinancialstatementsasafullyconsoli-datedsubsidiary.Infiscalyear2008,EuropeanFoun-
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dersFundGmbH&Co.BeteiligungsKGNr.2inturnacquiredinterestsinassociatedcompanies.Theacqui-sitioncostsforinvestmentsintheseportfoliocompa-niesamountedtoC24,452k.
Infiscalyear2007,UnitedInternetBeteiligungenGmbHacquiredashareholdingof66.67%intheEuro-peanFoundersFundGmbH&Co.BeteiligungsKGNo.1.ThetotalacquisitioncostamountedtoC34,403k.Duetocompanylawregulations,UnitedInternetBeteili-gungenGmbHcannotexertacontrollinginterestinthecompany–despiteholdingamajorityofvotingrights.Instead,itexertsamaterialinterestandthecompanyisthusconsolidatedasanassociatedcom-panypursuanttoIAS28.
Infiscalyear2007,theshareholdingsheldbyAdLINKInternetMediaAGinAdLINKSwitzerland(50%)andAdLINKAustria(30%)weretransferredtoGoldbachMediaAGKüsnacht-Zürich,Switzerland,asanon-cashcontribution.Inreturn,AdLINKInternetMediaAGreceived89,897sharesinGoldbachMediaAGascom-pensation,correspondingtoashareholdingof19.4%.AsaresultofGoldbach’sIPOandcapitalincrease,thisshareholdingwasdilutedto14.99%.Thecompanytransactionresultedinproceedsfrominitialrecogni-tionofC19,941k.ThesharesinGoldbachareclassifiedasavailable-for-salefinancialassetsanddisclosedundertheitem“Otherfinancialassets”.
Uptofiscalyear2005,80%ofsharesinInternetXGmbHwereacquired.TheoriginalshareholderswereinterestedinsuccessivelysellingfurthersharesinInterNetXGmbHtoUnitedInternetBeteiligungenGmbHupto2015.Infiscalyear2007,therefore,theshareholdinginInterNetXGmbHwasraisedfrom80%to85.09%.ThepurchasepriceforthisadditionalstakeamountedtoC627k.Afurther10.46%ofsharesweresoldtoUnitedInternetBeteiligungenGmbHinfiscalyear2008.ThepurchasepriceoftheseadditionalsharesamountedC1,833k.ThepurchaseofsharesinInterNetXtodateandfromtheforwardpurchaseagreementshasresultedingoodwillofC5,032k.
InanagreementdatedJuly10,2007,UnitedInternetBeteiligungenGmbHincreaseditsshareholdinginfuncommunicationsGmbHfrom33.33%to49.%.Theacqui-sitioncostwassettledincashandamountedtoC593k.
InacontractdatedDecember22,2006,UnitedInternetBeteiligungenGmbHacquireda12.51%shareholdingine-sportGmbH(now:BigpointGmbH),Hamburg.Theacquisitionofsharesoccurredaspartofacapitalincre-
aseofthecompanyinFebruary2007andwascondi-tionalonapprovaloftheanti-trustauthorities.Despiteholding12.51%ofshares,UnitedInternetBeteiligungenGmbHwasassigned25.02%ofvotingrights.Asaresult,thecompanywasincludedintheconsolidatedfinancialstatementsasanassociatedcompany.Theanti-trustauthoritiesapprovedtheshareacquisitiononFebruary5,2007.TheacquisitioncostamountedtoC6,296kandalsocompriseddirectlyassignablecostsofC46k.Theacquisitioncostwassettledincash.ThesesharesweresoldwitheffectfromAugust26,2008.
InMay2006,1&1UKHoldingsLtd.,Slough/UK,acquired100%ofsharesinFasthostsInternetLtd.,Gloucester/UK.ThepreliminaryacquisitioncostofthebusinesscombinationamountedtoC96,866kandalsocompriseddirectlyassignablecostsofC1,214k,settledincash.Duetoacontractuallyagreedpurchasepricereduction,whichalsodependedonthecompany’searningsinfiscalyear2006,thepurchasepricewasreducedbyC3,436kinfiscalyear2007.Thereductionwasassignedinfulltogoodwill.
Infiscalyear2005AdLINKInternetMediaAGacquiredthesharesheldbyUnitedInternetAGinSedoGmbH.Inaddition,AdLINKInternetMediaAGboughtfurthersharesfromaManagementBoardmemberofSedoGmbH.InNovember2006,AdLINKInternetMediaGmbHDeutschlandpurchasedafurther23.80%ofsharesinSedoGmbH.Atthesametime,AdLINKInternetMediaAGtransferredthesharesitalreadyheldasanon-cashcontributiontoAdLINKInternetMediaGmbHDeutschland,sothatasofDecember31,2006,75.94%ofsharesinSedoGmbHwereheld.TheacquisitioncostsoftheadditionalsharesamountedtoC34,606kandcomprisedcostsdirectlyallocatedtotheacquisitionamountingtoC100k.Theacquisitioncostwassettledincash.GoodwillfromthisacquisitionamountedtoC30,949k.InthecourseoftheincreaseinsharesheldinSedoGmbH,aprofittransferagreementwasconcludedbetweenAdLINKInternetMediaGmbHDeutschlandandSedoGmbH,effectivefromJanuary1,2007.Onthebasisofthisprofittransferagreement,SedoGmbHtransfersitscompleteresulttoAdLINKInternetMediaGmbHDeutschland.Ascompensationfortheminorityshareholders,thecontractallowsforadividendpaymentofC250kperfiscalyear.Thecon-tractcannotbeterminatedbeforeDecember31,2011.Aspartofthepurchaseofadditionalshares,theminorityshareholdersweregrantedaconditionalputoption,whichcanbeexercisedintheperiodfromJanuary1,2009toDecember31,2015,wherebytheoptioncanonlybeexercisedjointlyin2009and2010byallminority
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shareholders.TheoptionisconditionalinasfarasAdLINKhastherighttoopposetheexercisingoftheputoption.Thepurchasepricesdependmainlyonthecompany’sprofitdevelopment.
Explanations to the Income Statement
4 Sales revenue / Segment reportingSegmentreportingincludestheprimaryandsecon-daryreportingformatsinaccordancewithIAS14.TheCompanyhaschosentheorganizationalstructurealignedtoproducts/customersasitsprimaryreportingformat.ItrelatestotheProductsegment,Outsourcingsegment,OnlineMarketingsegmentandHeadOffice/Investmentssegment.SalesrevenueincludesrevenuefromexchangetransactionsamountingtoC2,290k(prioryear:C0)
Thesecondaryreportingformatdifferentiatesbetweendomesticandforeignbusiness.
Transactionsbetweensegmentsarechargedatmarketprices.
SegmentreportingofUnitedInternetAGinfiscalyear2008wasasshownonpage60.
SegmentreportingofUnitedInternetAGinfiscalyear2007wasasshownonpage61.
5 Cost of sales
2008 Dk
2007 Dk
Cost of services 806,076 726,953
Cost of goods 107,802 93,850
Personnel expenditure 52,086 42,099
Depreciation 25,055 28,531
Others 15,932 4,568
Total 1,006,951 896,001
Costofsalesincreasedinrelationtosalesrevenuefrom60.2%to61.0%,comparedwiththepreviousyear.This
resultedinadeteriorationofgrossmarginfrom39.8%to39.0%.ThemainreasonwasstronggrowthinnewcustomersforDSL,themigrationofexistingcustomerstocompletepackagesandlowermarginsinOnlineMarketing.
Amortizationofintangibleassetsresultingfromcom-panyacquisitionsisdisclosedseparatelyintheincomestatementandnotcontainedincostofsales.PleaserefertoNote9.
6 Selling expensesDuetohighcostsincurredfornewcustomeracquisi-tionandcostsinconnectionwithcustomerretention,sellingexpensesgrewfromC248,234ktoC278,564k.However,theirratiotosalesgrewonlyslightlyto16.9%(prioryear:16.7%).
Amortizationofintangibleassetsresultingfromcom-panyacquisitionsisdisclosedseparatelyintheincomestatementandnotcontainedinsellingexpenses.PleaserefertoNote9.
7 General and administrative expenses
Generalandadministrativeexpensesrosemoreslowlythansales,fromC82,470k(5.5%)toC83,652k(5.1%).
Amortizationofintangibleassetsresultingfromcompanyacquisitionsisdisclosedseparatelyintheincomestatementandnotcontainedingeneralandadministrativeexpenses.PleaserefertoNote9.
8 Other operating income / expenses
Otheroperatingincomeinfiscalyear2008resultmainlyfromthesubsequentvaluationofderivativefinancialinstrumentsinconnectionwiththeacqui-sitionoracceptanceofsharesinlistedcompanies(C12,274k),aswellasfromthesaleofsharesinBigpoint(C3,840k).Otheroperatingincomeinfiscal
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year2007wasmainlyinfluencedbythecontributionofsharesaspartoftheacquisitionofashareholdinginGoldbach(C16,808k)andthesaleofsharesinNTplus(C4,591k).
Lossesduetoaccountreceivablesof1&1amountedtoC21,465k(prioryear:C12,212k),whileincomefromdunningandreturndebitchargestotaledC11,270k(prioryear:C9,933k).
Duetothenegativefairvalueofaderivativefinancialinstrument,otheroperatingexpensesofC6,425k(prioryear:C2,663k)wererecognized.
Inthepreviousyear,anindemnityobligationtoajointventurecompanyresultedinotheroperatingexpensesofC10,000k.
Currencygains(net)infiscalyear2008amountedtoC777k,whilecurrencylosses(net)inthepreviousyearamountedtoC371k.
ExpensesrelatingtootheraccountingperiodstotaledC1,830k(prioryear:C2,112k).
9 Depreciation and amortization Depreciationandamortizationofintangibleassetsandproperty,plantandequipmentconsistofthefollowing:
2008 Dk
2007 Dk
Cost of sales 25,055 28,531
Selling expenses 1,915 2,496
General and administrative expenses
4,706
9,070
Total 31,676 40,097
Amortizationofcapitalizedintangibleassetsresultingfrombusinesscombinationsincludesthefollowingitems:
2008 Dk
2007 Dk
Portal 9,030 9,030
Customer base 7,350 7,280
Software 3,311 4,010
Licenses 1,132 1,412
Order backlog 460 762
Total 21,283 22,494
AmortizationofcapitalizedgoodwillofC18,100k(prioryear:C19,004k)resultedfromtheacquisitionoftheportalbusinessofWEB.DEAG(today:KizooAG),anamountofC2,247k(prioryear:C2,882k)fromtheacquisitionofFasthosts,anamountofC383k(prioryear:C0k)fromtheacquisitionofDollamore,andC553k(prioryear:C608k)fromtheacquisitionofCibleClick.
Asreliableallocationofamortizationofcapitalizedintangibleassetsresultingfrombusinesscombina-tionstoindividualfunctionaldivisionsisnotpossible,itisdisclosedseparatelyintheincomestatement.
10 Goodwill amortization
Inthecourseofimpairmenttests,goodwillwasamor-tizedbyC9,244kduringtheperiodunderreview.Ofthistotal,goodwillwrite-downsforaffilinetFranceaccountedforC6,430k,AdLINKGermanyforC1,631kandAdLINKFranceforC1,183k.
DuetorestructuringatCibleClickFranceandAdLINKUK,thegoodwillofbothcompanieswassubjectedtoanon-scheduledimpairmenttestinfiscalyear2007.Inconnectionwiththisimpairmenttest,goodwillofCibleClickFrancewaswrittendownbyC7,662kandofAdLINKUKbyC1,711kinthepreviousyear.FurtherdetailsareprovidedinNote30.
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11 Personnel expensesPersonnelexpensesaredividedamongthevariousdivisionsasfollows:
2008 Dk
2007 Dk
Cost of sales 52,086 42,099
Selling expenses 83,852 71,569
General and administrative expenses
35,843
32,176
Total 171,781 145,844
Thenumberofemployeesincreasedfrom3,954to4,565atyear-end2008,representinggrowthof15.5%:
2008 Dk
2007 Dk
Germany 3,618 3,127
Outside Germany 947 827
Total 4,565 3,954
Theaveragenumberofemployeesinfiscalyear2008amountedto4,341(prioryear:3,669),ofwhich3,418(prioryear:2,884)wereemployedinGermanyand923(prioryear:785)abroad.
12 Financial expenses
2008 Dk
2007 Dk
Loans and overdraft facilities 26,783 6,437
Expense from interest hedging transactions
6,671
-
Guaranteed dividend to minority interests
44
54
Expense for loans from an associated company
-
183
Total financial expenses 33,498 6,674
Theexpensefrominteresthedgingtransactionscon-cernsthevaluationofinterestswapsconductedinfis-calyear2008atmarketvalue.Theexpensefromtheguaranteeddividendreferstotheaccruedinterestexpenseforaliabilityduetominorityshareholders.
13 Financial income
2008 Dk
2007 Dk
Interest income from credit balances with banks
1,095
1,419
Income from financial investments 1,768 623
Income from purchase price install-ments from the sale of shares in an associated company
517
-
Income from loans to a joint venture 548 7
Total financial income 3,928 2,049
14 Amortization of investmentsAmortizationofinvestmentsamountedtoC42,379k(prioryear:C0).PleaseseeNote26forfurtherdetails.
15 Result from associated companies
2008 Dk
2007 Dk
Result from associated companies -234,193 2,284
Total -234,193 2,284
FurtherdetailsontheresultfromassociatedcompaniesareprovidedinNote25.
16 Income taxesTheincometaxexpensefromcontinuedoperationsiscomprisedasfollows:
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2008 Dk
2007 Dk
Current income taxes
– Germany 64,926 71,550
– Abroad 10,765 8,390
Total (current period) 75,691 79,940
Deferred taxes
- Due to tax loss carryforwards 3,385 852
- Tax effect on temporary differences -6,938 515
- Due to tax rate changes -252 -2,188
Total deferred taxes -3,805 -821
Total tax expense 71,886 79,119
UnderGermantaxlaw,incometaxescomprisecorporateincometaxandtradetax,aswellasthesolidaritysurcharge.
Germantradetaxonincomeisleviedonacompany’staxableincomeadjustedforcertainrevenueswhicharenotsubjecttosuchtaxandforcertainexpenseswhicharenotdeductibleforpurposesoftradetaxonincome.Theeffectivetradetaxratedependsonthemunicipalityinwhichthecompanyoperates.AspartoftheGermanCorporateTaxReform2008,passedbytheGermangovernmentin2007,tradetaxisnolongerdeductibleasanoperatingexpense.Ascompensation,thetradetaxbaseratewasreducedfrom5%atpresentto3.5%.Asaresult,theaveragetradetaxrateinfiscalyear2008amountedtoapprox.13.8%(prioryear:16.2%).
Germancorporateincometaxwasleviedat25%forthetaxassessmentyear2007–irrespectiveofwhethertheresultwasretainedordistributed.Inaddition,asolida-ritysurchargeof5.5%isimposedontheassessedcorporateincometax.WiththeintroductionoftheCorporateTaxReform2008,thecorporateincometaxratewasdecreasedfrom25%to15%.
