6-Month Report 2007
AdLINK Internet Media AG at a glance Selected key figures acc. to IFRS 30.06.2007 30.06.2006 Change in % Financial figures Sales EUR million 104.4 86.4 20.8 Gross margin % 25.6 26.2 - EBITDA EUR million 29.7 11.2 163.3 EBT EUR million 17.6 9.3 89.2 Earnings per share (undiluted) EUR 0.50 0.15 233.3 Employees 442 348 27.0 AdLINK share Share price EUR 16.40 14.90 10.1 Number of shares 26,152,640 25,914,900 - Market capitalization EUR million 428.9 385.2 - Quarterly development (in EUR million) Q1 2007 Q2 2007 Q2 2006 Sales 50.0 54.4 45.1 EBITDA 6.7 23.0 5.8 EBT 5.4 12.2 4.8
Foreword by the Management Board Marc Stilke Chief Operating Officer and speaker Stéphane Cordier Chief Executive Officer Andreas Janssen Chief Financial Officer Dear shareholders and all interested in AdLINK, AdLINK Internet Media AG, one of Europe s leading independent networks for digital marketing solutions, can look back on a successful first half-year 2007: in a very dynamic market environment we succeeded in significantly raising sales and key earnings ratios. Sales climbed 20.8%, from EUR 86.4 million last year to EUR 104.4 million. Pre-tax earnings (EBT) rose by 89.2%, from EUR 9.3 million to EUR 17.6 million. Earnings per share improved by 233.3% and reached EUR 0.50 in the first half-year 2007 (prior year: EUR 0.15). In order to be able to react more flexibly to market changes and utilize synergies more fully, we decided to realign our display and affiliate marketing business in the countries France, the UK, Austria and Switzerland. In the UK we put our display and affiliate marketing business under joint management and will develop both brands with a single sales organization in future. In France, we will replace the technical platform of CibleClick in 2007 and migrate to the standard European affilinet solution. We will thereby discontinue the CibleClick brand (acquired at the end of 2005) and launch the affilinet brand on the French market. Impairment costs of EUR 9.4 million were incurred in the UK and France in connection with the realignment. In Austria and Switzerland we entered into a long-term cooperation with Goldbach Media AG in our display marketing business and contributed our previous investments in these countries for a cooperation to Goldbach Media AG. This resulted in income of EUR 16.8 million, so that a positive net balance of EUR 7.4 million remained, which was booked in the second quarter of 2007. Apart from these key financial figures, we also succeeded in improving the relevant market figures in our three business segments the basis of our business: In Display Marketing sales improved by 16.0%, from EUR 33.8 million last year to EUR 39.2 million. The number of unique users per month increased from 67.1 million to 77.7 million. The average number of page impressions generated per month on marketed websites also grew from 6.5 billion to 8.2 billion. We are currently expanding the fields of Targeting, Optimizing and Monitoring in this segment, in order to offer customers the best possible campaign results. For example, in initial tests we achieved excellent results in the UK with campaign-based, return-oninvestment optimizations in which running campaigns are monitored and optimized with the aid of new software tools. In the second half of 2007 we will gradually introduce this technology to further nations. In reaction to the steadily growing importance of Hamburg-based media agencies, a sales office was opened in Hamburg in the second quarter of 2007. Sales in our Affiliate Marketing segment grew by 9.5%, from EUR 32.5 million last year to EUR 35.6 million. This increase in sales was below our expectations. The reasons include slower growth from internet auction business and telecommunications in Germany, as well as a subdued development in France where some customers are waiting for the migration to our new affilinet platform. The number of program suppliers in our affiliate business rose from 1,200 last year to over 1,500. The number of affiliated websites increased from 370,000 to 400,000. The number of ad impressions generated per month improved from 4.1 billion to over 5.2 billion. In order to serve growing market needs more fully and tap additional growth potential through further internationalization, we are investing significant amounts in the realization and further development of a standardized, pan-european technical platform for Affiliate Marketing in 2007. For our French subsidiary CibleClick, we will also complete the technical migration to a platform already used in Germany and the UK in 2007. The migration is expected to be completed by the end of 2007 and will also involve the launch of the affilinet brand in France and the discontinuation of the CibleClick brand. In our Domain Marketing business, sales climbed 47.3% from EUR 20.1 million to EUR 29.6 million. At the same time, the number of domains offered for trading by Sedo grew from 5.3 million last year to 7.9 million. Over 3.6 million of these domains (prior year: 1.5 million) are available for marketing purposes. In early July 2007 Sedo further accelerated the strong growth of the dynamic US market with the acquisition of the US domain trading platform GreatDomains.com. Founded as early as 1994, GreatDomains is regarded as a pioneer of domain trading in the USA, whereby GreatDomains specializes in the purchase and sale of high-quality premium domains. The acquisition enabled Sedo to significantly strengthen its competitive standing in the important US market and extend Sedo s global lead in domain trading. Customers in the premium segment will now be offered a more varied service, which makes it even easier to make highquality domains more visible among the steadily growing number of available domains.
