Half Year Review 2015 HALF YEAR REVIEW 2015 1
Contents 4. Who we are 6. Our business 7. 2015 Group highlights 8. Strategic priorities 10. CEO update 15. People 19. Product and technology 21. Environmental, social and governance 22. Our locations 24. HEG management HALF YEAR REVIEW 2015 3
Who we are With our purchase of intergenia AG in January 2015, HEG has cemented its position as Europe s largest privately owned hosting provider, largest 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 run and manage 7 data centre facilities across Europe and the USA, supported by over 1,100 employees. HEG has more than 1.7 million direct and indirect customers with over 7 million domain names under management. 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. 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. 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 HALF YEAR REVIEW 2015
Our business Group highlights - January to June 2015 Profitable Technology Aquisition Branding Mass and managed hosting business divisions More than 115,000 dedicated and virtual servers under operation Completion of intergenia AG acquisition Finalised new brand and technology architecture 1,100 Growing Appointments Product launches More than 1,100 employees globally 2nd Largest managed hosting provider in Europe with more Further appointments of key executives Launched 14 new products and upgraded a further 13 than 4,000 business customers 7 million Infrastructure Mass hosting NPS More than 7 million domain names registered 7 data centre facilities in Europe and the USA Finalised appointment of 5 new brand director roles for each core brand Increased NPS by over 30% on 2 power brands and maintained high levels on all others 1.7 million Direct and indirect customers Consolidation Consolidated our managed hosting offering under the brand, PlusServer Award winning Heart Internet awarded Best Shared Hosting from Internet Service Provider Awards, 2015 6 HALF YEAR REVIEW 2015 HALF YEAR REVIEW 2015 7
Strategic priorities Focus on outstanding customer service We pride ourselves on our customer service delivery but we are always seeking new and innovative ways to improve upon this. We believe that every employee can make a difference, not just our customer support staff. From a management perspective, this continues to be our number one goal in 2015. Focus on SME and SaaS: We believe that our biggest opportunity is to target the 20m SMEs across Europe, focusing on our software-as-a-service products. Become agile and consolidate We have implemented agile methodologies across the whole group through the process of scrum. This investment in training and development for all staff across all locations will be vital in improving our output. We have consolidated our technology platform across the group and are aligning and consolidating our brand portfolio to specific target segments. Become valued brands in the core markets Our brands are our most important asset they are what customers see and interact with every single day. In 2015, a new approach to marketing and customer service at HEG will be created to develop increased pride for each brand by focusing each brand on specific customer targets. 8 HALF YEAR REVIEW 2015 HALF YEAR REVIEW 2015 9
Group CEO statement I am delighted to present the HEG 2015 half-year report. The first six months of this year has been a period of solid progress for HEG. Despite ongoing economic uncertainty in Europe, HEG continues to be well placed to hold market-leading positions in the UK and Germany. I am delighted to be able to report healthy financial results for the first half of 2015, with proforma like-for-like (including intergenia) EBITDA at 54.5m and revenues at 137.1m this compares to 47.3m and 123m in 2014. This success is based on a number of key factors. Firstly, a clear strategy where we focus on the long-term needs of our customers and those products that can best serve them. Secondly, an experienced and skilled leadership team who deliver growth and opportunities for staff development across the whole of our organisation. Thirdly, our focus continues to be on the customer and how we can make their experiences, and their businesses, better each and every day. Finally, HEG s success continues to be underpinned by the healthy market dynamics in the sector with the underlying growth of SME s moving online across Europe. Going forward, we expect healthy growth in the number of digital SME businesses as moving online enables smaller companies to compete better in the global marketplace. Acquiring a market leader In January, HEG completed the acquisition of intergenia AG. Following this acquisition, HEG became the largest provider of managed hosting in Germany, and grew to the second largest provider of managed hosting in Europe. The co-founders of intergenia, Thomas Strohe and Jochen Berger, built a business that for many years HEG had admired. Through its leading brand PlusServer, intergenia created a business model that fostered growth, developed state of the art technology platforms and had a clear focus on customer service. These three components have been important in the complex and largescale integration process of our managed hosting operations in Germany. I am delighted to report that both Thomas and Jochen have taken strategic roles within HEG. Thomas has taken up the position of CEO, managed hosting and Jochen has been appointed global director, M&A. Our organisational structure has been designed to best fulfil the diverse needs of our customers. Patrick Pulvermüller Group CEO 10 HALF YEAR REVIEW 2015