Deferredtaxassetsarerecognizedfortaxlosscarry-forwardsandtemporarydifferences,ifitisprobablethattaxableprofitwillbeavailableagainstwhichthedeductibletemporarydifferencecanbeutilized,
Deferredtaxassetsfortaxlosscarryforwardsincertaincountriesareshowninthetablebelow:
2008 Dk
2007 Dk
USA 1,425 2,848
Germany 1,068 2,120
Italy 219 110
France 0 1,019
2,712 6,097
Taxlosscarryforwardsandtemporarydifferencesforwhichnodeferredtaxassetshavebeenformed,refertothefollowingcountries:
2008 Dk
2007 Dk
France 13,345 9,109
UK 4,750 3,521
Spain 4,659 1,855
Germany 3,836 3,836
Switzerland 1,305 956
27,895 19,277
InaccordancewithIAS12,deferredtaxassetsarereco-gnizedforthefuturebenefitsassociatedwithtaxlosscarryforwards.Thetimelimitforthenetlosscarryfor-wardsindifferentcountriesisasfollows: Belgium: indefinite Spain: 15years UnitedKingdom: indefinite France: indefinite Sweden: indefinite Italy: 5years Switzerland: 7years USA: 20years Germany: indefinite,butminimum taxation
InGermany,thelosscarryforwardscanbeclaimedforanindefiniteperiod.Asinthepreviousyear,theserelatetolosscarryforwardsasofDecember31,2008ofAdLINKInternetMediaAGandAdLINKInternetMediaGmbHDeutschland.Deferredtaxesresultedfromthefollowingitems:
94
2008 2007
Defer-red tax assets
Dk
Defer-red tax liabili-
ties Dk
Defer-
red tax assets
Dk
Defer-red tax liabili-
ties Dk
Trade receivables 234 0 356 0
Other financial assets - current
4,141
0
0
0
Other financial as-sets – non-current
1,360
125
46
133
Property, plant and equipment
0
66
0
0
Intangible assets 193 15,248 0 16,206
Other liabilities 953 0 900 0
Gross value 6,881 15,439 1,302 16,339
Tax loss carryfor-wards
2,712
0
6,097
0
Adjustments for consolidation
0
1,809
10
1,757
Other items 39 103 28 965
Consolidated balance sheet
9,632 17,351 7,437 19,061
DeferredtaxliabilitiesofC15,248k(prioryear:C16,206k)resultmainlyfromthedifferenttreatmentofcapitalizedintangibleassetsfrombusinesscombi-nationsintheconsolidatedaccountsandthetaxbalancesheet.
DeferredtaxliabilitiesincludedeferredtaxeswithoutaneffectonprofitandlossamountingtoC150k(prioryear:C133k).
Theaggregatetaxrateisreconciledtotheeffectivetaxrateofcontinuedoperationsasfollows:
2008 %
2007 %
Anticipated tax rate 29.6 38.5
- Goodwill amortization non- deductible for tax purposes
-5.5
1.5
- Amortization of investments non-deductible for tax purposes
-25.3
0.0
- Tax-reduced profit from disposals 2.7 -2.9
- Differences in foreign tax rates 1.6 -0.7
- Employee stock ownership plan -1.3 -0.2
- Tax losses of the fiscal year, for which no deferred taxes have been capitalized
-4.1
1.1
- First-time capitalization of tax losses not used in prior years
0.0
-1.9
- Utilization of non-capitalized tax loss carryforwards
0.0
-0.7
- Non-taxable at-equity results -139.5 -0.4
- Change in tax rates 0.5 -0.9
- Allowance for tax loss carryforwards capitalized in previous years
-2.0
0.1
- Allowance for deferred tax assets on temporary differences
-0.5
0.0
- Balance of other tax-free income and non-deductible expenses
-1.2
0.2
Effective tax rate -145.0 33.7
Theexpectedtaxratecorrespondstothetaxrateoftheparentcompany,UnitedInternetAG.
17 Result from discontinued operations
InacontractdatedJanuary19,2007,UnitedInternetAG,Montabaur,reachedanagreementwithTeleper-formanceSA,Paris,concerningthesaletoTeleper-formanceoftheUnitedInternetGroupmembertwenty4helpKnowledgeServiceAG,Montabaur.Teleperformancepaidthefullpurchasepriceincash.Thebusinesscombinationwasapprovedbytherespec-tiveantitrustauthoritiesonFebruary22,2007.TheeconomictransferoftheshareswascompletedonMarch13,2007.ThepurchasepriceamountedtoC79,619k(aftertransactioncosts).
TheresultfromdiscontinuedoperationsaftertaxofC68,098kcomprisedthecurrentperiodresult(infiscalyear2007untilthetimeofdisposal)ofC2,352kandincomefromthesaleofC65,746k.
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Asofthebalancesheetdate,therewerecommitmentsfromdiscontinuedoperationsofC2,153kduetotransac-tioncosts,whichweredisclosedunder“Otherliabilities”.
18 Earnings per share
AsofDecember31,2008,capitalstockwasdividedupinto251,469,184registeredno-parshareseachwithatheoreticalshareinthecapitalstockofC1.OnDecem-ber31,2008,theCompanyheld22,000,000treasuryshares(prioryear:18,000,000).ThesetreasurysharesdonotentitletheCompanytoanyrightsorproportio-naldividendsandarethusdeductedfromequity.Theweightedaveragenumberofsharesoutstandingusedforcalculatingundilutedearningspersharewas229,790,031forfiscalyear2008(prioryear:235,759,855).
AdilutiveeffectmustbetakenintoconsiderationforconversionrightsresultingfromtheemployeestockownershipprogramofUnitedInternetAGwhichwerecontainedincashasofDecember31,2008.Allconver-sionrightsexistingonDecember31,2008wereconsi-deredinthecalculationofdilutedearningspershare,usingthetreasury stock method,insofarastheconver-sionrightswereinmoneyandirrespectiveofwhethertheconversionrightswereactuallyexercisableonthebalancesheetdate.Thecalculationofthedilutiveeffectfromconversionismadebyfirstdeterminingthetotalofpotentialshares.Onthebasisoftheave-ragefairvalue,thenumberofsharesisthencalculatedwhichcouldbeacquiredfromthetotalamountofpay-ments(parvalueoftheconvertiblebondplusadditio-nalpayment).Ifthedifferencebetweenthetwovaluesiszero,thetotalpaymentisexactlyequivalenttothefairvalueofthepotentialsharesandnodilutiveeffectneedbeconsidered.Ifthedifferenceispositive,itisassumedthattheseshareswillbeissuedwithoutconsideration.
Thecalculationofdilutedearningspersharewasbasedon158,804(prioryear:2,196,756)potentialshares(fromtheassumeduseofconversionrights).BasedonanaveragemarketpriceofC10.95(prioryear:C14.47),thiswouldresultintheissuanceof95,678(prioryear:869,914)shareswithoutconsideration.DuetothenegativeresultattributabletoshareholdersofUnitedInternetAGforfiscalyear2008,thereisnodilutiveeffectfrompotentialshares.Thenumberofsharesforthedilutedearningspersharecalculationcorrespondstothatfortheundilutedearningspersharecalcula-
tion.Theweightedaveragenumberofsharesusedtocalculatedilutedearningspershareinthepreviousyearwas236,629,769.
Thefollowingtableshowstheunderlyingamountsforthecalculationofundilutedanddilutedearnings:
2008 Dk
2007 Dk
Profit attributable to the share-holders of United Internet AG
-120,183
220,218
Earnings per share (in C)
– undiluted -0.52 0.93
– diluted -0.52 0.93
Thereof result from continued operations
-120,183
152,120
Earnings per share (in C)
– undiluted -0.52 0.64
– diluted -0.52 0.64
Thereof result from discontinued operations
-
68,098
Earnings per share (in C)
– undiluted - 0.29
– diluted - 0.29
Weighted average number of out-standing shares (in million units)
– undiluted 229.79 235.76
– diluted 229.79 236.63
Thecalculationofundilutedanddilutedearningspersharefordiscontinuedoperationswasbasedontheweightedaveragenumberofshares,asdescribedabove.
19 Dividend per share
AdividendofC0.20persharewaspaidforthefiscalyear2007.ThisrepresentedatotaldividendpaymentintheperiodunderreviewofC42,886k.Treasurysharesreduceequityandhavenodividendentitle-ment.Nodividendwillbepaidforfiscalyear2008.
96
Explanations to the Balance Sheet
20 Cash and cash equivalents Cashandcashequivalentsconsistofbankbalances,short-terminvestments,checksandcashinhand.Bankbalancesbearvariableinterestratesforcallmoney.Short-terminvestmentsaremadeforvariousperiods,dependingontheGroup’srespectivecashneeds,ofbetweenonedayandthreemonths.
Thedevelopmentandapplicationofcashandcashequivalentsisstatedintheconsolidatedcashflowstatement.
21 Trade accounts receivable
2008 Dk
2007 Dk
Trade accounts receivable 135,705 133,677
Less
Bad debt allowances -16,639 -9,889
Trade accounts receivable, net 119,066 123,788
AsofDecember31,2008tradeaccountsreceivableamountingtoC16.639k(prioryear:C9,889k)wereimpaired.Thedevelopmentofthebaddebtallowancescanbeseenbelow:
2008 Dk
2007 Dk
As of January 1 9,889 8,223
Additions charged to the income statement
15,815
7,765
Utilization -6,609 -4,057
Reversals -2,221 -1,720
Exchange rate differences -235 -297
Disposal from deconsolidation 0 -25
As of December 31 16,639 9,889
Additionschargedtotheincomestatementofeachperiodunderreviewdonotcomprisereceivablesari-singduringtheyearandeliminatedbeforethebalancesheetdate.Asofthebalancesheetdatethereisnorecognizableindicationthatpaymentobligationsforreceivablesnotadjustedcannotbemet.
Themaximumcreditriskasofthebalancesheetdatecorrespondstothenetcarryingvalueoftheabovetradeaccountsreceivable.
Tradeaccountsreceivablearealwaysstatedatnominalvalue.Overduereceivablesaretestedforpossibleimpairment.Individualallowancesaremainlyformedbyclassifyingreceivablesaccordingtotheirageprofile.WerefertoNote43.
Alloverduereceivablesnotadjustedindividuallyaresubjectedtolump-sumallowances.
AsofDecember31,theageprofileoftradeaccountsreceivablelesstheaforementionedallowanceswasasfollows:
2008 Dk
2007 Dk
Trade accounts receivable, net
< 30 days 104,599 111,468
30 - 60 days 5,641 4,067
60 - 90 days 3,673 6,759
90 - 120 days 1,674 1,045
> 120 days 3,479 449
Trade accounts receivable, net 119,066 123,788
22 InventoriesInventoriesconsistofthefollowingitems:
2008 Dk
2007 Dk
Merchandise
- DSL hardware 6,999 7,975
- Mobile internet hardware 6,194 4,611
- Mobile telephony hardware 2,703 1,503
- Web hosting hardware 860 990
- Video-on-demand hardware 828 2,162
- Other 318 566
Domain stock held for sale
- Domain stock 5,370 3,624
23,272 21,431
Less
Allowances -4,224 -4,646
Inventories, net 19,048 16,785
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TheimpairmentofinventoriesexpensedintheperiodunderreviewamountedtoC1,581k(prioryear:C3,352k).Thischargeisdisclosedin“Costofsales”.AllowancesofC4,224k(prioryear:C4,646k)weremadeforinventorieswithanetcarryingvalueofC6,735k(prioryear:C2,177k).
23 Prepaid expensesPrepaidexpensesofC28,791k(prioryear:C23,020k)consistmainlyofprepaymentsfordomainfees,whichweredeferredandchargedtotheincomestatementonthebasisoftheunderlyingcontractualperiodofcusto-mersintheProductsegment.
24 Other current assets
2008 Dk
2007 Dk
Accounts receivables from the tax office 3,722 2,880
Outstanding purchase price installment 3,621 3,621
Payments on account 1,244 4,282
Premium claims 586 2,883
Other 3,564 2,705
Other assets, net 12,737 16,371Accountsreceivablesfromthetaxofficeresultmainlyfromcreditbalancesfromsalestax.
Theoutstandingpurchasepriceinstallmentreferstoapaymentdueattheendof2009fromthesaleofsharesinNTplusAG,tobesettledfullyincash.
Paymentsonaccountconsistmainlyofdownpay-mentsfordomains.
ThepremiumclaimsrepresentclaimsfromacooperationagreementwithDeutscheTelekomAGandVodafoneAG.Theyrelatetoperformance-basedpay-mentsfortheacquisitionofnewcustomersforthecooperationpartner.
25 Shares in associated companies / joint ventures
2008 Dk
2007 Dk
Carrying amount at the beginning of the fiscal year
309,023
11,006
Additions 170,307 309,299
Adjustments
- Dividends -392 -950
- Shares in result -169,338 2,284
- Impairment losses -64,855 0
- Other 1,729 0
Disposals -24,790 -12,616
221,684 309,023
TheadditiontosharesinassociatedcompaniesresultsmainlyfromtheacquisitionoffurthersharesinVersatel(C57,257k),fromtheacquisitionofsharesinfreenet(C46,111k)andfromtheinvestmentinEFFNo.1(C24,367k).FurtheradditionsofC24,452kresultfromthepurchaseofsharesinassociatedcompaniespurchasedbyEFFNo.2andtheacquisitionofsharesinVirtualMinds(C9,131k)andBW2(C5,826k).
TheresultfromassociatedcompaniesamountingtoC-169,338kwasmainlycausedbyproratedimpairmentlossesonsharesinfreenetheldbyMSPHoldingGmbH(C-158,886k).Thesewrite-downsweremadeasaresultofasharpdeclineinsharepricesinfiscalyear2008.
OtheradjustmentstotalingC1,729kresultfromprofitcontributionstoassociatedcompanieswithaninvest-mentvalueofC0(C1,613k)andprofitcontributionsrecognizeddirectlyinequityofassociatedcompanies(C116k).ThenegativeprofitcontributionsofassociatedcompanieswithaninvestmentvalueofC0areonlyconsiderediftheassociatedcompanieswereprovidedwithlong-termloansoriftherearecredit/liabilitycommitments.
Thefollowingtableprovidesanoverviewofdirectimpairmentlossesinfiscalyear2008:
98
2008 Dk
2007 Dk
Versatel 50,194 -
EFF Nr. 2 7,169 -
BW2 4,389 -
Other 3,103 -
64,855 0
TheimpairmentlossofVersatelresultsfromasharpdeclineinitssharepriceduringfiscalyear2008.
ImpairmentlossesofC7,169krefertosharesinassociatedcompaniesheldbyEFFNo.2.
ThedisposalresultsfromcapitalrepaymentsoftheinvestmentEFFN0.1(C20,037k)andfromthesaleofsharesinBigpoint(C4,753k).
Duetothecontractuallyagreedunanimityofvotingonallshareholderresolutions,theGroupcannotexertacontrollinginfluenceonEFFNo.1companies,butonlyasignificantinfluence.Incontrasttoitsshareincapitalof66.67%,theGroup’sparticipationinannualnetprofitofEFFNo.1isbetween33.33%and66.67%,dependingonthefund’sinternalrateofreturn.
TheCompanyitselfholds8.43%ofsharesinfreenetAG.Duetoacontractualvotingcommitment,theCompanybelievesitexertsasignificantinfluenceonthebusinesspolicyoffreenetAG.
ThefollowingtablecontainssummarizedfinancialinformationontheCompany’sinvestmentinMSPHoldingGmbH:
2008 Dk
2007 Dk
Current assets 311 21,792
Non-current assets 55,468 317,176
Current liabilities 19,715 8,248
Non-current liabilities 0 0
Shareholders’ equity 36,064 330,720
Sales revenue
0
0
Net profit -294,657 -80ThechangeintheconsolidatedbalancesheetandtheconsolidatedincomestatementofMSPHoldingGmbHcomparedwiththepreviousyearislargelyduetotheimpairmentlossonsharesinfreenetAG.
ThefollowingtablecontainssummarizedfinancialinformationontheCompany’sinvestmentinVersatelAG:
2008 Dk
2007 Dk
Current assets 179,123 225,022
Non-current assets 966,949 964,946
Current liabilities 182,576 205,859
Non-current liabilities 634,897 623,696
Shareholders’ equity 328,599 360,413
Sales revenue
576,718
700,646
Net profit -32,245 -89,005
Thefinancialinformationfor2008ofVersatelAGisbasedonpublishedfiguresasofSeptember30,2008.
Basedonthestockexchangepriceasofthebalancesheetdate,thesharesheldbyUnitedInternetAGinVersatelAGhaveafairvalueofC116,355k.
ThefollowingtablecontainssummarizedfinancialinformationontheCompany’sinvestmentinfreenetAG:
2008 Dk
2007 Dk
Current assets 896,496 369,315
Non-current assets 2,383,529 533,285
Current liabilities 967,511 491,182
Non-current liabilities 1,400,421 39,333
Shareholders’ equity 912,093 372,085
Sales revenue
1,800,738
1,863,284
Net profit 160,595 16,530Thefinancialinformationfor2008offreenetAGisbasedonpublishedfiguresasofSeptember30,2008.Thefinancialinformationfor2007isbasedonpublis-hedfiguresoffreenetAGforthefiscalyear2007.