Foreword by the Management Board Increasing importance of online advertising Online advertising is claiming an ever greater share of the spending mix of companies and advertising agencies. Improved technology on the pages of advertisers is helping to increase acceptance for online advertising. Tools for the planning, tracking, reporting and optimizing of online campaigns are becoming increasingly powerful and clearly differentiating themselves from the possibilities of classic advertising, due to the interactive nature and direct measurability of the internet. Online advertising therefore offers advertisers a unique added value compared with traditional marketing. One further reason for this strong sector growth is the continuing spread of high-performance broadband internet connections. Thanks to this fast internet access, increasingly effective online advertising formats can now be used with moving images and Flash animations. The rising number of internet users is also contributing to the success of online advertising as is the amount of time they spend online. The spread of broadband connections and the increasing use of flat rates have improved the quality and intensity of usage even more. From the advertisers point of view, the more people using the internet and the more time they spend on it, the more attractive the medium becomes. And the better the technology, the more interesting, varied and effective the formats will be enabling advertisers to reach their target groups as efficiently as possible. Our company will continue to benefit strongly from this growing market in future. As a network of specialists, the AdLINK Group offers advertisers in various online marketing segments maximum success: advertisers are attaching increasing importance to the combination of brand environment, target-group reach and permanent return-on-investment optimization all services which we offer from a single source and in which we are especially well positioned, for example with the services Quality Ad- Networks of AdLINK Media or Affiliate Marketing of affilinet. In future, further analytical and technical targeting instruments, such as behavioral targeting, re-targeting and technical response optimizing will strengthen this trend and contribute to the continued growth of the AdLINK Group. We therefore feel well positioned for further growth in the second half of 2007. Despite the fact that the second quarter failed to match our expectations, we still believe that we can benefit from dynamic market growth in 2007 and reach our targeted growth in sales and earnings. Montabaur, August 9, 2007 Marc Stilke Stéphane Cordier Andreas Janssen
Management report for the first half-year 2007 1. Economic environment Global economic growth The positive economic development forecast by many economists for 2007 was confirmed in the first half of 2007, both globally as well as in Europe and Germany. According to estimates of the International Monetary Fund (IMF), the global economy is now growing even faster than predicted in spring. The IMF currently expects global economic growth of around 5% and is thus slightly above its previous forecast of 4.9%. For the Euro zone, the IMF now forecasts growth of 2.3% to 2.5%, compared with 2.3% in its spring forecast. Experts also expect sustained and stable growth in Germany. Against this backdrop, the Kiel Institute for the World Economy (IfW) has increased its forecast for Germany to 3.2%. In its last forecast, the economists had predicted economic growth of 2.8%. As a result of this robust economic development, the German Labor Agency ( Bundesagentur für Arbeit ) reports that the number of officially registered unemployed fell by 712,000, compared to the previous year, to 3.7 million as of June 2007 and has thus reached its lowest point in over six-and-a-half years. Boom in IT sector The market for information technology and telecommunications (ITC) is profiting from the current global economic growth. The ITC sub-market online advertising also made strong national and international progress in the first half of 2007. In the USA, quarterly sales were up 26% on the first quarter 2006 to reach US$ 4.9 billion. In Germany, sales in classic internet advertising alone reached EUR 381 million in the first half of 2007 an increase of 50% over the first half of 2006 according to BIT- KOM. The online marketing circle of the German Digital Economy Association (Bundesverband Digitale Wirtschaft) expects a further increase of 33% to EUR 2.5 billion in 2007. 2. Business development Structure of the AdLINK Group The AdLINK Group is one of Europe s leading independent networks for digital marketing solutions. With AdLINK Media, affilinet and Sedo, the AdLINK Group has specialists in the business fields Display, Affiliate and Domain Marketing. With its three specialists, some 400 employees and 17 offices in 9 European nations and the USA, as well as cooperation partners in Latin America, South America and Asia, the AdLINK Group offers its customers a global network for online marketing. AdLINK Media is the specialist for Display Marketing within the AdLINK Group. With its network of high-reach and well-known websites, AdLINK Media is a leading independent European display marketer and reaches over 77 million unique users. This means that every second European internet user can be contacted with advertising via AdLINK Media. With its wide network of offices, AdLINK Media is represented in all major European nations. affilinet is the specialist for Affiliate Marketing within the AdLINK Group. Based in Germany, France and the UK, affilinet operates one of Europe s leading affiliate networks. It offers online advertisers (affiliate program suppliers) an effective digital sales channel and its registered sales partners (publishers) attractive earning opportunities. Throughout Europe, over 1,500 affiliate programs of online advertisers and more than 400,000 websites of publishers are registered with affilinet. Sedo is the specialist for Domain Marketing within the AdLINK Group. Based in Germany and the USA, and with numerous international websites, Sedo is a leading global market place for domain trading. Over 7.9 million domains are offered for sale via Sedo s database. With 3.6 million marketable domains, Sedo is one of the world s leading suppliers in the field of domain marketing. International business strengthened The AdLINK Group is today represented by its own subsidiaries in 9 European countries and the USA. Whereas we already enjoy a broad geographic presence in Europe in our Display Marketing segment, our international expansion is much more advanced in the Affiliate Marketing and Domain Marketing seg-