Mass and Managed The acquisition of intergenia has allowed HEG to complete the process of delivering two very clear and distinct business divisions. This has been necessary to continue to serve our 1.7 million plus direct and indirect customers but also to best utilise the diverse skill sets of our now more than 1,100 employees. This process, which began in late 2014, was completed midway through 2015. This organisational structure has been designed to best fulfil the diverse needs of our customers, specifically around their different expectations of service. We firmly believe that no two businesses are the same and each customer need is different. Therefore, it was vital that we created these two distinct divisions - mass and managed hosting to provide the best customer support and product suites, tailored towards customer needs. We have broken the mould with a clear customer benefit first mentality. Extensive market research has given us the confidence that a one size fits all approach will not work in the long term. We continue to tailor our services to the needs of the customer, using our three target segments and those brands within them. To match this, we have experts across our customer, marketing and product teams to deliver the right solutions for the right target customer. As such, we have organised each of our power brands (123-reg, domainfactory, Host Europe, Heart Internet and PlusServer) to focus on 3 core segments. These segments are: managed hosting; assist me in mass hosting and equip me, again within our mass hosting division. Managed hosting Our managed hosting brand, PlusServer, provides the technological benefits that come with being Germany s managed hosting market leader: reliability, security, dependability; alongside the benefits of a personal approach. Our old German managed hosting brands, Host Europe Solutions and Host Europe managed hosting, have all been integrated into the new PlusServer business. Mass hosting, assist me We believe that succeeding online should be achievable for all. That is why we have focused our brands; 123-reg in the UK and domainfactory in Germany on products and services that enable those customers who want simple and easy to use products to grow their business. Mass hosting, equip me Our second team focuses on customers who want to build their web presence themselves. Our brands, Host Europe in Germany, Spain and Switzerland and Heart Internet in the UK focus on products and services and environments tailored to this customer segment s needs. Building a powerful leadership team In line with this commitment, we have made a number of appointments this half-year especially to strengthen our mass hosting division. I can announce the appointments of Claus Boyens, brand director for Host Europe and Stephan Wolfram, brand director for domainfactory. Also appointed this half year was Nico Bender, CMO of our manged hosting division. Added to this, Carsten Sjørup joins HEG as Chief Technical Officer, mass hosting. Carsten will be responsible for all overarching technology decisions and will develop a technology and infrastructure strategy for all group infrastructure projects including our group data centres. Carsten has extensive experience in CTO roles in the cloudhosting sector, previously being CTO at OnApp. I am also delighted to announce three new appointments, which are all newly created roles. Robert Ackland, who joins HEG from EBay, has taken the position of director of engineering. Tobias Grossecker joins as group director of sales. All bring a wealth of fantastic experience to HEG and will enable us to continue to grow. Finally, I am delighted to announce the promotion of Matt Barry to Chief Operating Officer, mass hosting - previously Vice President, Group Product Management. Our customer commitment Customer focus is incredibly important to our future growth potential. As the market continues to grow in Europe, our customers become our biggest advocates and the source of new customer growth. We measure this through direct referrals and speaking positively about our brands in digital media. This is why we are thrilled that we receive so many positive online reviews on the leading hosting sectors forums, including a 4 out of 5 rating on Review Centre. Additionally, we maintain relatively low levels of customer churn in the industry, almost half the level of one of our leading competitors. I am delighted with this achievement and believe that our customer retention rates remain so strong because of our investment in local customer support teams, matched alongside our overarching strategy of ensuring that delighting our customers is at the heart of everything that we do. 12 HALF YEAR REVIEW 2015 HALF YEAR REVIEW 2015 13
