Quarterly Financial Report / 2015

Transcription

1 Quarterly Financial Report / 2015

2 #CO NT ENTS 01 interim status report / General 05 Group Business and Structure 06 Market and Competitive Environment 07 Business Development and Group Situation 15 Risks and Opportunities of Future Business Development 15 Major Events after the Balance Sheet Date 16 Forecast 02 Consolidated Quarterly Accounts / Consolidated Balance Sheets 20 Consolidated Statements of Operations 21 Consolidated Statements of Comprehensive Income 22 Consolidated Statements of Shareholders Equity 24 Consolidated Statements of Cash Flows 26 Notes 03 Further information 35 Events & Contact Information

3 Key Figures of the Sinner Schrader Group Q2 2014/2015 Q2 2013/2014 Change H1 2014/2015 H1 2013/2014 Change Gross revenues 000s 11,875 12,096 2 % 25,368 23, % Net revenues 000s 10,576 11,292 6 % 22,977 22, % EBITDA 000s 101 1, % 660 1, % EBITA 000s % 86 1, % Relation of the EBITA to net revenues (Operating margin) % % % EBIT 000s % 86 1, % Net income 000s % % Net income per share, diluted % % Shares outstanding 1) number 11,362,783 11,194, % 11,381,826 11,162, % Cash flows from operating activities 000s 2, % 1,337 1, % Employees, full-time equivalents number % % Change Change Liquid funds and securities 000s 2,922 3, % 2,922 5, % Shareholders equity 000s 12,867 12, % 12,867 14,075 9 % Balance sheet total 000s 24,401 23, % 24,401 28, % Shareholders equity rate % % % Employees, end of period number % % 1) Weighted average shares outstanding

4 Quarterly Financial Report / interim status report /2015 Consolidated Quarterly Accounts /

5 1 general This Interim Status Report of the Sinner Schrader Group ( Sinner Schrader or Group ) as at 28 February 2015 represents the development of the income, financial, and assets status of the Group which is managed by Sinner Schrader Aktiengesellschaft ( Sinner Schrader AG or AG ) in the first half and the second quarter of the 2014/2015 financial year from 1 September 2014 and 1 December 2014, respectively, to 28 February It deals with the major risks and opportunities and the probable developments in the remainder of the financial year. The consolidated financial statements on which this status report is based were drawn up according to the International Financial Reporting Standards ( IFRS ). The Interim Status Report, particularly Section 7, contains statements and information aimed at the future. These forward-looking statements are based on current knowledge, estimates, and assumptions and therefore entail a number of risks and uncertainties. A variety of factors, many of which are outside Sinner Schrader s sphere of influence, have an impact on the business development and results. These factors mean that the actual future business development of Sinner Schrader and the actual results achieved may differ significantly from the explicit or implicit information in the forward-looking statements. This quarterly financial report should be read in conjunction with the Consolidated Financial Statements of Sinner- Schrader AG for the 2013/2014 financial year. 2 group BUSINESS AND STRUCTURE The Sinner Schrader Group is a digital agency group which offers companies in Germany and abroad a comprehensive range of services for the use of digital technologies to optimise and further develop their business. The emphasis is on the use of the Internet for the sale of goods and services (e-commerce), for marketing and communication, and for the acquisition and retention of customers. With more than 500 employees, Sinner Schrader is one of the biggest independent digital agency groups in Germany and performs its services at locations in Hamburg, Frankfurt am Main, Berlin, Hanover, Munich and Prague. Sinner Schrader mainly works for companies based in Germany, but also counts companies from Switzerland, the UK, the Netherlands, France, and the Czech Republic among its clients. The consolidation group of the Sinner Schrader Group has changed against the status as at 31 August 2014 through the merger of mediaby GmbH and NEXT AUDIENCE GmbH with a retroactive effect as at 1 September The merging of the hitherto separately managed companies mainly serves to pool forces for consulting advertisers on the management and optimisation of advertising expenditure for digital channels and with respect to the use of the relevant software required, not least of all the NEXT AUDIENCE Platform. Other than that, the consolidation group has not changed in the first half of the 2014/2015 financial year in comparison to the status as at 31 August In the quarter and the half year of the report, the Sinner Schrader Group thus consisted of Sinner Schrader AG in addition to Sinner Schrader Deutschland GmbH, Sinner Schrader Mobile GmbH, Sinner Schrader Praha s.r.o., the NEXT AUDIENCE Group, comprising NEXT AUDIENCE GmbH and Sinner Schrader Content GmbH, and the Commerce Plus Group, made up of Commerce Plus GmbH and Commerce Plus Consulting GmbH. Moreover, the operationally inactive companies Sinner Schrader UK Ltd. in London and Sinner Schrader Benelux BV in Rotterdam are still part of the consolidation group. The Sinner Schrader Group continues to structure its business activity in the Interactive Marketing, Interactive Media and Interactive Commerce segments. The Interactive Marketing segment comprises Sinner Schrader Deutschland GmbH, Sinner Schrader Mobile GmbH and Sinner Schrader Praha s.r.o. The Interactive Media segment is formed by the NEXT AUDIENCE Group, and the Interactive Commerce segment by the Commerce Plus Group. 5 sinnerschrader group quarterly financial report /201 5 interim status report /2015