Management report for the first half-year 2007 ments. In Affiliate Marketing the main focus during the period under review was placed on developing and expanding business in the UK and France. In both countries we were able to extend our network of websites and gain major advertising partners, such as Seat, Meetic, BNP Paribas and Eurotunnel. A further area of focus were the ongoing projects to realize and develop a standardized European technical platform and to implement the technical migration of our French subsidiary to the platform already used in Germany and the UK. As part of the migration process, the affilinet brand replaces the current CibleClick brand. The process is expected to be completed by the end of 2007. In July 2007, Sedo further accelerated the strong growth of the dynamic US market with the acquisition of the US domain trading platform GreatDomains.com. Founded as early as 1994, GreatDomains is regarded as a pioneer of domain trading in the USA, whereby GreatDomains specializes in the purchase and sale of high-quality premium domains. The acquisition enabled Sedo to significantly strengthen its competitive standing in the important US market and extend Sedo s global lead in domain trading. Customers in the premium segment will now be offered a more varied service, which makes it easier to find high-quality domains among the steadily growing number of available domains. The revamped GreatDomains.com website will also offer monthly premium auctions with hand-picked English-language domains. Investment in the Goldbach Media Group On April 13, 2007 the AdLINK Group concluded an extensive cooperation agreement with the Swiss Goldbach Group which affects our marketing in the Swiss and Austrian markets and regulates a possible joint expansion into Eastern Europe. It was agreed with Goldbach Media AG, Küsnacht/Switzerland, that AdLINK Internet Media would contribute its shares of 50% in AdLINK Internet Media AG Switzerland and 30% in AdLINK Internet Media GmbH Austria to Goldbach Media AG and in return receive a 19.4% shareholding in Goldbach Media AG. Following the capital increase in connection with the IPO of Goldbach Media AG on the SW Swiss Exchange in June 2007, this shareholding was diluted to 14.99% as of June 30, 2007. Employees of staff employed outside Germany amounted to 211 (December 31, 2006: 204). The increase reflects the Group s growth in all segments. Share During the period under review the share price of AdLINK Internet Media AG rose from EUR 13.79 as of December 31, 2006 to EUR 16.40 as of June 30, 2007. 3. Segment development Display Marketing via AdLINK Media AdLINK Media is the specialist for Display Marketing within the AdLINK Group. With its network of high-reach and well-known websites, AdLINK Media is a leading independent European display marketer and reaches every second European internet user, in terms of unique users. With its numerous offices, AdLINK Media is represented in all major European nations. In April 2007 a further office was opened in Hamburg, Germany, in order to meet the growing demand of Hamburg-based media agencies. Segment sales improved by 16% in the first half of 2007, from EUR 33.8 million last year to EUR 39.2 million. At the end of June, 183 people were employed in this segment (prior year: 160). There was also progress in the segment s key market figures: the number of unique users per month rose from 67.1 million last year to 77.7 million. The average number of page impressions generated per month on marketed websites also grew from 6.5 billion to 8.2 billion. In terms of customers, the segment gained a number of major websites during the period under review, such as the Independent, evening news and vitanet, as well as extending existing contracts with MTV and OMS (an association of leading German dailies). At the end of June 2007, AdLINK Internet Media AG employed a total of 442 people (December 31, 2006: 400). The number
86.4 104.4 29.7 Key consolidated figures in EUR million Sales EBITDA 11.2 EBT 9.3 17.6 30.06.2006 30.06.2007 30.06.2006 30.06.2007 30.06.2006 30.06.2007 Display Marketing 30.06.2007 30.06.2006 Change Sales (EUR million) 39.2 33.8 16 % Employees 183 160 14 % Advertising clients 2,815 2,848-1 % Page impressions / month 8.2 billion 6.5 billion 26 % Unique users / month 77.7 million 67.1 million 16 % Affiliate Marketing via affilinet affilinet is the specialist for Affiliate Marketing within the AdLINK Group. Based in Germany, France and the UK, affilinet operates one of Europe s leading affiliate networks. It offers online advertisers (so-called affiliate program suppliers) an effective digital sales channel and its registered sales partners (the so-called publishers) attractive earning opportunities. Segment sales grew by 9.5%, from EUR 32.5 million last year to EUR 35.6 million. At the end of June, 89 people were employed in this segment (prior year: 73). Compared with the same balance sheet date last year, there was further improvement in the reach of the segment s network. Over 400,000 publishers (prior year: 370,000) generated a monthly average of 5.2 billion page impressions (prior year: 4.1 billion). With the newly gained programs, including BNP Paribas, Eurotunnel and Meetic, we were able to add major-name suppliers to our existing customers, which already include Ebay, 1&1, Proctor&Gamble, La Poste and Vodafone, and thus further widen our client base. Today, there are over 1,500 affiliate programs on offer (prior year: 1,200). Affiliate Marketing 30.06.2007 30.06.2006 Change Sales (EUR million) 35.6 32.5 10 % Employees 89 73 22 % Affiliate programs 1,500 1,200 25 % Websites 400,000 370,000 8 % Ad impressions /month 5.2 billion 4.1 billion 27 % Domain Marketing via Sedo Sedo is the specialist for Domain Marketing within the AdLINK Group. Based in Germany and the USA, Sedo is a leading global market place for domain trading. Over 7.9 million domains are offered for sale via Sedo s database. With 3.6 million marketable domains, Sedo is one of the world s leading suppliers in the field of domain marketing. The business model of AdLINK Internet Media AG: Website owners + Display Marketing Website owners + Affiliate Marketing Advertisers Domain owners + Domain Marketing
Management report for the first half-year 2007 In the first half of 2007, segment sales grew by 47.3% from EUR 20.1 million last year to EUR 29.6 million. At the end of June, 141 people were employed in this segment (prior year: 95). Once again, Sedo succeeded in achieving above-average growth in its relevant market figures. The number of tradable domains via Sedo grew from 5.3 million on the same date last year to 7.9 million. Of this total, over 3.6 million domains (prior year: 1.5 million) are available for marketing. The number of registered members also grew from 360,000 to 530,000. With the acquisition of GreatDomains and new cooperations with registrars such as NicLine and DomainRegistry of America, the segment was able to steadily expand its international business. Domain-Marketing 30.06.2007 30.06.2006 Change Sales (EUR million) 29.6 20.1 47 % Employees 141 95 48 % Domains 7.9 million 5.3 million 49 % Marketed domains 3.6 million 1.5 million 140 % Registered members 530,000 360,000 47 % 4. Assets, liabilities, financial position and profit or loss Earnings: AdLINK Group achieves strong growth In the first half of 2007, the AdLINK Group grew strongly in a dynamic market and profited on the one hand from the general market growth of online advertising and on the other hand from its positioning as a network of specialists, active not only in the field of display marketing but also in the affiliate and domain marketing segments. The positive market development resulted mainly from two factors: firstly, the growth in volume of the European advertising market, and within this market, from the growth in the proportion of spending on online