Quarterly Financial Report 3 2014 / 2015
#CO NT ENTS 01 interim status report 3 2014/2015 05 General 05 Group Business and Structure 06 Market and Competitive Environment 07 Business Development and Group Situation 16 Risks and Opportunities of Future Business Development 16 Major Events after the Balance Sheet Date 17 Forecast 02 Consolidated Quarterly Accounts 3 2014/2015 20 Consolidated Balance Sheets 22 Consolidated Statements of Operations 23 Consolidated Statements of Comprehensive Income 24 Consolidated Statements of Shareholders Equity 26 Consolidated Statements of Cash Flows 28 Notes 03 Further information 37 Events & Contact Information
Key Figures of the Sinner Schrader Group Q3 2014/2015 Q3 2013/2014 Change 9M 2014/2015 9M 2013/2014 Change Gross revenues 000s 12,524 13,479 7 % 37,892 37,288 +2 % Net revenues 000s 11,324 13,027 13 % 34,301 35,141 2 % EBITDA 000s 1,105 849 +30 % 1,766 2,700 35 % EBITA 000s 825 643 +28 % 911 2,114 57 % Relation of the EBITA to net revenues (Operating margin) % 7.3 4.9 +48 % 2.7 6.0 56 % EBIT 000s 825 622 +33 % 911 2,031 55 % Net income 000s 427 292 +46 % 408 902 55 % Net income per share, diluted 0.04 0.03 +46 % 0.04 0.08 55 % Shares outstanding 1) number 11,435,727 11,348,679 +1 % 11,399,793 11,224,783 +2 % Cash flows from operating activities 000s 1,374 2,049 +167 % 36 3,544 +101 % Employees, full-time equivalents number 473 460 +3 % 482 434 +11 % 31.05.2015 31.05.2014 Change 31.05.2015 31.08.2014 Change Liquid funds and securities 000s 4,171 1,019 +309 % 4,171 5,833 28 % Shareholders equity 000s 13,293 13,037 +2 % 13,293 14,075 6 % Balance sheet total 000s 24,635 25,386 3 % 24,635 28,551 14 % Shareholders equity rate % 54.0 51.4 +5 % 54.0 49.3 +9 % Employees, end of period number 514 515 0 % 514 521 1 % 1) Weighted average shares outstanding
Quarterly Financial Report 3 2014 / 2015 01 02 interim status report 3 2014/2015 Consolidated Quarterly Accounts 3 2014/2015 05 17 20 35
1 general This Interim Status Report of the Sinner Schrader Group ( Sinner Schrader or Group ) as at 31 May 2015 represents the development of the income, financial, and assets status of the Group which is managed by Sinner Schrader Aktiengesellschaft ( Sinner Schrader AG or AG ) in the first nine months and the third quarter of the 2014/2015 financial year from 1 September 2014 and 1 March 2015, respectively, to 31 May 2015. It deals with the major risks and opportunities and the probable developments in the remainder of the financial year. The consolidated financial statements on which this status report is based were drawn up according to the International Financial Reporting Standards ( IFRS ). The Interim Status Report, particularly Section 7, contains statements and information aimed at the future. These forward-looking statements are based on current knowledge, estimates, and assumptions and therefore entail a number of risks and uncertainties. A variety of factors, many of which are outside Sinner- Schrader s sphere of influence, have an impact on the business development and results. These factors mean that the actual future business development of Sinner Schrader and the actual results achieved may differ significantly from the explicit or implicit information in the forward-looking statements. This quarterly financial report should be read in conjunction with the Consolidated Financial Statements of Sinner- Schrader AG for the 2013/2014 financial year. 2 group Business and Structure The Sinner Schrader Group is a digital agency group which offers companies in Germany and abroad a comprehensive range of services for the use of digital technologies to optimise and further develop their business. The emphasis is on the use of the Internet for the sale of goods and services (e-commerce), for marketing and communication, and for the acquisition and retention of customers. With more than 500 employees, Sinner Schrader is one of the biggest independent digital agency groups in Germany and performs its services at locations in Hamburg, Frankfurt am Main, Berlin, Hanover, Munich and Prague. Sinner Schrader mainly works for companies based in Germany, but also counts companies from Switzerland, the UK, the Netherlands, France, and the Czech Republic among its clients. In the first nine months of the 2014/2015 financial year, the consolidation group of the Sinner Schrader Group has changed against the status as at 31 August 2014 through the merger of mediaby GmbH and NEXT AUDIENCE GmbH with a retroactive effect as at 1 September 2014. The merging of the hitherto separately managed companies mainly serves to pool forces for consulting advertisers on the management and optimisation of advertising expenditure for digital channels and with respect to the use of the relevant software required, not least of all the NEXT AUDIENCE Platform. Other than that, the consolidation group has not changed in the period of the report in comparison to the status as at 31 August 2014. In the third quarter and the first nine months of the 2014/2015 financial year, the Sinner Schrader Group thus consisted of Sinner Schrader AG in addition to Sinner Schrader Deutschland GmbH, Sinner Schrader Mobile GmbH, Sinner Schrader Praha s.r.o., the NEXT AUDIENCE Group, comprising NEXT AUDIENCE GmbH and Sinner Schrader Content GmbH, and the Commerce Plus Group, made up of Commerce Plus GmbH and Commerce Plus Consulting GmbH. Moreover, the operationally inactive companies Sinner Schrader UK Ltd. in London and Sinner Schrader Benelux BV in Rotterdam are still part of the consolidation group. The Sinner Schrader Group continues to structure its business activity in the Interactive Marketing, Interactive Media and Interactive Commerce segments. The Interactive Marketing segment comprises Sinner Schrader Deutschland GmbH, Sinner Schrader Mobile GmbH and Sinner Schrader Praha s.r.o. The Interactive Media segment is formed by the NEXT AUDIENCE Group, and the Interactive Commerce segment by the Commerce Plus Group. 5 sinnerschrader group quarterly financial report 3 201 4/201 5 interim status report 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 interim status report 3 2014/2015 3 market and Competitive Environment The third quarter of the 2014/2015 financial year was completed in a consistently positive economic environment. The ifo business climate index continued to rise in March and April, by 1.1 and 0.7 index points, respectively, to remain at the present positive level in May, which came very close to the peaks in the index in spring 2014. The GfK consumer climate index also rose again in the period from March to May 2015. Unlike the ifo business climate index, the consumer climate index clearly surpassed the level of the previous year in an upwards trend that has already been sustained for several years. Information from the Federal Statistical Office in May 2015 on economic development in the first calendar quarter of 2015 thus predicts that domestic consumption will continue to be an important pillar of economic development. According to information from the Federal Statistical Office, the real gross domestic product grew overall by 1.1 % in the first calendar quarter of 2015 in comparison to the first quarter of 2014. The growth was thus slightly below the latest expectations of the Federal Government and leading economic experts for 2015 as a whole, the majority of which are in the range of 1.8 % to 2.0 %. There were no changes in the quarter of the report with respect to the indicators used by Sinner Schrader for estimating the development of the digital economy. The German Retail Federation (HDE) and the Federal E-Commerce and Distance Selling Trade Association of Germany (bevh) remain confident that online trading in goods and services will grow by around 12 % in the calendar year of 2015. The Circle of Online Marketers (OVK) forecasts that the net volume of digital display advertising will increase by 6.5 % in 2015. Even if growth rates in the digital economy do gradually normalise, their momentum continues to be considerably greater than that of the economy as a whole. The pressure for change, with digital technologies affecting various corporate functions, has now progressed to become a strategic question of digital transformation for any company. In spring 2015, the interactive business climate surveyed by the magazine ibusiness had recovered quickly from the low in autumn 2014 thanks to impetus from digital transformation and the positive economic environment. The magazine believes that the mood among agencies and service providers is elevated. The Internet Agency Ranking for 2015 published by the Federal Association of the Digital Economy (BVDW) in April 2015 gave an inside view of the competitive landscape for digital agencies in the period of the report: measured in terms of the revenues generated in the calendar year 2014, Sinner Schrader is the third-largest digital agency in Germany and the agency with the highest growth among the five largest agencies with revenues of more than 40 million. 6
