ANNUAL REVIEW & ACCOUNTS

Transcription

1 ANNUAL REVIEW & ACCOUNTS ANNUAL REVIEW 1

2 Contents 4. About HEG 6. at a Glance 8. Our Strategy 11. Company Highlights 12. Chairman s Statement 14. Group CEO Statement 20. Group CFO Statement 22. Environmental, Social and Governance Report 25. Core Brands 30. HEG Locations 33. HEG Management 35. Our Shareholders 37. Financial Report ANNUAL REVIEW 3

3 About HEG With our purchase of intergenia AG in January 2015, HEG is now Europe s largest privately owned hosting provider, biggest domain registrar in the UK and Germany s third largest registrar. We are Germany s leading provider of Managed Hosting and number two in Europe. We currently own five data centre facilities in Europe, supported by over 700 employees. HEG has more than 1.7 million customers with over 7 million domain names under management. We focus on small and medium sized businesses (SMEs) along with enterprise businesses. We understand that the companies that put the web at their heart (we call them Next Generation Business ) are redefining commercial success. Our focus is to empower our customers to get the most out of the web through our products, our customer support or our How to guides. As a Next Generation Business ourselves we are embracing new forms of working together, new ways of working with our customers and with society, through our focus on ESG (Environment, Social and Governance) improvements. Our vision is to be the first choice for those looking to make the most of what the web can do: HEG the first choice for any Next Generation Business. HEG believes that every company can benefit from harnessing the power of the internet, whoever they are and whatever their needs. Be it those who ve never been online before or those who need assistance to improve their online presence; be it competent professionals who need powerful web tools and dedicated support to evolve their skills and their businesses; or businesses and enterprises with more complex IT requirements, who need a managed solution, combining reliable hosting technology with a flexible and personal service. 4 ANNUAL REVIEW

4 HEG at a Glance Our products and services Domain Names Web Hosting Website Builder Online Marketing Tools 49%* Mass Hosting Assist Mass Hosting Equip 30%* Premium Web Hosting Virtual Private Servers Dedicated Servers Reseller Hosting HEG s mission is to web enable Next Generation Businesses like no other. We support businesses, whatever their size, to succeed and grow online because we think that those businesses that put the internet at their heart, will redefine their commercial success. Our Mass Hosting teams focus on the SME market and split into two core divisions: Assist Me: We focus on customers who need higher levels of assistance to develop online. We believe that succeeding online should be achievable for all and as such our services are designed to be effortlessly easy and straightforward. Equip Me: Our second team focuses on customers who want to build their web presence themselves. From building a website to optimising core aspects of a server, our products and services are designed to work simply. Our Managed Hosting team focuses on SME and enterprise customers, to offer fully customisable cloud hosting solutions matched with the highest performance and availability Managed Hosting: We understand a clients need for the reliability and security that they might expect from a big provider, but that they also want the informality and closeness of a relationship with a smaller, noncorporate player. We offer the best of both worlds. Reliability, security and dependability the hallmarks of our Managed Hosting offering alongside the benefits of a personal approach. 21%* Managed Hosting Web and Mail Clusters Managed Hosting Managed Cloud * revenue split 6 ANNUAL REVIEW ANNUAL REVIEW 7

5 At a Glance Operational highlights* Company 152 Turnover million Gross Profit million Profitable Mass and Managed Hosting business divisions Technology 5 data centre facilities, run and managed Adjusted EBITDA million 15 CAPEX 14.8 million 700+ More than 700 employees globally 1.7 million Customers across Mass and Managed Hosting Turnover origin 7 million Domain names registered 84 Germany million United Kingdom million Other Countries million (*Excluding intergenia AG, completed 2015) 8 ANNUAL REVIEW ANNUAL REVIEW 9

6 Our Strategy and Strategic Priorities Company Highlights HEG strategy Company reorganisation Our vision To web enable Next Generation businesses like no Strategic priorities Group CEO other. We want to be the first choice for companies looking to make the most of the web Focus on outstanding customer service CEO Mass Hosting CEO Managed Hosting Group CFO Our mission We listen to our customers, solve their problems, and deliver the best possible support Company highlights Our values Helpful: If we can, we do. Open: We are honest and transparent with each other and our customers. We talk: We prefer talking to typing. Continued focus on the SME market Become agile and consolidate Acquisition of intergenia AG and signup.to with significant synergy potential Completion of Leeds data centre Refinancing in the course of intergenia AG acquisition EBITDA 12% year on year We can: buildout in May 12% growth We embrace new ideas and act on them. Excellence: Become a valued brand in our core markets Good isn t enough. The best is better. For both our customers and our company. 10 ANNUAL REVIEW ANNUAL REVIEW 11

