• Customer ownership increases by 3.3 per cent to 8.84 million (previous year: 8.56 million); contract customer base grows by 1.6 per cent to 5.90 million

• EBITDA climbs by 2.9 per cent to EUR 87.6 million (previous year: EUR 85.2 million)

• Free cash flow* up by 5.4 per cent to EUR 74.2 million (previous year: EUR 70.4 million)

• Focus on high-margin revenue and decision to dispense with certain hardware trading activities with no or very small margins leads to a declined Group revenue of EUR 727.2 million (previous year: EUR 809.6 million).

 Büdelsdorf, 5 August 2014 - Today, freenet AG [ISIN DE000A0Z2ZZ5] published its interim report for the second quarter of 2014 and confirmed its outlook for the financial years 2014 and 2015. 

In its customer ownership base, in which the customer groups postpaid and no-frills are combined and which serves as one of the most important control parameters in the company, customer numbers increased over the previous year by around 280,000 to 8.84 million (previous year: 8.56 million), representing an increase of 3.3 per cent. This growth manifested itself in approximately 190,000 new customers in the no-frills segment, in which online sales channels are used to reach particularly price-sensitive customers who require few to no advisory services. But with a surge of 95,000 customers, the particularly high-revenue postpaid customer base also developed most positively compared to the previous year. 

The monthly average revenue per contract customer (postpaid ARPU) rose to EUR 21.5 in Q2 2014, EUR 0.30 higher than the level of the previous quarter. Compared with the same period of 2013 (EUR 22.5) a decrease amounted to EUR 1.0. This was attributable to unrelenting price competition on the German market. This development can, however, predominantly be explained by the fact that freenet customers with older contracts, some of which still have relatively high monthly basic charges, are switching to the smartphone tariffs currently being offered from the own assortment. No-frills ARPU, too, was lower than in the previous year at EUR 3.0 (previous year: EUR 3.6). 

In the second quarter, the company generated Group revenue of EUR 727.2 million (previous year: EUR 809.6 million). This development can be attributed in particular to reduced business activity from hardware sales with very low or no margins. The lower average revenue per customer (ARPU) in the postpaid customer segment was another contributory factor in this development. The mobile communications segment maintained its dominant position in the Group with revenue of EUR 714.5 million (previous year: EUR 801.6 million). This means that in the first half of the current financial year, the Group's revenue decreased to EUR 1,444.7 million (previous year: EUR 1,584.9 million). 

The gross profit of EUR 190.5 million reported for the second quarter represents an increase of EUR 13.5 million (previous year: EUR 177.0 million), a development that can be attributed primarily to the increased proportion of business activity with higher margins. Accordingly, the gross profit margin increased in the reporting period by a significant 4.3 percentage points to 26.2 per cent (previous year: 21.9 per cent). The growth achieved in the first half of 2014 amounted to EUR 23.2 million, resulting in an overall figure of EUR 373.0 million (previous year: EUR 349.8 million) and consequently a gross profit margin of 25.8 per cent (previous year: 22.1 per cent). 

'In the first half of the year, we once again demonstrated our strengths in all sales channels. We are also looking forward to working together with Media-Saturn-Holding as its exclusive cooperation partner during the launch of their first own mobile communications tariff', said Christoph Vilanek, CEO of freenet AG, responding to the second-quarter result. Mr Vilanek added: 'I'm expecting positive things to come from the merger of Telefonica and E-Plus with regard to planning certainty up until 2025 and concerning the access to LTE that will be enjoyed by our many existing customers with both of these providers.' 

Group EBITDA (earnings before interest, taxes, depreciation and amortisation) correspondingly increased to EUR 87.6 million in the quarter under review (previous year: EUR 85.2 million). Group EBITDA totalling EUR 173.1 million was reported for the first half of 2014 (previous year: EUR 170.4 million). Measured by the EBITDA margin, which in the half-year comparison increased by 1.2 percentage points to its current level of 12.0 per cent (previous year: 10.8 per cent), the profitability of the business continued to grow. 

Depreciation and amortisation increased in the second quarter by EUR 2.9 million to EUR 16.4 million (previous year: EUR 13.5 million). This upward trend results in particular from the intangible assets estimated within the scope of the purchase price allocation for the acquisition of the freenet Digital Group (formerly Jesta Digital Group). 

Taking the reduction in the income tax burden of EUR 3.4 million into account (previous year: EUR 6.1 million), the Group result increased by EUR 1.7 million to EUR 57.1 million (previous year: EUR 55.4 million) in the quarter under review. This corresponds to earnings per share of EUR 0.44 (previous year: EUR 0.43) in the quarter under review. This means that a Group result of EUR 114.5 million is being reported for the first six months of 2014 (previous year: EUR 115.6 million), corresponding to earnings per share of EUR 0.89 (previous year: EUR 0.90). 

The free cash flow* increased in the second quarter by EUR 3.8 million to EUR 74.2 million (previous year: EUR 70.4 million). This upward trend results on the one hand from an increase in cash flow from current operating activities totalling EUR 78.8 million (previous year: EUR 73.8 million). In addition, cash flow from investing activities changed in the second quarter of 2014 from EUR -2.8 million to EUR -4.3 million as a result of higher IT-Investments in connection with numerous strategic projects. Finally, cash flow from financing activities totalled EUR -215.9 million in the quarter under review (previous year: EUR -207.7 million), influenced primarily by the higher dividend payout of EUR 185.6 million (previous year: EUR 172.8 million) in the current financial year. 

'Based on our very good results, mainly resulting from the further increase in the profitability of our business activities in the first half of the year, we are confirming our earnings and cash flow forecast for the financial years 2014 and 2015', adds Joachim Preisig, CFO of freenet AG. 

In the most important key points, the Executive Board confirms the guidance for 2014 and 2015, according to which the Executive Board is then aiming for Group EBITDA of around EUR 365 million and EUR 370 million for the financial years 2014 and 2015, accompanied by free cash flow* of around EUR 265 million and EUR 280 million respectively. In setting these targets, the company is assuming that the financial year 2014 will bring a reduction in Group revenue as since the first quarter of 2014, it has decided to dispense with certain types of hardware business with either no or very low margins. The Executive Board expects revenue to stabilise in the financial year 2015.

The complete half-year financial report as of 30 June 2014 - second quarter of 2014 - can be downloaded at www.freenet-group.de/investor and the conference call will be transmitted there via webcast at 2 p.m. CEST on 6 August 2014. 

*Free cash flow is defined as cash flow from operating activities, minus investments in property, plant and equipment and intangible assets, plus proceeds from the disposal of property, plant and equipment and intangible assets.


Investor Relations contact:
freenet Aktiengesellschaft
Investor Relations
Deelbögenkamp 4c
22297 Hamburg
Tel.: +49 (0) 40 / 513 06 778
Fax: +49 (0) 40 / 513 06 970
E-Mail: ir@freenet.ag


»

distributed by