Basedonthestockexchangepriceasofthebalancesheetdate,thesharesheldbyUnitedInternetAGinfreenetAGhaveafairvalueofC44,815k.ThefollowingtablecontainssummarizedfinancialinformationontheCompany’sinvestmentinotherassociatedcompaniesandjointventuresasofthebalancesheetdate:
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2008 Dk
2007 Dk
Current assets 19,802 17,044
Non-current assets 31,491 19,984
Current liabilities 12,906 5,000
Non-current liabilities 800 15,002
Shareholders’ equity 37,586 17,027
Sales revenue
27,186
13,471
Net profit -11,740 5,751
Thesummarizedfinancialinformationonassociatedcompaniesisbasedonthe100%figuresofthesecompanies.
26 Other financial assetsThedevelopmentoftheseshareswasasistshowninthetablebelow.
Thenewlyfounded,fullyconsolidatedinvestmentfundEFFNo.3madeinvestmentsofC50,071kinatotalof24companies(portfoliocompanies)infiscalyear2008.Asthefundholdslessthan20%ofvotingshares,theseinvestmentsareclassifiedasavailable-for-salefinancialassetspursuanttoIAS39.
Againstthebackdropofasharpdeclineinsharepricesinfiscalyear2008,thelistedsharesinGoldbachandDrillischwerewrittendownduetoimpairment,aswereotherinvestments(portfoliocompanies)ofEFFNo.3.
Amortization of revalua-tion reserve not
recognized in income
01.01.2008 Dk
Additions
Dk
Recycling
Dk
Addition
Dk
Impair-ment loss
Dk
Reclassifi-cation
Dk
Disposal
Dk
31.12.2008
DkGoldbach shares 28,794 -8,853 -7,894 12,047
Drillisch shares 28,325 3,090 -22,506 8,909
Afilias shares 5,353 2,373 7,726
Portfolio compa-nies of EFF No. 3
0 50,071 3,371 -11,626 41,816
Purchase price in-stallment NTplus
3,621 -3,621 0
Others 1,774 866 -353 2,287
67,867 50,937 -5,763 5,744 -42,379 -3,621 0 72,785
Amortization of revalua-tion reserve not
recognized in income
01.01.2007 Dk
Additions
Dk
Recycling
Dk
Addition
Dk
Impair-ment loss
Dk
Reclassifi-cation
Dk
Disposal
Dk
31.12.2007
DkGoldbach shares 0 19,941 8,853 28,794
Drillisch shares 0 31,415 -3,090 28,325
Afilias shares 1,842 3,511 5,353
Purchase price in-stallment NTplus
0 3,621 3,621
Others 1,853 -79 1,774
3,695 54,977 0 9,274 0 0 -79 67,867
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ThepurchasepriceinstallmentNTplus,resultsfromthe2ndpurchasepriceinstallmentinconnectionwiththesaleofsharesinNTplusAGinfiscalyear2007,whichistobefullysettledincashbytheendof2009.Inthepreviousyear,thisitemwasdisclosedunder“Non-currentassets”.
Otherfinancialassetsaremainlyotherdepositsandloansforwhommarketvaluecoincidedwithcarryingvalue.
27 Property, plant and equipment
2008 Dk
2007 Dk
Acquisition costs
- Land and buildings 8,047 6,986
- Furniture and fixtures 196,645 156,905
- Payments on account 3,464 10,227
208,156 174,118
Less
Accumulated depreciation -121,662 -97,013
Property, plant and equipment, net 86,494 77,105
Analternativepresentationofthedevelopmentofproperty,plantandequipmentinthefiscalyears2007and2008isshownintheexhibittothenotesoftheconsolidatedfinancialstatements(assetsmovementschedule).
28 Intangible assets (without goodwill)
2008 Dk
2007 Dk
Acquisition costs
- Licenses 28,337 27,462
- Order backlog 2,141 2,141
- Software 37,695 34,367
- Trademarks 21,423 21,904
- Customer base 42,927 45,525
- Portal 72,240 72,240
204,763 203,639
Less
Accumulated amortization and impairment
-107,251
-83,608
Intangible assets, net 97,512 120,031
Analternativepresentationofthedevelopmentofintangibleassetsinthefiscalyears2007and2008isshownintheexhibittothenotesoftheconsolidatedfinancialstatements(assetsmovementschedule).
Intangibleassetswithunlimitedusefullives(trade-marks),aremostlyallocatedtotheProductsegment.ThecarryingvaluesamounttoC21,379k.Intangibleassetswithunlimitedusefullivesweresubjectedtoanimpairmenttestonthebalancesheetdate.Animpair-mentlossofC44k(prioryear:C0)wasrecognizedintheOnlineMarketingsegment.Thefurtherdeclineresultedfromcurrencytranslationeffects.
Inthepreviousyear,animpairmenttestwascon-ductedonsoftwareintheProductsegmentwhichresultedinanimpairmentlossofC3,536k.
29 Goodwill
2008 Dk
2007 Dk
gross net gross netProduct segment 289,570 289,570 297,670 297,670
Online Marketing segment
109,602
89,306
102,204
91,152
399,172 378,876 399,874 388,822
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Analternativepresentationofthedevelopmentofgoodwillinthefiscalyears2007and2008isshownintheexhibittothenotesoftheconsolidatedfinancialstatements(assetsmovementschedule).
TotalgoodwillfellonbalancebyC9,946ktoC378,876k.TheincreaseingoodwillofC9,302kresultsfromtheacquisitionofDollamoreandthepurchaseoffurthersharesinAdLINK(C7,399k).Currencytransla-tioneffectsintheProductsegmentresultedinadeclineingoodwillofC17,403k.Afurthernegativeeffectresultedfromnon-scheduledamortizationofgoodwillforAdLINKofC9,244k.Wereferinthiscon-nectiontothefollowingsection.
30 Impairment of goodwill and intangible assets with unlimited useful lives
Thegoodwillandintangibleassetswithunlimitedusefullivesaresubjectedtoanimpairmenttestatleastonceperyear.Withreferencetoitsinternalbud-getingprocess,theCompanyhaschosenthelastquar-terofitsfiscalyeartoconductitsstatutoryannualimpairmenttest.
Thescheduledannualimpairmenttestconductedinthe4thquarterof2008resultedinamortizationofC9,244k(prioryear:C0).Ofthistotal,goodwillwrite-downsforaffilinetFranceaccountedforC6,430k,AdLINKGermanyforC1,631kandAdLINKFranceforC1,183kandreferexclusivelytotheOnlineMarketingsegment.Themaincauseforthewrite-downswasadeteriorationofearningsoftherespectivecash-gene-ratingunit.Theimpairmentlosswasdisclosedsepara-telyintheincomestatement.
DuetosignsofadeteriorationinearningsofCibleClickFranceandAdLINKUKandsubsequentrestructuring,thegoodwillofthesecash-generatingunitswassubjectedtoanimpairmenttestinthepreviousyear.Therecoverableamountsofthecash-generatingunitsconcernedweremeasuredusingcashflowforecasts.Theassumptionsusedwerethesameasthosefortheannualimpairmenttestofcash-generatingunitsintheOnlineMarketingsegment,asdescribedbelow.Asaresultofthisimpairmenttest,goodwillofCibleClickFrancewaswrittendownbyC7,662kandofAdLINK
UKbyC1,711kinthepreviousyear.Theimpairmentlosswasdisclosedseparatelyintheincomestatement.
Goodwillacquiredinthecourseofbusinesscombina-tionsisallocatedforimpairmenttestpurposestocash-generatingunits,whicharedistributedamongtheCompany’ssegmentsasfollows:
Cash-generatingunitsintheProductsegmentTheProductsegmentconsistsofthefollowingthreecash-generatingunitstowhichgoodwillwithcarryingvaluestotalingC289,570k(prioryear:C297,670k)hasbeenallocated:
2008 Dk
2007 Dk
WEB.DE 228,493 228,493
Fasthosts / Dollamore 56,045 64,145
InterNetX 5,032 5,032
289,570 297,670
Therecoverableamountsofthecash-generatingunitsintheProductsegmentarecalculatedonthebasisofavalue-in-usecalculationusingcashflowforecasts.ThecashflowforecastsarebasedontheCompany’sbud-getsforfiscal2009.Thesebudgetswerepreparedbymanagementonthebasisofexternalmarketstudiesandinternalassumptions,extrapolatedforaperiodoffiveyears.Followingthisperiod–andasintheprevi-ousyear–managementassumesanannualincreaseincashflowof1.5%to2.0%,correspondingtolong-termaveragegrowthofthesectorinwhichtherespectivecash-generatingunitoperates.Thediscountedpre-taxinterestrateusedintheperiodunderreviewforthecashflowforecastsamountsto11%(prioryear:11%and13%).
TheProductsegmentalsohastrademarkswithatotalcarryingvalueofC21,314k(prioryear:C21,795k).Thestatedtrademarksrefertothefollowingcash-genera-tingunits:
2008 Dk
2007 Dk
WEB.DE 17,098 17,098
Fasthosts / Dollamore 4,216 4,697
21,314 21,795
102
Inthecourseofbusinesscombinations,thetrademarkswerevaluedattheirfairvaluesusingtheso-called“royaltyrelief”methodandtestedagainforimpair-mentonthebalancesheetdate.Thetrademark-rele-vantcashflowsweremultipliedwiththetrademark-relevantroyaltyrates.Theseremainedunchangedatbetween1%and2%.Theforecastoftrademark-relevantcashflowswasbasedonthesameassumptionsregar-dingmarketdevelopmentanddiscountratesasusedforthecalculationofvalue-in-useofthecash-genera-tingunits.
Cash-generatingunitsintheOnlineMarketing segmentTheOnlineMarketingsegmentconsistsofthirteencash-generatingunitstowhichgoodwilltotalingC89,306k(prioryear:C91,152k)hasbeenallocated.GoodwillintheOnlineMarketingsegmentreferstothefollowingsummarizedcash-generatingunits:
2008 Dk
2007 Dk
AdLINK Media 3,630 6,444
Affiliate Marketing 9,554 15,984
Domain Marketing 31,635 31,635
Minority interests 44,487 37,089
89,306 91,152
GoodwillfromtheacquisitionofminorityinterestsinAdLINKInternetMediaAGaretestedbytheCompanyforimpairmentonasub-grouplevel.
Therecoverableamountsofthecash-generatingunitsintheOnlineMarketingsegmentarealsocalculatedonthebasisofavalue-in-usecalculationusingcashflowforecasts.ThecashflowforecastsfortheOnlineMarketingsegmentarebasedonthebudgetforfiscal2009approvedbytheSupervisoryBoard.AnexpectedestimatemadebytheManagementBoardwasusedfortheyears2010to2013,aswellasexternalmarketstu-dies.Asinthepreviousyear,annualcashflowincre-asesafterthisfive-yearperiodarebasedonanexpectedinflationrateof2%.Asinthepreviousyear,thediscountedpre-taxinterestratesusedforthecashflowforecastsarebetween12%and14%,dependingonthecash-generatingunit.
TheOnlineMarketingsegmentalsoincludestrade-markswithatotalcarryingvalueofC65k(prioryear:C109k).Inthecourseofbusinesscombinations,thesewerealsovaluedattheirfairvaluesusingtheroyalty
reliefmethod.ThetestresultedinimpairmentofC44k(prioryear:C0).Thewrite-downsarerecognizedin“Costofsales”.
Basicassumptionsforthecalculation ofvalue-in-useThereareuncertaintiesinvolvedwiththeunderlyingassumptionsusedforthecalculationofvalue-in-useforthecash-generatingunits:
SalesrevenueThemanagementoftherespectivecash-generatingunitexpectsafurtherincreaseinsaleswithinitsplanninghorizon.Forthecash-generatingunitsoftheProductsegment,anincreaseofbetween4%and23%isexpectedforthefiscalyears2009to2013(prioryear:6%and19%).Forthecash-generatingunitsoftheOnlineMarketingsegment,manage-mentexpectssalestogrowbybetween-59%and28%(prioryear:2%and39%).
GrowthratesGrowthratesarebasedonpublishedsector-specificmarketforecasts.Inthecasethatsuchforecastsarenotavailable,internalassumptionsaremade.
GrossmarginTheplannedgrossmarginsarebasedonmarketassumptionsmadebythemanagementoftherespectivecash-generatingunit.IntheOnlineMarketingsegment,areductionofbetween0%and2%perannumwasassumedwithintheplanninghorizon,inordertoaccountforgrowingcompetiti-on.ManagementexpectsconstantgrossmarginsintheProductsegment.
DiscountratesDiscountratesreflectmanagementassumptionsregardingthespecificrisksattributabletotherespectivecash-generatingunits.ThechoiceofsuitablediscountratesintheProductsegmentisbasedonavirtuallyrisk-freeinterestrate,whichisincreasedbyaspecificriskpremium.
SensitivityofassumptionsThesensitivityoftheassumptionsmadewithrespecttotheimpairmentofgoodwillortrademarksdependsontherespectivecash-generatingunits.
Productsegment
Forthecash-generatingunitsoftheProductsegment,theCompany’smanagementbelievesthat,onthebasisofreasonablejudgment,nogenerallypossiblechange
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inoneofthebasicassumptionsusedtodeterminethevalue-in-useofacash-generatingunitcouldcausethecarryingvaluetosignificantlyexceeditsrecoverablevalue.Theeffectsofchangestothebasicassumptionsisexplainedbelow:
DiscountratesAchangeinthevirtuallyrisk-freeinterestrateorspecificriskpremiumalsochangestheunderlyingdiscountratesoftheimpairmenttest.Achangeinthediscountratesusedof1%-point,however,wouldnothaveanyeffectontheimpairmenttest.
GrowthratesManagementrecognizesthatthegrowthoftheProductsegment,andthusthegrowthofthosecash-generatingunitsoperatinginthissegment,dependsheavilyonthedevelopmentofinternetusageandthusitsacceptanceasamediumusedinprivateandbusinesslife.Theentryofnewcompe-titorsandtheprojectedmarketconsolidationintheProductsegmentarenotexpectedtohaveanynegativeeffectonforecastsusedinthebudgets.Apossiblechangeonthebasisofreasonablejudg-ment,however,mayleadtogrowthrateswhichdifferfromthoseusedinthebudgetsoftherespectivecash-generatingunit.Adeclineingrowthrates,withinthepossibleparametersofreasonablejudgment,wouldnotresultinareductionofvalue-in-usetobelowcarryingvalue.
OnlineMarketingsegment
DiscountratesAchangeinthevirtuallyrisk-freeinterestrateorspecificriskpremiumalsochangestheunderlyingdiscountratesoftheimpairmenttest.Achangeinthediscountratesusedof1%-point,wouldresultinadditionalimpairmentofC725k.
GrowthratesAdeclineintheunderlyinggrowthrateof1%-point,wouldresultinadditionalimpairmentofC1,020k.
31 Trade accounts payableTradeaccountspayableamountingtoC170,743k(prioryear:C232,421k)areowedtoindependentthirdpartieswithtermsoflessthanoneyear.
32 Liabilities due to banksa)Liabilitiesduetobanks
2008 Dk
2007 Dk
Bank loans 528,301 369,223
less
Current portion of liabilities to banks 0 -174
Non-current portion of liabilities to banks
528,301
369,049
Current portion of non-current liabilities to banks
0
174
Short-term loans/overdrafts 16,069 1,882
Current portion of liabilities to banks 16,069 2,056
Total 544,370 371,105
InSeptember1997theCompanyraisedtwolong-termloansofC2,045kandC2,250ktofinancetheMultime-diaInternetParkinZweibrücken.Thefirstloanwasrepaidinfullonexpiryofthefixed-interestperiodonJuly30,2007.Afterthefixed-interestperiodofthesecondloanendedonJuly30,2008,theremainingdebtofC961kwasrepaidinfull.
Non-currentbankliabilitiesresultmainlyfromasyndicatedloanwithatotalamountcommittedofC500.0million.ThesyndicatedloanagreementwasconcludedonSeptember14,2007.ThetotalcreditfacilityisdividedintoTrancheAamountingtoC300.0millionandTrancheBtotalingC200.0million.
Asofthebalancesheetdate,C300.0millionhavebeenusedfromTrancheAandC80.0millionfromTrancheB.