advertising. This once again confirms the trend that the online share of advertising budgets tends to follow the increase in internet usage, which has been particularly strong in the past. Secondly, improved targeting technologies have raised efficiency, and increased use of performance-based products have raised the acceptance of online advertising. We believe that these trends will continue in future. As a result, the AdLINK Group was able to raise sales in the first half of 2007 by 20.8%, from EUR 86.4 million to EUR 104.4 million. In the AdLINK Media segment, in which we mainly market display advertising, sales grew by 16% from EUR 33.8 million to EUR 39.2 million, in the Affiliate Marketing segment by 9.5% from EUR 32.5 million to EUR 35.6 million and in the Domain Marketing segment by 47.3% from EUR 20.1 million to EUR 29.6 million. In the first half of 2007, we therefore achieved encouraging overall year-on-year growth in sales, although the affiliate segment remained below our expectations. The proportion of sales generated outside Germany amounted to 46.9% (prior year: 38.5%) in the period under review. Gross margin was slightly below the prior-year level at 25.6% (26.2%), but at the same level as in 2006 as a whole. Due to strong pressure on margins, especially in the media business and foreign affiliate operations, there was less than proportionate growth in gross profit of 18% to EUR 26.7 million (prior year: EUR 22.6 million). Selling expenses increased in line with sales growth to EUR 7.3 million (prior year: EUR 6.0 million). General and administrative expenses rose more than proportionately at 23.3%, from EUR 5.8 million to EUR 7.1 million, due mainly to investments in international expansion and the further development of the technology platform in our affiliate business. As a result of these developments, our operating result (without the special item described below) developed less than proportionately from EUR 9.6 million to EUR 11.3 million (up 16.9%) while pre-tax earnings (EBT) grew from EUR 9.3 million to EUR 10.1 million (up 9.1%). In order to be able to react more flexibly to market changes and utilize synergies more fully, we decided to realign our display and affiliate marketing business in the countries France, the UK, Austria and Switzerland. In the UK we put our display and affiliate marketing business under joint management and will develop both brands with a single sales organization in future. In France, we will replace the technical platform of CibleClick in 2007 and migrate to the standard European affilinet solution. We will thereby discontinue the CibleClick brand (acquired in 2005) and launch the affilinet brand on the French market. Impairment costs of EUR 9.4 million were incurred in the UK and France in connection with the realignment. In Austria and Switzerland we entered into a long-term cooperation with Gold-
bach Media AG in our display marketing business and contributed our previous investments in these countries to Goldbach. This resulted in income of EUR 16.8 million, so that a positive net balance of EUR 7.4 million remained, which was booked in the second quarter of 2007. Earnings before taxes therefore increased from EUR 9.3 million last year to EUR 17.6 million. Undiluted earnings per share (EPS) grew particularly strongly from EUR 0.15 in 2006 to EUR 0.50 in 2007. In addition to the net positive effect from the above mentioned structural measures, the increase was influenced by the allocation of 100% of shares in Sedo GmbH, which resulted from the share purchase in the fourth quarter of 2006 and the agreement of a guaranteed dividend for Sedo s minority shareholders. In the prior-year period, only 52.14% of the period result could be allocated to the AdLINK Group s EPS. Financial position: cash flow grows to EUR 9.7 million Cash flow from operating activities rose to EUR 9.7 million, compared with EUR 7.0 million last year, while net cash flow from operating activities grew to EUR 9.5 million (prior year: EUR 8.6 million). In terms of investment activity, an amount of EUR 2.6 million was spent mainly on intangible assets and technical infrastructure (total: EUR 2.0 million). The prior-year figure of EUR 8.4 million included investments in other companies of EUR 7.5 million. The main items in cash flow from financing activities were the redemption of loans from affiliated companies (EUR 25.8 million) and an inflow from the use of bank loans (EUR 20.4 million). Cash and cash equivalents amounted to EUR 7.9 million at the end of the period under review, compared with EUR 6.5 million on December 31, 2006. Assets and liabilities: positive special items on balance The Company s assets and liabilities have changed compared with the balance sheet of the annual financial statements due to two main developments. On the one hand, the Group s strong earnings enabled it to steadily redeem its loans. As a result, the total sum of liabilities due to affiliated companies and bank loans fell from year-end 2006 (EUR 63.3 million) to EUR 57.4 million at the end of the reporting period. On the other hand, the above mentioned structural and organizational measures also affected the Group s balance sheet. As a result of our investment in Goldbach Media AG, equity investments were removed, while at the same time other financial assets increased to EUR 27.7 million at the end of the period. Due to the structural measures in our display and affiliate business in France and the UK, goodwill was reduced from EUR 83.0 million as of December 31, 2006 to EUR 73.6 million at the end of the period. Equity increased from EUR 38.2 million to EUR 59.4 million at the end of the period as a result of operating profits and the above mentioned special items. The Group s equity ratio thus grew to 34.8% (December 31, 2006: 25.2%). 5. Risk report The risk management system of AdLINK Internet Media AG identifies, classifies and evaluates risks according to statutory regulations. The aim of risk management is to systematically deal with potential risks as well as to promote a risk-oriented approach throughout the entire organization. This controlled approach to risks is aimed at utilizing existing opportunities to the full and enhancing the company s success. Our risk management system not only serves to fulfill statutory regulations, but aims to raise corporate value and is thus in the general interest of our lenders and stakeholders. During the first half of 2007, the overall risk situation remained mostly unchanged from the risk report provided as part of the annual financial statements 2006. There were no risks which directly jeopardized the continued existence of AdLINK Internet Media AG as of the date on which this interim report was prepared, neither from individual risks nor from the overall risk situation. As competition on the online advertising market continues to be intense, the major risks for the Company s present and future assets, liabilities, financial position and profit or loss focus on the areas of competition, inventory, personnel and product development. The risk management culture we have introduced enables us to proactively counter such risks and limit them to a minimum. We judge the probability of such adverse developments as low in the short term and moderate in the medium term.
