EM.TV AG

EM.TV AG
Q1 2005
Quarterly report 2005
Content
Q1 2005
2
Key Figures
3
First quarter highlights
4
Business unit report
4
9
Sports
Entertainment
12
The EM.TV Share
14
Economic Development
19
Outlook
20
Consolidated financial statements
29
Corporate calendar
29
Production credits
Forward-looking statements.
This quarterly report contains statements relating to future events that are based on management’s assessments of future developments. A series of factors beyond the control of
the company, such as changes in the general economic and business environment and the incidence of individual risks or occurrence of uncertain events, can result in the actual
results differing substantially from those forecast. EM.TV does not intend to continually update the forward-looking statements contained in the quarterly report.
2 Key Figures
Q1 2005
EM.TV group (based on IFRS)
In million Euro
31/3/2005
31/12/2004
90.7
93.9
Non-current assets
128.2
131.0
Total assets
320.3
426.6
Film rights, EDP programs
Subscribed capital
66.6
65.6
Equity
156.5
153.1
Equity ratio (in percent)
48.9%
35.9%
Long-term financial liabilities
69.2
181,9
Short-term financial liabilities
0.0
0.0
1/1/ to
31/3/2005
1/1/ to
31/3/2004
51.0
47.6
Sales
> Sports
44.2
44.1
> Entertainment
6.8
3.4
> Others
0.0
0.0
Earnings before interest, taxes, depreciation
and amortization (EBITDA)
7.8
2.8
Depreciation and amortization
-3.7
-3.1
Earnings before interest and taxes (EBIT)
4.1
-0.3
Earnings before taxes (EBT)
3.3
94.4
Consolidated net profit/loss for the year
2.3
93.5
Cash flow from operational activities
0.5
-4.1
Cash flow from investment activities
116.2
-2.6
Cash flow from financing activities
-112.9
-1,7
Outstanding shares in million*
51.0
0.0
Average number of outstanding shares (undiluted) in million*
50.0
0.0
Share in Euro*
5.94
0.0
Earnings per share (undiluted) in Euro*
0.05
–**
302.9
0.0
612
618
Market capitalization (based on outstanding shares)*
Employees (annual average)
*Initial listing of the EM.TV AG share took place on April 27, 2004.
**Consolidated earnings per share on a diluted and undiluted basis cannot be determined within the scope of the complex restructuring of EM.TV AG in the first quarter of 2004 in view of the fact that all the shares in the company were held within the Group itself.
3 Highlights
First quarter highlights
Development of business generally exceeds expectations
Group achieves quarterly net earnings of EUR 2.3 million
Both operating segments with a positive earnings contribution
Consolidated sales increase by 7 percent
Marketing of 2006 FIFA World Cup™ gains in momentum
Q1 2005
4 Business Unit Report
Business unit reports
Sports
DSF
Just like in the second half-year of 2004, the first quarter of 2005 was also characterized by an unvaryingly cautious TV advertising market, which had an dempening effect on the development of sales.
DSF reacted to this stagnating market with the intensification of its sales activities in the classic TV
marketing and increased its customer portfolio in the reporting period by 21 new customers – including
well-known enterprises like eBay, Chevrolet or Real SB Warenhaus.
DSF is trying out new marketing methods and is expanding its B2C sector
The B2C sector opened up new sales options in the advertising market for DSF: since March 2005 DSF,
as the first TV station, has been offering a sport cellular phone together with debitel. At a purchase
price of 1 Euro, the DSF cellular offers high-quality sport content such as the soccer LIVE ticker, the
Premier Soccer League LIVE table, the latest sports news, DSF ring tones and games.
The T-Commerce sector was also extended by a new offer: during the broadcasts of the indoor soccer
tournaments in January 2005, the DSF offered interactive tip games for the first time and set important
trends with this new form of viewer integration. Tens of thousands of calls were generated every day.
Market-share development: DSF confirms good level for the entire year 2004
With a market share of 1.9 percent in the core target group men 14 to 49 as well as 1.1 percent with
viewers overall, DSF achieved exactly the identical values in the period under review as in the fourth
quarter last year. At the same time DSF confirmed the market shares of the entire year 2004 in the first
quarter of 2005 (1.9 percent in the core target group; 1.1 percent with viewers overall).