TrancheAhasatermoffiveyears.RepaymentismadefromMarch14,2010insixequalhalf-yearlyinstallments.TrancheBisarevolvingsyndicatedloan,whichisalsousedtorefinancethesyndicatedloanofOctober13,2005amountingtoC125.0million.ThesyndicatedloanexpiresonSeptember13,2012.
Theloanshavevariableinterestrates.Theeffectiveinterestratesfortheinterestperiodsofone,two,three,sixortwelvemonthsaretiedtotheEURIBORrateplusamarginp.a..Thismargindependsonkeyperfor-manceindicatorsoftheUnitedInternetGroup.Asofthebalancesheetdate,theinterestratesrangebet-ween3.25%and4.38%(prioryear:5.05%and5.18%).Nocollateralwasprovidedforthesesyndicatedloans.
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Furtherliabilitiesduetobanksresultfromapromis-sorynoteloanofC150.0million.ThepromissorynoteloanwasissuedonJuly23,2008.ThepromissorynoteisabulletloananddividedintoaTrancheAofC78.0millionwithatermendingJuly23,2011andaTrancheBofC72.0millionwithatermendingJuly23,2013.Noseparatecollateralwasprovidedforthispromissorynoteloan.Theloanshavevariableinterestrates.TheeffectiveinterestratefortheinterestperiodofthreemonthsistiedtotheEURIBORrateplusamarginp.a..Asofthebalancesheetdate,theinterestratesrangebetween6.04%and6.24%.
CurrentbankliabilitiesmainlyresultfromacreditlineusedbyAdLINK.Asofthebalancesheetdate,theinterestratesrangebetween2.92%und3.70%.Thecre-ditlinesofAdLINKInternetMediaAGamounttoC53.4million.ThematuritydateforC20.0millionisMay2009,forC15.0millioninNovember2009andafur-therC18.4millionareavailableuntilfurthernotice.
Thefairvaluesoftheseloansamountmainlytotheircarryingvalues.
Acashpoolingagreement(overdraftservice)hasbeeninplacebetweenUnitedInternetAG,certainsubsidia-riesandWestLBAG,Düsseldorf,sinceOctober1,2002.Undertheagreement,creditanddebitbalancesarenettedwithintheCompanyeachbankingdayandsummarized.
b)CreditlinesUnitedInternetAGhasthefollowingcreditlinesforadvancesoncurrentaccountsandothershort-termloanswiththreebanks:
2008 Dm
2007 Dm
Available credit lines 55.0 55.0
Utilization (guarantees only) 9.2 7.1
Average interest rate (in %) n.a. n.a.
Unutilized credit facilities 45.8 47.9
Thecreditfacilitieshavebeengrantedbythebanksforlimitedperiods.C15.0millionexpireinJune2009,C25.0millionexpireinSeptember2009andafurtherC15.0millionareavailableatfurthernotice.
AfurtheramountofC120millionisalsoavailableuntilSeptember13,2012fromtheunutilizedproportionofthesyndicatedloan.
WithregardtocreditlinesgrantedtothecompaniesoftheUnitedInternetGroupbyonebank,UnitedInternetAGisliableasco-debtor.Thecreditfacilitieshadonlybeenutilizedthroughguaranteesasofthebalancesheetdate.Forthisreason,noaverageinterestratehasbeengiven.
33 Accrued taxesAccruedtaxesconsistofthefollowingitems:
2008 Dk
2007 Dk
Germany 30,601 27,333
United Kingdom 2,823 2,049
Spain 201 0
Belgium 196 135
France 34 57
USA 0 598
33,855 30,172
34 Deferred revenueIntheProductsegment,customerspayforcertaincontractsinadvanceforamaximumof24months.
Theprepaidchargesareallocatedandrecognizedasrevenuesovertheunderlyingcontractualperiod.
35 Other accrued liabilitiesThedevelopmentofaccrualsinfiscalyear2008wasasfollows:
Litigation risks
Dk
Others
Dk
Total
DkJan. 1, 2008 2,573 5,110 7,683
Utilization 705 5,000 5,705
Reversal 577 0 577
Addition 445 2,667 3,112
Dec. 31, 2008 1,736 2,777 4,513
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Litigationrisksconsistofvariouslegaldisputesof1&1InternetandAdLINK.
Otheraccrualsreferredmainlytoprovisionsforimpendinglossesandobligationstojointventures.Inthepreviousyear,otheraccruedliabilitiesreferredmainlytoanindemnitycommitmentforajointventure.
36 Other liabilities
2008 Dk
2007 Dk
Other current liabilities
- Liabilities to the tax office 20,929 19,222
- Salary and social security liabilities 11,027 11,764
- Liability from interest hedging 6,671 0
- Option agreement 6,425 2,663
- Marketing and selling expenses / commissions
6,133
7,387
- Transaction costs for sale of shares 2,153 2,153
- Legal and consulting fees, auditing fees
1,816 3,125
- Indemnity commitment 0 5,000
- Loans received from associated companies
0
2,983
- Purchase price for acquisition of shares
0 1,836
- Others 6,611 4,110
Total 61,765 60,243
Liabilitiestothetaxofficemainlyrelatetosalestaxliabilities.
Theliabilityfrominteresthedgingresultsfromanegativemarketvalueasofthebalancesheetdate.
Theliabilityfromanoptionagreementinfiscalyear2008isinconnectionwiththevaluationofawrittencalloptionregardingtheacquisitionofsharesinfree-netAG.PleaseseeNote42formoredetails.
Transactioncostsforthesaleofsharesrefertothesaleofsharesintwenty4helpKnowledgeServiceAG.
Forfurtherdetailsontheindemnitycommitmentforajointventureandtheloanreceivedfromanassociatedcompany,pleaserefertoNote42.
Thepurchasepricefortheacquisitionofsharesrefer-redtoaforwardpurchaseagreementinconnectionwiththepurchaseoffurthersharesinInterNetXGmbH.,whichwassettledincashinfiscalyear2008.
Thenon-currentliabilitiesofC10,892k(prioryear:C886k)resultmainlyfromminorityinterestsofthepartnershipsEFFNo.2andEFFNo.3.
37 Employee stock ownership plansTheUnitedInternetGrouphasvariousplanswhichallowexecutivesandmanagerstoparticipateintheCompany’sprofits.Alloftheseplansaretreatedasequity-settledshared-basedpaymenttransactions.
UnitedInternetAG
Convertible bondsInaccordancewiththeresolutionpassedbytheshare-holders’meetingonMay16,2003,convertiblebondsmaybeissuedtoemployeesoftheCompanyandofsubsidiariesoftheCompanyandtoexecutivebodymembersofsubsidiariesoftheCompany.ConditionalcapitalofC6,000kwascreatedforthispurpose.
Theconvertiblebonds,whichbearinterestof3.5%perannum,maybeexchangedasawholeorinpartforsharesinUnitedInternetAG.EachC1nominalamountoftheconvertiblebondscanbeexchangedfor4regis-teredshares(followingthesharesplit).
Theauthorizedsubscribersareentitled,afterspecifiedperiods,toconverttheconvertiblebondsinfullorparttosharesintheCompany.Intheeventthatthiscon-versionoptionisexercised,anadditionalpaymentincashistobemadetoacquireeachno-parshare;thisistheamountbywhichtheconversionpriceexceedsonequarterofthenominalamountoftheconvertiblebond(followingthesharesplit).
Upto25%maybeconvertedattheearliest24monthsafterthedateofissueoftheconvertiblebonds;upto50%(i.e.includingthepreviouslyexercisedconversionoptions)attheearliest36monthsafterthedateofissueoftheconvertiblebonds.Atotalofup75%maybeexercisedattheearliest48monthsafterthedateofissueoftheconvertiblebonds;thefullamountmaybe
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exercisedattheearliest60monthsafterthedateofissueoftheconvertiblebonds.
UsinganoptionpricingmodelinaccordancewithIFRS2,thepersonnelexpenseforconvertiblebondsamoun-tedtoC129k(prioryear:personnelincomeofC48k).Thecompensationexpenseforthisemployeestockownershipplanisincludedinadministrativeexpenses.
UsinganoptionpricingmodelinaccordancewithIFRS2(“Black-Scholes”stockoptionpricingmodel),thefairvalueofoptionsconnectedwiththeconversionrightswasdeterminedasisshowninthetableabove.
AdLINKInternetMediaAG
Convertible bondsInaccordancewiththeresolutionpassedbytheextra-ordinaryshareholders’meetingonApril4,2000,convertiblebondsmaybeissuedtomembersoftheManagementBoardandotherexecutivesoftheCompanyandofsubsidiariesoftheCompanyandtoexecutivebodymembersofsubsidiariesoftheCompany.
EverynominalamountofC1ofapartiallyconvertiblebondcanbeconvertedintoano-parshareinAdLINKInternetMediaAGhavinganaccountingshareinthecapitalstockofC1.Ifconverted,acashpremiumintheamountofthedifferencebetweenC1andtheconver-sionpricehastobepaid.TheconversionpriceisthecashsettlementpriceoftheAdLINKInternetMediaAGshareasrecordedduringtradeintheelectronictradingsystemofDeutscheBörseAGatthetimetheconvert-iblebondwasissued.
A20%portionofthecompany’sconvertiblebondsmaybeconvertedintosharesinthecompanynoearlier
than12monthsafterthedateofissue.Upto40%maybeconvertednoearlierthan24months,upto70%noearlierthan36months,andthewholeamountnoearlierthan48monthsaftertheywereissued.
Inaccordancewiththeresolutionpassedbytheannualshareholders’meetingonMay17,2004,convertiblebondsmaybeissuedtoemployeesofthecompanyandofsubsidiariesofthecompany,aswellastomembersofthecompany’sManagementBoardandexecutivebodymembersofsubsidiariesofthecompany.
EverynominalamountofC1ofapartiallyconvertiblebondcanbeexchangedfor10no-parshareshavinganaccountingshareinthecapitalstockofC1each.Iftheconversionoptionisexercised,anadditionalcashpay-menthastobemadeintheamountbywhichthecon-versionpriceexceedsonetenthoftheparvalueoftheconvertiblebond.Theconversionpricecorrespondsto120%ofthemarketprice,calculatedastheaverageoftheclosingpriceofthecompanyshareinfloortradingoftheFrankfurtstockexchangeonthelastfivetradingdaysbeforetheconvertiblebondsareissued.
Upto25%maybeconvertedattheearliest24monthsafterthedateofissueoftheconvertiblebonds;upto50%(i.e.includingthepreviouslyexercisedconversionoptions)attheearliest36monthsafterthedateofissueoftheconvertiblebonds.Atotalofup75%maybeexercisedattheearliest48monthsafterthedateofissueoftheconvertiblebonds;thefullamountmaybeexercisedattheearliest60monthsafterthedateofissueoftheconvertiblebonds.
UsinganoptionpricingmodelinaccordancewithIFRS2,thepersonnelexpenseforconvertiblebondsamoun-tedtoC70k(prioryear:C180k).Thecompensationexpenseforthisemployeestockownershipplanisincludedinadministrativeexpenses.
Valuation parametersIssue date 25.03.2003 31.08.2003 15.08.2004 27.05.2005
Fair value 1,141 Ck 3,211 Ck 411 Ck 932 Ck
Average market value per convertible bond
0.82 C
1.68 C
1.29 C
1.55 C
Dividend yield 0.5 % 0.5 % 1.0 % 1.0 %
Volatility of the share 61 % 52 % 45 % 39 %
Expected term (years) 4 5 5 5
Risk-free interest rate 3.66 % 3.85 % 3.85 % 2.86 %
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UsinganoptionpricingmodelinaccordancewithIFRS2(“Black-Scholes”stockoptionpricingmodel),thefairvalueofoptionsconnectedwiththeconversionrightswasdeterminedshowninthetableabove.
Thechangesintheconvertiblebondsgrantedandout-standingareshownintablebelow.
Asinthepreviousyear,theexercisepriceforoutstan-dingconvertiblebondsofUnitedInternetAGattheendofthereportingperiodwasC4.35.
TheweightedaveragesharepriceforconvertiblebondsofUnitedInternetAGexercisedintheperiodunderreviewamountedtoC4.87.
TheexercisepriceforoutstandingconvertiblebondsofAdLINKInternetMediaAGattheendofthereportingperiodwasbetweenC3.24andC3.60(prioryear:C1.71andC3.60).
TheweightedaveragesharepriceforconvertiblebondsofAdLINKInternetMediaAGexercisedintheperiodunderreviewamountedtoC13.47.
UnitedInternetAG
Option agreementIn2004,anoptionagreementwasconcludedbetweenMr.StéphaneCordierandUnitedInternetAG.Under
United Internet AG AdLINK Internet Media AGAverage Average
Convertible bond strike price (C) Convertible bond strike price (C)
Outstanding as of December 31, 2006 2,702,292 3.81 778,000 3.08
Exercised -278,796 4.35 -85,000 1.71
Exercised -880,000 2.13 -100,000 3.24
Exercised -40,000 3.82 -54,740 3.60
Expired -26,740 4.35 -51,000 1.71
Expired -80,000 3.82 -25,630 3.60
Expired -600,000 5.26 - -
Outstanding as of December 31, 2007 796,756 4.35 461,630 3.37
Exercised -35,212 4.35 -51,250 3.60
Expired -602,740 4.35 -58,250 3.60
Outstanding as of December 31, 2008 158,804 4.35 352,130 3.29
Exercisable as of December 31, 2007
352,508
750
Exercisable as of December 31, 2008 158,804 101,880
Weighted average remaining term (in months)
6
28
Valuation parametersIssue date 02.01.2004 20.04.2005 23.05.2005
Fair value 209 Ck 364 Ck 614 Ck
Average market value per convertible bond
1.23 C
0.91 C
1.71 C
Dividend yield 0.0 % 0.0 % 0.0 %
Volatility of the share 88 % 68 % 68 %
Expected term (years) 4 5 5
Risk-free interest rate 3.85 % 3.50 % 3.50 %
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theprovisionsofthisagreement,Mr.Cordierhastherighttoacquire400,000sharesofAdLINKInternetMediaAGfromtheUnitedInternetAG,dividedintofouroptionsof100,000shares.ThestrikepriceamountstoC1.50pershare,whereby25%ofsharescannotbeacquiredbeforeJuly1,2004,50%notbeforeMarch30,2005,75%notbeforeMarch30,2006and100%notbeforeMarch30,2007.Theoptionsmayonlybeexercisedinfull.Partialexerciseisnotpossi-ble.Nooptionshadbeenexercisedasofthebalancesheetdate.
UsinganoptionpricingmodelinaccordancewithIFRS2,thepersonnelexpenseforoptionsissuedamountedtoC0k(prioryear:C14k).Thecompensationexpenseisincludedinadministrativeexpenses.
UsinganoptionpricingmodelinaccordancewithIFRS2(“Black-Scholes”stockoptionpricingmodel),thefairvalueoftheoptionswasdeterminedasfollows:
Valuation parametersIssue date 24.04.2004
Fair value 543 Ck
Average market value per convertible bond
1.36 C
Dividend yield 0.0 %
Volatility of the share 79 %
Expected term (years) 3
Risk-free interest rate 3.85 %
UnitedInternetAG
Virtual stock optionsTheemployeestockownershipplans2006and2008employvirtualstockoptions(so-calledStockApprecia-tionRights-SARs).SARsrefertothecommitmentofUnitedInternetAG(orasubsidiary)topaythebenefi-ciaryacashamountequivalenttothedifferencebetweenthesharepriceonthedateofgrantingtheoption(strikeprice)andthesharepriceonexercisingtheoption.Theexercisehurdleis120%oftheshareprice,whichiscalculatedastheaverageclosingpriceinelectronictrading(Xetra)oftheFrankfurtStockExchangeoverthetendaysprecedingissuanceoftheoption.Paymentofvaluegrowthtotheentitledpersonislimitedto100%ofthecalculatedshareprice.
AnSARcorrespondstoavirtualsubscriptionrightforoneshareofUnitedInternetAG.However,itisnota
sharerightandthusnota(genuine)optiontoacquiresharesofUnitedInternetAG.UnitedInternetAGretainstheright,however,tofulfillitscommitment(orthecommitmentofasubsidiary)topaytheSARincashbyalsotransferringoneUnitedInternetAGshareperSARfromitsstockoftreasurysharestothebenefi-ciary,atitsowndiscretion.