7 Chairman s Statement I am pleased to report in my second year as Chairman the considerable strides forward that HEG has made. HEG continues to perform well in the competitive technology sector. HEG has increased revenues year on year by 5% from 144.5m to 152.5m. More importantly we have driven EBITDA growth to + 12% year on year rising to 60.9m from 54.4m. This is an exceptional achievement in the increasingly crowded technology sector, with particularly aggressive pricing strategies in web hosting and domain registration pursued by the competition in HEG s main markets of Germany and the UK. HEG has also made considerable strides in its acquisition strategy and the newly acquired companies continue to drive bottom line and top line growth. HEG has continued to invest in companies that expand its product range and the number of services it can provide for its 1.7m customers. Last year HEG acquired Signup.to and intergenia AG. Signup.to is a UK based marketing platform and now forms part of HEG s new SoftwareasaService (SaaS) strategy, allowing its Mass Hosting brands to sell products to their 1.7m customer base. The second acquisition was intergenia AG, and was anounced at the end of. At the time of acquisition, intergenia had more than two million active websites hosted on its platforms with over 20,000 customers. This vital acquisition increased HEG s data centre 12 ANNUAL REVIEW capacity especially in the dedicated server market. Intergenia s PlusServer will become HEG s main brand, serving the Managed Hosting market; enabling HEG to grow and target new and emerging markets. Lastly, HEG implemented a root and branch organisational restructure designed to further step change EBITDA growth by better integrating the newly acquired companies across technology and marketing platforms to increase Group efficiencies. This has also enabled the Group to better focus on different target customer Groups and fully align HEG teams behind more focused goals. HEG is already the number one domain registrar in the UK, and number three in Germany and the number one Managed Hosting provider in Germany. Last year I remarked that HEG had a highly ambitious growth strategy. Whilst stretching, we believe these targets to be achievable with the right focus, and last year s numbers validate such a bold strategy. HEG is a company with a strong entrepreneurial drive, reflected heavily in the approach to acquisitions. Working with the Board, we have overseen a more organised and structured business to enable HEG to reach the next stage of the Group s ambition. HEG s goal is to become the number one player in all of its core markets whilst still adapting to the competitive market conditions seen within the technology industry. Lord Birt Chairman My role has been to oversee a more organised and structured business to enable HEG to reach the next stage of its growth ambitions Lord Birt Chairman

8 Group CEO Statement I am delighted to report on the continued positive headway that HEG continues to make. The last 12 months have been characterised by the many activities aimed at further establishing our presence and success within our core markets. I am thrilled with our performance and proud to report on this growing momentum. Organisation Update Last year was without a doubt a year of considerable change. The need for transformation was necessary, especially considering the growth of the organisation. In, HEG altered its organisational structure as part of the business s transformation into two clear and distinct operating divisions Mass and Managed Hosting. The business s realignment meant some change at Board level. In November, Dr. Andreas Palm joined the Board as CEO Mass Hosting, joining from 1&1 Internet AG. In 2015, Thomas Strohe, cofounder of intergenia AG, was appointed CEO Managed Hosting. We also appointed our first Group CMO, Kate Cox, who joined in 2015, representing our renewed focus on marketing to help deliver our next step change in growth. Andreas, Thomas and Kate will all bring a new vision and specialism to their areas of responsibility and I look forward to working with them. Two new divisions for growth Such farreaching operational and structural shifts have clear strategic objectives: To strengthen our sales in our core markets To continue to put our customers at the heart of our company To consolidate service and technology offerings post mergers and acquisitions Mass Hosting Our Mass Hosting team will concentrate on the large number of businesses who need accessible and automated tools to manage and grow their online presence. This restructuring will be delivered through two dedicated teams within Mass Hosting. The first team focuses on customers who need higher levels of assistance to develop online, and our 123reg and domainfactory brands will concentrate their products and services on this customer segment. Our second Mass Hosting team focuses on customers who want to build their web presence themselves. These customers tend to be web developers, designers or business owners and IT specialists, and we provide them with the right tools for the job. Our brands, Host Europe and Heart Internet will focus their offerings towards this customer segment. Managed Hosting Following the completed acquisition of intergenia AG in 2015, HEG is the leading Managed Hosting provider in Germany and second largest in Europe. Our Managed Hosting brand, PlusServer provides the technological benefits that comes with being Germany s Managed Hosting market leader: reliability, security, and dependability; alongside the benefits of a personal approach with 24/7 expert to expert customer support, alongside a clear understanding of customer needs. This team will focus on organisations whose choice of hosting solution is mission critical to the success of their business. Our Managed Hosting team will deliver premium outsourcing solutions for businesses, tailored to their exact requirements. As HEG s Managed Hosting offering is the largest in Germany, this is where our core market will continue to be based. Creating these two distinct business divisions will allow HEG to harness the expertise within our ever expanding Group to meet our goal of becoming the number one provider in each of our core markets. Strategic Priorities Last year we worked hard to align the whole Group to central priorities. This gave me the chance to visit all locations across the expanded HEG and speak to employees about the need to put our customers at the centre of everything we do. These priorities have been shaped to allow us to consolidate our position as market leaders but also define the areas where development of our offerings can be made to meet our growth targets. We identified these overarching areas as: Focus on outstanding customer service Continued focus on the SME and SaaS market Become agile and consolidate Become a valued brand in our core markets I would like to take this opportunity to update on our progress within these key areas. Focus on Outstanding Customer Service Customer service is one of the clear differentiators for HEG and greater improvements will allow us to cement our leading positions in our core target markets. We take pride in our customer service delivery and we have made enormous strides in the past year to develop our service framework for the benefit of our customers. The Executive Board are committed to outstanding customer service and have worked with our Group Human Resources department to develop customer service focused yearly objectives. We measure the success on our delivery through the Net Promoter Score. The NPS has become an accepted metric for customer loyalty and satisfaction due to its broad adoption. In we 14 ANNUAL REVIEW ANNUAL REVIEW 15