Management report for the first half-year 2007 6. Subsequent events There were no major events subsequent to the reporting period which had a significant impact on the business development of AdLINK Internet Media AG. In general, the positive development of fiscal year 2007 also continued up to the date on which this interim report was prepared. 7. Opportunities and outlook Outlook for 2007 remains positive The positive economic development forecast by many economists for 2007 was confirmed in the first half of 2007 globally, as well as in Europe and Germany. Dynamic growth in online marketing JupiterResearch forecast growth of 18% to EUR 5.9 billion for the European advertising market in 2007, while emarketer expects sales to grow in Western Europe alone by 25% to EUR 5.5 billion. Despite a leap in sales of 84% to EUR 1.9 billion, there is still no end in sight for growth on the German online advertising market. The online marketing circle of the German Digital Economy Association (Bundesverband Digitale Wirtschaft) expects a further increase of 33% to EUR 2.5 billion in 2007. Due to our successful positioning in these growth markets we therefore feel well prepared for further growth in the second half of 2007. Despite the fact that the second quarter failed to meet our own expectations, we believe that we can benefit from dynamic market growth in 2007 and achieve our planned increases in sales and earnings. 10
Consolidated Balance Sheet as of June 30, 2007 30.06.2007 31.12.2006 Notes EUR EUR ASSETS Cash and cash equivalents 4.1 7,904,262 4.6 % 5,924,572 3.9 % Accounts receivable 1) 4.2 40,719,751 23.9 % 36,304,642 24.0 % Accounts receivable from affiliated companies 4.3 178,626 0.1 % 1,643,300 1.1 % Other current assets 2,465,486 1.4 % 1,978,214 1.3 % Inventories 2,237,364 1.3 % 2,000,271 1.3 % Prepaid expenses 880,287 0.5 % 586,595 0.4 % Current assets 54,385,776 31.9 % 48,437,594 32.0 % Equity investments 3 0 0.0 % 3,012,187 2.0 % Other financial assets 2.2, 3 27,670,224 16.2 % 0 0.0 % Property, plant and equipment 4.4 1,814,684 1.1 % 1,558,650 1.0 % Intangible assets (w/o Goodwill) 4.4 7,536,867 4.4 % 7,197,111 4.8 % Goodwill 5.4 73,638,363 43.2 % 83,011,363 54.9 % Deferred tax assets 4.5 5,608,135 3.3 % 8,045,117 5.3 % Non-current assets 116,268,273 68.1 % 102,824,428 68.0 % Total assets 170,654,049 100.0 % 151,262,022 100.0 % LIABILITIES AND EQUITY Liabilities Accounts payable, trade 1) 37,491,247 22.0 % 35,160,537 23.2 % Accounts payable due to affiliated companies 4.6 21,999,422 12.9 % 48,277,315 31.9 % Accrued taxes 4,124,788 2.4 % 4,574,367 3.0 % Other liabilities 8,589,080 5.0 % 6,141,577 4.1 % Deferred income 450,195 0.3 % 467,089 0.3 % Convertible bonds 15,826 0.0 % 101,300 0.1 % Liabilities to banks (short-term) 4.10 35,419,399 20.8 % 15,003,314 9.9 % Current liabilities 108,089,957 63.3 % 109,725,499 72.5 % Deferred tax liabilities 4.5 2,028,539 1.2 % 2,205,236 1.5 % Convertible bonds 31,100 0.0 % 98,900 0.1 % Long-term liabilities due to minority shareholders 1,109,428 0.7 % 1,082,369 0.7 % Non-current liabilities 3,169,067 1.9 % 3,386,505 2.2 % Total liabilities 111,259,024 65.2 % 113,112,004 74.8 % Equity Capital Stock 4.7 26,152,640 15.3 % 25,914,900 17.1 % Additional paid-in capital 4.8 63,278,322 37.1 % 62,750,216 41.5 % Accumulated deficit -41,851,624-24.5 % -54,813,402-36.2 % Revaluation Reserve 4.9 7,582,228 4.4 % 0 0.0 % Currency translation adjustments -72,093 0.0 % -7,248 0.0 % Total equity w/o minority interest 55,089,473 32.3 % 33,844,466 22.4 % Minority interest 4,305,552 2.5 % 4,305,552 2.8 % Total equity 59,395,025 34.8 % 38,150,018 25.2 % Liabilities and equity, total 170,654,049 100.0 % 151,262,022 100.0 % 1) Change in receivables from/accounts payable due to associated companies disclosed in the previous year has been allocated to these items in order to aid comparability. 11
Consolidated Income Statement from January 1 to June 30, 2007 Jan.-June 2007 Jan.-June 2006* Notes in EUR in EUR Sales 5.1 104,353,910 100.0 % 86,429,883 100.0 % Cost of sales 5.2-77,672,499-74.4 % -63,823,117-73.8 % COS in % from Sales 25.6% 26.2% Gross Profit 26,681,411 25.6 % 22,606,766 26.2 % Selling expenses 5.3, 5.5-7,315,132-7.0 % -6,028,703-7.0 % General and administrative expenses 5.3, 5.5-7,100,651-6.8 % -5,760,879-6.7 % Asset impairment charges 5.4-9,373,000-9.0 % 0 0.0 % Other operating (income) expenses 5.6 16,658,058 16.0 % -293,595-0.3 % Depreciation of capitalized assets in the scope of acquisitions -854,790-0.8 % -887,922-1.0 % Operating Result 18,695,896 17.9 % 9,635,667 11.1 % Interest and similar expenses 5.7-1,415,239-1.4 % -751,285-0.9 % Interest and similar income 116,727 0.1 % 81,061 0.1 % Result from associated companies 5.8 173,196 0.2 % 322,228 0.4 % Pre-tax result 17,570,580 16.8 % 9,287,671 10.7 % Income taxes 4.5-4,608,802-4.4 % -3,124,078-3.6 % Net income 12,961,778 12.4 % 6,163,593 7.1 % Minority interest 0 0.0 % 2,232,131 2.6 % Net income attributable to shareholders of AdLINK Internet Media AG 12,961,778 12.4 % 3,931,462 9.7 % Earnings per share Basic (EUR/share) 0.50 0.15 Diluted (EUR/share) 0.49 0.15 Weighted average number of shares outstanding 25,948,143 25,853,416 Weighted average number of shares outstanding diluted 26,657,596 26,791,391 * Depreciation of capitalized assets in the scope of acquisitions are disclosed separately from general and administrative expenses. 12
Consolidated Income Statement Quarterly development Q1 2007 Q2 2007 Q2 2006* in in in Sales 49,979 54,375 45,110 Cost of sales -36,731-40,942-33,409 COS in % from Sales 26.5% 24.7% 25.9% Gross Profit 13,248 13,433 11,701 Selling expenses -3,596-3,719-3,173 General and administrative expenses -3,385-3,716-2,910 Asset impairment charges 0-9,373 0 Other operating (income) expenses 2 16,656-224 Depreciation of capitalized assets in the scope of acquisitions -427-427 -444 Operating Result 5,842 12,854 4,950 Interest and similar expenses -695-720 -468 Interest and similar income 47 70 48 Result from associated companies 156 17 244 Pre-tax result 5,350 12,221 4,774 Income taxes -2,482-2,127-1,348 Net income 2,868 10,094 3,426 Minority interest 0 0 1,043 Net income attributable to shareholders of AdLINK Internet Media AG 2,868 10,094 2,383 Earnings per share Basic (EUR/share) 0.11 0.39 0.09 Diluted (EUR/share) 0.11 0.38 0.09 * Depreciation of capitalized assets in the scope of acquisitions are disclosed separately from general and administrative expenses. 13