Inthecaseofstock-basedremunerationplanswhichgranttheCompanythecontractualchoiceofsettlingincashorissuingequityinstruments,theCompanymustdeterminewhetherthereisacurrentcashsettle-mentcommitmentanddisclosethestock-basedremunerationtransactioncorrespondingly.Thereisacurrentcashsettlementcommitmentifthepossibilitytosettlebymeansofequityinstrumentshasnoecono-micsubstance(e.g.becausethecompanyislegallyforbiddentoissueshares),orcashsettlementwascommonbusinesspracticeorthedeclaredcompanyguidelineinthepast,orthecompanygenerallysettlesincashifthebeneficiarysodesires.
Thistransactioniscarriedinthebalancesheetaccor-dingtotheregulationsforstock-basedremunerationplanswithsettlementviaequityinstruments.
Upto25%oftheoptionrightmaybeconvertedattheearliest24monthsafterthedateofissueoftheoption;upto50%(i.e.includingthepreviouslyexercisedoptions)attheearliest36monthsafterthedateofissueoftheoption.Atotalofup75%maybeexercisedattheearliest48monthsafterthedateofissueoftheoption;thefullamountmaybeexercisedattheear-liest60monthsafterthedateofissueoftheoption.
UsinganoptionpricingmodelinaccordancewithIFRS2,thepersonnelexpenseforoptionsissuedamountedtoC2,469k(prioryear:C1,342k).
Usinganoptionpricingmodelonthebasisofabino-minalmodelinaccordancewithIFRS2,thefairvalueofoptionsissuedwascalculatedasisshowninthetableabove.
AdLINKInternetMediaAG
Virtual stock optionsTheemployeestockownershipplan2007employsvir-tualstockoptions(so-calledStockAppreciationRights-SARs).SARsrefertothecommitmentofAdLINKInter-netMediaAG(orasubsidiary)topaythebeneficiaryacashamountequivalenttothedifferencebetweenthe
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issuepriceonthedateofgrantingtheoptionandthemedianclosingpriceoftheCompany’sshareinelectro-nictrading(Xetra)oftheFrankfurtStockExchangeonthelast10tradingdaysbeforeexercisingtheoption.TheissuepriceisthemedianclosingpriceoftheCompany’sshareinelectronictrading(Xetra)oftheFrankfurtStockExchangeonthelast10tradingdaysbeforeexercisingtheoption,plusasurchargeof20%.Paymentofvaluegrowthtotheentitledpersonislimi-tedto100%ofthestrikeprice.
Thistransactioniscarriedinthebalancesheetaccor-dingtotheregulationsforstock-basedremunerationplanswithsettlementviaequityinstruments.
Upto25%oftheoptionrightmaybeconvertedattheearliest24monthsafterthedateofissueoftheoption;upto50%(i.e.includingthepreviouslyexercisedoptions)attheearliest36monthsafterthedateofissueoftheoption.Atotalofup75%maybeexercisedattheearliest48monthsafterthedateofissueoftheoption;thefullamountmaybeexercisedattheear-liest60monthsafterthedateofissueoftheoption.
Asopposedtostandardconditions,differenttimehurdleswereagreedforthetrancheofMarch6,2008.Upto50%oftheoptionrightmaybeexercisedatthe
earliestonApril1,2008andthefullamountattheearliestonApril1,2009.
UsinganoptionpricingmodelinaccordancewithIFRS2,thepersonnelexpenseforoptionsissuedamountedtoC1,352k(prioryear:C117k).
Usinganoptionpricingmodelonthebasisofabino-minalmodelinaccordancewithIFRS2,thefairvalueofoptionsissuedwascalculatedasisshownbelow.
Thechangesinthevirtualstockoptionsgrantedandoutstandingareshowninthetableabove.
ThemeanweightedsharepriceforStockAppreciationRightsofUnitedInternetAGexercisedintheperiodunderreviewamountedtoC13.89.
Assumptionsusedinevaluatingoptions
Theanticipatedmaturitiesofconversionrightsfromconvertiblebondsandvirtualstockoptionsarebasedonhistoricaldataanddonotnecessarilycorrespondtotheactualexercisebehaviorofthebeneficiaries.Expectedvolatilityisbasedontheassumptionthathistoricalvolatilityisanindicatoroffuturetrends.
Valuation parametersIssue date 30.05.2006 14.08.2006 14.03.2007 12.11.2007 29.01.2008 30.05.2008 20.11.2008
Fair value 1,000 Ck 1,790 Ck 1,200 Ck 1,394 Ck 596 Ck 1,309 Ck 1,424 Ck
Average market value per convertible bond
2.50 C
2.24 C
3.00 C
3.49 C
2.98 C
3.27 C
0.95 C
Dividend yield 1.0 % 1.0 % 1.4 % 1.6 % 1.5 % 1.4 % 0.0 %
Volatility of the share 36 % 39 % 44 % 46 % 46 % 46 % 55 %
Expected term (years) 5 5 5 5 5 5 5
Risk-free interest rate 3.65 % 3.84 % 3.83 % 3.91 % 3.64 % 4.30 % 2.63 %
Valuation parametersIssue date 03.09.2007 28.11.2007 22.02.2008 06.03.2008 30.10.2008
Fair value 863 TC 723 TC 231 TC 870 TC 12 TC
Average market value per convertible bond
3,75 C
3,61 C
3,86 C
4,35 C
1,65 C
Dividend yield 0,0 % 0,0 % 0,0 % 0,0 % 0,0 %
Volatility of the share 52 % 55 % 40 % 39 % 53 %
Expected term (years) 5 5 5 5 5
Risk-free interest rate 4,00 % 3,86 % 3,61 % 3,51 % 3,24 %
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Actualvolatilitycanthusdifferfromtheassumptionsmade.
38 Deferred tax liabilities
PleaserefertoNote16fordetailsondeferredtaxliabilities.
39 Capital stock
Onthebalancesheetdate,fullypaidcapitalstockamountedtoC251,469,184,dividedinto251,469,184registeredshareseachhavingatheoreticalshareinthecapitalstockofC1.
Throughpartialuseofconditionalcapital,thecapitalstockoftheCompanywasincreasedinDecember2008byC35,212,fromC251.433.972toC251,469,184,byissu-ing35,212new,no-parregisteredsharesforcashcontri-bution.Thecashcontributionrepresentedtheconver-sionofconvertiblebondsinfiscalyear2008issuedundertheCompany’semployeestockownershipplan.
Infiscalyear2008,UnitedInternetAGacquired22,000,000treasuryshares(prioryear:18,000,000),or8.75%(prioryear:7.16%)ofcurrentcapitalstock(prioryear:3.29%).Treasurysharesreduceequitycapitalarebearnodividendrights.
Authorizedcapital
TheCompany’sManagementBoardisauthorized,subjecttotheapprovaloftheSupervisoryBoard,toincreasethecapitalstockbyJune12,2011byamaxi-mumofC124,550,402byissuingononeormoreoccasionsnewno-parcommonsharesinreturnforcashand/ornon-cashcontributions.
Inthecaseofacapitalincreaseinreturnforcashcontributions,theshareholdersshallbegrantedsubscriptionrights.However,theManagementBoardisauthorized,subjecttotheapprovaloftheSupervi-soryBoard,toexcludetherighttosubscribeinthecaseoffractionalamountsandalsotoexcludetherighttosubscribetotheextentthatthisshouldbenecessaryinordertograntsubscriptionrightsfornewsharestobearersofwarrants,convertiblebondsorwarrantbondsissuedbytheCompanyorsubordinatedGroupcompaniesintheamounttowhichtheyareentitledonconversionoftheirconversionorwarrantrightsorfulfillmentoftheirconversionobligation.TheManage-mentBoardisalsoauthorized,subjecttotheapproval
United Internet AG AdLINK Internet Media AGAverage Average
SAR strike price (C) SAR strike price (C)
Outstanding as of December 31, 2006 1,200,000 10.36 0
Issued 400,000 13.74 230,000 15.51
Issued 400,000 15.77 200,000 17.41
Outstanding as of December 31, 2007 2,000,000 12.21 430,000 16.39
Issued 1,000,000 12.85 60,000 18.15
Issued 400,000 13.89 200,000 18.60
Issued 1,495,000 6.07 7,200 7.43
Exercised -100,000 11.30
Expired -300,000 9.89 -70,000 15.51
Outstanding as of December 31, 2008 4,495,000 10.56 627,200 17.26
Exercisable as of December 31, 2007
0
0
Exercisable as of December 31, 2008 0 0
Weighted average remaining term (in months)
49
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oftheSupervisoryBoard,toexcludetherightofshare-holderstosubscribeinthecasethattheissueamountofthenewsharesisnotsubstantiallylowerthanthequotedmarketpriceofCompanyshareswiththesametermsatthetimeoffinalizingtheissueamountandthesharesissuedinaccordancewithSec.186(3)Sentence4AktGdonotexceedintotal10%ofcapitalstock.SharessoldorissuedduetootherauthorizationsindirectorcorrespondingapplicationofSec.186(3)Sentence4AktGunderexclusionofsubscriptionrightsaretobeaccountedforinthislimitation
Furthermore,theManagementBoardisauthorized,subjecttotheapprovaloftheSupervisoryBoard,toexcludetherightofshareholderstosubscribeinthecaseofcapitalincreasesinreturnfornon-cashcontri-butions,especiallyinconnectionwiththeacquisitionofcompanies,shareholdingsorassets.
Conditionalcapital
Therearethefollowinglotsofconditionalcapital: ThecapitalstockhasbeenconditionallyincreasedbyuptoafurtherC4,868,364,dividedinto4,868,364no-parregisteredshares.Theconditionalcapitalincreaseisearmarkedforconversionoptionstobegrantedtobearersofconvertiblebonds,whichtheshareholders’meetingonMay16,2003authorizedtheManagementBoardtoissue.Theshareswillparticipateinprofitsfromthebeginningofthefiscalyearinwhichtheyarecreatedbyexercisingtheconversionrights.
ThecapitalstockhasbeenconditionallyincreasedbyuptoafurtherC3,000,000,dividedinto3,000,000no-parregisteredshares.Theconditionalcapitalincreaseisearmarkedforconversionoptionstobegrantedtobearersofconvertiblebonds,whichtheshareholders’meetingonMay18,2005authorizedtheSupervisoryBoardtoissue.Theshareswillparticipateinprofitsfromthebegin-ningofthefiscalyearinwhichtheyarecreatedbyexerciseoftheconversionoption.
ThecapitalstockhasbeenconditionallyincreasedbyuptoafurtherC92,000,000,dividedinto92,000,000no-parregisteredshares.Theconditio-nalcapitalincreaseisearmarkedforsharestobegrantedtobearersorholdersofwarrantorconver-tiblebonds,whichtheshareholders’meetingonMay18,2005authorizedtheCompanyorasubordi-natedGroupcompanytoissue,providingtheissueisinreturnforcashandthewarrantorconvertible
bondsarenotservicedfromthestockoftreasurysharesorapprovedcapital.
InaccordancewithSec.71(1)No.8AktG,theCompanyisauthorizeduntilNovember26,2009toacquiretreasurysharesofuptotenpercentofitscapitalstock.Thepricefortheacquisitionofthesesharesmaynotbemorethan10%lowerorhigherthanthestockmarketprice.Asofthebalancesheetdate,theCompanyheld22,000,000treasuryshares.TreasurysharescanbeusedforallpurposesnamedintheauthorizationoftheAnnualShareholders’MeetingofMay27,2008.
40 Reserves
AsofDecember31,2008,capitalreservesamountedtoC163,896k(prioryear:C160,095k).TheincreaseresultsmainlyfromtheexerciseofconversionrightsfromtheemployeestockownershipplanamountingtoC118k(prioryear:C2,043k),aswellasfromthecorrespon-dingbookingofpersonnelexpensesfromtheemplo-yeestockownershipplantotalingC3,867k(prioryear:C1,605k).
Asofthebalancesheetdate,therevaluationreserveconsistedofthefollowingitems:
2008 Dk
2007 Dk
- Afilias shares 7,189 4,805
- EFF No. 3 2,697 0
- EFF No. 1 116 0
- Goldbach shares 0 7,650
- Drillisch shares 0 -3,044
Total 10,002 9,411
Thechangeintherevaluationreserveresultsmainlyfromthereclassificationoftemporaryvalueadjust-mentsrecognizeddirectlyinequityinthepreviousyear.Profitandlossfromsubsequentvaluationtofairvaluearerecognizednetinequity–i.e.lessdeferredtaxes–andafterminorityinterests.DuetothenolongertemporaryvalueadjustmentsofsharesinGoldbachandDrillisch,therewasareclassificationfromtherevaluationreserveandanexpensewasrecognizedintheincomestatement.PleaseseeNote26.
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41 Additional details on financial instruments
Thetableonthenextpageshowsthecarryingvaluesforeachcategoryoffinancialassetsandliabilitiesforfiscalyear2008.
Cashandcashequivalents,tradeaccountsreceivableandtradeaccountspayablemostlyhaveshortremai-ningterms.Theircarryingvaluesonthebalancesheetdatearethussimilartofairvalue.
Tradeaccountspayablegenerallyhaveshortremai-ningterms.Theircarryingvaluesonthebalancesheetdatearethussimilartofairvalue.
Financialliabilitiescarriedatfairvaluethroughprofitorlossmainlyrefertoaderivativefinancialinstru-mentresultingfromadeliveryobligationforsharesinlistedcompaniesandaninteresthedgingtransaction.
Thetableonthepageafternextshowsthecarryingvaluesforeachcategoryoffinancialassetsandliabilitiesforfiscalyear2007:
Derivativefinancialinstruments
TheUnitedInternetGroupholdsthefollowingderivativefinancialinstruments:
OnOctober7,2008UnitedInternetAGconcludedtwointerestswapagreements.ThenominalvolumeofeachamountstoC100,000kwithatermuntilOctober9,2013.Theinteresthedgingagreementscanbetermina-tedoncebythecreditinstitutesinvolvednosoonerthaninOctober2010.Theinteresthedgingtransac-tionswereconcludedtohedgeagainsttheinterestrisk,butdonotmeettherequirementsofIAS39onHedgeAccountingandwererecognizedatfairvaluethroughprofitandloss.ThenegativefairvalueasofthebalancesheetdateamountstoC6,671kandwasdisclo-sedunder“Currentotherliabilities”.
InacontractdatedDecember16,2008,UnitedInternetAGsubmittedanoffertoacontractualpartner,limitedtoFebruary28,2009,topurchase5,399,409sharesinfreenetAGatanagreedprice.ThenegativefairvalueofthewrittencalloptionamountstoC6,425kasofthebalancesheetdateandwasdisclosedunder“Currentotherliabilities”.Thecontractualpartnerdidnotexer-
cisethecalloptionbytheendoftheterminFebruary2009.
Inaddition,theUnitedInternetGrouphasvariousfirstrefusalrightsandcalloptionsforthepurchaseoffurthersharesincertaininvestments,someofwhicharetiedtocertainprerequisitesandconditions.Theunderlyingpurchasepricesaremainlythefairvaluesofthesharestobepurchased,sothatnosignifi-cantfinancialassetsorliabilitiesarisefromtheseagreements.
42 Transactions with related partiesIAS24definesrelatedpartiesasthosepersonsandcompaniesthatcontrolorcanexertasignificantinfluenceovertheotherparty.Accordingly,UnitedInternetAGissubjecttosignificantinfluencefromMr.RalphDommermuth,themajorshareholder,aswellasfromthemembersoftheManagementBoardandSupervisoryBoard.
UnitedInternet’spremisesinMontabaurareleasedfromMr.RalphDommermuth,theChiefExecutiveOfficerandamajorshareholderoftheCompany.ThecorrespondingleaseagreementsrununtilJune2009,February2015andDecember2016.TheresultingrentexpensesarecustomaryandamountedtoC1,609kinfiscalyear2008(prioryear:C1,561k).
Attheordinaryshareholders’meetingonMay18,2005,Mr.KurtDobitsch(chairman),Mr.BernhardDorn†andMr.MichaelScheerenwereelectedonceagainasmembersoftheCompany’sSupervisoryBoard.