Net Revenues, EBITA And Net revenue margin by quarter in million and % 4.9 % 13.0 0.6 Q3 2013/2014 7.1 % 13.5 1.0 Q4 2013/2014 4 Business Development and Group Situation 12.4 1.8 % The business volume of the Sinner Schrader Group recovered again in the third quarter of the 2014/2015 financial year against the weak preceding second quarter. In a quarterly comparison, the revenue generated by the Group increased by 7 % to 11.3 million. Against the background of a consistently positive overall economic environment, the existing clients have given up the reluctance to spend they exercised in the final few months of 2014 and the first few months of 2015. Revenues generated with new clients were also at a low level in the quarter of the report due to the meagre outcome of efforts to acquire new clients in the first half of 2014/2015. However, the number of enquiries remained at a high level, and the success rate in the acquisition of new clients has fortunately improved again considerably. In spite of the increase in comparison to the previous quarter, the business volume for the third quarter of 2014/2015 remained 13.1 % behind the revenue in the third quarter of the previous year, in which revenue exceeded 13 million for the first time. The operating result, EBITA, reached a good 0.8 million in the quarter of the report, which corresponds to 7.3 % of the revenue. The EBITA improved over that of the preceding quarter by more than 1 million, with the figure for the previous year also being exceeded. The increase of 0.2 million highlights the fact that the efficiency-oriented resource and cost management in the third quarter of 2014/2015 has been effective. The quarterly EBITA of the Group included a loss from NEXT AUDIENCE business in the amount of a good 0.3 million. Without taking account of this loss, the operating margin would have been 10.2 %. Accumulated over the first nine months of 2014/2015, Sinner Schrader achieved revenue of 34.3 million, which fell short of the figure for the nine-month period of the previous year by a good 0.8 million, or 2.4 %. After the weak results of the first half of 2014/2015, the EBITA reached 0.9 million in the first nine months, in comparison to 2.1 million in the previous year. This resulted in net income of 0.4 million, or just under 0.04 per share. 7 2.2 % 0.3 Q1 2014/2015 10.6 Q2 2014/2015 0.2 11.3 7.3 % 0.8 Q3 2014/2015 sinnerschrader group quarterly financial report 3 201 4/201 5 interim status report 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 interim status report 3 2014/2015 Net Revenues by Segment in million for 9M 2014/2015 in comparison to 9M 2013/2014 25.5 24.9 Interactive marketing The operating cash flow was again clearly positive at 1.4 million in the third quarter of 2014/2015. The amount of liquid funds increased to just under 4.2 million in comparison to the end of the second quarter. In the first nine months of 2014/2015 the operating cash flow was only slightly positive, which meant that the amount of liquid funds decreased by 1.7 million during the course of the financial year. This was mainly due to the dividend payment made in January. The shareholders equity rate was 54 % on 31 May 2015, against 52.7 % at the end of the second quarter of 2014/2015 and 49.3 % on 31 August 2014, the final day of the previous financial year. The following describes the development of the income, financial, and assets status in the third quarter and in the first nine months of the 2014/2015 financial year in more detail. 4.1 revenues 4.3 4.2 Interactive media Interactive commerce In the third quarter of the 2014/2015 financial year, Sinner Schrader earned a net revenue of 11.3 million. This clearly fell short of the comparable value of the previous year, which exceeded 13.0 million for the first time thanks to a concurrent strong development in business with existing clients and new clients, by 1.7 million, or 13.1 %. However, after two setbacks in the first and second quarters of 2014/2015, the business volume rose again in the quarter of the report, to increase over the second quarter of 2014/2015 by just under 0.75 million, or 7.1 %. In the Interactive Marketing segment, revenue of 8.4 million was achieved in the third quarter of 2014/2015. This was 1.3 million less than in the same period of the previous year, but 0.8 million more than in the second quarter of the current financial year. The two units in the segment, the Sinner Schrader agency and Sinner Schrader Mobile, developed at a similar rate in each case, with changes at Sinner Schrader Mobile being less pronounced. The decline in business in the Interactive Marketing segment in the quarter of the report against that of the previous year was characterised by the fact that anticipated falls in revenues generated in relationships with existing clients, including relationships with the E-Plus Group as part of integration in the Telefónica Germany organisation, could not be offset by business with newly acquired clients. 8 6.0 5.7 0.7 0.5 HOlding/ Consolid.
Demand for services in the segment nevertheless remained extremely brisk, and the success rate in new-client pitches was also pleasingly high in the third quarter of 2014/2015. However, achievable revenues in new-client relationships in the quarter of the report were not yet significant enough to be able to offset the existing budgets, which were lower than in the previous year. Even though the volume of business conducted with existing clients fell far short of that of the previous year, it nevertheless recovered markedly in comparison to the preceding second quarter. This development was made possible by the elimination of the negative effects of the second quarter s Christmas and New Year seasonal influences on revenue generated under current supervision and by newly authorised project budgets in the light of a stabilisation of the positive expectations for business. Revenue for the Interactive Media segment amounted to 1.1 million in the quarter of the report. The business volume in this segment thus fell short of the figure both for the previous year and the previous quarter, by a good 0.3 million. In comparison to the previous year, the development in the quarter of the report was determined by Sinner Schrader Content, which passed the efficiency potential realised from business experience gained in the first year to its client as part of prolonging the assignment for the content portal CURVED.DE beyond 31 December 2014. Revenue generated in NEXT AUDIENCE business including media business following the merger with mediaby GmbH in the first half of the year remained at the level of the previous year. In the quarter of the report, it was not possible to realise the acquisition of a second major client for the NEXT AUDIENCE Platform, and thus a concomitant rise in revenue, targeted for the second half of the 2014/2015 financial year. The result of a comparison with the preceding second quarter of 2014/2015 is in some parts also due to the Sinner- Schrader Content price adjustments, which were undertaken in stages throughout the first few months of 2015. Furthermore, the NEXT AUDIENCE revenue decreased from quarter to quarter. This was mainly due to the negative effects of seasonal factors in the media industry, which regularly reports a higher level of activity in the periods before and after Christmas in the second quarter of the financial year than in springtime. It was not possible to offset the seasonal effects since an expansion of the business base failed in the quarter of the report. The Interactive Commerce segment reported a stable business volume in the third quarter of 2014/2015 in comparison to the previous year. At 1.9 million, the revenue was virtually unchanged against that of the previous year, increasing by a good 0.1 million in comparison to the second quarter of 2014/2015. Accumulated over the first nine months of the 2014/2015 financial year, Sinner Schrader achieved a revenue