6 sinnerschrader group quarterly financial report /201 5 interim status report / market AND COMPETITIVE ENVIRONMENT After perceivable uncertainty concerning economic development in Germany arose in the period from August to October 2014, the mood was brightened by figures on the gross domestic product in the third calendar quarter of 2014 and the fall in the oil price as of November This was clearly shown in the development of the ifo business climate index, which reached a low at points based on the 2013 and 2014 calendar years in October, after six months of decline, and has been rising steadily again since then. The index improved to reach points in March 2015, equally supported by an improvement in the assessment of the situation and expectations for the commercial economy. Information from the Federal Statistical Office in January and February 2015 on the development of the gross domestic product in the fourth calendar quarter of 2014 and summarised for 2014 as a whole confirmed that the concerns which had arisen about the economy had not come to fruition. According to the economic performance results published on 24 February 2015, the real gross domestic product in the fourth calendar quarter of 2014 exceeded the comparable quarter of 2013 by 1.6 % and was better by 0.7 % than the third calendar quarter of 2014 while taking account of seasonal and calendar effects. Private consumption and domestic investments in equipment and buildings were the main drivers of the positive trend. A rise of 1.6 % in the real gross domestic product was calculated for 2014 as a whole on the basis of the figures for the fourth calendar quarter. Economic experts had scaled down their expectations for 2014 to a growth rate of approximately 1.3 % in the months of uncertainty. Economic researchers and business institutions have considerably raised their expectations again for the development in 2015 as a result of the positive figures for More recent estimations from the first few months of the year lie in the range of 1.3 % to 2 %. For example the German Council of Economic Experts raised its forecast for the growth rate in 2015 from 1.0 % to 1.8 % at the end of March. The positive picture is backed up by the GfK consumer climate index. After a break in autumn 2014, it has now risen again markedly to approach the 10-point mark, which it is expected to reach in April. Private consumption will thus remain a pillar of the positive economic development in Germany in 2015 as well. This is why the German Retail Federation (HDE) is expecting the retail sector to grow at a nominal rate of 1.5 % in On the other hand, the HDE presumes that online trading in goods and services will develop much faster, and expects to see growth of 12 %. The Federal E-Commerce and Distance Selling Trade Association of Germany (bevh) also forecast the same growth rate for online trading with goods in 2015 at its annual press conference held early in March. Initial forecasts for the development of the advertising market expect growth in the range of 1 % to 2 % in Given this environment, the Circle of Online Marketers (OVK) in its most recent study expects to see growth of 6.5 % in the field of digital display advertising. Even if growth rates in the digital economy do gradually normalise, their momentum continues to be considerably greater than that of the economy as a whole. The pressure for change, with digital technologies affecting various corporate functions, has now progressed to become a strategic question of digital transformation for any company. This trend is also reflected in the fact that strategic consultants such as McKinsey and BCG are going digital in the words of manager magazin in January 2015 on the occasion of the opening of the first McKinsey Digital Lab in Germany. In general, this means that more attention needs to be paid to digital issues in the senior managements of companies, and it also means new competition in terms of processing these issues and of the talent required to be able to do so. 6

7 Net Revenues, EBITA And Net revenue margin by quarter in million and % % 0.9 Q2 2013/ % 0.6 Q3 2013/ % BUSINESS DEVELOPMENT AND GROUP SITUATION 1.8 % In spite of the positive development of general economic conditions, contrary to previous concerns, Sinner Schrader was not able to achieve its excellent performance of the comparable quarter of the 2013/2014 financial year during the course of the second quarter of 2014/2015. Revenue, at 10.6 million in the quarter of the report, was a good 6 % lower than in the previous year. The EBITA was slightly negative, at 0.2 million significantly below the 0.86 million that Sinner Schrader had achieved in the comparable period of the previous year. In addition to the reluctance to spend among major existing clients at the end of the 2014 calendar year, weak business with new clients and a resulting comparatively low number of large individual projects meant that, unlike in the previous year, seasonal influences were again felt more strongly in the quarter of the report. The weakness of business with new clients was mainly caused by the price sensitivity among companies, the extent of which had not been expected. The revenue of the Sinner Schrader Group totalled 23.0 million for the first half of the 2014/2015 financial year, thus still exceeding that of the first half year of 2013/2014 by just under 4 %. However, the operating result in the half year of the report only just reached 0.1 million, in comparison to just under 1.5 million in the previous year. Delays were unavoidable in the adjustment of the operating cost basis, which was aligned to the peaks in revenue in July to September 2014 and to a largely stable development of revenue. After operating losses in November and December 2014 and a balanced result in January 2015, Sinner Schrader nevertheless again reported a significantly positive EBITA in February With net income slightly increased by 0.14 million in the first quarter of the 2014/2015 financial year and decreased to roughly the same extent in the second quarter, Sinner Schrader just achieved a balanced result in the half year of the report. Net income for the first half year had amounted to 0.6 million in the previous financial year Q4 2013/ % 0.3 Q1 2014/ Q2 2014/2015 sinnerschrader group quarterly financial report /201 5 interim status report /2015