People Developing the NPS mentality This is why we have aligned the whole company, across all locations and territories, around the Net Promoter Score (NPS). This is now used as our core shared metric and we have a solid process in place to align any newly acquired brands. Our domainfactory brand has industry leading NPS scores with its average NPS score consistently over 70%. These scores are comparable with companies who lead the global NPS ranking tables across industries. We have also developed a group-wide customer service task force. This team is responsible for tracking the successes of initiatives introduced across our brands and report to the business any negative impact on our NPS scores and to scale the positive successes across all our brands. I am delighted to report that this strategy is working and we have seen significant NPS improvements to date by our mass hosting brands. NPS improvements January-June 2015 123-reg 80% increase Heart Internet 39% increase Host Europe 5% increase from a high level domainfactory 1% increase from a high level Future growth Whilst a key aim of our business is to retain our customers, this has not halted our ambitions or ability to acquire new customers. I am confident that we have struck a very healthy balance between the two principles with gross new customer additions nearing 100,000 in 2015. HEG continues to grow and continues to equip itself well for future challenges. The Board and I agree that we are well placed to benefit from the continued economic recovery in our core markets due to the continued strengths of digital SMEs. We also keep a strong hold on our costs and further operational improvements. Finally, I would like to thank all our employees for their hard work and commitment to HEG. Our employees are dedicated individuals who strive to make every customer experience better every single day. It is with this passion that HEG grows, and I would like to express my gratitude to every one of them for their fantastic contributions. Patrick Pulvermüller Group CEO We recognise the importance of hiring key personnel for the overall development of the Group. Since January, we have identified a number of key positions in our Technology, and Product teams within our mass and managed business, divisions. Carsten Sjørup In July 2015,HEG announced the appointment of Carsten Sjørup as CTO, mass hosting. Carsten is responsible for all overarching technology decisions within mass-hosting brands. Carsten joins HEG from OnApp, a cloud automation platform for service providers, where as CTO, he was instrumental in bringing structure and agility to the full product lifecycle, as well as strengthening and stabilising product platforms. Robert Ackland Robert is the group director of product development at HEG. Robert joined the company in 2015 to focus on improving user experience and to streamline product development across all HEG brands. Prior to joining HEG, Robert held senior positions with industry leaders such as ebay, Panasonic, and Motorola, and worked with start-ups such as Internet of Things-focused Passiv Systems. 14 HALF YEAR REVIEW 2015 HALF YEAR REVIEW 2015 15
Claus Boyens Before joining HEG, Claus led the ecommerce and Online Marketing business at 1&1 Internet, following various leadership positions in Product Management and Marketing. He started his professional career as a Strategy Consultant at Booz & Co. (now Strategy&). Claus holds a Ph.D. in Information Systems from Humboldt University Berlin and a Diploma in Industrial Engineering from University of Karlsruhe Tobias Grossecker Tobias started his professional career at Sitel, responsible for Quality- and Product-Management, where later he was in charge for Customer Experience in EMEA. In his previous role until 2014, before joining HEG, Tobias managed different international divisions at 1&1 Internet, including customer contact, projects and optimisation and was head of customer sales. Tobias holds a MBA and also a Doctor of Business Administration (DBA) from Grenoble Ecole de Management & Tongji University Shanghai, where he researched Services Marketing. Stephan Wolfram In May 2015, HEG appointed Stephan Wolfram as brand director of domainfactory. Before joining HEG, Stephan was vice president of the tungsten area epublishing at Deutsche Telekom where he established the Tolino business within both the German and international market. Prior to this, Stephan was CEO of arvato online services GmbH, responsible for the development of the business segment and the ecommerce eloyalty program. 16 HALF YEAR REVIEW 2015 HALF YEAR REVIEW 2015 17