Consolidated Statements of Changes in Shareholders Equity Common stock Additional paid-in capital Accumulated deficit Revaluation reserves in shares EUR EUR EUR Balance as of January 1, 2006 25,851,945 62,047,026-66,853,265 Amortization of deferred stock option compensation 174,330 Exercise of convertible bonds 62,955 32,248 Aquisition of minority interest Currency translation adjustment Net income 3,931,463 Balance as of June 30, 2006 25,914,900 62,253,604-62,921,802 0 Amortization of deferred stock option compensation 128,237 Subsequent reduction of IPO costs due to refund of input tax 368,375 Aquisition of minority interest Currency translation adjustment Net income 8,108,400 Balance as of December 31, 2006 25,914,900 62,750,216-54,813,402 0 Amortization of deferred stock option compensation 106,632 Exercise of convertible bonds 237,740 421,474 Revaluation reserve 7,582,228 Currency translation adjustment Net income 12,961,778 Balance as of June 30, 2007 26,152,640 63,278,322-41,851,624 7,582,228 14
Currency translation adjustment loss Total shareholders equity Minority interest Total company s equity Total net income of AdLINK Internet Media AG shareholders of minority interest EUR EUR EUR EUR EUR EUR 228,409 21,274,115 4,116,694 25,390,809 989,018 1,599,354 174,330 174,330 95,203 95,203-58,494-58,494-94,128-94,128-94,128-94,128 3,931,463 2,232,131 6,163,594 3,931,463 2,232,131 134,281 25,380,983 6,290,331 31,671,314 3,837,335 2,232,131 128,237 128,237 368,375 368,375-4,054,572-4,054,572-141,529-141,529-141,529-141,529 8,108,400 2,069,793 10,178,193 8,108,400 2,069,793-7,248 33,844,466 4,305,552 38,150,018 7,966,871 2,069,793 106,632 106,632 659,214 659,214 7,582,228 7,582,228 7,582,228-64,845-64,845-64,845-64,845 12,961,778 12,961,778 12,961,778-72,093 55,089,473 4,305,552 59,395,025 20,479,161 0 15
Consolidated Statements of Cash Flows from January 1 to June 30, 2007 Jan.-June 2007 Jan.-June 2006 Notes EUR EUR Cash flow from operating activities Net Income 12,961,778 6,163,593 Adjustment to reconcile net income to net cash provided by operating activities Depreciation 1,417,585 1,268,735 Asset impairment charges 5.4 9,373,000 0 Disposals of assets -7,731 0 Change in deferred taxes 4.5 2,113,431-772,356 Compensation expenses from employee stock option plans 106,632 174,330 Result from associated companies -173,196-322,228 Distributed profit of associated companies 666,176 448,575 Compounding liability guarantee dividend minority shareholders 27,059 0 Non-Cash Result from sale of investment before tax 3-16,808,211 0 Operative cash flow 9,676,523 6,960,649 Changes in assets and liablities Change in receivables and other assets 1) 2) -4,925,604-2,953,875 Change in other short-term financial assets 0 3,084,423 Change in Inventories 1) -237,093-1,183,125 Change in receivables from affiliated companies 1,464,674 303,987 Change in prepaid expenses -299,528-440,952 Change in accounts payable, trade 2) 2,395,803 1,552,567 Change in accounts payable due to affiliated companies -526,902 232,926 Change in accrued taxes -446,518-366,516 Change in other liabilities 2,455,849 1,688,299 Change in provisions 0-75,000 Change in deferred income -16,864-88,604 Changes in currency translation adjustments 3) -39,878-71,008 Changes in assets and liabilities, total -176,061 1,683,122 Cash flow from operating activities 9,500,462 8,643,771 Cash flow from investment activities Capital expenditure for intangible assets 4.4-1,369,144-279,669 Capital expenditure for property, plant and equipment 4.4-646,975-557,088 Investments in other financial assets 3-50,724 0 Investments -563,000-7,536,676 Cash inflow through disposal of assets 7,731 2,541 Cash flow from investment activities -2,622,112-8,370,892 Cash flow from financing activities Change of utilized credit line from affiliated companies 4.6-25,750,991-32,587,387 Borrowing/Repayment of short-term bank loans 4.10 20,416,085 28,059,165 Payments for the exercise/conversion of convertible bonds 4.7, 4.8 558,940 61,053 Payment/Repayment of convertible bonds -53,000-9,400 Cash flow from financing activities -4,828,966-4,476,569 Net increase/net decrease in cash 2,049,384-4,203,690 Cash and cash equivalents at the beginning of the fiscal year 5,924,572 10,844,941 Effect of exchange rate differences on cash -69,694-97,254 Cash and cash equivalents at the end of the reporting period 7,904,262 6,543,997 Deposit of interest 114,555 85,406 Cash paid for interest -1,762,594-404,069 Cash paid for taxes -2,426,873-2,798,017 1) The prior-year figures were adjusted insofar as inventories are now disclosed in a separate row. 2) Change in receivables from/accounts payable due to associated companies disclosed in the previous year has been allocated to these items in order to aid comparability. 3) Reclassification in comparison to the previous year. 16
Notes 1. Information on the company Management Board Stéphane Cordier (CEO) Marc Stilke (COO and speaker) Andreas Janssen (CFO) Supervisory Board Michael Scheeren (Chairman) Norbert Lang (Deputy Chairman) Andreas Gauger 2. Significant accounting, valuation and consolidation principles The condensed consolidated interim report for the period January 1 to June 30, 2007 was prepared in accordance with IAS 34 Interim Financial Reporting. A condensed reporting format was chosen for the presentation of this consolidated interim report, as compared with the annual financial statements. For this reason, it is to be read in connection with the consolidated financial statements as at December 31, 2006. With regard to the accounting and valuation principles applied in the consolidated accounts, we therefore refer to the explanations provided in the notes to the consolidated financial statements as of December 31, 2006. In the following, we shall only explain any new or amended accounting and valuation principles. The application of new or revised IFRS standards and interpretations had no significant effect on the consolidated interim report. This consolidated interim report was not audited according to Sec. 317 HGB nor reviewed by an auditor. The consolidated interim report includes all subsidiaries and associated companies. During the course of the first half-year 2007, there were the following changes in the consolidated group in comparison with the consolidated financial statements as at December 31, 2006. 