8 sinnerschrader group quarterly financial report /201 5 interim status report /2015 Net Revenues by Segment in million for H1 2014/2015 in comparison to H1 2013/ Interactive marketing As expected, the operating cash flow was significantly positive again in the second quarter, at just under 3.0 million in spite of weak operating earnings. It was, however, not yet possible to offset the negative amount from the first quarter, so that an operating cash flow of 1.3 million remained in net terms for the half year of the report. In the first half year of 2013/2014, the outflow of funds in the operating area was still 0.2 million higher. Liquid funds amounted to 2.9 million as at 28 February 2015, including the dividend payment in the amount of just under 1.35 million in January 2015, thus falling short of the figure as at 31 August 2014 by 2.9 million. The following sums up the development of the income, financial, and assets status in the second quarter and in the first half of the 2014/2015 financial year in more detail. 4.1 revenues Interactive media Interactive commerce In the second quarter of the 2014/2015 financial year, Sinner Schrader earned net revenues of 10.6 million. The business volume of the Group fell short of the comparable value of the previous year by 0.7 million, or 6.3 %. In the development from quarter to quarter, the revenue was reduced for the second time, decreasing by 1.8 million, or 14.7 %, against the preceding first quarter, and thus falling significantly short of expectations. The comparison with the second quarter of the previous year and with the previous quarter was negative in all three business segments HOlding/ Consolid.

9 After the strong momentum in the development of business in the previous year, with annual growth of 35.8 %, the consolidation of revenue was strongest in the Interactive Marketing segment, with a reduction of revenue in the second quarter of 2014/2015 in the amount of 1.4 million, or 15.6 %, against that of the previous quarter. At 7.6 million, the quarterly revenue was just under 0.4 million, or 4.8 %, below that of the same period of the previous year. The low volume of new contracts was decisive for the development, since in many cases Sinner Schrader was unexpectedly unsuccessful in winning though against competitors offering lower prices, in spite of convincing presentations as regards content. Without significant impulses from business with new clients, the seasonal factors in the second quarter few working days and a low level of activity around New Year once again had a tangible effect. Besides, major existing clients showed a marked reluctance to spend in December, after growth-oriented spending behaviour for large parts of the calendar year of In addition, one of the major clients in the previous year, the E-Plus Group, had limited its level of activity as expected in the wake of the merger with O2 following the Telefónica takeover of E-Plus. In the second quarter of 2014/2015, the revenue volume of the Interactive Media segment was only slightly lower than that of the previous quarter. However, in comparison to the previous year, the revenue was significantly reduced by 0.4 million, or 20.8 %. In this case the decline against the previous year was only due to content management business, with relatively considerable revenues from the set-up and pilot phase of the CURVED.DE project in the second quarter of 2013/2014 matched by revenues from the established operating phase in the quarter of the report. In contrast, revenues generated by NEXT AUDIENCE business, which has covered media technology business and media consulting business since the merger with mediaby GmbH, increased slightly in comparison to the previous quarter and in comparison to the same quarter of the previous year. The Interactive Commerce segment earned net revenues of 1.7 million in the quarter of the report. The business volume thus fell short of that of the same quarter of the previous year and the previous quarter by 0.15 million, or 8.1 %, and by just under 0.4 million, or 17.5 %, respectively. While seasonal factors were decisive for the declining revenue during the course of the quarter, the level of services commissioned by existing clients fell short of expectations in comparison to the previous year, while the dynamic development of business with new clients continued. Accumulated during the first half year of 2014/2015, the Sinner Schrader Group revenue, at 23.0 million, was higher than in the first half year of 2013/2014 by just under 0.9 million in spite of a weak second quarter. This corresponds to growth of 3.9 %. While the Interactive Marketing and Interactive Media segments contributed to this increase in the amount of 0.8 million and 0.1 million, respectively, the comparison with the previous year resulted in a decrease of 0.3 million in the Interactive Commerce segment due to follow-up orders from existing clients falling short of the anticipated volume. Revenues to be consolidated between the segments were down by a good 0.2 million in comparison to the previous year. The increase in comparison to the previous year is still mainly the result of the dynamic development of revenue throughout the 2013/2014 financial year. After the highest monthly revenue in the history of Sinner Schrader so far, in the amount of 4.5 million, had been achieved in September 2014, the revenue in the following months of the first half year fell, mainly due to slow new business. This is also reflected in a drop of around 5.1 % in the new-client rate in comparison to the previous year. In the first half year of 2013/2014, the rate was 15.1 %, and in the full previous year it was 11.4 %. The client concentration continued to rise as a result of the weak business with new clients. While the share of revenue generated with the largest client fell from 18.9 % in the previous year to 17.3 %, the share generated by the five largest clients increased from 47.2 % to 54.8 %, and that of the ten largest clients increased from 68.4 % to 75.1 %. The comparable figures were 21.0 %, 50.1 % and 71.0 %, respectively, in the full 2013/2014 financial year. The sector mix changed, with the share enjoyed by the Financial Services and Transport & Tourism sectors benefiting in particular. In the first half year of 2014/2015, the share of revenue generated by the two groups of clients increased from 20.1 % to 23.8 %, and from 17.3 % to 18.7 %, respectively, over the share generated in the previous year as a whole. A slight increase was also reported for the Media & Entertainment sector, from 5.2 % in the previous year as a whole to 5.3 % in the half year of the report. 9 sinnerschrader group quarterly financial report /201 5 interim status report /2015