Ourlong-standingSupervisoryBoardmemberMr.BernhardDorn†passedawayonFebruary10,2008.FollowingaproposalbytheSupervisoryBoardandManagementBoard,Mr.Kai-UweRickewasappointedacc.toSec.104AktGbythedistrictcourtofMontabaurasthenewmemberoftheCompany’sSupervisoryBoardonFebruary20,2008.TheappointmentwasmadefortheperioduptothenextAnnualSharehol-ders‘Meeting.AttheAnnualShareholders‘MeetingofMay27,2008,Mr.Kai-UweRickewaselectedbytheshareholderstotheSupervisoryBoard.Mr.RickewaselectedfortheperiodendingwiththeAnnualShare-holders‘MeetingwhichadoptstheresolutiontoreleasetheSupervisoryBoardmembersfromtheirresponsibi-lityforfiscalyear2009.
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Measured acc. to IAS 392008
in Ck
Valuation category acc.
to IAS 39
Carrying value on
Dec. 31, 2008
Amortized
cost
Fair value not through profit or loss
Fair value through pro-
fit or loss
Fair value on Dec. 31, 2008
Financial assets
Cash and cash equivalents lar 55,372 55,372 55,372
Trade accounts receivable lar 119,066 119,066 119,066
Loans to joint ventures lar 0 0 0
Other assets lar 12,737 12,737 12,737
Other financial assets lar/afs
Others lar 2,287 2,287 2,287
Investments afs 70,498 70,498 70,498
Financial liabilities
Trade accounts payable flac 171,423 171,423 171,423
Liabilities due to banks flac 544,370 544,370 544,370
Other liabilities flac/hft 71,977 58,881 13,096 71,977
Convertible bonds flac 74 74 74
Of which aggregated acc. to valuation categories:
Loans and receivables lar 189,462 189,462 0 0 189,462
Available-for-sale afs 70,498 0 70,498 0 70,498
Financial liabilities measured at amortized cost
flac
774,748
774,748
0
0
774,748
Held-for-trading hft 13,096 13,096 13,096
Net result acc. to valuation categories for fiscal year 2008 Valuation
category acc. to IAS 39
From in-terest and dividends
Net profits and losses from subsequent valuation
in Ck Fair valueCurrency
translationValue adju-
stedFrom
disposal Net resultLoans and receivables (lar) lar 2,160 - 544 -22,908 - -20,204
Available-for-sale (afs) afs - - - - - 0
- erfolgsneutral - -19 - - - -19
- erfolgswirksam 1,768 -42,379 - - - -40,611
Financial liabilities measured at amortised cost (flac)
flac
-33,498
-
233
-
-
-33,265
Held-for-trading (hft) hft - -822 - - - -822
-29,570 -43,220 777 -22,908 0 -94,921
Thefollowingnetresultswerestatedfortheindividualcategoriesoffinancialinstrumentsacc.toIAS39infiscalyear2008:
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Measured acc. to IAS 392007
in Ck
Valuation category acc. to IAS 39
Carrying value on Dec. 31, 2007
Amortized cost
Fair value not through profit or loss
Fair value through pro-fit or loss
Fair value on Dec. 31, 2007
Financial assets
Cash and cash equivalents lar 59,770 59,770 59,770
Trade accounts receivable lar 123,788 123,788 123,788
Loans to joint ventures lar 4,007 4,007 4,007
Other assets lar 16,371 16,371 16,371
Other financial assets lar/afs
Others lar 5,395 5,395 5,395
Investments afs 62,472 62,472 62,472
Financial liabilities
Trade accounts payable flac 233,307 233,307 233,307
Liabilities due to banks flac 371,105 371,105 371,105
Other liabilities flac/hft 60,243 57,580 2,663 60,243
Convertible bonds flac 245 245 245
Of which aggregated acc. to valuation categories
Loans and receivables lar 209,331 209,331 209,331
Available-for-sale afs 62,472 62,472 62,472
Financial liabilities measured at amortized cost
flac
662,237
662,237
662,237
Held-for-trading hft 2,663 2,663 2,663
Net result acc. to valuation categories for fiscal year 2007 Valuation
category acc. to IAS 39
From in-terest and dividends
Net profits and losses from subsequent valuation
in Ck Fair valueCurrency
translationValue
adjustedFrom
disposal Net resultLoans and receivables (lar) lar 1,426 - -260 -13,690 - -12,524
Available-for-sale (afs) afs - - - - - 0
- erfolgsneutral - 9,274 - - - 9,274
- erfolgswirksam 623 - - - - 623
Financial liabilities measured at amortised cost (flac)
flac
-6,674
-
-111
-
-
-6,785
Held-for-trading (hft) hft - -2,663 - - - -2,663
-4,625 6,611 -371 -13,690 0 -12,075
Thefollowingnetresultswerestatedfortheindividualcategoriesoffinancialinstrumentsacc.toIAS39infiscalyear2007:
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Infiscalyear2008,themembersoftheSupervisoryBoardalsoheldseatsonsupervisoryboardsorsimilarcommitteesofthefollowingcompanies:
KurtDobitsch 1&1InternetAG,Montabaur NemetschekAG,Munich(Chairman) BechtleAG,Gaildorf docuwareAG,Munich HybrisAG,Zürich/Switzerland GraphisoftS.E,Budapest/Hungary
Kai-UweRicke 1&1InternetAG,Montabaur APInvestmentEuropeLimited,Guernsey(Chairman)
AssicurazioniGeneraliS.p.A,Trieste/Italy easycashGmbH,Eschborn KabelBaden-WürttembergGmbH&Co.KG,Heidelberg
SaudiOgerTelecomLtd.,Dubai/EmiratDubai
MichaelScheeren 1&1InternetAG,Montabaur(Chairman) AdLINKInternetMediaAG,Montabaur(Chairman) UnitedInternetMediaAG,Montabaur(DeputyChairman)
GoldbachMediaAG,Küsnacht-Zürich/Switzerland
ThemembersoftheSupervisoryBoardreceivecom-pensationconsistingofafixedelementandavariableelementwhichdependsontheCompany‘ssuccess.ThefixedremunerationforanordinarymemberoftheSupervisoryBoardamountstoC20kperfullfiscalyear.ThechairmanoftheSupervisoryBoardreceivesthedoubleamount.ThevariableelementforeachmemberoftheSupervisoryBoard,includingthechair-man,amountstoC2kforeverycentwhichexceedstheconsolidatedearningspersharevalueofC0.10forUnitedInternetAG,calculatedaccordingtoIFRS.
Thefollowingtableprovidesdetailsonthecompen-sationreceivedbymembersoftheSupervisoryBoard:
2008 Fixed Dk
Variable Dk
Total Dk
Kurt Dobitsch 40 - 40
Kai-Uwe Ricke 20 - 20
Michael Scheeren 20 - 20
80 0 80
2007 Fixed Dk
Variable Dk
Total Dk
Kurt Dobitsch 40 72 112
Bernhard Dorn † 20 72 92
Michael Scheeren 20 72 92
80 216 296
Therearenosubscriptionrightsorshare-basedpaymentsformembersoftheSupervisoryBoard.
TheSupervisoryBoardisresponsiblefordeterminingtheremunerationoftheManagementBoard.ThemembersoftheManagementBoardarecompensatedaccordingtoperformance.Thiscompensationconsistsofafixedandavariableelement(bonus).Atargetremunerationfigureisagreedforthefixedcomponentandthebonus,whichisregularlyreviewed.Thelastreviewwasmadeinfiscalyear2008.Thefixedremun-erationcomponentispaidmonthlyasasalary.Thesizeofthebonusdependsonreachingcertain,fixedfinan-cialtargetsagreedatthebeginningofthefiscalyear.Thesetargetsarebasedmainlyonsalesandearningsfigures.Thetargetattainmentcorridorisgenerallybetween80%to120%.Nobonusispaidbelow80%oftheagreedtargetandthebonuscalculationendsat120%oftheagreedtarget.Nosubsequentamendmentoftheperformancetargetsisallowed.Thereisnominimumguaranteedbonus.PaymentisgenerallymadeaftertheannualfinancialstatementshavebeenadoptedbytheSupervisoryBoard.Infiscalyear2008,apreliminaryremunerationofC1,000k(prior-year:C953k)wasagreedfortheManagementBoard.Ofthistotal,C600kor60%wasfixedandC400kor40%variable.
TherearenoretirementbenefitsfromtheCompanytomembersoftheManagementBoard.
Infiscalyear2008,Mr.NorbertLangwasgranted800,000virtualstockoptions(SARs)atanexercisepriceofC12.85.Whenthevirtualstockoptionsweregranted,theirfairvalueamountedtoC2,384k.
Thefollowingtableprovidesdetailsonthecompensa-tionreceivedbymembersoftheManagementBoard:
2008 Fixed Dk
Variable Dk
Total Dk
Ralph Dommermuth 300 211 511
Norbert Lang 300 189 489
600 400 1,000
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2007 Fixed Dk
Variable Dk
Total Dk
Ralph Dommermuth 200 242 442
Norbert Lang 200 293 493
400 535 935
ThenumberofsharesinUnitedInternetAGheldbymembersoftheManagementBoardandtheSuper-visoryBoardisgiveninthetablebelow.
TheUnitedInternetGroupcanalsoexertsignificantinfluenceonitsassociatedcompaniesandjointventures.
Conditionsoftransactionswithrelatedparties
Salestoandpurchasesfromrelatedpartiesareconductedatstandardmarketconditions.Theopenbalancesatyear-endareunsecured,non-interest-bea-ringandsettledincash.Therearenoguaranteesforreceivablesfromorliabilitiesduetorelatedparties.Noallowanceswererecognizedforreceivablesfromrelatedpartiesinfiscalyear2008orthepreviousyear.Animpairmenttestisconductedannually.Thisinclu-desanassessmentofthefinancialpositionoftherela-tedpartyandthedevelopmentofthemarketinwhichtheyoperate.
Infiscalyear2008,interestincomeofC33k(prioryear:C7k)resultedfromaloanofC4,000kgrantedinthepreviousyeartoMSPHoldingGmbH.Theloanwasrepaidinfullduringtheperiodunderreview.AloangrantedduringtheyearresultedininterestincomeofC511k.TheloanofC2,800kreceivedinthepreviousyearfromEuropeanFoundersFundGmbH&Co.Betei-
ligungsKGNo.1wasrepaidinfullatthebeginningoftheperiodunderreview.Therewerenomoreinterestpaymentsinfiscalyear2008(prioryear:C183k).
TheobligationfromanindemnityobligationofC10,000ktoMSPBeteiligungsGmbH,awhollyownedsubsidiaryofMSPHoldingGmbH,wasrepaidinfulloroffsetinfiscalyear2008.
OnDecember29,2008,UnitedInternetAGacquired10,798,817sharesinfreenetAGfromMSPHoldingGmbH,equivalentto8.43%ofvotingrights,atapriceofC3.38pershare.Atthesametime,DrillischAGwasgrantedtherighttoacquire5,399,409sharesinfreenetAGfromUnitedInternetAGbyFebruary28,2009.ThiscalloptioninfavorofDrillischAGhadafairvalueofC6,425kasofDecember31,2008.Thefairvaluewascal-culatedusinganoptionpricingmodel.Avolatilityof123.11%andabasicpriceofC3.38persharewasassu-med.Asoftheacquisitiondate,thefairvalueofafree-netshareamountedtoC4.27.
AspartofthecooperationwithProSiebenSat.1MediaAG,1&1InternetAGownsaninterestinthejointventuremaxdomeGmbH&Co.KG,whichoperatesthevideo-on-demandportalmaxdome.Aspartofthiscooperation,1&1InternetAGprovideshostingandotherservices.TherevenuesgeneratedbyorderandonaccountofmaxdomewereforwardedtomaxdomeGmbH&Co.KG.Moreover,1&1InternetAGhasunder-takentoprovidemaxdomeGmbH&Co.KG,undercertaincircumstances,withsubordinatedpartnerloansofuptoC3,000k.AsofDecember31,2008,C400kofthiscreditfacilityhadalreadybeenutilized.TheloanservestofinancetheoperatingbusinessofmaxdomeGmbH&Co.KGandhasatermuntilDecem-ber31,2012.Nocollateralwasprovidedfortheloan.
Shareholding January 1, 2008 January 1, 2008 December 31, 2008 December 31, 2008Management Board direct indirect total direct indirect total
Ralph Dommermuth 17,600,000 70,400,000 88,000,000 17,600,000 74,400,000 92,000,000
Norbert Lang - 576,128 576,128 - 576,128 576,128
17,600,000 70,976,128 88,576,128 17,600,000 74,976,128 92,576,128
Supervisory Board direct indirect total direct indirect total
Kurt Dobitsch - - - - - -
Kai-Uwe Ricke - - - - - -
Michael Scheeren 700,000 - 700,000 700,000 - 700,000
700,000 - 700,000 700,000 - 700,000
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Thetablebelowpresentstheoutstandingbalancesandtotaltransactionsvolumeswithassociatedcompaniesandjointventuresintherespectivefiscalyear.
43 Objectives and methods of financial risk management
Principlesofriskmanagement
TheriskmanagementsystemintroducedbytheUnitedInternetGroupisbasedontheCOSO-ERMframeworkandisdescribedindetailintheManagementReport.
TheprinciplesoffinancepolicyaresetbytheManage-mentBoardandmonitoredbytheSupervisoryBoard.CertaintransactionsrequirethepriorapprovaloftheSupervisoryBoard.
ThemainfinancialliabilitiesusedbytheGroupincludebankloansandoverdraftfacilities,convertiblebonds,tradeaccountspayableandotherfinanciallia-bilities.
TheGroupholdsvariousfinancialassetswhichresultdirectlyfromitsbusinessactivities.Theyconsistmainlyoftradeaccountsreceivable,available-for-salefinancialinvestmentsandshort-termdeposits.Asof
thebalancesheetdate,theGroupmainlyheldprimaryfinancialinstruments.Inaddition,therearederivativefinancialinstruments,whichconsistmainlyofinterestswapsandsupplyandacquisitionobligationsforsharesinlistedcompanies.
Theaimoffinancialriskmanagementistolimittheserisksthroughongoingoperatingandfinancialactivi-ties.TheCompanyisherebyexposedtocertainriskswithregardtoitsassets,liabilitiesandplannedtrans-actions,especiallyliquidityrisksandmarketrisks,asdescribedbelow.
Liquidityrisk
Asinthepreviousyear,thegeneralliquidityriskofUnitedInternetconsistsofthepossibilitythattheCompanymaynotbeabletomeetitsfinancialobliga-tions,suchastheredemptionoffinancialdebts.TheCompany’sobjectiveisthecontinualcoverageofitsfinancialneedsandsecuringflexibilitybyusingover-draftfacilitiesandloans.
Ourglobalcashrequirementsandsurplusesaremana-gedcentrallybyourcashmanagementsystem.Bynet-tingthesecashrequirementsandsurpluseswithintheGroup,wecanminimizetheamountofexternalbanktransactions.Nettingismanagedviaourcashpoolingprocess.TheCompanyhasestablishedstandardizedprocessesandsystemstomanageitsbankaccountsandinternalnettingaccountsaswellasfortheexecu-tionofautomatedpaymenttransactions.
Inadditiontooperatingliquidity,UnitedInternetalsoholdsotherliquidityreserves,availableatshortnotice.Theseliquidityreservesconsistofsyndicatedcreditlineswithvaryingterms.
Purchases/services from related parties
Sales/services to related parties
Liabilities due to related parties
Receivables from related parties
2008 Dk
2007 Dk
2008 Dk
2007 Dk
2008 Dk
2007 Dk
2008 Dk
2007 Dk
maxdome GmbH & Co. KG 3,806 - - - 2,915 - - -
Other 1,122 508 38 - 238 30 13 1
Interest income
Interest expense
2008 Dk
2007 Dk
2008 Dk
2007 Dk
MSP Holding GmbH 544 7 - -
maxdome GmbH & Co. KG 4 - - -
EFF Nr. 1 - - - 183
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Thetablebelowshowsallcontractuallyfixedpay-mentsforredemption,repaymentsandinterestforfinancialliabilitiescarriedinthebalancesheetasofDecember31,2008and2007.