9 Group CEO Statement made wide sweeping changes to how we measure customer satisfaction and have introduced both Support and Marketing NPS on all HEG brands. Marketing NPS: Performance of each brand; measuring performance year on year. Support NPS: Measuring customers who have contacted a brands support team; measuring performance year on year. In, we implemented uniformed Support NPS processes which will allow us to track performance in a more cohesive fashion. Focus on SME and SaaS Markets Today, there are more than 20 million small and medium sized businesses in the European Union alone and we believe that the potential for these companies across Europe lies online. For this reason, we have aligned our products and services to reflect this, and offer full endtoend product responsibility from strategic vision through execution and ongoing maintenance targeted at small businesses, with Mass and Managed Hosting playing a central role in this. This refocus paved the way for the significant hire of Matt Barry, Group Head of Product Management, from Comcast, (who has since been promoted to COO, Mass Hosting) whose role is to bring new products, that our customers love, to market. In, the process of refocusing our Product and Development teams began to deliver upon customer need first and I am excited to see the results of this. Our SaaS strategy will be vital to the sustained growth of HEG especially due to the rise of nontraditional players moving into the hosting space. Creating separate business divisions will allow us to better serve the needs of small businesses by marketing to them in a language that they understand. Our strategy is to create a new model, creating SaaS products and services for less technical small businesses which will give them a full suite of competitive products to help them grow online. Become Agile and Consolidate HEG has implemented agile methodologies across the whole Group through the process of Scrum ideology. This better way of working will allow us to increase individual team s output at a fraction of the cost. This commitment has been matched with investment in training and development for all staff across all locations. Become a Valued Brand in our Core Markets Our brands are our backbone: they are what customers see and their success is vital to the Group s growth. Creating the right structure and concentration has been a key part of creating valuable and recognised brands within our key markets. This approach has been created to develop pride for each brand through a customer centred approach. To achieve this, last year strategic roles were created for each brand through the hiring of Brand Directors. Each Brand Director has full endtoend profit and loss responsibility and works in matrix structure. In, our brands were recognised across the industry for their exceptional performance and service offerings. Host Europe was once again recognised in the Experton Group Cloud Vendor Benchmark and remains the only German hosting provider represented in the Leader s Quadrant in the Public Cloud Services Company. Heart Internet was the winner in Micromart s Editor s Choice Awards. This award, based on independent testing, determined Heart Internet as the best performing web host in. Additionally, Heart Internet was also recognised in the PC Pro Awards as Best Web Host for the previous year. Heart Internet scored 94% in the UK s largest independent IT customer satisfaction survey, voted by customers and readers of PC Pro magazine. Start Your Business magazine named 123reg Best Domain Name Registrar, for the second consecutive year. The award highlighted 123reg for its work in helping startups get their businesses online and to maximize their customers business potential through better ways of using the web. A Simple Corporate Brand Towards the end of, the decision was made to rebrand Host Europe Group to the shorter HEG. The decision was born out of the need not to limit ourselves to Europe. By taking away our geographic location in our name, we now have a unique opportunity to begin exploring emerging markets to enhance business growth. Compliance and Governance I can also report on our work, related to corporate governance. In, the business formed a new Compliance Committee; tasked with addressing all issues relating to governance that affect the business and holds a view of the compliance risks faced by HEG. This function will administer and oversee the business compliance programme. The Committee is formed of Heads of Departments from across our brands with specific interest from Legal, HR and Finance. 16 ANNUAL REVIEW ANNUAL REVIEW 17