level of 34.3 million. The revenue in the same period of the previous year was 35.1 million. After the strong growth of the previous year, the business volume was thus consolidated at around 0.8 million, or 2.4 %. The Interactive Marketing, Interactive Media and Interactive Commerce segments contributed to this consolidation with reductions of 0.5 million, 0.2 million and 0.3 million, respectively. Against this trend, revenues between the segments fell by 0.2 million. The declining trend in the nine-month period is mainly the result of the extremely slow-moving new-client business in the first half of the financial year. The new-client rate of the Sinner Schrader Group only reached 4.4 % in the first nine months of the current financial year. The revenue generated with clients with whom the Company had not yet had any business relationship a year ago only amounted to 1.5 million in the nine months of the report. It was thus not possible to fully compensate for the contraction in the volume of business conducted with existing clients which was expected to follow the strong growth. The new-client rate in the comparable period of the previous year amounted to a good 15.7 %, which corresponds to a revenue volume of 5.5 million. The client concentration rose as a result of the weak business with new clients, a process which was already clearly discernible in the first half of 2014/2015. Although the share of revenue generated with the largest client fell from 20.9 % and 21.0 % in the first nine months of the previous year and in the full year of 2013/2014, respectively, to 16.2 % for the first nine months of 2014/2015, revenue earned with the five biggest clients rose from 50.1 % in the 2013/2014 financial year to 55.3 % in the nine-month period of 2014/2015. A comparable increase was also shown for the ten biggest clients, whose share of revenue increased from 71.0 % for the entire previous year to 74.7 % in the period of the report. 9 sinnerschrader group quarterly financial report 3 201 4/201 5 interim status report 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 interim status report 3 2014/2015 Net Revenues by sector in % for 9M 2014/2015 5.5 (previous year: 5.2) Media & Entertainment 16.8 (previous year: 20.2) Retail & Consumer goods 26.0 (previous year: 20.1) Financial Services Previous year = 2013/2014 financial year The sector mix changed, with the share enjoyed by the Financial Services sector benefiting in particular. In the first nine months of 2014/2015, the share of revenue generated by this group of clients increased from 20.1 % to 26.0 % in comparison to the share generated in the previous year as a whole. In contrast, the shares for the Retail & Consumer Goods and Telecommunications & Technology sectors were significantly reduced, by 3.4 and 3.0 percentage points, to 16.8 % and 30.6 %, respectively. In spite of the reduction, the Telecommunications & Technology sector nevertheless clearly remained the most important sector for Sinner Schrader. The shares reported for the Transport & Tourism and Media & Entertainment sectors were approximately the same, at 17.2 % and 5.5 %, respectively. Other clients accounted for a share in revenue of 3.9 % in the nine-month period, which was also virtually unchanged. 4.2 Operating Result (EBITA) 9M 2014/2015 30.6 (previous year: 33.6) Telecommunications & Technology 17.2 (previous year: 17.3) Transport & Tourism 3.9 (previous year: 3.6) Other The Sinner Schrader Group achieved an operating result in the amount of 0.8 million in the third quarter of 2014/2015, thus exceeding the result of the same quarter of the previous year by just under 0.2 million, or 28.4 %, although the revenue fell short of the figure for the previous year by 13.1 %. The improvement in the operating result also considerably exceeded the development of revenue in comparison to the preceding second quarter of 2014/2015. The rise in revenue of around 0.75 million was matched by an upturn in income of 1.0 million. The operating margin was 7.3 % in the quarter of the report, thus exceeding the margin achieved in the 2013/2014 financial year as a whole, and only falling short of the best quarterly figure of the 2013/2014 financial year, achieved in the second quarter, by 0.3 percentage points. The third-quarter EBITA continued to be negatively affected by losses resulting from NEXT AUDIENCE business. Adjusted for these losses, the EBITA would have amounted to just under 1.2 million, which would have corresponded to a margin of 10.2 % in terms of the same revenue basis. Apart from slight reductions in Sinner Schrader AG costs which were not allocated to the segments, the improvement in the operating profit in the third quarter of 2014/2015 over the previous year resulted from the Interactive Marketing segment. Sinner Schrader improved the EBITA for this segment by a good 0.2 million in spite of a decline in revenue of 1.3 million in comparison to the previous year. The measures to enhance efficiency, particularly the replacement of freelancers with the Company s own employees, as well as reductions across the cost items, have mainly taken effect in the Sinner Schrader agency. The operating margin for the segment was improved by 4.3 percentage points to 13.3 % in the quarter of the report, thanks to these measures. 10
EBITA by Segment in million for 9M 2014/2015 in comparison to 9M 2013/2014 3.2 Interactive marketing 1.8 0.4 0.3 Interactive media In the Interactive Media segment, it was possible to offset a large proportion of the decline in revenue against the previous year by way of cost cuts, particularly in the case of NEXT AUDIENCE. A decline in income of just under 0.1 million remained. The Interactive Commerce segment fell just short of the operating result and revenue of the previous year. The Interactive Marketing and Interactive Commerce segments contributed 0.9 million and just under 0.1 million, respectively, to the 1.0 million rise in income over the preceding second quarter of 2014/2015. Added to this were reduced costs in the amount of just under 0.3 million, which were not allocated to the segments. The reduction was mainly the result of the elimination of costs primarily incurred in the second quarter for the Annual General Meeting and the Annual Report. The decline in revenue also resulted in a 0.2 million decrease in the EBITA in the Interactive Media segment. In spite of the rise in income over the previous year, in the third quarter of 2014/2015, the weak first half of the financial year meant that the Sinner Schrader Group still fell significantly short of the figure for the previous year in a nine-month total. The nine-month EBITA for the Group amounted to 0.9 million in the current financial year, while Sinner Schrader achieved 2.1 million in the same period of the previous year The operating margin thus only reached 2.7 % in the ninemonth period. The margin would have been 5.5 % without the NEXT AUDIENCE losses. The Interactive Marketing segment alone accounted for the deficit in comparison to the previous year. At 1.8 million, the EBITA in this segment for the nine-month period in 2014/2015 fell short of the previous year by just under 1.4 million. The cost basis, targeted at further, albeit slight, increases in revenue, encountered an unexpected weakness in revenue in the first half of the financial year. It took until the third quarter for the measures subsequently initiated to generate operative margins of more than 10 % again. The two other segments, Interactive Media and Interactive Commerce, fell just short of the figure for the previous year by 0.1 million each in the first nine months of 2014/2015. The loss in the Interactive Media segment for the nine-month period in 2014/2015 was thus reduced to 0.3 million. In the same period, the Interactive Commerce segment achieved a surplus of 0.2 million in its EBITA. The costs for the holding company which are not allocated to the segments amounted to just under 0.8 million in the first nine months of the current financial year, and were virtually unchanged against those of the previous year. The Statement of Operations of the Sinner Schrader Group shows that the fall in revenue of 2.4 % in comparison to the previous year was matched by cost of revenues dropping by a good 1 % for the first nine months of 2014/2015. The adjustment to the capacity of the Company s own employees and of freelancers, which was based on slight growth, was only possible after some delay, resulting in