PleaserefertoNote32fordetailsoninterestandredemptionpaymentsforliabilitiestobanks.Itisassu-medthattherevolvingsyndicatedloanwillberepaidbytheendofitstermin2012.Theobligationstomino-rityshareholdersoftheCompany’sinvestmentfundsEFFNo.2andEFFN.3disclosedunder“Otherliabili-ties”areonlydueonthesaleoftheunderlyingportfo-liocompanies.
TheCompanyhasnosignificantconcentrationofliquidityrisks.
Marketrisks
TheactivitiesofUnitedInternetaremainlyexposedtofinancialrisksfromchangesininterestrates,exchangerates,stockexchangeprices,andcreditorcontingencyrisks.
InterestriskTheGroupisexposedtointerestrisksasthemajorshareofitsborrowingasofthebalancesheetdatebearsvariableinterestrateswithvaryingterms.Aspartofliquidityplanningweconstantlymonitorthevariousinvestmentandborrowingpossibilities.Borro-wingrequirementsaremetbyusingsuitableinstru-
mentstomanageliquidity,whilesurpluscashisinve-stedonthemoneymarkettoachievethebestpossiblereturn.Duetodevelopmentsontheglobalfinancemarkets,theinterestriskhasincreasedsincetheprevi-ousyear.
Infiscalyear2008,theCompanyconcludedtwointerestswapswithatotalnominalamountofC200,000kinordertoreduceitsinterestrisk.LiabilitiesduetobanksamountingtoC544,370kisthuscoveredtoaround37%.TheagreementshaveatermuntilOctober9,2013andcanbeunilaterallyterminatedbytheothercontractualpartnersnosoonerthaninOctober2010.
Marketinterestratechangesmighthaveanadverseeffectontheinterestresultandareincludedinourcal-culationofsensitivefactorsaffectingearnings.Inordertopresentmarketrisks,UnitedInternethasdeve-lopedasensitivityanalysiswhichshowstheimpactofhypotheticalchangestorelevantriskvariablesonpre-taxearnings.Thereportingperiodeffectsareillustra-tedbyapplyingthesehypotheticalchangesinriskvariablestothestockoffinancialinstrumentsasofthebalancesheetdate.
Achangeinthemarketinterestlevelhasaneffectoninterestswapsstatedatfairvaluewithaneffectonincome.Aparallelshiftintheintereststructurecurveof+/-100basispointsmighthaveresultedinacom-parableincreaseinpre-taxearningsofC5,139koradecreaseofC7,141k.
31.12.2008 Dk
2009 Dk
2010 Dk
2011 Dk
2012 Dk
>2013 DkD
Total Dk
Liabilities to banks 544,370 31,408 115,265 193,664 188,081 74,570 602,988
Convertible bonds 74 74 0 0 0 0 74
Trade accounts payable 170,743 170,743 0 0 0 0 170,743
Other liabilities 72,657 56,274 2,923 674 196 10,399 70,466
31,12,2007 Dk
2008 Dk
2009 Dk
2010 Dk
2011 Dk
2012 Dk
Total Dk
Liabilities to banks 371,105 19,124 19,071 107,332 102,009 196,132 443,667
Convertible bonds 245 0 245 0 0 0 245
Trade accounts payable 232,421 232,421 0 0 0 0 232,421
Other liabilities 61,129 60,083 250 250 296 250 61,129
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Theinterestriskisnegligibleforotherinterest-bearingliabilities.
CurrencyriskAcurrencyriskistheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentmayfluctuateduetochangesintheexchangerates.TheGroupismainlyexposedtocurrencyrisksasaresultofitsoperations(ifrevenueand/orexpensesareinacurrencyotherthantheGroup’sfunctionalcurrency)anditsnetinvestmentsinforeignsubsidiaries.ThecurrencyriskofUnitedInternetresultsfrominvestments,financingactivitiesandoperations.Currencyriskswhichdonotaffectcashflows(i.e.risksfromtranslatingtheassetsandliabilitiesofforeignoperationsintotheGroup’sreportingcurrency)arenothedgedagainst.Intheperiodunderreview,therewerenoforeignexchangeriskswithasignificantimpactonthecashflows.
Withregardtooperatingactivities,individualGroupcompaniesperformtheirbusinessmainlyintheirrespectivefunctionalcurrencies.Asinthepreviousyear,theCompanythereforeregardsthecurrencyriskfromoperationsaslow.CertainGroupcompaniesareexposedtoforeignexchangerisksinconnectionwithplannedpaymentsoutsidetheirfunctionalcurrency.
Foreignexchangerisksarisefromfinancialinstru-mentswhicharedenominatedinadifferentcurrencytothefunctionalcurrencyandareofamonetarynature;exchangeratedifferencesfromthetranslationofannualfinancialstatementsintotheGroup’srepor-tingcurrencyarenotconsidered.Therelevantriskvariablesincludeallnon-functionalcurrenciesinwhichtheCompanyholdsfinancialinstruments.
A10-percentchangeintheUSdollarexchangerateagainsttheeuroupwards(downwards)mighthaveresultedinadecrease(increase)inpre-taxearningsofC925kbasedonthebalancesheetofDecember31,2008.A10-percentchangeintheEnglishpoundagainsttheeuroupwards(downwards)mighthaveresultedinanincrease(decrease)inpre-taxearningsofC648k.
A10percentincrease(decrease)intheexchangerateoftheUSdollaragainsttheeuro,basedonthebalancesheetvalesofDecember31,2007,wouldhaveresultedinandecrease(increase)inpre-taxearningsofC1,327k.A10percentincrease(decrease)intheexchangerateoftheUKpoundagainsttheeuro,wouldhaveresultedinanincrease(decrease)inpre-taxearningsofC3,107k.
Stockexchangerisk(valuationrisk)TheCompanyclassifiescertain(quoted)assetsasavailable-for-saleandrecordschangesintheirfairvalueinequitywithoutaneffectonprofitorloss.Ifthereisasignificantorpersistentdecreaseinthefairvalueofanequityinstrumentbelowitsacquisitioncost,theCompanyrecognizesanimpairmentofthefinancialinstrumentinitsincomestatement.ThefairvalueoftheselistedassetsamountedtoC20,956kasofthebalancesheetdate(prioryear:C57,119k).
Impairmentsmayresultfromthesharepricedevelopmentoflistedinvestments.
TheCompanyhasnosignificantconcentrationofmarketrisks.
Creditandcontingencyrisk
Inthecourseofitsoperatingactivities,theCompanyisexposedtoacontingencyrisk.Outstandingamountsarethereforemonitoredlocallyandonacontinualbasis.Individualandlump-sumallowancesaremadetoaccountforsuchcontingencyrisks.TheGroupdoesnotseeanysignificantincreaseinthecontingencyriskoverthepreviousyear.
Withregardtotradeaccountsreceivable,themaxi-mumriskinthegrossamountstatedinthebalancesheetisbeforeallowancesbutafternetting.Tradeaccountsreceivablewhicharenotimpairedasofthebalancesheetdate,areclassifiedaccordingtoperiodsinwhichtheybecomeoverdue(seeNote20).
InternalratingsystemIntheProductsegment,apre-contractualfraudcheckisconductedandcollectionagenciesarealsousedforthemanagementofreceivables.IntheOnlineMarke-tingsegment,apre-contractualcheckofcreditworthi-nessismadeinthemediasalesbusinessandcollectionagenciesarealsousedforthemanagementofreceiva-bles.
IntheProductsegment,individualallowancesforreceivablesoverduearegenerallymadeonthebasisoftherespectiveageprofile.Theseallowancesaremainlyderivedfromsuccessratesoftheagenciesusedforcoll-ectingsuchdebts.100%individualallowancesaremadeforallreceivablesoverduemorethan365days.IntheOnlineMarketingsegment,individualallowancesaremadeforeachcustomeraccordingtovariouscrite-ria(e.g.dunninglevel,insolvency,fraudcasesetc.).
120
TheCompanyhasnosignificantconcentrationofcreditrisks.
Capitalmanagement
Inadditiontothelegalprovisionsforstockcorpora-tions,theCompanyhasnofurtherobligationstomaintaincapitalaccordingtoitsstatutesorotheragreements.ThekeyfinancialindicatorsusedbytheCompanyaremainlyperformance-oriented.Thetar-gets,methodsandprocessesofcapitalmanagementarethussubordinatetotheseperformance-orientedfinancialindicators.
Inordertomaintainandadaptitscapitalstructure,theCompanycanadjustdividendpaymentsorpaycapitalbacktoitsshareholders,canissuenewsharesorpurchasetreasuryshares.AsofDecember31,2008andDecember31,2008,nochangesweremadetotheCompany’stargets,methodsandprocesses.
44 Specific contingencies and commitments
Litigation
Litigationrisksmainlyrelatetovariouslegaldisputesof1&1InternetandAdLINK.
Anaccrualforlitigationwasformedforanycommit-mentsarisingfromthesedisputes(seeNote35).
Guarantees
Asofthebalancesheetdate,theCompanyhasissuednoguarantees.
45 Other financial commitments and contingencies
Operatingleasecommitments
Attheendofthefiscalyear,therewerefixed-termobli-gationsfromtherentingofbuildings,officesandmovables.
Mostleaseshaveoptionstoprolongthecontractualrelationship.Thetermsoftheseprolongationoptionsarenegotiableoridenticalwiththecurrentterms.
AsofDecember31,thefutureminimumleaseobliga-tionswereasfollows:
2008 Dk
2007 Dk
Up to 1 year 12,171 10,362
1 to 5 years 23,077 25,644
Over 5 years 3,046 3,155
38,294 39,161
Intheperiodunderreview,theseoperatingleasesincurredexpensesofC11,857k(prioryear:C9,965k).
Contingentliabilitiesandotherobligations
TheCompanyisjointlyandseverallyliableforcreditlinesgrantedtocompaniesoftheUnitedInternetGroupbyabank.Thecreditfacilitieshadonlybeenutilizedwithregardtoguaranteesasofthebalancesheetdate.
OtherfinancialcommitmentsforthefollowingtwofiscalyearstotalC4,200k(prioryear:C6,539k).
Inthepreviousyear,therewereshort-termcommit-mentsofC3,524kresultingfromapendingpurchasecontractfortheacquisitionofsharesinalistedcom-pany.
TheManagementBoardhasnoknowledgeofanyotherfactswhichcouldhaveasignificant,adverseeffectonthebusinessactivities,thefinancialsituationortheoperatingresultoftheCompany.
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46 Cash flow account
Infiscalyear2008,cashflowfromoperatingactivitiesincludesinterestpaymentsofC27,632k(prioryear:C7,246k)andinterestincomeofC2,036k(prioryear:C1,206k).Incometaxpaymentsinfiscalyear2008amountedtoC74,062k(prioryear:C71,389k).ProceedsfromdividendspaidbyassociatedcompaniestotaledC392k(prioryear:C950k).ProceedsfromdividendsdistributedbyotherinvestmentsamountedtoC1,768k(prioryear:C623k)infiscalyear2008.
AtotalofC160,696k(prioryear:C309,229k)waspaidincashforthepurchaseofsharesinassociatedcompa-niesandjointventuresinfiscalyear2008.FurtherdetailsareprovidedinNote25.
AnamountofC9,538k(prioryear:C37,949k)waspaidincashforthepurchaseofadditionalsharesofAdLINKinfiscalyear2008.TheacquisitioncostsforthepurchaseofsharesinDollamoreamountedtoC10,477k.Thepurchasepricewassettledfullyincash.AspartoftheacquisitionofDollamore,cashandcashequivalentsofC154kwerereceived.
Thesaleofsharesinassociatedcompanies(prioryear:includingaffiliatedcompanies)resultedintotalcashproceedsofC12,268k(prioryear:C92,129k)infiscalyear2008.
47 Changes in the reporting unitInadditiontothebusinesscombinationsandinvest-mentsdescribedinNote3,thefollowingcompanieswerefoundedbytheCompanyoritssubsidiariesinfis-calyear2008: DollamoreLtd.,Melbourne/UnitedKingdom(100.00%)
ImmobilienverwaltungNMHGmbH,Montabaur(100.00%)
UIMUnitedInternetMediaAustriaGmbH,Wien/Austria(100.00%)
EuropeanFoundersFundNr.3ManagementGmbH,Munich(80.00%)
EuropeanFoundersFundNr.3VerwaltungsGmbH,Munich(80.00%)
EuropeanFoundersFundGmbH&Co.BeteiligungsKGNr.3,Munich(80.00%) EuropeanFoundersFundNr.3BeteiligungsGmbH,Munich(100.00%)
Theconsolidatedgroupremainedotherwiseunchan-gedcomparedwiththeconsolidatedfinancialstate-mentsasofDecember31,2007.
48 Exemption pursuant to Sec. 264 (3) HGB
ThefollowingcompaniesofUnitedInternetAGmakeuseoftheexemptingprovisionsofSec.264(3)HGB: 1&1InternetAG,Montabaur 1&1InternetServiceGmbH,Montabaur 1&1InternetServiceGmbH,Zweibrücken A1Marketing,KommunikationundneueMedienGmbH,Montabaur
GMXInternetServicesGmbH,Munich GMXGmbH,Munich UnitedInternetBeteiligungenGmbH,Montabaur UnitedInternetMediaAG,Montabaur WEB.DEGmbH,Montabaur
49 Subsequent eventsInacontractdatedDecember12,2008,UnitedInternetBeteiligungenGmbHacquiredthesharesinunited-domainsAG–subjecttoapprovalfromtherespectiveanti-trustauthorities.Followingtheapprovaloftheanti-trustauthoritiesonJanuary30,2009,theacquisi-tionwascompletedonFebruary27,2009.united-domainsAGwillcontinuetoberunbyitsfounders,whoretainatotalshareholdingof15%inunited-domainsAGaftertheacquisition.Inthecourseofthetransaction,thevalueofunited-domainsAGwassetataroundC34million.Thepreliminarypurchasepricewassettledfullyincash,wherebyC7millionisheldinescrowasasecurityguaranteeforUnitedInternetBeteiligungenGmbH.Thefinalpurchasepricewillbedeterminedafterunited-domainsAGhasposteditsannualfinancialstatementsforfiscalyear2008.
InacontractdatedFebruary25,2009,Sedo.comLLCacquired100%ofsharesinRevenueDirect,Vancouver/USA.
Asofthebalancesheetdate,UnitedInternetAGwasthesilentpartnerofanoptionagreement(OTC)tosupplycertainlistedsecurities.TheoptionhadatermuntilFebruary28,2009andwasnotexercisedbythecontractualpartner.
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50 Auditing fees
Infiscalyear2008,auditingfeestotalingC1,651k(prioryear:C1,273k)wereexpensedintheconsolidatedfinancialstatements.TheseincludeauditingfeesofC781k(prioryear:C620k),taxconsultancyservicesofC327k(prioryear:C243k),andotherservicesofC543k(prioryear:C410k).
Inaddition,auditingfeesfortaxconsultancyservicesandotherservicesamountingtoC47k(prioryear:C46k)werecarriedintheconsolidatedfinancialstatementswithouteffectonincomeandcapitalizedastransactioncostsinconnectionwithcompanyacquisitions.
51 Corporate Governance Code
ThedeclarationpursuanttoSec.161AktGonobservanceoftheGermanCorporateGovernanceCodehasbeenmadebytheManagementBoardandSupervisoryBoardandhasmadeavailabletoshareholdersviatheinternetportalofUnitedInternetAG(www.united-internet.de)andAdLINKInternetMediaAG(www.adlink.net).
Montabaur,March16,2009
TheManagementBoard
RalphDommermuth NorbertLang
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Audit Opinion of the Independent Auditor
WehaveauditedtheconsolidatedfinancialstatementspreparedbyUnitedInternetAG,Montabaur,compri-singthebalancesheet,theincomestatement,thestatementofchangesinequity,thecashflowstate-mentandthenotestotheconsolidatedfinancialstate-ments,togetherwiththegroupmanagementreportforthefiscalyearfromJanuary1toDecember31,2008.ThepreparationoftheconsolidatedfinancialstatementsandthegroupmanagementreportinaccordancewithIFRSsasadoptedbytheEU,andtheadditionalrequire-mentsofGermancommerciallawpursuanttoSec.315a(1)HGB[„Handelsgesetzbuch“:„GermanCommercialCode“]aretheresponsibilityoftheparentcompany’smanagement.Ourresponsibilityistoexpressanopi-nionontheconsolidatedfinancialstatementsandonthegroupmanagementreportbasedonouraudit.