10 Group CEO Statement This cross location team is dedicated to ensuring that HEG continues to work in a transparent and ethical manner, putting procedures and measures in place to make sure that all employees of HEG follow both local and international law. Whilst this is not new for our organisation, the new programme is more focused on bringing clarity and consistency to our policies, across all locations. In, the Committee was instrumental in developing the framework for a new Code of Conduct, Compliance Register and a Whistleblowing policy. All our employees will be trained on these policies by the end of Challenges I firmly believe that HEG is well positioned to continue to captalise on market opportunities. Our new product strategy is defined to match the needs of our customers today but is also flexible enough to meet their ever changing needs and the pace of change in the sector. Future Outlook Our business model gives us the flexibility to look for future opportunities as well as consolidate our strengths within our key markets. HEG has an ambitious growth strategy which will need much attention and we are excited about achieving this. and accountabilities. Fundamental to this will be our work to clearly define our brands. Further to this, our future outlook will identify the significant and specific synergies towards the successful integration and further consolidation of intergenia systems and products into HEG. HEG continues to be a strong and attractive business backed by highly supportive investors which has given us considerable financial power to further consolidate within a fragmented market. HEG s continuous success is steered by its successful and experienced senior leadership team, and passionate and motivated staff that excel in delivering exceptional levels of service to our customer s every single day. Supporting this, we have bestinclass technical infrastructure to deliver highend services to online businesses. I would like to thank everyone at HEG for their outstanding contributions this past year. The lasting success of HEG is based on the great people that help businesses to succeed and grow online. Working as one united team, HEG continues to build on its market leading position. Patrick Pulvermüller Group Chief Executive Officer The next 12 months will see us develop managerial concentration to formulate clear responsibilities 18 ANNUAL REVIEW HEG s continuous success is steered by its successful and experienced senior leadership team, and passionate and motivated staff that excel in delivering exceptional levels of service to our customers Patrick Pulvermüller Group CEO

11 Group CFO Statement HEG achieved strong financial results in and the business has continued to perform soundly in its core markets. We continue to operate a high margin business in an attractive and healthy industry. Whilst was a year of much consolidation, our investments have led to notable increases in revenues and EBITDA in the 12 months to 31 December. If turnover on a likeforlike basis was restated at the year end GBP:EUR exchange rate of , turnover would be 154.2m for, compared with 141.7m for showing growth of 8.8% versus prior year. On the same basis EBITDA would be 61.5m for, compared with 53.9m for showing growth of 14.1%. HEG continues to reflect a highly attractive financial profile and we continue to post healthy and sustainable revenues. Our two sizeable business divisions, Mass and Managed Hosting, continue to provide the business with strong market positions. HEG has strong operational perfomance indicators including, adding around 500,000 services on a net basis per year; summing up to almost 8million services provided to almost 1.7million direct customers. I said last year that we were acutely aware of the need to ensure that our infrastructure meets the needs of our customers. I am delighted to report that in we completed the first phase of our data centre buildout in Leeds and our acquisition of intergenia further enhances our core infrastructure. Continued investment in our IT infrastructure will also help to build a foundation on 20 ANNUAL REVIEW which we can base our growth and consolidation plans for the coming years. was a landmark year for the domain name industry with the first full year of the launch of new generic Top Level Domain Names (gtlds). HEG holds a top position of global domain registrars, with particularly strong sales figures for.london and.xyz. As the market becomes more educated, HEG remains well placed to take advantage of this relatively untapped opportunity. The hosting industry continues to offer businesses like HEG strong growth prospects. As the European economy continues its shift online, businesses rely more and more on gaining new customers and retaining them through the internet, and are steadily increasing their online advertising spends to drive traffic to their sites. As the UK s number one domain registrar, we sell and manage more.uk domains every day than any other registrar, with one in three new.uk domains sold by HEG in the UK, and we are third largest in Germany. Our Managed offering is number one in Germany and second largest in Europe and the business continues to be the largest reseller of hosting services in the UK. HEG s diverse mix of Mass and Managed Hosting services, combined with customer service excellence, means that we are able to win new customers, meet their wide range of needs and retain them. Tobias Mohr Group Chief Financial Officer As the UK s number one, we sell and manage more.uk domains every day than any other registrar, and we are third largest in Germany Tobias Mohr Group CFO