10 sinnerschrader group quarterly financial report /201 5 interim status report /2015 Net Revenues by sector in % for H1 2014/ (previous year: 5.2) Media & Entertainment 16.4 (previous year: 20.2) Retail & Consumer goods 23.8 (previous year: 20.1) Financial Services Previous year = 2013/2014 financial year The significance of clients in the area of Retail & Consumer Goods continued to decline decisively, with the share in the total revenue decreasing against that of the previous year by 3.8 percentage points, to 16.4 %. The share in revenue of the Telecommunications & Technology sector also fell by two percentage points, but at 31.6 %, the sector nevertheless remained by far the most important sector for the Sinner Schrader Group. Other clients accounted for a share in revenue of 4.2 %. This figure was 3.6 % in the previous year. 4.2 OPERATING RESULT (EBITA) H1 2014/ (previous year: 33.6) Telecommunications & Technology 18.7 (previous year: 17.3) Transport & Tourism 4.2 (previous year: 3.6) Other The operating result (EBITA) of the Sinner Schrader Group amounted to just under 0.2 million in the second quarter of 2014/2015, after 0.3 million in the preceding first quarter of 2014/2015 and 0.86 million in the second quarter of 2013/2014. The development from the first to the second quarter of 2014/2015 shows that it was possible to offset a major part of the difference in revenue between the two quarters in the amount of 1.8 million by reducing external costs mainly incurred through the use of freelancers in the amount of around 0.9 million, and by way of a reduction in personnel costs in the amount of just under 0.6 million. The comparison with the same quarter of the previous year nevertheless shows that the decline in income is not only a result of the low level of revenue. Instead, in spite of the use of flexible cost components, it is also due to an increase of 0.4 million in the cost basis, mainly for the Group s own personnel capacity, which was incurred on the basis of the increase in the volume of business planned for the 2014/2015 financial year, and which remains largely unaffected by short-term adjustment measures. The EBITA in the quarter of the report was thus a good 1.0 million below the result of the same quarter of the previous year. This decline in income mainly resulted from the Interactive Marketing segment, with a decrease of a good 0.8 million. This meant that the EBITA for the quarter was still only 0.2 million in the second quarter of 2014/2015. The sales dynamism in this segment was particularly strong in the previous year, through to the first month of the 2014/2015 financial year, as was the time-delayed development of its own capacity. The EBITA in the Interactive Media segment decreased by a good 0.1 million in comparison to the previous quarter, and was balanced in the quarter of the report, with the result only falling in the content marketing business, and improving slightly over that of the same quarter of the previous year in the combined media technology and media consulting business. 10

11 EBITA by Segment in million for H1 2014/2015 in comparison to H1 2013/ Interactive marketing Interactive media Interactive commerce HOlding/ Consolid. The Interactive Commerce segment was able to compensate for the development of revenue on the cost side also as a result of the elimination of non-recurring costs for allowances in the previous year and improve revenue slightly in comparison to the previous year to achieve a likewise balanced operating result in the quarter of the report. The costs for the holding company which are not allocated to the segments increased over those of the previous year by 0.1 million, to 0.4 million in the second quarter of 2014/2015. The EBITA for the first two quarters of the 2014/2015 financial year was still slightly positive on the whole, at just under 0.1 million in the first half year of 2014/2015. The Interactive Marketing segment contributed 0.7 million to this result, the Interactive Media segment 0.1 million, the Interactive Commerce segment 0.1 million and the holding company 0.6 million. The segments reported changes in their operating results in the amount of 1.6 million, 0.2 million and 0.1 million, respectively, in comparison to the first half year of 2013/2014. The holding costs were virtually unchanged against those of the same period of the previous year. The restrained 3.9 % rise in revenue in the first half year of the report resulted in connection with the increase in the Company s own personnel capacity particularly in the Interactive Marketing segment by 15.5 %. This increase was disproportionately high due to the intention to replace external service providers. Since it was only possible to achieve the targeted reduction of costs for external services with a delay, the increase in the number of staff resulted in a temporary excess capacity situation which raised revenue costs in relation to the revenue from 74.6 % in the first half year of 2013/2014 to 78.7 % in the first half year of 2014/2015. The gross margin in turn was reduced by 4.1 percentage points, from 25.4 % to 21.3 %. Sales efforts were considerably increased in the first half year of 2014/2015, in particular in the second quarter. However, since these efforts failed in some cases due to unexpected price pressure in the market, or will only have a positive effect on the development of revenue in the second half of the year, the sales costs rose over those of the previous year by 23.7 %, and their share in revenue increased from 7.7 % to 9.2 %. In spite of a considerable capacity expansion, the increase in the general and administrative costs was disproportionately low in comparison to the development of revenue, at only 2.4 %. The share of these costs in the revenue consequently fell to 10.8 %. 11 sinnerschrader group quarterly financial report /201 5 interim status report /2015