over-capacities in the first six months of the current financial year in particular. The gross margin consequently fell from 23.8 % in the same period of the previous year to 23.0 % in the first nine months of 2014/2015; the gross profit was reduced by 0.5 million in comparison to the previous year. 11 0.1 Interactive commerce 0.2 0.8 0.8 HOlding/ Consolid. sinnerschrader group quarterly financial report 3 201 4/201 5 interim status report 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 interim status report 3 2014/2015 Development of costs by function 9M 2014/2015 9M 2013/2014 Change IN 000s IN % 1) IN 000s IN % 1) IN % Cost of revenues 26,403 77.0 26,784 76.2 1.4 thereof amortisation expenditure 71 0.2 100.0 Costs of marketing 2,976 8.7 2,592 7.4 14.8 thereof amortisation expenditure 11 100.0 General and administrative costs 3,540 10.3 3,598 10.2 1.6 Research and development costs 737 2.1 263 0.7 180.0 Development of costs by cost type 9M 2014/2015 9M 2013/2014 Change IN 000s IN % 1) IN 000s IN % 1) IN % Personnel expenses 23,062 67.2 20,213 57.5 14.1 Costs of materials and services 5,416 15.8 7,745 22.0 30.1 Other operating expenses 4,324 12.6 4,611 13.1 6.2 Depreciation 854 2.5 587 1.7 45.6 Amortisation expenses 82 0.2 100.0 1) As a percentage of net revenues In addition to the worsening of the gross margin, an increase in sales efforts of 14.8 %, or just under 0.4 million, and 180 %, or just under 0.5 million, more in research and development costs contributed to the declining trend in the operating result in the first nine months. The rise in research and development costs was related to the completion of the first fully functional version of the NEXT AUDIENCE Platform in August 2014, following which the costs for the further development and maintenance of the software were no longer capitalisable, but were instead directly charged to the Statement of Operations. The administrative costs were reduced against the trend by just under 0.1 million, or 2 %, and the other expenses and income increased by 0.1 million in net terms. The comparison of the Statement of Operations for the third quarter of 2014/2015 and the nine-month period shows that the measures to improve the operating relations have been effective. The gross margin was already at 26.6 % again in the quarter of the report, against the 23.0 % calculated for the nine-month period. Marketing and administrative costs also accounted for far less in the third quarter, at 7.7 % and 9.3 %, respectively, than in the overall view of the first nine months of 2014/2015, in which they amounted to 8.7 % and 10.3 %, respectively. The comparison with the third quarter of 2013/2014 clearly shows that the improvement in the operating profit in the quarter of the report was primarily the result of the improvement in the gross profit of just under 0.3 million, or 9.8 %. The gross margin of 26.6 % in the third quarter of 2014/2015 exceeded that of the previous year by 5.5 percentage points. 12
The development of costs by cost type in the first nine months of 2014/2015 clearly shows the effects of the replacement of external service providers with the Company s own personnel capacity. While the personnel expenses rose by 14.1 %, or just under 2.9 million, as part of the increase in the Company s own workforce from an average 434 full-time employees in the same period of the previous year to 482 full-time employees in the first nine months of 2014/2015, the cost of purchased services was reduced by 2.3 million, or 30.1 %. However, the positive effect of the conversion was not fully felt until the quarter of the report: in comparison to the third quarter of the previous year, the 0.6 million increase in personnel costs was matched by a reduction of 2.3 million in expenses for services. General cost management also ensured that other operating expenses were reduced by 0.3 million in the first nine months of 2014/2015; the expenses were thus 6.2 % lower in the first nine months of 2014/2015 than in the previous year. On the other hand, depreciation is reported to have risen considerably to amount to just under 0.9 million, after 0.6 million in the previous year. The reason for this rise is the depreciation absorbed in the current financial year for the capitalised development services incurred for setting up the NEXT AUDIENCE Platform. 4.3 Net Income Thanks to the positive development of the operating result in the third quarter, Sinner Schrader earned net income in the amount of 0.4 million, or just under 0.04 per share, in the first nine months of the current financial year. The operating nine-month result of 0.9 million was in this case negatively affected by current and deferred taxes in the amount of 0.5 million. Due to the reduced operative earning power in the first nine months, the separation of the fiscal spheres of the NEXT AUDIENCE Group from the fiscal unit in Germany in particular had a disproportionately negative effect. The tax rate was thus around 55 %. The low interest rates and low average levels of liquidity meant that the financial activities of the Group did not result in any positive contribution to profits in the period of the report. No amortisation costs needed to be borne in the first nine months of 2014/2015. Net income for first nine months of the previous year amounted to 0.9 million. A drop in the operative result alone accounts for the difference between the current financial year and the previous year. A decrease in the taxes on income and the elimination of amortisation costs in an amount of just under 0.1 million have narrowed the gap to the previous year in terms of net income. 4.4 Cash Flows The amount of liquid funds rose further in the third quarter of 2014/2015, thanks to the clearly positive operating cash flow of a good 1.35 million. In view of comparatively weak investment activities in the quarter of the report, with an outflow of funds of only 0.1 million, around 1.25 million went into the Sinner Schrader Group liquidity item. The inflow of funds from operational activities in the third quarter resulted in the operating cash flow in the first nine months of 2014/2015 achieving an overall, albeit only minor, positive value. The inflow of funds from adjusted net income was 1.2 million in the nine-month period. Funds in the amount of 0.4 million were received as a result of a reduction in the funds tied up in net current assets, and an amount of 0.1 million was received from the change in the net tax refund claims and tax liabilities. Most of this inflow of funds served to cover the use of accruals in the first nine months, so on balance an operating cash flow of just under 0.05 million remained. The strong growth in the volume of business in the comparable period of the previous year resulted in an outflow of funds from operational activities of 3.55 million. 13 sinnerschrader group quarterly financial report 3 201 4/201 5 interim status report 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 interim status report 3 2014/2015 Sinner Schrader spent 0.5 million on fixed asset investments in the nine-month period. In the comparable period of the previous year, funds in the amount of a good 1.15 million were spent on investments. The reduction in the investment volume is largely the result of NEXT AUDIENCE not capitalising any further development costs after the completion of the first version of the NEXT AUDIENCE Platform in August 2014. Expenses in the amount of 0.4 million were capitalised in the same period of the previous year. In the period of the report, the replacement and expansion investment in the Group s office and workplace infrastructure was slightly below the level of the previous year. The payment of a dividend of 0.12 per share in January 2015 resulted in an outflow of funds of a good 1.35 million in the area of financing activities in the first nine months of 2014/2015. This outflow of funds was only marginally offset by an inflow of 0.15 million for the issuing of treasury stock as part of the exercising of 91,667 employee options. The resulting cash flow from financing activities amounted to 1.2 million in the nine-month period. In the previous year, outflows of funds for repurchasing shares of treasury stock and inflows of funds from issuing shares of treasury stock to service employee options resulted in an inflow of funds from financing activities of 0.05 million in net terms. The total amount of cash flows from operating, investment and financing activities resulted in a