12 Environmental, Social and Governance HEG is committed to the guiding principles of Environmental Social Governance (ESG) and aims to carry out all business practices to the highest of ethical standards. We act responsibly in our decision making in order to make a positive contribution to the communities we work in. Environmental Sustainability A United Nations report titled: Principles for Responsible Investment highlighted that over 40% of people s feelings about a company s reputation is based on their perceptions of the company s ESG procedures. We subsequently conducted a full reassessment of our current policies to determine the most significant issues and opportunities. Following this, a new policy was developed to encompass the current status of each area in view of our commitment to ESG. Environmental sustainability is a crucial component as we are a business that is fully dependent upon our data centres. We are committed to considerably reducing our carbon footprint. We do this by putting Power Usage Effectiveness (PUE), a metric used to measure the efficiency of a data centre, at the heart. This year we can report on our average Group weighted PUE (for all HEG data centre facilities), which stands at We expect these figures to reduce further as we continue to increase efficiencies in We minimise our consumption of natural resources and manage waste through responsible disposal, reuse and recycling. HEG recognises that the concept of environmental governance is a means of increasing citizens participation in environmental policy and technological choice, in order to make policy processes more deliberating and socially inclusive. In Germany, we have implemented the Plantatree programme in conjunction with our partner PRIMAKLIMAweltweite.v. HEG offers its customers the chance to actively support the programme by simply adding the option to plant a tree when placing an online order for only 1. In 2015, we will extend this initiative across all our brands to offset the carbon emissions that server hosting produces. Social Responsibility As part of our social responsibility to employees health and wellbeing, HEG Romania participates in the sponsorship of local sports clubs with funds used to cover costs for equipment, training camps and courses. We have continued our support with the project Lets support the little ones of the KOKORO Club in Botosani, Romania. We also try to support underprivileged children where possible and provide necessary financial aid for school supplies, books and medical treatment. HEG will continue to commit great focus on community outreach in Governance We are committed to areas of good governance. In we created the Compliance Committee, Risk Register and Whistleblowing policy. By the end of 2015 all employees will be fully trained within these areas. Diversity HEG is an equal opportunities employer. Applications for employment by disabled persons are always fully considered. In the event of members of staff becoming disabled every effort is made to ensure that their employment with the Group continues and the appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of a disabled person is identical to that of a person who does not suffer from a disability. Nondiscrimination We will never discriminate based on race, colour, religion, gender, sexual orientation, disability or any other factor governed by law. We act fairly when hiring any individual or contracting with suppliers and challenge any discriminatory behaviour in the workplace. Any decisions related to employment matters are based purely on merit. We believe diversity is a great aspect of our business and our hiring practice implements this value. We aim to ensure that there is equal opportunity for all regardless of gender or any other characteristics. We recognise and celebrate the importance of diversity in our workplace so we are as diverse as the customers we serve. In, 22.5% of HEG s workforce was female with 77.5% male. Equal opportunities We are committed to equal opportunities in employment and actively promote that we all share responsibility for treating each other with mutual respect. At HEG we strive to provide an inclusive work environment in which different ideas, perspectives and beliefs are respected and encouraged. Human Rights We base relationships with employees on respect for human rights and the rights of workers. At HEG, we will not tolerate child labour or forced labour. We also ensure that both, HEG and/or our suppliers, comply with acceptable workforce welfare standards. We strive to ensure that our employees are paid the acceptable living wages and that our suppliers also maintain these standards. We do not use finished goods produced by child or forced labour. We will further avoid engaging in business with suppliers who do not comply with applicable local and international laws. 22 ANNUAL REVIEW ANNUAL REVIEW 23

13 Our Core Brands Managed Hosting PlusServer* PlusServer has focused on the German Managed Hosting market for over 15 years and is now the clear leader in this field. Its solutions are aimed specifically at business customers, ranging from ambitious, small to medium sized enterprises through to large international companies. PlusServer provides reliability, security and dependability; alongside the benefits of a personal approach with 24/7 experttoexpert customer support. PlusServer s offering consists of servers, load balancers, storage systems, firewalls and fully customisable cloud hosting solutions; all matched with the highest performance and availability. (*Aquired in 2015 as part of intergenia AG) ANNUAL REVIEW 25