12 sinnerschrader group quarterly financial report /201 5 interim status report /2015 Development of costs by function H1 2014/2015 H1 2013/2014 change IN 000s IN % 1) IN 000s IN % 1) IN % Cost of revenues 18, , thereof amortisation expenditure Costs of marketing 2, , thereof amortisation expenditure General and administrative costs 2, , Research and development costs Development of costs by cost type H1 2014/2015 H1 2013/2014 change IN 000s IN % 1) IN 000s IN % 1) IN % Personnel expenses 15, , Costs of materials and services 4, , Other operating expenses 2, , Depreciation Amortisation expenses ) As a percentage of net revenues On the other hand, the research and development costs rose significantly; in the first half year of 2014/2015 they were almost three times higher than in the same half-year period of the previous year. The main reason for this is that expenses for the further development and maintenance of the NEXT AUDIENCE Platform subsequent to completion of the development work and the launch of Version 1.0 were to be reported direct in costs and not capitalised. A breakdown of costs by cost type shows that personnel costs accounted for a significant increase in costs in the half year of the report, exceeding the figure for the comparable half-year period of the previous year by 17.3 %. By contrast, the cost of purchased services only fell slightly. The increase in the Company s own capacity is not expected to have a significant effect on these costs until the second half of the financial year. The other operating expenses were also slightly below those of the previous year in the half year of the report. Depreciation on the other hand clearly exceeded the figure for the previous year by 50.7 %, mainly because the appropriation for the NEXT AUDIENCE Platform was to be depreciated at the beginning of the 2014/2015 financial year. This accounted for around 40 percentage points of the increase. Reconciliation of operating income acc. to statement of operations and EBITA H1 2014/2015 H1 2013/2014 CHANGE IN 000s IN 000s IN % Operating Income 86 1, Add-back amortisation expenditure 1) EBITA 86 1, ) Amortisation of intangible assets from acquisitions 12

13 4.3 NET INCOME On the bottom line, the net income was just balanced in the first half year of 2014/2015. The operating half-year result was in this case absorbed by current and deferred taxes in the amount of 0.1 million. Due to the low operative earning power in the first half year, the separation of the fiscal spheres of the NEXT AUDIENCE Group from the fiscal unit in Germany had a disproportionately negative effect. The low interest rates and low average levels of liquidity meant that the financial activities of the Group did not result in any positive contribution to profits in the half year of the report. No amortisation costs needed to be borne in the first half year of 2014/2015. The net income was around 0.6 million lower than in the previous year. The decrease in the EBITA in the amount of 1.4 million was mainly contrasted with reductions in taxes on income of 0.7 million and the elimination of amortisation costs in the amount of just under 0.1 million. 4.4 CASH FLOWS Cash funds normalised again in the second quarter of 2014/2015 after the considerable rise in the amount of funds tied up in working capital at the end of the previous quarter. In particular, the trade receivables, which are particularly high on 30 November of every year due to the year-end planning of the Group clients, were reduced by just under 4.8 million. The release of these funds meant that the operating cash flow, at just under 3.0 million, was distinctly positive in the second quarter. The operating cash flow nevertheless remained negative for the full first half year of 2014/2015, amounting to 1.3 million. This was mainly caused by the use of funds through the contraction of accruals in the amount of around 1.8 million. On the other hand, the net income adjusted mainly by depreciation and changes in the deferred tax items, and an increase in tax liabilities contributed positively to the operating cash flow in the amount of 0.2 million and just under 0.3 million, respectively, in the half year of the report. The amount of funds tied up in working capital changed only marginally in view of the parallel reduction in the corresponding receivable and liability items. Sinner Schrader spent just under 0.4 million on fixed asset investments in the half year of the report. In the previous year an amount of a good 0.7 million was reported as investment funds. The reduction in the investment volume is almost completely the result of NEXT AUDIENCE not capitalising any further development costs after the completion of the first version of the NEXT AUDIENCE Platform in August Expenses in the amount of 0.3 million were capitalised in the same half year of the previous year. Replacement and expansion investments in the office and workplace infrastructure of the Group were in the range of the previous year s level in the first half year of 2014/2015. The payment of a dividend of 0.12 per share in January 2015 resulted in an outflow of funds of a good 1.35 million in the field of financing activities in the second quarter of 2014/2015. This outflow of funds was only marginally offset by an inflow of 0.15 million for the issuing of treasury stock as part of the exercising of 91,667 employee options. The resulting cash flow from financing activities amounted to 1.2 million in the quarter of the report and likewise in the half year of the report. In the same half year of the previous year, outflows of funds for repurchasing shares of treasury stock and inflows of funds from issuing shares of treasury stock to service employee options virtually offset each other. No dividend payment was made in the comparable period of the previous year. The total amount of cash flows from operating, investment and financing activities resulted in a reduction of a good 2.9 million in liquid funds in the first half of the current financial year. The aggregated cash flows in the same half year of the previous year resulted in an outflow of funds in the amount of 2.2 million (including the reduction in the total of securities and fixed-term deposits). 13 sinnerschrader group quarterly financial report /201 5 interim status report /2015