reduction of a good 1.65 million in liquid funds in the first nine months of the current financial year. The liquid funds including the total of securities and fixed-term deposits were reduced by 4.9 million in the same period of the previous year. 4.5 asset and Financial Situation The development of the Sinner Schrader Group balance sheet in the first nine months of 2014/2015 is characterised by the decline in business dynamics in comparison to the previous year. During the phase of strong growth in the 2013/2014 financial year, the balance sheet total had increased considerably before reaching the final figure as at 31 August 2014. In line with the consolidation of the development of business in the period of the report, the balance sheet total has fallen in comparison to the total on 31 August 2014, by 3.9 million to 24.6 million on 31 May 2015. On the asset side, the consolidation mainly had the effect of reducing the amount of accounts receivable by 1.9 million. The total amount of other current assets not including the liquid funds only changed marginally. At the same time, the fixed assets were reduced by 0.4 million, with contributions to this reduction resulting from the low volume of investments in comparison to the previous year and the commencement of depreciation on the NEXT AUDIENCE Platform after it had been delivered and put into operation at the end of the preceding financial year. On the liabilities side, the reduction in the use of freelancers in particular resulted in a contraction of trade accounts payable in the amount of 0.9 million. The 1.7 million decrease in current reserves is also mainly the result of the consolidation of the development of business. Advance payments received and the other current liability items fell by a total of 0.5 million. In addition to the consolidation of the business development, the dividend payment made in January 2015 also contributed 1.3 million to the decrease in the balance sheet total. The payment of the dividend played a significant role in the 1.7 million decrease in the amount of liquid funds in the first nine months of 2014/2015. Offset by the increases in shareholders equity from the net income achieved in the nine-month period and from issuing treasury stock to service exercised employee options, the amount paid out caused a reduction in equity capital of 0.8 million. The decrease in equity capital was, however, disproportionately low in relation to the decrease in the balance sheet total, which meant that the shareholders equity rate, at 49.3 % on 31 August 2014, improved to 54.0 % on 31 May 2015. 14
Employee structure according to areas in full-time employees for 9M 2014/2015 145 (Previous year: 130) Consultancy 185 (Previous year: 171) Technology Previous year = 9M 2013/2014 4.6 Employees 482 (Previous year: 434) 105 (Previous year: 87) Creation 47 (Previous year: 46) Administration The number of employees in the Sinner Schrader Group fell by 15 to 514 in the third quarter of 2014/2015 in comparison to the number of employees as at the end of the previous quarter. The status as at the end of the quarter of the report on 31 May 2015 thus fell short of the number on 31 August 2014 and on 31 May 2014 by 7 employees and 1 employee, respectively. The development of the number of employees thus reflected the generally weak, or slightly declining, develop ment of revenue in the current financial year. At the same time, the trend in the number of employees was different in the individual segments. The Interactive Marketing segment, primarily comprising the Sinner Schrader agency, increased its capacity by 4 and 16 employees, respectively, against the comparable numbers for the previous year on 31 August and 31 May 2014, the aim being to reduce the rate of freelancers. The segment had 332 employees on 31 May 2015. The number of employees in the Interactive Media segment was slightly reduced, at 50 employees on 31 May 2015, which is 3 and 2 employees fewer than on 31 August and 31 May 2014, respectively. Clearer reductions were reported by the Interactive Commerce segment, which, with the aim of enhancing efficiency, reduced the numbers of employees against those of the comparable reporting dates of the previous year by 10 and 18 employees, respectively, to 87 employees on 31 May 2015. With 45 employees on 31 May 2015, the holding company had 2 and 3 more employees, respectively, than on each of the comparable reporting dates. In contrast to this more long-term trend and in a comparison with the status on 28 February 2015, it was mainly the Interactive Marketing segment that contributed to reducing the number of employees, with a reduction of 13 employees. The capacities in the other two business segments were reduced by 2 employees each in the third quarter, whereas the holding company took on 2 more employees. Of the 514 employees on 31 May 2015, 11 employees were receiving vocational training. 51 employees were working as students or completing an internship. 15 sinnerschrader group quarterly financial report 3 201 4/201 5 interim status report 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 interim status report 3 2014/2015 After standardisation of part-time employment relationships and calculated as an average over the period, Sinner- Schrader had a personnel capacity of 473 full-time employees in the third quarter of 2014/2015, after 486 and 487 fulltime employees in the preceding second and first quarters, respectively. In the third quarter of 2013/2014 the capacity was 460 full-time employees. The increase in capacity against the previous year was thus 2.9 % in the quarter of the report. The 13.1 % decrease in revenue in the quarter of the report provided the capacity with sufficient potential to reduce the rate of freelancers. Since Sinner Schrader had started the financial year with different expectations for the development of revenue, the personnel capacity of 482 full-time employees in the nine-month period of 2014/2015 exceeded the capacity for the final third quarter. It exceeded the capacity of 434 employees for the first nine months of the previous year by 11.1 %. Based on the nine-month period, the capacity was increased by 18.0 % to 314 full-time employees, with the main increase in the Interactive Marketing segment. The Interactive Media segment grew at almost the same high rate, at 16.5 % with an increase of 7 employees. However, this growth rate only relates to the establishment of content marketing business in Sinner Schrader Content GmbH, with a capacity of just under 12 full-time employees in the nine-month period of 2014/2015. In the Interactive Commerce segment, the capacity in the nine-month period was reduced against the trend in comparison to the previous year, by 10.3 % to 84 full-time employees. In the first nine months of 2014/2015, the personnel capacity in the holding company exceeded that of the previous year by 3 full-time employees, which corresponds to an increase of 9.5 % in capacity. Broken down according to areas of expertise, 145 full-time employees were assigned to consulting (strategy, client services and media planning and purchasing), 185 to technology, 105 to creation, and 47 to administrative activities in the first nine months of 2014/2015. Sinner Schrader has thus relatively gradually increased its capacity across the operating fields of competence by 15, 14 and 18 full-time employees, respectively, over the first nine months of 2013/2014. The administrative capacity was increased by 1 full-time employee. 5 risks and Opportunities of Future Business Development With respect to risk management at Sinner Schrader and the main risks and opportunities in particular, there were no major changes in the first nine months of 2014/2015 in comparison to the situation outlined in the 2013/2014 Annual Report. There are still no identifiable risks that could endanger the existence of the Sinner Schrader Group or Sinner- Schrader AG. 6 major Events after the Balance Sheet Date After assessing the development of business in the past three months, on 28 June 2015 the Management Board and the Supervisory Board decided to restructure NEXT AUDIENCE business and to adjust the cost structure, which was based on an independent establishment of business, mainly by way of reducing the personnel capacity. Sinner Schrader AG will determine courses of action, including the sale of the remaining reduced business operations or their transfer to a joint enterprise with a partner. On the same day, the Management Board and the Supervisory Board of Sinner Schrader AG also decided to take over Swipe GmbH, Hamburg, thus increasing the Group s range of services in the area of mobile applications. The purchase contract was signed on 30 June 2015. The shares in Swipe GmbH were transferred to Sinner Schrader AG a few days later. Swipe GmbH achieved revenues of 1.45 million and operative earnings of just under 0.19 million in 2014. Expectations for 2015 are slightly below these figures. The takeover was implemented with a cash payment of 0.3 million and the transfer of 156,000 Sinner Schrader shares from the treasury stock of Sinner Schrader AG. The shares are subject to a lock-up period. 16