14 Our Core Brands Mass Hosting 123reg 123reg is the UK s largest domain registrar, registering every third.uk and co.uk domain name every year for more than five years. 123reg manages over 3 million domain names and hosts more than 1.7 million websites with more than 800,000 customers. 123reg provides easy to use and intuitive products for all website needs, with a particular focus on providing online services to the UK s small business community. The philosophy is simple: the internet should be for the many and not the few which, is why every single product is designed for the small business owner looking for an easy and hasslefree way of getting online. domainfactory domainfactory is one of Germany s largest web hosting companies, managing more than 1.2 million domain names and has more than 180,000 customers. Providing easy to use and intuitive products for all website needs, domainfactory has a particular focus on providing online services to Germany s SMEs and web experts including resellers. domainfactory aims to provide excellent customer support through its local, friendly, knowledgeable team with NPS scores consistently over 70%. 123reg enables SMEs to maximise their potential online to significantly grow their business through expanding and improving their online presence, helping businesses every step of the way with excellent local and friendly customer support. 26 ANNUAL REVIEW ANNUAL REVIEW 27

15 Our Core Brands Mass Hosting Host Europe Host Europe targets a technically adept audiences including web developers, web designers, hosting resellers or business owners. Host Europe focuses on equipping webskilled customers with the right tools for them to succeed online; be that with domain names, professional web hosting, softwareasaservice products and virtualised server environments. Host Europe supplies reliable and welldesigned services that work simply first time. Host Europe operates across Germany, Spain and Switzerland. Host Europe s infrastructure includes awardwinning energyefficient data centres in Germany, certified with data center excellence standards TÜV Trust IT and the TÜV seal ISO In Host Europe was again recognised in the Experton Group s Cloud Vendor Benchmark. Heart Internet Heart Internet is one of the UK s leading web hosting and reseller hosting companies focusing on web design, web developer, and technically adept business customers. No matter what it is from building a site to optimising core aspects of a server Heart Internet provides reliable and welldesigned services to over 500,000 customers, both direct customers and indirect customers. Indirect customers resell our hosting services to other end users. Heart Internet s success has been driven by excellent customer support and reliable hosting infrastructure, growing rapidly to become the UK s number one choice for hosting websites amongst web creatives as measured by winning PC Pro, Best Web Host award. 28 ANNUAL REVIEW ANNUAL REVIEW 29

16 Our Locations Office locations HEG operates some of the most innovative and efficient Data Centres and office facilities in Europe. Behind every website and web service sits a data centre and that is why it is critical that businesses are backed by a reliable and secure infrastructure from a provider they can trust. We take this commitment incredibly seriously and understand the importance of a firstclass service coupled with an assurance of transparent accountability. We run and manage five state of the art facilities across Europe. 30 ANNUAL REVIEW Host Europe Group Ltd The Old Vinyl Factory, Hayes, London

17 HEG Management Lord Birt 02. Patrick Pulvermüller 03. Tobias Mohr 04. David Barker 05. Florian Luther 06. Thomas Railhac 01. Lord Birt Chairman After a successful career in ITV, Lord Birt was the BBC s DirectorGeneral from 1992 until During his tenure, Birt won plaudits for equipping the corporation for the digital age. 03. Tobias Mohr Group CFO HEG Tobias Mohr joined HEG in April 2008, and since then he has been responsible for the setup and streamlining of the Group s financial systems. Tobias is also involved in the improvement of controlling and reporting processes within the Group and has been heavily involved in Following his time at the BBC, Birt has held a number repositioning HEG s product offering in the UK. of high profile positions, including Chairman of PayPal Europe. Birt became a crossbencher in the House of Prior to joining HEG, Tobias worked for 5 years for Lords in 2000, and was Strategy Adviser to the Prime Minister from In, Lord Birt was United Internet / 1&1 Internet AG as the Head of Financial Controlling for the Webhosting Division in appointed nonexecutive Chairman of HEG. Germany and internationally. Tobias has also held various financial positions within the private banking and asset 02. Patrick Pulvermüller Group CEO HEG management sectors. Patrick Pulvermüller is Group CEO of HEG Europe`s largest privately owned hosting provider. Patrick joined the Group in 2001 as a sales manager, and was the businesses fourth employee. Since becoming Group CEO in, Patrick has been the driving force behind HEG s organic and inorganic growth, and has played a pivotal role in the acquisitions of domainfactory, Telefonica Online Services and most recently, intergenia AG. Thanks to Patrick`s dedication, HEG today is the leading Managed Hosting player in Germany and the UK s largest domain registrar. Patrick Pulvermüller has an MBA from the Open University Business School and is an expert in operational management and strategic financial planning. 32 ANNUAL REVIEW ANNUAL REVIEW 33