14 sinnerschrader group quarterly financial report /201 5 interim status report / asset AND FINANCIAL SITUATION The significant slow-down in the dynamics of the business development of the Sinner Schrader Group and the payment of a dividend together accounted for a reduction in the balance sheet total of 4.15 million in the first half year of 2014/2015. On the assets side, the outflow of liquid funds in the amount of 2.9 million, a reduction in current liabilities, notably accounts receivable, of a good 1.0 million, and a reduction in fixed assets, in particular in connection with the commencement of depreciation of the NEXT AUDIENCE Platform, contributed a good 0.2 million to this reduction. On the liabilities side, the contraction of accruals in the amount of 1.8 million in the period from 31 August 2014 to 28 February 2015 constituted the biggest share in the reduction of the balance sheet total. Trade accounts payable and other current liabilities were reduced by 1.5 million and the deferred tax liabilities by 0.35 million. The shareholders equity was reduced mainly as a result of the dividend payment by 1.2 million. Against the trend, advance payments received increased by 0.4 million and tax liabilities by just under 0.3 million. The shareholders equity rate increased by 3.4 percentage points in the half year of the report as a result of the developments described, from 49.3 % on 31 August 2014 to 52.7 % on 28 February EMPLOYEES Against the backdrop of weak revenue development, the number of employees in the Sinner Schrader Group fell in the second quarter of 2014/2015 in comparison to the end of the previous quarter, from 535 to 529 on 28 February In comparison to the number of employees on 31 August 2014, this does however still mean an increase of 8 employees during the course of the first half of the 2014/2015 financial year. The rise in the number of employees was focused on the Interactive Marketing segment, in which 345 of the 529 Group employees were working at the end of the quarter of the report. This is an increase of 17 employees on the basis of 328 employees on 31 August The recruitments were mainly undertaken with the aim of reducing the considerably increased rate of freelancers in connection with the growth in revenue in the previous year back to a lower level. One year earlier, the segment had 293 employees adjusted by the subsequent allocation of Sinner Schrader Content GmbH to the Interactive Media segment. As at the end of the half year of the report, there were 52 employees in the Interactive Media Segment, against 53 employees on 31 August In comparison to the final figure for the same half year of the previous year with 47 employees including the employees with Sinner Schrader Content GmbH 5 employees were added, in particular because of the development of content marketing business. The number of employees in the Interactive Commerce segment continued to decline in the first half year of 2014/2015. On 28 February 2015 there were 89 employees in the segment, so there were 8 and 11 employees fewer than on 31 August and 28 February 2014, respectively. The number of employees in the holding company was unchanged at 43 employees at the end of the half year of the report against the number on 31 August On 28 February 2014 there were 40 employees in the holding. Of the 529 employees on 28 February 2015, 11 employees were receiving vocational training and 55 employees were working as students or completing an internship. After standardisation of part-time employment relationships and calculated as an average over the period, Sinner- Schrader had a personnel capacity of just under 486 full-time employees in the second quarter of 2014/2015, after 487 full-time employees in the preceding first quarter. 14

15 Employee structure according to areas in full-time employees for H1 2014/ (previous year: 125) Consultancy 185 (previous year: 170) Technology Previous year = H1 2013/ (Previous year: 421) This is calculated as an average capacity of a good 486 full-time employees for the first half year of 2014/2015. The figure exceeded the capacity of the comparable period of the previous year by 65 full-time employees, which corresponds to a 15.6 % rise in the capacity. The distinctly disproportionately high increase in the Group s own capacity in comparison to the growth in revenue in the half year of the report was mainly undertaken in connection with the targeted normalisation of the external provider rate in the Interactive Marketing segment following the extremely dynamic growth phase with a considerable use of external services in the previous year. The personnel capacity was spread as 315, 48, 87 and 36 full-time employees over the Interactive Marketing, Interactive Media and Interactive Commerce segments and the holding company, respectively, in the half year of the report. The comparative figures for the first half year of 2013/2014 were 256, 39, 93 and 33 full-time employees, respectively. Broken down according to areas of expertise, 146 full-time employees were assigned to consulting (strategy, client services and media planning and purchasing), 185 to technology, 108 to creation, and 47 to administrative activities in the first half year of 2014/2015. Sinner Schrader has thus increased its capacity over that of the first half year of 2013/2014, in particular in the creative sector, with an increase of 28 full-time employees. The capacity of full-time employees in consulting and technology increased by 21 and 15, respectively. The administrative capacity was increased by 1 full-time employee. 5 risks AND OPPORTUNITIES OF FUTURE BUSINESS DEVELOPMENT With respect to risk management at Sinner Schrader and the main risks and opportunities in particular, there were no major changes in the first quarter of 2014/2015 in comparison to the situation outlined in the 2013/2014 Annual Report. There are still no identifiable risks that could endanger the existence of the Sinner Schrader Group or Sinner Schrader AG. 6 major EVENTS AFTER THE BALANCE SHEET DATE There were no major events after the balance sheet date on 28 February 2015 that should be reported (previous year: 80) Creation 47 (previous year: 46) Administration sinnerschrader group quarterly financial report /201 5 interim status report /2015

