Half-year figures of telegate AG: Media business with clearly improved profitability

Business sector Media improves earnings by about 28 percent and
already contributes 39 percent to group revenues

Group EBITDA before non-recurring items of EUR 5.1 m
within the target range of the annual profit guidance

Planegg-Martinsried near Munich, August 02, 2012 - The figures of telegate AG for the first six months of the fiscal year 2012 meet the expectations of the corporate management. The strategic focus of the current year remains on sustainable growth of the Media business. Main drivers to reach this objective in the business area Media are an accelerated churn rate reduction and an increased profitability. In both areas telegate achieved significant progress in the first half-year: The customer churn rate was reduced by about 8 percent within the first six months 2012 while profitability of Media business increased by about 28 percent.

Group half-year revenues in the amount of EUR 45.1 m were approx. 12 percent below the previous year's level of EUR 51.2 m. In the Media business, telegate registered only a moderate but sustainable growth: revenues are up by 1 percent while profits have improved by 28 percent. However, the share of the Media sector in group revenues increased further from 34 percent in the previous year to 39 percent now. Due to the overall market trend, telegate's classic DA business declined by 19 percent, as expected - business area DA solutions generated revenues of EUR 27.7 m compared to EUR 34.0 m in the previous year.

At segment level, it should be considered that the business segment Spain is shown as 'discontinued operations', in accordance with IFRS guidelines. telegate intends to sell the segment. This is based on the company's strategy to focus its activities on the German market.

Profit situation: measures to increase customer loyalty and sales efficiency help to
improve profitability of the Media business

telegate group's profit margins are lower than in the previous year, as expected. The Media sector worked more efficiently, as desired - the contribution to losses at EBITDA before non-recurring items level was significantly improved by approx. 28 percent to EUR -5.6 m compared to the same period of the previous year. This is a result of a lot of efforts in the past months to increase sales efficiency and customer loyalty, to reduce churn rate and to boost traffic and usage on both online and mobile platforms. As expected, the positive earnings trend of the Media sector was not sufficient yet to compensate the declining earnings of the DA business. Thus, group EBITDA before non-recurring items moved from EUR 6.8 m to EUR 5.1 m, primarly due to the overall lower top line figures. However, earnings are right on track with regard to the profit guidance for the full fiscal year 2012.

Negative non-recurring items amounted to EUR 2.2 m in the first half of the fiscal year and thus were EUR 1.5 m higher than in the same period of the previous year. Non-recurring items in the reporting period were primarily due to capacity adjustments within the administration sector as well as expenses for the planned merger of the call center Stralsund with the locations Rostock and Neubrandenburg. Net earnings after taxes amounted to EUR -0.8 m and EUR -0.04 per share respectively after the first six months of 2012. Net earnings of the first six months of the previous year amounted to EUR 2.2 m and EUR 0.11 per share respectively.

telegate AG is still free from debt and has sufficient financial resources to finance all operating activities, investments as well as potential acquisitions easily on its own, in spite of declining income. Available liquid assets amount to EUR 29.1 m as of June 30, 2012, compared to EUR 37.4 m in the previous year. This change is mainly attributable to a dividend payment in the amount of EUR 6.7 m made at the end of June 2012. With regard to the liquidity situation, it should also be taken into account that the high inflow of liquidity from the data cost actions for damages of the telegate subsidiaries telegate MEDIA AG and datagate GmbH against Deutsche Telekom recently won in the last instance will be shown in the balance sheet within the course of the third quarter 2012. Net cash flow* amounted to EUR -3.3 m in the first half of 2012 compared to EUR -1.8 m in the same period of the previous year. The equity ratio amounted to 53.7 percent as of the period date compared to 51.7 percent in the previous year.

Outlook: operational focus still on improving profitability of the Media business

telegate AG expects that the two business areas Media and DA solutions will continue showing an opposite trend in the further course of the fiscal year: the company expects only a moderate but sustainable growth in the Media business, while the DA business will probably continue declining, even still generating strong margins. Focus in the second half of the fiscal year 2012 will remain on improving profitability in the business area Media: telegate expects to reduce the loss of the fiscal year 2011 by approx. one third in 2012.

On the basis of the half-year figures and in spite of the missing contribution to earnings of the Spanish segment shown as 'discontinued operations', telegate group confirms the profit guidance made for the full year with EBITDA before non-recurring items within a range of EUR 10-12 m. Regardless of the declining liquidity trend in the first half of the year, the company still expects to generate a positive net cash flow* both in the full year 2012 and subsequent years.

In addition, there will be inflows of liquidity from the recently won data cost actions for damages by the subsidiaries datagate GmbH and telegate MEDIA AG against Deutsche Telekom AG. The Federal High Court of Justice finally sentenced Deutsche Telekom in the first two of a total of three sub-actions to repay telegate approx. EUR 47 m including interest payable as from commencement of proceedings. Furthermore, the final judicial decision on the third damage claim, the action of telegate AG for additional approx. EUR 50 m including interest payable as from commencement of proceedings, can be expected within the next months.
 

(All figures stated in m of EUR)

*) Operative cash flow + cash flow from investment activity +/- interest income/expense

Contact:

Joerg Kiveris
telegate AG
Head of Public Relations Department
GERMANY
Fraunhofer Str. 12a
82152 Planegg-Martinsried near Munich
Phone: +49-89-8954-1188
Fax: +49-89-8954-1189
Email: presse@telegate.com
http://www.telegate.com
http://twitter.com/telegate
http://www.youtube.com/telegateAG