18 04. David Barker Executive Director Cinven David leads Cinven s TMT sector team and is a member of the UK and Ireland regional team. He has been involved in numerous transactions, including Aprovia, CPA Global, Eutelsat, HEG, MediMedia, Northgate Public Services, Springer, Ufinet, Visma and Ziggo. David has a BA in Natural Sciences from Cambridge University and is a Chartered Accountant. He joined Cinven in Thomas Railhac Executive Director Cinven Thomas is a member of Cinven s TMT sector team and the regional team for France. He has been involved in a number of transactions, including HEG, Numericable Group and Ufinet. 05. Florian Luther Executive Director Cinven Florian is a member of Cinven s TMT sector team and the regional team for Germany and Central Europe. He has worked on a number of transactions, including HEG, JOST and SLV. Prior to joining Cinven, Florian worked in corporate finance at UBS, advising companies within the metals and mining sector. Previously, he was at HewlettPackard. Florian has a joint MA in Business Administration and Computer Engineering and an MA in Computer Science, from the Technical University of Berlin. He joined Cinven in About Cinven Cinven is a leading European private equity firm, founded in 1977, with offices in Guernsey, London, Frankfurt, Paris, Madrid, Milan, Luxembourg, Hong Kong and New York. It acquires Europebased companies that require an equity investment of 100 million or more. Its European focus and expertise are complemented by an ability to capitalise on global growth opportunities through its offices in Asia and the Americas. The firm focuses on six sectors: Business Services, Consumer, Financial Services, Healthcare, Industrials, and Technology, Media and Telecommunications (TMT). Cinven acquires successful, highquality companies and works with them to help them grow and develop, using its proven valuecreation strategies. It takes a responsible approach towards its portfolio companies, their employees, suppliers and local communities, the environment and society. Prior to joining Cinven, Thomas worked in the private equity division of Goldman Sachs (GS Principal Investment Area) in London. Thomas has an MSc in Engineering from the École Centrale Paris. He joined Cinven in ANNUAL REVIEW ANNUAL REVIEW 35

19 Financial Report ANNUAL REVIEW 37

20 Officers and Professional Advisers Strategic Report Directors D Barker Lord Birt F Luther T Mohr P Pulvermüller T Railhac Secretary J Shutler Registered Office 11/15 Seaton Place St Helier Jersey JE4 0QH Bank Lloyds Bank Plc City Office 1115 Monument Street London EC3V 9JA As a private equity owned company, HEG is committed to providing full and transparent reporting of its performance as detailed in the guidelines established by the Walker Review in 2007 and updated by the Guidelines Monitoring Group in Principal activity and future developments Host Europe Holdings Limited and its subsidiaries (the Group) provides web hosting, application hosting, managed hosting services and internet domain names mainly to SME customers. The Group plans to continue its existing activities. Business review On 18 August the Group acquired SignUp Technologies Limited for 3.1m consideration including costs of 0.1m. The acquisition was funded by cash of 2.3m with the remaining consideration left outstanding and being dependent on performance. Turnover on a likeforlike basis (for the full and calendar years for the acquired companies including any preacquisition periods) was 152.5m for, compared with 144.5m for. Turnover for the Group is expected to increase further in 2015 driven by acquisitions, scheduled price increases and forecasted increase in the Group s customer base. The results for the Group for the year ended 31 December show an adjusted EBITDA of 60.8m compared to total senior debt of 272.4m. With 19.3m of cash liquidity and with revenues and EBITDA expected to grow, the business appears well funded for the foreseeable future. During the year ended December the Group generated revenues of 151.5m and a loss on ordinary activities of 76.3m. Auditor Deloitte LLP Reading United Kingdom 38 ANNUAL REVIEW ANNUAL REVIEW 39

21 Strategic Report An analysis of the likeforlike comparison is shown below: The Group has financial key performance indicators (KPIs) as follows: Turnover Likeforlike adjustment* Likeforlike Turnover Note 2 Year ended 2011 (unaudited) m Year ended 2012 (unaudited) m Year ended (unaudited) m Year ended (unaudited) m Compound Annual Growth Rate 15.0% Revenue Gross profit Adjusted EBITDA Capital expenditure Year ended m Period ended m The Group s net debt at was as follows: Adjusted EBITDA** Likeforlike adjustment* m m Likeforlike Adjusted EBITDA % *Proforma retrospective adjustment for the results of Host Europe Solutions GmbH, Domain Factory GmbH, Heart Internet Limited, Mesh Digital Limited, Host Europe Iberia (formerly RedCoruna SLU), SignUp Technologies Limited and Host Europe Suisse AG (formerly dynamicnet.ch AG) for the relevant periods preacquisition so that the likeforlike figures above include full year results for each subsidiary for each year shown. Cash Bank loans Loan notes Finance leases Total net debt (19.3) (21.4) **EBITDA is adjusted for any nonrecurring income or expense as defined in the accounting policies (see note 1). 40 ANNUAL REVIEW ANNUAL REVIEW 41