16 sinnerschrader group quarterly financial report /201 5 interim status report / FORECAST The second quarter of the 2014/2015 financial year fell significantly short of expectations: on the one hand reluctance to spend among major existing clients continued far into the second quarter, and on the other hand expectations for business with new clients were not met. In spite of recognised first-class work in terms of content, Sinner Schrader was repeatedly unable to assert itself over competitors due to the price positioning situation. Some market participants were obviously successful in winning through with aggressive pricing. In contrast, the general economic environment has continued to improve. The growth forecasts for 2015 are being raised across the board and now generally see growth at 1.5 % to 2.0 %, frequently with an outlook on a comparatively stable situation in The forecasts on the development of the digital economy published in the first few months of the year also show a positive picture. This is also shown in the continued strong demand which has frequently enabled Sinner Schrader to generate new orders in the past few weeks, with the Sinner Schrader agency alone acquiring six new clients, including Unilever Food Solutions a first assignment from a Unilever brand. Furthermore, the level of activity in relationships with existing clients, particularly in the Financial Services sector, was also significantly boosted. In spite of the positive development in the past few weeks, Sinner Schrader will no longer be able to completely make up for having fallen behind in its scheduled development for the financial year in the first half year. In the 2014/2015 financial year, Sinner Schrader now expects to achieve revenue which falls slightly short of the 48.6 million achieved in the previous year. Sinner Schrader will also come close to the previous year s operative result of 3.06 million with a special focus on efficiency and cost management. Hamburg, 15 April 2015 The Management Board Matthias Schrader Thomas Dyckhoff 16

17 Quarterly Financial Report / interim status report /2015 Consolidated Quarterly Accounts /

18 sinnerschrader group quarterly financial report /201 5 Consolidated Quarterly Accounts /2015 CONSOLIDATED BALANCE SHEETS As at 28 February 2015 Assets in Current assets: Liquid funds 2,921,714 5,832,597 Liquid funds 2,921,714 5,832,597 Accounts receivable, net of allowances for doubtful accounts of 55,625 and 55,625 as at and , respectively 9,032,893 9,904,203 Unbilled revenues 4,486,813 4,556,459 Tax receivables 224,552 15,865 Other current assets and prepaid expenses 829,512 1,113,398 Total current assets 17,495,484 21,422,522 Non-current assets: Goodwill 4,028,740 4,028,740 Other intangible assets 970,491 1,107,758 Property and equipment 1,838,948 1,902,187 Tax receivables 67,422 89,938 Total non-current assets 6,905,601 7,128,623 Total assets 24,401,085 28,551,145 18

19 Liabilities and shareholders equity in Current liabilities: Trade accounts payable 3,619,269 4,547,841 Advance payments received 2,092,587 1,660,965 Accrued expenses 2,737,861 4,520,738 Tax liabilities 818, ,264 Other current liabilities and deferred income 1,914,104 2,502,083 Total current liabilities 11,182,227 13,776,891 Non-current liabilities: Deferred tax liabilities 352, ,880 Total non-current liabilities 352, ,880 Shareholders equity: Subscribed capital Common stock, stated value 1, issued: 11,542,764 and 11,542,764, outstanding: 11,327,525 and 11,235,858 as at and , respectively 11,542,764 11,542,764 Treasury stock, 306,906 and 306,906 as at and , respectively 377, ,778 Additional paid-in capital 3,646,096 3,654,636 Reserves for share-based compensation 265, ,077 Accumulated deficit (incl. revenue reserves) 2,236, ,487 Changes in shareholders equity not affecting net income 25,796 25,162 Total shareholders equity 12,866,673 14,075,374 Total liabilities and shareholders equity 24,401,085 28,551,145 The accompanying notes are an integral part of these Consolidated Financial Statements. 19 sinnerschrader group quarterly financial report /201 5 Consolidated Quarterly Accounts /2015

20 sinnerschrader group quarterly financial report /201 5 Consolidated Quarterly Accounts /2015 CONSOLIDATED Statements of operations from 1 September 2014 to 28 February 2015 in Q2 2014/2015 Q2 2013/2014 H1 2014/2015 H1 2013/2014 Gross revenues 11,874,835 12,096,422 25,367,834 23,808,424 Media costs 1,298, ,359 2,390,879 1,694,463 Total revenues, net 10,576,329 11,292,063 22,976,955 22,113,961 Cost of revenues 8,336,221 8,449,963 18,090,780 16,500,497 Gross profit 2,240,108 2,842,100 4,886,175 5,613,464 Selling and marketing expenses 1,139, ,450 2,103,369 1,700,524 General and administrative expenses 1,129,373 1,202,107 2,481,312 2,421,997 Research and development expenses 249,519 65, , ,755 Other income and expenses, net 91,744 25, ,311 89,077 Operating income 186, ,555 85,849 1,409,265 Financial income 497 3,817 1,917 12,459 Financial expenses 2,157 3,796 3,577 6,049 Income before provision for income tax 188, ,576 84,189 1,415,675 Income tax 28, , , ,721 Net income 160, ,858 18, ,954 Net income attributable to the shareholders of SinnerSchrader AG 160, ,858 18, ,954 Net income per share (basic) Net income per share (diluted) Weighted average shares outstanding (basic) 11,255,025 11,112,787 11,245,441 11,113,848 Weighted average shares outstanding (diluted) 11,362,783 11,194,758 11,381,826 11,162,835 The accompanying notes are an integral part of these Consolidated Financial Statements. 20

