euro adhoc: AG
quarterly or semiannual financial statement / Q1/2006: freenet continues on expansionist course

-------------------------------------------------------------------------------- Disclosure announcement transmitted by euro adhoc. The issuer is responsible for the content of this announcement. -------------------------------------------------------------------------------- 09.05.2006 Q1/2006: freenet continues on expansionist course • Revenues up +37 percent to 200.1 million euros (vs. Q1/2005) • Maintained market position with 75 thousand new DSL customers in first quarter • EBITDA of 27.5 million euros despite massive investments in growth • 20 million euros in earnings before taxes AG / Hamburg - The AG, Hamburg, continues its expansionist course in the present year, in a market environment that - while it is fraught with increasingly tough competition in all lines of business - also holds great opportunities for the company. First-quarter revenues rose significantly year on year, by 37 percent to 200.1 million euros, which put them nearly on par with the excellent level of the (usually most revenue-intensive) fourth quarter of 2005. All segments improved their sales performance vs. Q1/2005 except Telephony (37.6 million euros), which posted a slight decline in revenue due to difficult market conditions. Internet access contributed 98.0 million euros, or nearly half of the group’s revenue (up by +16 percent vs. Q1/2005). B2B Services followed at 36.4 million euros (+1620 percent vs. Q1/2005) and the portal business including Digital Services with revenues 28.1 million euros (+40 percent vs. Q1/2005). The two latter segments have lastingly established themselves as additional important revenue mainstays for freenet, after last year’s acquisition and successful integration of Next-ID and the Strato group. To stand its ground in the DSL market against what freenet perceives as distorting competitive advantages granted to other competitors by Deutsche Telekom AG, and to safeguard future growth, AG considerably stepped up its marketing expenditure during the first quarter of the present year, to 13 million euros - up by 50 percent vs. Q1/2005. By the end of the first quarter, the number of DSL customers recruited with this high marketing expenditure and through acquisition costs rose by 75 thousand to 775 thousand (vs. 465 thousand at the end of Q1/2005); the number of narrowband customers is at a solid 2.7 million. Stronger customer growth in the DSL business was prevented by new offers which hit the market in February and which freenet believes could only be based on extremely discounted "Net Rental" wholesale conditions granted to very few providers - conditions that would not have been available to freenet to the same extent even had it signed the contract in question and which therefore impeded freenet’s growth considerably. However, freenet trusts that the Federal Network Agency will soon put an end to Deutsche Telekom’s special terms. At the same time, AG increased the number of its subscription customers to 2.7 million and that of its active members to 7.7 million. In all, AG had 9.9 million customers at March 31, 2006, 520,000 customers more than a year earlier. Another factor that impacted results is the delay in the completion of the merger between freenet and mobilcom already approved last summer by the Annual General Meetings of both companies. Only a closer dovetailing of the two companies’ resources and market positioning would allow us to better maximise synergy potential and seize growth opportunities in the market. In this tough competitive environment and despite artificially imposed differences in the playing field, the management of freenet continues to rely on growth, even though it may occur at the expense of the profits for fiscal year. Accordingly, the results seen in Q1/2006 are down slightly: At 27.5 million euros, EBITDA is roughly 4 percent below the previous quarter and 25 percent below that of Q1/2005. Amortisation/depreciation was also down slightly year on year and vs. the previous quarter, to currently 8.3 million euros. This resulted in earnings before taxes of 20.0 million euros, after 20.3 million euros in Q4/2005. Group result for the first quarter of 2006 amounted to 12.1 million euros. This again reinforces freenet’s position as a rapidly growing and yet profitable company in a very sophisticated, promising market. The company’s liquidity improved again during the first quarter, rising by 29 million euros from 163.7 million to 192.7 million euros, enhancing freenet’s financial scope for further investments and/or acquisitions. Q1/2006 Q4/2005 Q1/2005 Revenues 200,068 204,894 146,256 Segment Internet Access 98,027 92,734 84,187 Segment Voice 37,584 39,254 39,914 Segment B2B Services 36,365 42,512 2,114 Segment Portal 28,092 30,394 20,041 Gross profit 74,065 74,154 73,842 EBITDA 27,467 28,535 36,588 Earnings before taxes (EBT) 20,031 20,339 28,056 Group result 12,096 13,861 17,429 Capital and reserves 294,590 282,494 268,814 Balance sheet total 586,435 548,045 463,664 Cash and cash equivalents 192,672 163,673 90,925 Financial data per IFRS; in TEUR / Source: AG end of announcement euro adhoc 09.05.2006 07:29:04 -------------------------------------------------------------------------------- ots Originaltext: AG Im Internet recherchierbar: Further inquiry note: Andreas Neumann Investor Relations Tel.: +49 (0)40 51306 778 E-Mail: Branche: Online ISIN: DE0005792006 WKN: 579200 Index: TecDAX, CDAX, Prime All Share, HDAX, Technologie All Share, Midcap Market Index Börsen: Frankfurter Wertpapierbörse / regulated dealing/prime standard Börse Berlin-Bremen / free trade Hamburger Wertpapierbörse / free trade Baden-Württembergische Wertpapierbörse / free trade Börse Düsseldorf / free trade Niedersächsische Börse zu Hannover / free trade Bayerische Börse / free trade

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