Product and technology Product The past 12 months have seen consolidation within our product and technology departments. HEG is committed to providing user friendly products which are targeted towards the individual, specific to brands. We have introduced a new way of working whereby platform teams are dedicated to group-wide; core user and technical needs and tasks are prioritised by needs of our customers and operational necessities. Our development structure has been realigned to key areas: Teams work across the group and are not aligned by geography or brand. Increase quality with more technical QA team Focus on user experience with dedicated front-end development team Ability to share knowledge across different platforms to mitigate risk of lost knowledge on legacy systems In 2015, on both our Heart Internet and 123- reg brands, we launched our flagship Premium Hosting product. We have developed Premium Hosting to manage the day-to-day administration of customer s servers, allowing users to focus on running their business. With unmanaged hosting, customers are solely responsible for all service and maintenance tasks, a time consuming and resource draining activity particularly for small businesses. A strong web presence is crucial for all small business owners but many do not have the capacity to manage the technical side of their operations on a daily basis. There is a clear and growing need for the Premium Hosting service that will handle the upkeep of the servers and allow customers to focus on growing and maintaining their business without their online presence suffering. Since launch, sales have been beating initial revenue assumptions. Technology Following the acquisition of intergenia AG, HEG acquired two new data centre facilities in Strasbourg, France and St Louis, USA. These two state of the art facilities will be utilised in conjunction with our other advanced facilities in the UK and Germany. Our new Strasbourg facility is one of the most energy efficient centres in Europe, measured by its Power Usage Effectiveness (PUE) rating of 1.18. Normally, more than 60% of the energy which is needed for operating the IT (servers, storage etc.), has to be added for operating the data centre infrastructure (especially the climate system). For our facility in Strasbourg, this amounts to just 18% - which is a huge energy saving. This equates to more than 25 million kwh power savings per year at full load; which in turn means more than 24 million kg less CO2 emission, which is the CO2 consumption of over 119,000 trees in one year. Creation of true product-focused platform groups to focus on core products Working alongside Brand directors to provide brand-specific business plans for product launches 18 HALF YEAR REVIEW 2015 HALF YEAR REVIEW 2015 19
Environmental, social and governance Our locations We are committed to operating and growing our business in a responsible way with a key vision to be environmentally friendly. Our vision is to improve the quality of life for all of our communities through integrated and sustainable development in every possible way. In the first half of 2015, HEG created a new Environmental, Social and Governance policy which will be incorporated across the whole of the group. Previously, there were many individual policies, and whilst these all related to specific areas relating to ESG, they were not all reported at group level. Bringing these policies into one central reporting mechanism has been the key aim of this process. We take seriously our responsibility to reduce carbon emissions across our global data centre operations and we believe that environmental sustainability is a crucial component as we are a business that is fully dependent upon our data centre infrastructure. At HEG, Power Usage Effectiveness (PUE) is the metric used to measure the efficiency of our data centre facilities. PUE is an important measure because if a data centre is inefficient and has a high PUE, the on-going costs and carbon emissions associated with running the facility will also be high. Currently, we control and operate 7 data centre facilities in Europe and USA. This consists of two data centre facilities in Cologne, Germany, three in Leeds, UK, one in Strasbourg, France and a further site in St. Louis, USA. Additionally, HEG uses co-location services in Germany and Spain. In Germany, these sites are located in Falkenstein, Gütersloh, Neubiberg and Wendlingen. In Spain, the site is located in Madrid. We have a stringent structure whereby our Group Head of Data Centres is now responsible for the PUE reporting process. Each data centre produces a monthly and annual report. The C-level for mass and managed hosting (depending on business division) will be responsible for bringing new data centres in line with HEG reporting standards and