21 CONSOLIDATED Statements of comprehensive income from 1 September 2014 to 28 February 2015 in Q2 2014/2015 Q2 2013/2014 H1 2014/2015 H1 2013/2014 Net income 160, ,859 18, ,954 Other comprehensive income Items that may be reclassified to profit or loss in future periods Foreign currency translation adjustment Taxes on income recognised directly in shareholders equity Changes in shareholders equity not affecting net income Consolidated comprehensive income 160, ,117 17, ,932 Comprehensive income attributable to the shareholders of SinnerSchrader AG 160, ,117 17, ,932 The accompanying notes are an integral part of these Consolidated Financial Statements. 21 sinnerschrader group quarterly financial report /201 5 Consolidated Quarterly Accounts /2015

22 sinnerschrader group quarterly financial report /201 5 Consolidated Quarterly Accounts /2015 CONSOLIDATED Statements of shareholders equity from 1 September 2014 to 28 February 2015 in Number of shares outstanding Balance as at ,122,612 11,542,764 Comprehensive income Deferred compensation Purchase of treasury stock 36,754 Re-issuance of treasury stock 50,000 Balance as at ,135,858 11,542,764 Balance as at ,235,858 11,542,764 Comprehensive income Common stock Deferred compensation Re-issuance of treasury stock 91,667 Balance as at ,327,525 11,542,764 The accompanying notes are an integral part of these Consolidated Financial Statements. 22

23 Treasury stock Additional paid-in capital Reserves for share-based compensation Retained earnings/losses Other comprehensive income Total shareholders equity 730,252 3,669, ,271 2,712,724 25,190 12,047, , ,932 20,070 20,070 70,364 70,364 87,613 2,113 85, ,003 3,667, ,341 2,102,770 25,168 12,692, ,778 3,654, , ,487 25,162 14,075,374 18, ,890 1,348,303 1,348,303 5,408 5, ,624 8, , ,154 3,646, ,485 2,236,314 25,796 12,866, sinnerschrader group quarterly financial report /201 5 Consolidated Quarterly Accounts /2015

24 sinnerschrader group quarterly financial report /201 5 Consolidated Quarterly Accounts /2015 CONSOLIDATED Statements of cash flows from 1 September 2014 to 28 February 2015 in H1 2014/2015 H1 2013/2014 Cash flows from operating activities: Net income 18, ,954 Adjustments to reconcile net income to net cash used in operating activities: Amortisation of intangible assets from first consolidation 61,278 Depreciation of property and equipment 574, ,157 Share-based compensation 5,408 20,070 Gains/losses on the disposal of fixed assets 3,835 5,925 Deferred tax provision 346, ,328 Changes in assets and liabilities: Accounts receivable 871, ,991 Unbilled revenues 69,646 1,291,272 Tax receivables 186,171 15,367 Other current assets 283, ,786 Accounts payable, deferred revenues and other liabilities 1,084, ,282 Tax liabilities 273, ,951 Other accrued expenses 1,782,878 26,300 Net cash provided by (used in) operating activities 1,337,494 1,494,601 24

25 in H1 2014/2015 H1 2013/2014 Cash flows from investing activities: Purchase of property and equipment 393, ,531 Proceeds from the sale of equipment 15,572 3,572 Incoming payment of capital investments in the context of cash management 1,000,000 Net cash provided by (used in) investing activities 377, ,041 Cash flows from financing activities: Payment to shareholders 1,348,303 Payment for treasury stock 70,364 Incoming payment for treasury stock 152,084 85,500 Net cash provided by (used in) financing activities 1,196,219 15,136 Net effect of rate changes on cash and cash equivalents Net increase/decrease in cash and cash equivalents 2,910,883 1,210,446 Cash and cash equivalents at beginning of period 5,832,597 4,949,325 Cash and cash equivalents at end of period 2,921,714 3,738,879 thereof back-up of bank guarantees 451, ,575 For information only, contained in cash flows from operating activities: Interest payment received ,863 Paid interest 3,577 2,126 The accompanying notes are an integral part of these Consolidated Financial Statements. 25 sinnerschrader group quarterly financial report /201 5 Consolidated Quarterly Accounts /2015

26 sinnerschrader group quarterly financial report /201 5 Consolidated Quarterly Accounts /2015 Notes as at 28 february

27 1 general Foundations The Consolidated Interim Financial Statements as at 28 February 2015 of Sinner Schrader Aktiengesellschaft ( Sinner Schrader AG or AG ) and its subsidiaries ( Sinner Schrader Group, Sinner Schrader, or Group ) for the first half and the second quarter of the 2014/2015 financial year from 1 September 2014 and 1 December 2014, respectively, to 28 February 2015 were prepared according to the International Financial Reporting Standards ( IFRS ) of the International Accounting Standards Board ( IASB ) in force on the report date, taking account of the interpretations of the International Financial Reporting Interpretations Committee ( IFRIC ) and in compliance with the standard for interim financial reports specified by DRS 16 of the German Accounting Standards. They were not subject to auditing and should be read in conjunction with the Consolidated Financial Statements of Sinner Schrader AG as at 31 August The accounting, valuation, and consolidation principles of the Quarterly Report at hand are unchanged from the Group s Consolidated Financial Statements as at 31 August They are disclosed and explained in the Group s Consolidated Financial Statements as at 31 August 2014, which are published in the 2013/2014 Annual Report. 27 sinnerschrader group quarterly financial report /201 5 Consolidated Quarterly Accounts /2015