7 Forecast After two financial quarters, which fell short of expectations, the results for the third quarter of 2014/2015 are moving in the right direction again overall. Revenue increased over that of the previous quarter. The basis for the next growth steps was laid in the quarter of the report with the considerable success achieved in new-client business and with the new dynamics in some relationships with major existing clients. Although the business volume of the previous year has not been reached again yet, the third quarter of 2014/2015 was nevertheless already better than the previous year in terms of earnings. This shows that the revenue consolidation has been used to significantly improve efficiency. Even though the crisis in Greece still involves a certain negative potential, the overall economic outlook and the mood in the digital industry are generally positive. Expectations for the development of revenue and earnings in the fourth quarter of 2014/2015 are thus high. Unlike the overall development, the third quarter of 2014/2015 and the weeks that followed were not successful for NEXT AUDIENCE business. On the one hand it was not possible to acquire a significant new client for the use of the NEXT AUDIENCE platform, and on the other hand, the pilot client BASE had to terminate its cooperation with NEXT AUDIENCE as at the end of September 2015 due to the merger integration in the Telefónica organisation. This development prompted Sinner Schrader to take a decision to adjust the NEXT AUDIENCE cost basis and consider courses of action, including a sale or transfer to a joint enterprise. Without non-recurring charges which may result from the decision in terms of the further development of NEXT AUDIENCE, and given an extremely positive fourth quarter, Sinner Schrader expects to be able to achieve revenue of more than 47 million and operating earnings (EBITA) in the range of 2.4 million and 2.7 million in 2014/2015 as a whole. Contributions to the full-year figures for revenue and earnings from the mobile agency Swipe, taken over at the beginning of July, will only to be minor due to the short period since the takeover and the size of the company. Non-recurring charges against the EBITA in the range of 1.0 million to 1.2 million may be incurred should it not be possible to come up with a concept for NEXT AUDIENCE to continue. Hamburg, 15 July 2015 The Management Board Matthias Schrader Thomas Dyckhoff 17 sinnerschrader group quarterly financial report 3 201 4/201 5 interim status report 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 18
Quarterly Financial Report 3 2014 / 2015 01 02 interim status report 3 2014/2015 Consolidated Quarterly Accounts 3 2014/2015 05 17 20 35
sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015 CONSOLIDATED BALANCE SHEETS As at 31 May 2015 Assets in 31.05.2015 31.08.2014 Current assets: Liquid funds 4,171,419 5,832,597 Liquid funds 4,171,419 5,832,597 Accounts receivable, net of allowances for doubtful accounts of 55,325 and 55,625 as at 31.05.2015 and 31.08.2014, respectively 8,038,859 9,904,203 Unbilled revenues 4,702,316 4,556,459 Tax receivables 224,174 15,865 Other current assets and prepaid expenses 748,307 1,113,398 Total current assets 17,885,075 21,422,522 Non-current assets: Goodwill 4,028,740 4,028,740 Other intangible assets 866,596 1,107,758 Property and equipment 1,786,507 1,902,187 Tax receivables 68,035 89,938 Total non-current assets 6,749,878 7,128,623 Total assets 24,634,953 28,551,145 20
Liabilities and shareholders equity in 31.05.2015 31.08.2014 Current liabilities: Trade accounts payable 3,641,767 4,547,841 Advance payments received 1,382,774 1,660,965 Accrued expenses 2,839,763 4,520,738 Tax liabilities 839,817 545,264 Other current liabilities and deferred income 2,003,230 2,502,083 Total current liabilities 10,707,351 13,776,891 Non-current liabilities: Deferred tax liabilities 634,880 698,880 Total non-current liabilities 634,880 698,880 Shareholders equity: Subscribed capital Common stock, stated value 1, issued: 11,542,764 and 11,542,764, outstanding: 11,327,525 and 11,235,858 as at 31.05.2015 and 31.08.2014, respectively 11,542,764 11,542,764 Treasury stock, 215,239 and 306,906 as at 31.05.2015 and 31.08.2014, respectively 377,154 537,778 Additional paid-in capital 3,646,096 3,654,636 Reserves for share-based compensation 264,761 260,077 Accumulated deficit (incl. revenue reserves) 1,809,540 869,487 Changes in shareholders equity not affecting net income 25,795 25,162 Total shareholders equity 13,292,722 14,075,374 Total liabilities and shareholders equity 24,634,953 28,551,145 The accompanying notes are an integral part of these Consolidated Financial Statements. 21 sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015 CONSOLIDATED Statements of operations from 1 September 2014 to 31 may 2015 in Q3 2014/2015 Q3 2013/2014 9M 2014/2015 9M 2013/2014 Gross revenues 12,524,052 13,479,459 37,891,886 37,287,883 Media costs 1,199,704 452,563 3,590,583 2,147,026 Total revenues, net 11,324,348 13,026,896 34,301,303 35,140,857 Cost of revenues 8,312,166 10,283,226 26,402,946 26,783,723 Gross profit 3,012,182 2,743,670 7,898,357 8,357,134 Selling and marketing expenses 872,866 891,459 2,976,235 2,591,983 General and administrative expenses 1,058,309 1,176,154 3,539,621 3,598,151 Research and development expenses 259,052 92,435 737,008 263,190 Other income and expenses, net 3,490 38,445 265,801 127,522 Operating income 825,445 622,067 911,294 2,031,332 Financial income 620 2,061 2,537 14,520 Financial expenses 325 302 3,902 6,351 Income before provision for income tax 825,740 623,826 909,929 2,039,501 Income tax 398,966 331,793 501,679 1,137,514 Net income 426,774 292,033 408,250 901,987 Net income attributable to the shareholders of SinnerSchrader AG 426,774 292,033 408,250 901,987 Net income per share (basic) 0.04 0.03 0.04 0.08 Net income per share (diluted) 0.04 0.03 0.04 0.08 Weighted average shares outstanding (basic) 11,327,525 11,146,184 11,272,803 11,124,627 Weighted average shares outstanding (diluted) 11,435,727 11,348,679 11,399,793 11,224,783 The accompanying notes are an integral part of these Consolidated Financial Statements. 22
CONSOLIDATED Statements of comprehensive income from 1 September 2014 to 31 may 2015 in Q3 2014/2015 Q3 2013/2014 9M 2014/2015 9M 2013/2014 Net income 426,775 292,033 408,250 901,987 Other comprehensive income Items that may be reclassified to profit or loss in future periods Foreign currency translation adjustment 1 2 633 23 thereof taxes on income recognised directly in shareholders equity Changes in shareholders equity not affecting net income 1 2 633 23 Consolidated comprehensive income 426,774 292,031 408,883 901,964 Comprehensive income attributable to the shareholders of SinnerSchrader AG 426,774 292,031 408,883 901,964 The accompanying notes are an integral part of these Consolidated Financial Statements. 23 sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015 CONSOLIDATED Statements of shareholders equity from 1 September 2014 to 31 may 2015 in Number of shares outstanding Balance as at 31.08.2013 11,122,612 11,542,764 Comprehensive income Deferred compensation Purchase of treasury stock 36,754 Re-issuance of treasury stock 75,000 Balance as at 31.05.2014 11,160,858 11,542,764 Balance as at 31.08.2014 11,235,858 11,542,764 Comprehensive income Disbursed dividend Deferred compensation Re-issuance of treasury stock 91,667 Balance as at 31.05.2015 11,327,525 11,542,764 The accompanying notes are an integral part of these Consolidated Financial Statements. 24 Common stock