guidelines. In June 2015, HEG s overall PUE rating was 1.34. In the United Kingdom, HEG is committed to helping the local communities in which we work. In the UK, HEG partnered with The Challenge, a local charity in Hayes. The charitable organisation works to inspire and connect young people and their communities. This summer, HEG UK invited more than 100 young people to its offices to show them the set-up of a business as well as offer practical advice on setting up an online business. In 2016, this partnership will be extended to our locations in Nottingham and Leeds. The second half of 2015 will see HEG produce a Key Performance Indicator report for ESG as well as make investments into key strategic partnerships to strengthen our vision of being the first choice for those looking to make the most of the internet. Reporting will be available in 2016. 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 first-class service coupled with an assurance of transparent accountability. We run and manage five state of the art facilities across Europe and the USA. 20 HALF YEAR REVIEW 2015 HALF YEAR REVIEW 2015 21
HEG Management 01 02 03 04 05 06 07 08 01. Lord Birt 02. Patrick Pulvermüller 03. Tobias Mohr 04. Andreas Palm 05. Thomas Strohe 06. David Barker 07. Florian Luther 08. Thomas Railhac 22 HALF YEAR REVIEW 2015 Host Europe Group Ltd - The Old Vinyl Factory, Hayes, London HALF YEAR REVIEW 2015 23
01. Lord Birt Chairman 02. Patrick Pulvermüller Group CEO HEG 05. Thomas Strohe CEO Managed hosting - HEG 06. David Barker Executive Director - Cinven After a successful career in ITV, Lord Birt was the BBC s Director-General from 1992 until 2000. During his tenure, Birt won plaudits for equipping the corporation for the digital age. Following his time at the BBC, Birt has held a number of high profile positions, including Chairman of PayPal Europe. Birt became a crossbencher in the House of Lords in 2000, and was Strategy Adviser to the Prime Minister from 2000-2005. In 2013, Lord Birt was appointed non-executive Chairman of HEG. 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 2013, 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 Thomas joined HEG in 2015 after HEG s acquisition of intergenia AG. Following this acquisition, Thomas has taken on responsibility for HEG s Managed Hosting offering. A serial entrepreneur, Thomas founded his first business in 1995 at the age of fifteen. In 1999, Thomas cofounded intergenia where he was CEO. In 2000, Thomas was named Cologne s Bill Gates by local media. Thomas holds an MBA from Northwestern University. 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 1996. the Open University Business School and is an expert in operational management and strategic financial planning. 03. Tobias Mohr Group CFO HEG 04. Andreas Palm CEO Mass hosting 07. Florian Luther Executive Director - Cinven 08. Thomas Railhac Executive Director - Cinven Tobias Mohr joined HEG in April 2008, and since then he has been responsible for the set-up and streamlining of the Group s financial systems. Tobias is also involved in the improvement of controlling and reporting processes Andreas joined the executive board at HEG in 2014. Andreas is responsible for the strategic development of HEG s mass hosting division. Andreas has a wealth of experience within the hosting industry, having previously 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. 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. within the Group and has been heavily involved in repositioning HEG s product offering in the UK. Prior to joining HEG, Tobias worked for 5 years for United Internet / 1&1 Internet AG as the Head of Financial Controlling for the Webhosting Division in Germany and internationally. Tobias has also held various financial positions within the private banking and asset management sectors. worked as Chief Sales and Marketing Officer responsible for the hosting business for United Internet / 1&1 Internet AG. Andreas is an economics and politics graduate, holds an MBA as well as a doctorate in the field of post-merger integration. Prior to joining Cinven, Florian worked in corporate finance at UBS, advising companies within the metals and mining sector. Previously, he was at Hewlett-Packard. Florian has a joint MA in Business Administration and Computer Engineering and an MA in Computer Science, from the Technical University of Berlin. 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 2008. He joined Cinven in 2007. 24 HALF YEAR REVIEW 2015 HALF YEAR REVIEW 2015 25
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 Europe-based 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, high-quality companies and works with them to help them grow and develop, using its proven value-creation strategies. It takes a responsible approach towards its portfolio companies, their employees, suppliers and local communities, the environment and society. 26 HALF YEAR REVIEW 2015