2.1. Changes in the consolidated group The shareholdings in the associated companies AdLINK Internet Media AG, Küsnacht/Switzerland (50%) and AdLINK Internet Media GmbH, Vienna/Austria (30%) were contributed to Goldbach Media AG as of April 13, 2007 (see section 3). The prorated results of the two companies up to the time of their disposal were included in the consolidated interim report according to the equity method and disclosed in the AdLINK Media segment. AdLINK Internet Media AG received 89,897 shares in Goldbach Media AG, Küsnacht/Switzerland as compensation. This corresponds to 19.4% of the capital stock of Goldbach Media AG as of the time of acquisition. The shares of Goldbach Media AG are included as available-for-sale financial assets in the consolidated financial statements in accordance with IAS 39. Goldbach Media AG had its IPO in June 2007. As a consequence, AdLINK Internet Media AG s share of the capital stock of Goldbach Media AG was reduced to 14.99% (from 19.4%). AdLINK Internet Media AG thus no longer has a significant influence on the business policy of both companies nor of Goldbach Media AG. From April 2007 onward, all business relationships, liabilities and receivables with Goldbach companies are thus disclosed as business relationships, liabilities and receivables with third parties. In order to aid comparability, the previous year was adjusted in such a way that the respective items with associated companies in the balance sheet and cash flow statement have been allocated to trade payables or trade receivables. The liquidation process of AdLINK Internet Media APS, Copenhagen/Denmark was completed and the company deconsolidated as of the first quarter of 2007. Deconsolidation charges amounted to EUR 29k. 2.2. Other financial assets Financial assets held for trading are defined as being those which were acquired for the main reason of achieving profits from short-term price fluctuations. Held-to-maturity investments are those with fixed or definable payments and periods of maturity, which the Company can and wishes to hold until maturity, with the exception of loans and receivables originated by the Company itself. All other financial assets, with the exception of 17
Notes loans and receivables originated by the Company, are classified as available-for-sale financial assets. Apart from the loans and receivables originated by the Company itself, the Company only holds financial assets of the category available-for-sale financial assets. Financial assets are initially valued at the acquisition cost corresponding to the fair value of the consideration given; transaction costs are included. Available-for-sale financial assets are subsequently valued at fair value without deduction of any transaction costs and under disclosure of their listed market price as of the balance sheet date. Profit or loss resulting from the valuation of available-for-sale financial assets to their fair value are carried directly under equity capital net, i. e. less deferred taxes, (revaluation reserve) until the financial asset is sold, redeemed or otherwise disposed of, or until an impairment of the financial asset is determined so that the cumulative profit or loss previously carried under equity capital is included in the period s result. 3. Company transactions Shares held in the joint venture companies operated with Goldbach, AdLINK Internet Media AG, Küsnacht/Switzerland (50 %) and AdLINK Internet Media GmbH, Vienna/Austria (30 %), were contributed to Goldbach Media AG during the period under review. The sale was made by means of a capital increase with a non-cash contribution of our shareholding in the joint ventures to Goldbach Media AG. As compensation, AdLINK Internet Media AG received 89,897 Goldbach shares representing a total of 19.4 % of the capital stock of Goldbach Media AG. Both companies will continue to be included in the AdLINK Group s international network. In the course of the non-cash contribution, the terms of the purchase contract concerning the 30 % share in AdLINK Internet Media GmbH, Vienna/Austria were reformulated. As a consequence of this reformulation, a purchase price payment of EUR 563k was made by AdLINK Internet Media AG during the period under review. As a consequence of the sale and contribution of shares in both associated companies, AdLINK Internet Media AG realized a non-cash book profit amounting to EUR 16,808k. In June 2007, shares in Goldbach Media AG were listed for the first time on the Swiss Exchange. In the course of recapitalization at the IPO, AdLINK Internet Media AG s shareholding in Goldbach Media AG was diluted to 14.99 %. These shares are classified as available-for-sale financial assets and disclosed under the item Other financial assets. Ancillary acquisition costs of EUR 51k were incurred in the course of the transaction. These were allocated to the investment valuation of Goldbach Media AG. The change and disposal of shares in associated companies in the first half of 2007, as well as the addition of other financial assets, was as follows: Opening amount of shares in associated companies as of 01.01.2007 3,012 Result of associated companies (prorated) 173 Additions from acquisitions 563 Dividend payments -666 Disposal value of associated companies 3,082 Proceeds from sale / initial valuation of shares received in Goldbach Media AG 19,890 Result from the contribution of company shares 16,808 Ancillary acquisition costs 51 Additions to other financial assets 19,941 4. Explanations of balance sheet items Specific explanations are only given for those items which display material changes in the amounts or contents presented as compared with the annual financial statements 2006. 4.1. Cash and cash equivalents Cash and cash equivalents are bank balances and cash in hand. A significant proportion of the increase as compared with December 31 is due to higher foreign currency balances within the AdLINK Group as of June 30, 2007. 18