22 Strategic Report Financial risk management objectives and policies Senior management is aware of their responsibility for managing risks within their business units. Each business unit head reports to the Board on the status of these risks through management reports. Risk is regularly reviewed at Board level to ensure that risk management is being implemented and monitored effectively. The Board s policy is to ensure that the business units are empowered to run their business effectively and appropriately, bearing in mind the requirements for timely decision making and commercial reality. Through management reports, risks are highlighted and monitored to identify potential business risk areas and to quantify and address the risk wherever possible. Commercial and general risk Standard form contracts are provided for commercial use and to assist the commercial function to negotiate within approved parameters. Insurance policies are regularly reviewed to ensure these are adequate and appropriate, in line with the nature, size and complexity of the business. Credit risk The majority of the Group s customers pay in advance for services. Where services are supplied without advance payment, a credit review of the customer is performed when the order is received and subsequently on a periodic basis. Liquidity risk The Group actively maintains a mixture of longterm and shortterm debt finance that is designed to ensure the company has sufficient available funds for its operations. Currency risk The Group is exposed to movements in foreign currency exchange rates in respect of foreign currency denominated transactions and movements in respect of the translation of net assets and profit and loss of foreign subsidiaries. The Group does not hedge the translation effect of exchange rate movements in the profit and loss or balance sheet of foreign subsidiaries. Going concern The Group has net current liabilities of 42,329,000 as set out in the balance sheet on page 50. Excluding an accrual for shareholder interest the Group has net assets of 7,702,000 and made a loss in the period of 79,542,000 as set out in the profit and loss statement on page 48. In assessing whether the going concern basis is appropriate, the Directors take into account all available information about the future, which is at least, but is not limited to, 12 months from the date of approval of these financial statements. The Directors have performed this review at a company level and have also performed a review for the entire Group. The Directors have a reasonable expectation that despite the current economic uncertainty the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis in preparing these financial statements. Approved by the Board of Directors and signed on behalf of the Board Interest rate risk The Group has arranged for the majority of its debt to be on a fixed interest basis. The Group has taken out an interest rate swap to remove its exposure to floating exchange rates on bank debt. J Shutler Company Secretary 30 April ANNUAL REVIEW ANNUAL REVIEW 43

23 Directors Report The Directors present their report together with the audited financial statements for the year ended 31 December. Results and dividends The profit and loss account is set out on page 48 and shows the result for the period. The Directors do not recommend the payment of a dividend ( nil). Directors The Directors of the company during the period and to the date of approval of the financial statements were: D Barker Lord Birt F Luther T Mohr P Pulvermüller T Railhac Employment of disabled persons Applications for employment by disabled persons are always fully considered, bearing in mind the respective aptitudes and abilities of the applicant concerned. In the event of members of staff becoming disabled every effort is made to ensure that their employment with the Group continues and the appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of a disabled person should, as far as possible, be identical to that of a person who does not suffer from a disability. Employee participation Consultation with employees or their representatives has continued at all levels, with the aim of ensuring that their views are taken into account when decisions are made that are likely to affect their interests and that all employees are aware of the financial and economic performance of their business units. Auditor and disclosure of information to auditor Each of the persons who is a Director at the date of approval of this report confirms that: so far as the Director is aware, there is no relevant audit information of which the company s auditor is unaware; and the Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the company s auditor is aware of that information. Deloitte LLP have expressed their willingness to continue in office and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting. Approved by the Board of Directors and signed on behalf of the Board J Shutler Company Secretary 30 April ANNUAL REVIEW ANNUAL REVIEW 45

24 Directors Responsibilities Statement Independent Auditor s Report to the Members of Host Europe Holdings Limited The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgments and accounting estimates that are reasonable and prudent; state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies (Jersey) Law They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. We have audited the financial statements of Host Europe Holdings Limited for the year ended 31 December which comprise the consolidated profit and loss account, the consolidated statement of total recognised gains and losses, the consolidated and company balance sheets, the consolidated cash flow statement and the related notes 1 to 30. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the company s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law Our audit work has been undertaken so that we might state to the company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and auditor As explained more fully in the Directors Responsibilities Statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company s circumstances and have been 46 ANNUAL REVIEW ANNUAL REVIEW 47