Treasury stock Additional paid-in capital Reserves for share-based compensation Retained earnings/losses Other comprehensive income Total shareholders equity 730,252 3,669,974 252,271 2,712,724 25,190 12,047,223 901,987 23 901,964 30,105 30,105 70,364 70,364 134,287 6,037 128,250 666,329 3,663,937 282,376 1,810,737 25,167 13,037,178 537,778 3,654,636 260,077 869,487 25,162 14,075,374 408,250 633 408,883 1,348,303 1,348,303 4,684 4,684 160,624 8,540 152,084 377,154 3,646,096 264,761 1,809,540 25,795 13,292,722 25 sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015 CONSOLIDATED Statements of cash flows from 1 September 2014 to 31 may 2015 in 9M 2014/2015 9M 2013/2014 Cash flows from operating activities: Net income 408,250 901,987 Adjustments to reconcile net income to net cash used in operating activities: Amortisation of intangible assets from first consolidation 82,181 Depreciation of property and equipment 854,301 586,907 Share-based compensation 4,684 30,105 Bad debt expenses 7,500 Gains/losses on the disposal of fixed assets 4,622 7,962 Deferred tax provision 64,000 333,271 Changes in assets and liabilities: Accounts receivable 1,865,344 4,927,120 Unbilled revenues 145,857 1,612,606 Tax receivables 186,406 14,569 Other current assets 365,090 325,440 Accounts payable, deferred revenues and other liabilities 1,683,119 181,297 Tax liabilities 294,553 420,730 Other accrued expenses 1,680,975 769,978 Net cash provided by (used in) operating activities 36,487 3,543,679 26
in 9M 2014/2015 9M 2013/2014 Cash flows from investing activities: Purchase price payments for acquisition of subsidiary companies in previous years 306,346 Purchase of property and equipment 518,461 1,143,926 Proceeds from the sale of equipment 16,382 6,093 Incoming payment from financial assets as part of short-term financial management 1,000,000 Net cash provided by (used in) investing activities 502,079 444,179 Cash flows from financing activities: Payment to shareholders 1,348,303 Payment for treasury stock 70,364 Incoming payment for treasury stock 152,084 128,250 Net cash provided by (used in) financing activities 1,196,219 57,886 Net effect of rate changes on cash and cash equivalents 633 23 Net increase/decrease in cash and cash equivalents 1,661,178 3,929,995 Cash and cash equivalents at beginning of period 5,832,597 4,949,325 Cash and cash equivalents at end of period 4,171,419 1,019,330 thereof back-up of bank guarantees 476,575 451,575 For information only, contained in cash flows from operating activities: Interest payment received 697 13,391 Paid interest 3,902 3,693 The accompanying notes are an integral part of these Consolidated Financial Statements. 27 sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015 Notes As at 31 May 2015 28
1 general Foundations The Consolidated Interim Financial Statements as at 31 May 2015 of Sinner Schrader Aktiengesellschaft ( Sinner Schrader AG or AG ) and its subsidiaries ( Sinner Schrader Group, Sinner Schrader, or Group ) for the first nine months and the third quarter of the 2014/2015 financial year from 1 September 2014 and 1 March 2015, respectively, to 31 May 2015 were prepared according to the International Financial Reporting Standards ( IFRS ) of the International Accounting Standards Board ( IASB ) in force on the report date, taking account of the interpretations of the International Financial Reporting Interpretations Committee ( IFRIC ) and in compliance with the standard for interim financial reports specified by DRS 16 of the German Accounting Standards. They were not subject to auditing and should be read in conjunction with the Consolidated Financial Statements of Sinner Schrader AG as at 31 August 2014. The accounting, valuation, and consolidation principles of the Quarterly Report at hand are unchanged from the Group s Consolidated Financial Statements as at 31 August 2014. They are disclosed and explained in the Group s Consolidated Financial Statements as at 31 August 2014, which are published in the 2013/2014 Annual Report. 29 sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015 2 Consolidation Group The consolidation group as at 31 May 2015 consists of Sinner Schrader AG as well as the following direct and indirect subsidiaries of the AG, each of which is fully consolidated: 1. Sinner Schrader Deutschland GmbH, Hamburg, Germany 2. Commerce Plus GmbH, Hamburg, Germany 3. Commerce Plus Consulting GmbH, Hamburg, Germany 4. NEXT AUDIENCE GmbH, Hamburg, Germany 5. Sinner Schrader Content GmbH, Hamburg, Germany 6. Sinner Schrader Mobile GmbH, Berlin, Germany 7. Sinner Schrader Praha s.r.o., Prague, Czech Republic 8. Sinner Schrader UK Ltd., London, Great Britain 9. Sinner Schrader Benelux BV, Rotterdam, the Netherlands The consolidation group has changed as follows in comparison to the status on 31 August 2014 due to the merger of mediaby GmbH and NEXT AUDIENCE GmbH with retroactive effect as at 1 September 2014. The relevant resolutions and contracts were notarised on 4 November 2014, and the merger was entered in the Commercial Register on 19 November 2014. 3 Segment Reporting Sinner Schrader still breaks down its business into the three business segments Interactive Marketing, Interactive Media, and Interactive Commerce. Sinner Schrader Deutschland GmbH, Sinner Schrader Praha s.r.o. and Sinner Schrader Mobile GmbH are brought together in the Interactive Marketing segment. The Interactive Media segment comprises NEXT AUDIENCE GmbH and its full subsidiary Sinner Schrader Content GmbH. The Commerce Plus Group forms the Interactive Commerce segment. Accounting for the individual segments follows the accounting principles that are also used in the Group. Administrative costs incurred in Sinner Schrader AG are charged to the operative segments, where they can be assigned. Costs that cannot be assigned are not distributed to the segments these are largely costs for original holding tasks, such as investor relations work. 30
Table 1a shows the segment information for the first nine months of the 2014/2015 financial year; the adjusted comparative data of the previous year can be seen in Table 1b: Table 1a Segment information for the first nine months 2014/2015 in and number 01.09.2014 31.05.2015 Interactive Marketing Interactive Media Interactive Commerce Total Segments Holding/ consolidation External revenues 24,593,391 7,694,256 5,604,239 37,891,886 37,891,886 Internal revenues 347,894 52,023 139,053 538,970 538,970 Gross revenues 24,941,285 7,746,279 5,743,292 38,430,856 538,970 37,891,886 Media costs 3,590,583 3,590,583 3,590,583 Total revenues, net 24,941,285 4,155,696 5,743,292 34,840,273 538,970 34,301,303 Segment income (EBITA) 1,833,507 305,452 155,440 1,683,495 772,202 911,294 Employees, end of period 332 50 87 469 45 514 Table 1b Segment information for the first nine months 2013/2014 in and number 01.09.2013 31.05.2014 Interactive Marketing Interactive Media Interactive Commerce Total Segments Holding/ consolidation External revenues 24,824,922 6,449,681 6,013,280 37,287,883 37,287,883 Internal revenues 647,064 54,391 42,377 743,832 743,832 Gross revenues 25,471,986 6,504,072 6,055,657 38,031,715 743,832 37,287,883 Media costs 2,147,248 2,147,248 222 2,147,026 Total revenues, net 25,471,986 4,356,824 6,055,657 35,884,467 743,610 35,140,857 Segment income (EBITA) 3,203,610 399,204 85,175 2,889,581 776,068 2,113,513 Employees, end of period 316 52 105 473 42 515 In the Interactive Marketing segment, net revenue in the amount of 5,557,000, 4,185,000 and 3,743,000, respectively, which accounts for around 16 %, 12 % and 11 %, respectively, of the consolidated net revenue for the Group, was achieved with three groups of companies in the period of the report. The external Group revenues were mainly generated by the Sinner Schrader Group companies located in Germany. Sinner Schrader Praha s.r.o. conducts most of its activities for Group companies in Germany. Table 1c explains the transfer of the total segment income to Group income before taxes for the period from 1 September 2014 to 31 May 2015 and for the comparable period of the previous year: Table 1c Reconciliation of segment income to Group income before taxes in Group Group 9M 2014/2015 9M 2013/2014 Segment income (EBITA) all reporting segments 1,683,495 2,889,581 Central costs not passed on to segments 772,202 776,068 EBITA of the Group 911,294 2,113,513 Amortisation of intangible assets from first consolidation and of goodwill 82,181 Group financial income 1,365 8,169 Group income before taxes 909,929 2,039,501 31 sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015 4 Breakdown of Expenses according to the Total Cost Method The total revenues, marketing, administrative, and