4.2. Trade accounts receivable The rise results from an increase in business volume. This item includes allowances for receivables amounting to EUR 1,976k (December 31, 2006: EUR 1,621k). 4.3. Accounts receivable from affiliated companies The decline in accounts receivable from affiliated companies amounting to EUR 749k is due to the settlement of a claim regarding sales tax on IPO costs. The IPO took place during the inter-company relationship regarding sales taxes (until December 31, 2002) with United Internet AG and was therefore corrected at parent company level. This resulted in a corresponding claim of AdLINK Internet Media AG toward United Internet AG. The remaining decline results from the lower business volume with companies of the United Internet Group in comparison to the fourth quarter of 2006. 4.4. Property, plant and equipment, intangible assets and goodwill During the period under review, the AdLINK Group acquired property, plant and equipment amounting to EUR 647k, mainly for IT equipment, servers and office furniture. Investments in intangible assets amounted to EUR 1,369k. The investments concerned mainly software and licenses as well as the acquired assets (brand, domain, customer base) in connection with the acquisition of the domain trading platform GreatDomains. 4.5. Deferred taxes and tax result The tax result comprises the following items: 1st half-year 2007 2006 Income taxes -2,496-3,899 Deferred tax expense (-) / income (+) -2,113 775 Disclosed tax result -4,609-3,124 The deferred tax expense results mainly from the consumption of loss carryforwards as a result of the positive result development and the concluded profit transfer agreements, as well as the reversal of deferred tax liabilities (opposite effect). As a consequence, there was a decline in the balance sheet value of the corresponding deferred tax claims and deferred tax liabilities. Deferred tax liabilities also increased by EUR 147k due to the revaluation reserve. 4.6. Liabilities due to affiliated companies The decline in liabilities due to affiliated companies results partly from a payback of financing by United Internet AG amounting to EUR 25,751k. The remaining reduction results from the settlement of interest liabilities due to United Internet AG. 4.7. Capital stock By making partial use of Conditional Capital I/2000 in the amount of EUR 85,000 and Conditional Capital 2004 in the amount of EUR 152,740, capital stock was increased during the period under review by a total of EUR 237,740, from EUR 25,914,900 to EUR 26,152,640, through the issue of 237,740 new registered ordinary shares against payment by cash. The capital increase resulted from conversions of convertible bonds issued under the Company s employee stock ownership plans. 4.8. Capital reserves The increase in capital reserves amounting EUR 528k resulted basically from cash contributions in excess of par value in connection with a capital increase resulting from conversions of convertible bonds issued under the Company s employee stock ownership plans (EUR 421k). 4.9. Revaluation reserves Revaluation reserves resulted from the subsequent valuation to fair value of shares in Goldbach Media AG as of June 30, 2007. The difference between fair value as of June 30, 2007 and initial valuation was transferred to the revaluation reserves less deferred taxes. 19
Notes 4.10. Liabilities due to banks Liabilities due to banks result from the utilization of existing credit lines. The credit lines have variable interest rates according to the respective underlying EURIBOR rate for the term plus a risk surcharge. In comparison to the balance sheet date December 31, 2006, a greater share of financing is covered by bank loans. This explains the strong increase in liabilities, which in turn led to a decrease in liabilities due to affiliated companies (see section 4.6). One credit line due to expire amounting to EUR 40 million was extended with unchanged conditions during the period under review until May 8, 2008. As of the balance sheet date, there were therefore unutilized credit lines available to AdLINK Internet Media AG amounting to EUR 35 million. 5. Explanations of income statement items 5.1. Segment reporting The Group defines the following three primary segments: - Germany - Euroland: Italy, Spain, France, Belgium, the Netherlands, - Non-Euroland: Sweden, Denmark, USA, UK (see the tables on the next page). 5.2. Direct product costs Direct product costs increased in the first half of 2007 to EUR 72,394k (prior year: EUR 59,723k). Direct product costs mainly comprise payments for marketed advertising media and the technical costs incurred in supplying the advertising. Direct product costs are disclosed under Cost of sales. 5.3. Personnel expenses During the period under review, there was a year-on-year increase in personnel expenses from EUR 10,991k to EUR 13,021k. As of the balance sheet date, the AdLINK Group employed 442 people (prior year: 348), of which 231 were employed in Germany (prior year: 169). Personnel expenses according to income statement items 1st half-year 2007 2006 Cost of sales 4,337 3,353 Selling expenses 4,659 4,138 General and administrative expenses 4,025 3,500 Total 13,021 10,991 5.4. Asset impairment charges Due to organizational changes in the UK and France, the goodwill of CibleClick Performances SA and AdLINK Internet Media Ltd. were subjected to impairment tests. As a result of the test, an impairment was ascertained for Cible- Click Performances SA amounting to EUR 7,662k and for AdLINK Internet Media Ltd. amounting to EUR 1,711k (see also the goodwill table in section 4.4). 5.5. Depreciation and amortization Depreciation and amortization of intangible assets and property, plant and equipment amounted to EUR 1,418k (prior year: EUR 1,269k). Of this total, amortization of capitalized assets resulting from business combinations amounted to EUR 855k (prior year: EUR 888k) while depreciation and amortization of property, plant and equipment and other intangible assets totaled EUR 563k (prior year: EUR 381k). Depreciation and amortization according to income statement items 1st half-year 2007 2006 Cost of sales 145 99 Selling expenses 184 129 General and administrative expenses 234 153 Amortization of capitalized assets resulting from business combinations 855 888 Total 1,418 1,269 20