WeconductedourauditoftheconsolidatedfinancialstatementsinaccordancewithSec.317HGBandGer-mangenerallyacceptedstandardsfortheauditoffinancialstatementspromulgatedbytheInstitutderWirtschaftsprüfer[InstituteofPublicAuditorsinGermany](IDW).Thosestandardsrequirethatweplanandperformtheauditsuchthatmisstatementsmate-riallyaffectingthepresentationofthenetassets,financialpositionandresultsofoperationsintheconsolidatedfinancialstatementsinaccordancewiththeapplicablefinancialreportingframeworkandinthegroupmanagementreportaredetectedwithreasonableassurance.KnowledgeofthebusinessactivitiesandtheeconomicandlegalenvironmentoftheGroupandexpectationsastopossiblemisstate-mentsaretakenintoaccountinthedeterminationofauditprocedures.Theeffectivenessoftheaccounting-relatedinternalcontrolsystemandtheevidencesupportingthedisclosuresintheconsolidatedfinan-cialstatementsandthegroupmanagementreportareexaminedprimarilyonatestbasiswithintheframe-workoftheaudit.Theauditincludesassessingtheannualfinancialstatementsofthoseentitiesincludedinconsolidation,thedeterminationofentitiestobeincludedinconsolidation,theaccountingandconsoli-dationprinciplesusedandsignificantestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationoftheconsolidatedfinancialstatementsandthegroupmanagementreport.Webelievethatourauditprovidesareasonablebasisforouropinion.
Ouraudithasnotledtoanyreservations.
Inouropinion,basedonthefindingsofouraudit,theconsolidatedfinancialstatementscomplywithIFRSsasadoptedbytheEU,theadditionalrequirementsofGermancommerciallawpursuanttoSec.315a(1)HGBandgiveatrueandfairviewofthenetassets,finan-cialpositionandresultsofoperationsoftheGroupinaccordancewiththeserequirements.Thegroupmanagementreportisconsistentwiththeconsolida-tedfinancialstatementsandasawholeprovidesasuitableviewoftheGroup’spositionandsuitablypresentstheopportunitiesandrisksoffuturedevelopment.
Eschborn/FrankfurtamMain,March17,2009
Ernst&YoungAGWirtschaftsprüfungsgesellschaftSteuerberatungsgesellschaft
Bösser GroteGermanPublicAuditor GermanPublicAuditor
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Responsibility Statement
Tothebestofourknowledge,andinaccordancewiththeapplicablereportingprinciples,theconsolidatedfinancialstatementsgiveatrueandfairviewoftheassets,liabilities,financialpositionandprofitorlossoftheGroup,andtheManagementReportandGroupManagementReportincludesafairreviewofthedeve-lopmentandperformanceofthebusinessandtheposi-tionoftheGroup,togetherwithadescriptionoftheprincipalopportunitiesandrisksassociatedwiththeexpecteddevelopmentoftheGroup.
Montabaur,March16,2009
TheManagementBoard
RalphDommermuth NorbertLang
Management
Our Strategy
The Share
Management Report
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Audi
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A GOFTheArbeitsgemeinschaftOnlineForschung(AGOF)[WorkingGroupforOnlineMediaResearch]isanaffiliationoftheleadingonlinemarketersinGermany.Byprovi-dingstandardizedonlinecoveragecurrencyandcomprehensivedataononlinemediaconsumption,AGOFmakestheInternetatrans-parentandplannableadvertisingmedium.
B ITKOMTheBundesverbandInformations-wirtschaftTelekommunikationundneueMediene.V.(BITKOM)[GermanAssociationforInforma-tionTechnology,Telecommunica-tionsandNewMedia]isthevoiceoftheinformationtechnology,tele-communications,andnewmediaindustryinGermany.
BVDWTheBundesverbandDigitaleWirt-schafte.V.(BVDW)[GermanAssoci-ationfortheDigitalEconomy]representstheinterestsofcompa-niesinthefieldofinteractivemar-keting,digitalcontentandinterac-tivevalueadded.
C ontentThecontentofawebsite,e.g.text,graphicsormultimedia.
CustomerCareGenerictermforallserviceswithwhichacompanycaresforitscustomers.
D edicatedServerAdedicatedserverisaserverwhichisdedicatedtoaparticularactivity(dedicatedservice)ortoasinglecustomer(dedicatedcusto-mer).Itgenerallyinvolvesprovi-dingacustomerwithaserverforhisexclusiveuse(seealsosharedhosting).
C ashflowBalanceofincomingandoutgoingcashflows
ChurnratePercentageofcustomerstermina-tingcontractsand/orchanginginternetserviceproviderwithinaspecifiedperiod
ConsolidationAnnualfinancialstatementsofagroup,preparedasifallgroupcompaniesweredependentpartsofasingleunit.Allfinancialrelati-onshipsbetweengroupcompaniesarethuseliminated.
CorporategovernanceTermusedtosignifyresponsible,long-term,value-orientedmanage-mentandcorporatecontrol.
D ilutedEarningspersharearetermed“diluted”whennotonlyallout-standingsharesareusedinthecalculation,butalsothosetheoreti-callyconvertiblesharesissuedaspartofemployeestockoptionprograms.
E BITDAEarningsbeforeinterest,taxes,depreciationandamortization.
EBTEarningsbeforetaxes
EquityratioShareholder’sequityasapropor-tionofthebalancesheettotal.
F FreefloatProportionofsharecapitalwhichisownedbymanydifferentshare-holders.
G oodwillPositivedifferencebetweenmarketvalueandnetassetsofanacquiredcompany.
H GBGermanCommercialCode(Handelsgesetzbuch)
I FRS=InternationalFinancialReportingStandards.Internationalaccoun-tingstandard.
M arketcapitalizationMarketpriceofalistedcompany.Theresultofsharepricemultipliedbynumberofshares.
R iskmanagementSystematicprocesstoidentifyandevaluatepotentialrisksaswellastoselectandimplementmeasurestodealwithsuchrisks.
T ecDAXIndexoftheFrankfurtStockExchange.TheTecDAXiscalculatedfromthemarketpriceofGermany’stop30technologyshares.
X etraElectronictradingsystemofDeut-scheBörseAG.TheoverwhelmingproportionofallsharetradingatGermanstockexchangesishandledbytheXETRAtradingsystem.exchangesishandledbytheXetratradingsystem.
Glossary Commercial terms and abbreviations:
Other terms and abbreviations:
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DomainSpecificareaofhierarchicalinter-netnamesystemadministeredbydomainnameserver.Dividedintogenerictop-leveldomains,orgTLD,(suchas.com,.net,.orgor.info)andcountry-codetop-leveldomains,inshortccTLD(suchas.deor.uk).
DownstreamDatatransferfrominternetservertouser’sPC.Oppositeofupstream.DatatransferratesforDSLconnec-tionsaregiveninMbit/sandactasayardstickforconnectionspeed.
DSL=DigitalSubscriberLine.Techno-logyforhigh-speeddatatransferviastandardcoppercablenetworksoverdistancesofuptoaboutthreekilometers.
DSLtelephony(alsocalledVoIP=VoiceoverInter-netProtocol)Technologytoesta-blishphoneconnectionsviaDSLdatanetworks.
E -commerce=Electroniccommerce.Generictermforbusinesstransactionsusingelectronicmedia,suchastheinternet.
E-mail=Electronicmail.Fastandcheapmethodofsendingandreceivingmailbetweeninternetusersviamailboxesanddatanetworks.F ederalCartelOffice(Bundeskartellamt-BKartA)Hig-herfederalauthorityforallanti-trustissues.Itsmaintasksincludeimplementingcartelbans,exami-ningbusinesscombinationreque-stsandexercisingitsantitrustmonitoringdutieswithregardtomarket-dominatingcompanies.
FederalNetworkAgency(GermanFederalNetworkAgencyforelectricity,gas,telecommunica-tions,postalandrailwaynetworks)Higherfederalauthority(formerRegulatoryAuthorityforTelecom-municationsandPost,RegTP).Itsresponsibilitiesincludeimple-mentingcartelbans,examiningbusinesscombinationrequestsandexercisingitsantitrustmonitoringdutieswithregardtomarket-domi-natingcompanies.
FlatrateLump-summonthlyfee,irrespectiveofusagetime.
G PRSGeneralPacketRadioService(GPRS)isatransmissionserviceusedinmobiletelephony.
H osting(alsowebhosting)Provisionofsto-ragespaceviatheinternet.Inaddi-tiontoregisteringandoperatingdomainsandrentingoutwebser-vers,hostingmainlyreferstotheprovisionofvalue-addedinternetservicesenablinguserstoworkmoreefficientlyontheinternet.SharedHostingmeansthatseveralcustomersshareaphysicalserver,whileinDedicatedHostingonecustomerhasexclusiveaccesstoonesever.
O KVUndertheumbrellaoftheBVDW(seeBVDW),theOnline-Ver-markterkreis(OVK)[CircleofOnlineMarketers]isGermany’scentralcommitteeforonlinemar-keting,whichthecountry’sleadingonlinemarketerscreatedtoraisetheprofileofonlineadvertising.
P ageimpressionsMeasurementunitforthenumberoftimesaninternetpage(andthusitspotentialadvertising)isviewed.Pageimpressionsareanimportantbasisforcalculatingthereachofawebsite.
PortalCentralinternetaccesspointorstartpage.Usuallycontainsawiderangeofnavigationfunctions,con-tentandadditionalservices,suchase-mail.
S haredHostingInsharedhosting,orvirtualhosting,severalcustomersshareaserver.Manyindividualcustomerwebsitesareoftenhostedononeserver.Thismakeswebhostingoffersmorecost-efficientandaccessibleforsmallerandmid-sizecompanies.
T echnicalvalue-addedservices(alsovalue-addedservices)Allservicesabovethelevelofbasicserviceprovisionareregardedasvalue-addedservices.Technicalvalue-addedservices(incontrasttocontentvalue-addedservices)aresolutionsofferingtheuseradditio-nalfunctionality.
V -DSL=VeryHighSpeedDigitalSubscri-berLine.FastestofthecurrentlyavailableDSLtechnologiesenablinghighdatatransferratesviatelephonelines.Theusabletransferwidthsinks,however,withthelengthoftheline
VideoonDemand(VoD)Serviceofaninternetproviderenablingsubscriberstoselectandwatchfilmsatanytimeformoney.
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VisitTermtodescribecoherentusage(visit)ofaspecificinternetofferbyauser.
W hitelabelproductsProductsorservicesofferedtothirdparties,whichmaythenmarketthemundertheirownbrand.
W-LANTermforwirelesslocalnetwork,generallyofferinghightransmis-sionperformanceandhighdatatransferrates.Severalcomputerscanalsobelinkedtogetherwire-lesslyandhaveaccesstoacentralinformationsystem,printerorscanner.
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March26,2009 Annualfinancialstatementsforfiscalyear2008
March26,2009 Pressandanalyst’sconference
May13,2009 QuarterlyReport2009
May26,2009 AnnualShareholder’sMeetinginFrankfurtamMain,AlteOper
August132009 6-MonthReport2009
August13,2009 Pressandanalyst’sconference
November12,2009 9-MonthReport2009
*Updatesavailableatwww.united-internet.comintheInvestorRelationssection,“Calendar”.
ImprintPublisherandcopyright©2009UnitedInternetAGElgendorferStraße57D-56410MontabaurGermanywww.united-internet.de
ContactInvestorRelationsPhone: +49260296-1631Fax: +49260296-1013E-mail: [email protected]:MontabaurHRB5762
ThisannualreportisavailableinGermanandEnglish.Bothversionscanbedownloadedfromwww.united-internet.de.Inallcasesofdoubt,theGermanversionshallprevail.
DisclaimerThisAnnualReportcontainscertainforward-lookingstatementswhichreflectthecurrentviewsofUnitedInternetAG’smanagementwithregardtofutureevents.Theseforwardlookingstatementsarebasedonourcurrentlyvalidplans,estimatesandexpectations.Theforward-lookingstatementsmadeinthisAnnualReportareonlybasedonthosefactsvalidatthetimewhenthestatementsweremade.Suchstatementsaresubjecttocertainrisksanduncertainties,aswellasotherfactorswhichUnitedInternetoftencannotinfluencebutwhichmightcauseouractualresultstobemateriallydifferentfromanyfutureresultsexpressedorimpliedbythesestatements.Suchrisks,uncertaintiesandotherfactorsaredescribedindetailintheRiskReportsectionoftheAnnualReportsofUnitedInternetAG.UnitedInternetdoesnotintendtoreviseorupdateanyforward-lookingstatementssetoutinthisAnnualReport.
Financial calendar 2009 *
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Portal Information management
PortalInformation management
Webhosting, Internet access
Webhosting products as white label
Webhosting products as white label
Display marketing
Affiliate marketing
Domain marketingOnl
ine
Mar
ketin
gPr
oduc
ts
Consumers
Internet service providerin Germany
Advertisers
Discerning private users and small offices/home
offices (SoHos)
Segments and Brands
Portal Information management
Internet service providerin the United Kingdom
and USA
Brand Products / Services Target Group 2008 in Figures
GeneralInformation Management applications, Hosting solutions and Internet Access products for consumers, small offices/home offices. Portal marketing for e-commerce providers and advertisers
Customer contracts: 7.95 million of which 1.36 million in Information Management, 3.62 million in Hosting and 2.97 million in Internet Access Portals: No. 1 in Germany with 19.4 million unique visitors per month Webhosting: Global market leader with 3.62 million contracts, of which 1.93 million outside GermanyDSL: No. 3 in Germany with 2.82 million contracts
BrandsGMX: No. 5 among German portals with 8.5 million unique visitors WEB.DE: Second highest reach of all German websites with 12.9 million unique visitors 1&1: No. 3 in German DSL market and one of the largest hosting companiesInterNetX: No. 1 in German white-label business with over 19,000 resellersFasthosts: No. 1 in UK white-label business with over 5,700 resellers
GeneralSales and marketing solutions for advertisers Display marketing via AdLINK MediaAffiliate marketing via affilinet Domain marketing via Sedo
BrandsAdLINK Media: online advertising network with 10.3 billion ad impressions per month, thus Europe’s leading supplier of digital communication solutions affilinet: Over 470,000 registered affiliate websites and 1,500 affiliate programs, thus generating over 6.1 billion ad impressions per month Sedo: administers 15.3 million domains for sale and markets 6.2 million parked domains
Rückenstärke bitte anpassen!! Seite ist verkürzt auf 195 mmm
United Internet AGElgendorfer Straße 5756410 Montabaur GermanyPhone: +49 2602 96 - 1100Fax: +49 2602 96 - 1013E-Mail: [email protected]
2008 2007
Income Statement
Sales t millions 1,649m6 1,487m4EBITDA t millions 318m8 308m8Net Income t millions -121m5* 155m4
Balance Sheet Current assets t millions 235m0 243m7Non-current assets t millions 867m0 970m3Shareholders’ equity t millions 145m6 383m9Total assets t millions 1,102m0 1,214m0
EmployeesGermany number 3,618 3,127Abroad number 947 827Total number 4,565 3,954Personnel expenses t millions 171.8 145.8
ShareShare price at year end (Xetra) t 6m29 16m65Earnings per share t -0.52* 0m64
United Internet at a glance
United Internet comprises a family of strong and attractive internet brands. Each one stands for added value and success. These brands are tailored to our relevant target groups and fully utilize available market potential.
Annual Report 2008
www.united-internet.com
Uni
ted
Inte
rnet
AG
A
nnua
l Rep
ort
2008
Quarterly development Q1 2008t millions
Q2 2008t millions
Q3 2008t millions
Q4 2008t millions
Q4 2007t millions
Sales 402.0 412.4 407.4 427.8 414.3
EBITDA 83.2 88.6 77.7 69.3 73.3
Net income 45.1 45.2 -103.8* -108.0* 40.1
* The figures for 2008 include total negative, non-recurring and non-cash effects of C 275.4 million – of which C 145.6 million refer to Q3 and C 129.8 million to Q4.