research and development costs in the first nine months of the 2014/2015 and 2013/2014 financial years were broken down according to cost types, as shown in Table 2: Table 2 Operating costs by cost type in 9M 2014/2015 9M 2013/2014 Personnel expenses 23,061,921 20,212,813 Costs of materials and services 5,415,511 7,744,524 Depreciation of property and equipment, as far as not from first consolidation 854,301 586,907 Other operating expenses 4,324,077 4,610,622 Amortisation of intangible assets from first consolidation 82,181 Total 33,655,810 33,237,047 5 income Tax The income tax reported in the Statements of Operations is made up of current and deferred components, as shown in Table 3 Table 3 Income Tax in 9M 2014/2015 9M 2013/2014 Current 565,679 804,243 Deferred 64,000 333,271 Total 501,679 1,137,514 In the first nine months of the 2014/2015 financial year, current taxes in the amount of 566,000 (previous year: 804,000) were incurred. Deferred taxes were to be formed in recognition of profit and loss according to IAS 12 due to temporary differences between the book values in the Consolidated Balance Sheets and the tax assumptions. This resulted in income in the amount of 64,000 for the period of the report. In the same period of the previous year, deferred tax expenditure amounted to 333,000. 6 Financial Obligations and Contingent Liabilities The contingencies and other financial obligations as at 31 May 2015 were largely unchanged compared to the Consolidated Financial Statements as at 31 August 2014. 32
7 Treasury Stock As at 31 May 2015, the treasury stock of Sinner Schrader AG amounted to 215,239 shares with a calculated face value of 215,239, representing 1.86 % of the share capital. On 31 August 2014 the number of shares of treasury stock still amounted to 306,906 shares with a calculated face value of 306,906, or 2.66 % of the share capital. The decrease in the number of shares of treasury stock during the course of the nine months of the financial year was due to the exercising of 91,667 employee options in the second quarter of 2014/2015. The 215,239 shares of treasury stock as at 31 May 2015 were to be recognised at acquisition costs in an amount of 377,154, or an average of 1.75 per share. 8 Stock Option Plans In January 2007, the Annual General Meeting of Sinner Schrader AG approved the 2007 Sinner Schrader Stock Option Plan ( 2007 Plan ), which provided by 31 December 2011 for the granting of share options to allocate a total of 600,000 shares to the members of the Management Board of Sinner Schrader AG and to the members of the management of the affiliated companies as well as to selected employees performing managerial tasks within Sinner Schrader AG and affiliated companies. In a resolution of 20 December 2012, the Annual General Meeting of Sinner Schrader AG adopted the 2012 Sinner Schrader Stock Option Plan ( 2012 Plan ) to grant share options for the sale of a total of 550,000 shares to members of the Management Board of Sinner Schrader AG (100,000 options) and members of the management of the companies affiliated with Sinner Schrader AG (300,000 options) as well as selected employees with management functions in Sinner Schrader AG and the companies affiliated with Sinner Schrader AG (150,000 options). Detailed information on the 2007 and 2012 Stock Option Plans can be found in the Notes to the Consolidated Financial Statements as at 31 August 2014. A total of 91,667 options from the 2007 Stock Option Plan with an average exercise price of 1.66 were exercised in the second quarter of the financial year. In the third quarter of the 2014/2015 financial year, 5,000 options from the 2012 Stock Option Plan were allocated, and 25,000 options were to be cancelled. As at 31 May 2015, 145,001 employee options from the 2007 Stock Option Plan and 130,000 employee options from the 2012 Stock Option Plan with an average exercise price of 2.08 and 1.90, respectively, were thus still outstanding. IFRS 2 prescribes income-affecting entry in the balance sheet of costs resulting from the issue of employee options on the basis of the current value. The market value of the options on the issue date should be distributed over the waiting period for exercising the option and then proportionately entered in the Statements of Operations as personnel costs for the relevant period. The costs are recorded against the shareholders equity in the reserve for share-based compensation. In the first nine months of the 2014/2015 financial year, the costs to be taken into account amounted to 4,684, compared to 30,105 in the comparable period of 2013/2014. 9 related Party Transactions In the first nine months of the 2014/2015 and 2013/2014 financial years, Sinner Schrader earned gross revenues in the amount of 1,522,852 and 1,852,654, respectively, with companies in which members of the Sinner Schrader Supervisory Board held positions relevant to decision-making. 33 sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015 10 major Events after the Balance Sheet Date After assessing the development of business in the past three months, on 28 June 2015 the Management Board and the Supervisory Board decided to restructure NEXT AUDIENCE business and to adjust the cost structure, which was based on an independent establishment of business, mainly by way of reducing the personnel capacity. Sinner Schrader AG will determine courses of action, including the sale of the remaining reduced business operations or their transfer to a joint enterprise with a partner. On 28 June 2015 the Supervisory Board also approved the takeover of Swipe GmbH, based in Hamburg, by Sinner- Schrader AG. With the purchase contract concluded on 30 June 2015, Sinner Schrader AG took over all the shares in Swipe GmbH. As a specialist in mobile content, Swipe GmbH increases the Sinner Schrader range of services in the area of mobile business 11 directors Holdings of Shares and Subscription Rights to Shares ( Directors Dealings ) Table 4 Table 4 shows the number of shares and subscription rights to shares of Sinner Schrader AG held by Board members of Sinner Schrader AG as at 31 May 2015 and their changes in the first nine months of the 2014/2015 financial year: Shares and options of the Board members in number Shares 31.08.2014 Additions Disposals 31.05.2015 Management Board: Matthias Schrader 2,576,289 2,576,289 Thomas Dyckhoff 74,950 75,000 40,000 109,950 Total shares of the Management Board 2,651,239 75,000 40,000 2,686,239 Supervisory Board: Dieter Heyde Prof. Cyrus D. Khazaeli Philip W. Seitz Total shares of the Supervisory Board Total shares of the Board members 2,651,239 75,000 40,000 2,686,239 options 31.08.2014 Additions Disposals 31.05.2015 Current value of each subscription right on the date of granting Management Board: Matthias Schrader Thomas Dyckhoff 120,000 75,000 45,000 0.48 Total options of the Management Board 120,000 75,000 45,000 Supervisory Board: Dieter Heyde Prof. Cyrus D. Khazaeli Philip W. Seitz Total options of the Supervisory Board Total options of the Board members 120,000 75,000 45,000 34
12 responsibility Statement To the best of our knowledge, and in accordance with the applicable reporting principles, the Quarterly Financial Report of the Sinner Schrader Group gives a true and fair view of the asset, financial, and income situation of the Group, and the Interim Status Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Hamburg, 15 July 2015 The Management Board Matthias Schrader Thomas Dyckhoff 35 sinnerschrader group quarterly financial report 3 201 4/201 5 Consolidated Quarterly Accounts 3 2014/2015
sinnerschrader group quarterly financial report 3 201 4/201 5 36
Events & Contact Information Financial Calendar 2014/2015 Announcement of preliminary figures for the 2014/2015 financial year October 2015 Annual Report 2014/2015 November 2015 Annual General Meeting 2014/2015 January 2016 Our previous reports are available online and for download on our website www.sinnerschrader.ag. Contact SinnerSchrader AG, Investor Relations Völckersstraße 38, 22765 Hamburg, Germany T. +49. 40. 39 88 55-0, F. +49. 40. 39 88 55-55 www.sinnerschrader.com, ir@sinnerschrader.com Editorial Information Published by Concept and design SinnerSchrader Aktiengesellschaft, Hamburg, Germany ringzwei, Hamburg, Germany Date of publication: 15 July 2015 37 sinnerschrader group quarterly financial report 3 201 4/201 5
Sinner Schrader Aktiengesellschaft VölckersstraSSe 38 22765 Hamburg, Germany www.sinnerschrader.com