261 hours live highlights in the DSF program
In the first quarter of 2005 the DSF noted a very high live share in its program with 261 hours, i.e. an
increase of around 17 percent compared with the same period last year. All in all, the DSF once again
presented a large range of program highlights in the reporting period – in particular with soccer, tennis
and the world handball championship. Besides the success formats Bundesliga – Der Sonntag and
Hattrick –2. Liga, DSF broadcasted a large number of high-class soccer events in the first quarter of
2005: games from the UEFA Cup and the English league cup, World Cup qualifying games, indoor soccer tournaments, test games in the run-up to the second half of the Premier Soccer League season and
Q1 2005
5
Q1 2005
U21 national-team games. In addition, the DSF continued to invest in high-quality new rights in the first
quarter of 2005: The live and exclusive rights to the games of the German Davis Cup team were acquired for the next two years. DSF broadcasted the first appearance of the DTB team in South Africa between March 4 and 6 LIVE. A third important pillar in the DSF program was the world handball championship in Tunisia in January: DSF cooperated with the public stations ARD and ZDF and acquired the
Free-TV rights for a total of 16 World Cup matches.
Second-best rating since the station was founded with Bundesliga – Der Sonntag
On March 13 the DSF achieved an average of 4.7 million viewers (viewers overall) and a peak of up to
5.53 million with the highlights of the games Schalke 04 v. Bayern Munich and Borussia Dortmund v.
VfB Stuttgart. This was a rating record since the acquisition of the rights to the Premier Soccer League
Sunday games in 2003. With a market share of 17.5 percent, the DSF show Bundesliga – Der Sonntag
also achieved a record in the target group men 14 to 49. This was the DSF's second-best rating since
the station was founded and nearly achieved the record of 4.8 million viewers overall from 1993. The
DSF also cleared the 4 million mark on February 13 2005: the highlights of the games Leverkusen
against Mainz and Bielefeld against Bayern achieved an average of 4.2 million viewers. DSF also
achieved outstanding successes with the world handball championship: the live broadcast of the
Norway v. Germany game on January 27 reached an average of 1.1 million viewers, thus achieving the
rating record in the non-soccer sector in the reporting period.
Sport1
In a consistently weak advertising market, Germany’s largest sports portal, Sport1, noted a total output
in the first three months of 2005 which was below the previous year level but nonetheless above expectations. Earnings were increased as a result of a significantly optimized cost structure and a positive
earnings contribution was generated for the EM.TV Group.
Focus on core business
After the portfolio restructuring in 2004, Sport1 was able to start the year 2005 successfully focusing
on the core business areas Media Sales and the sale of sports content. The successful strategy of
Sport1 of operating sectors with external partners that go beyond the core business was continued. A
partnership with the production office "onpact" as well as cooperation with the auto-portal "mobile.de"
was already able to be concluded at the beginning of the year for the Auto & Motor sector.
6 Business Unit Report
Massive reach increases
In the first quarter of 2005, Sport1 once again achieved strong growth in hit rates with 37 million visits
and 234 million page-impressions. This means a rise in visits by more than 54 percent compared to the
first quarter of 2004. In March 2005, Germany's biggest sports portal achieved hit rates with 14 million
visits.
Marketing
The online marketer mediasquares GmbH, Hamburg, became the marketing partner of Sport1 with
effect from March 1, 2005. In this function mediasquares takes over the marketing of the classic advertising areas under www.sport1.de as well as the ad-management connected to it. Mediasquares is one
of the most powerful online marketers in Germany and is therefore an excellent strategic partner for
Sport1.de as an ideal completion to Sport1's own marketing activities within the scope of sponsoring,
cooperations and cross-media. Additionally, Sport1 continued to extend its own distribution in the
period under review with regard to the 2006 FIFA World Cup™.
PLAZAMEDIA
The market recovery in the production sector that is becoming apparent in the financial year 2004 also
continued in the first quarter of 2005. All in all, there was more movement on the production market,
and new concepts for TV formats and TV channels were created. PLAZAMEDIA countered the still predominant price pressure with innovative production approaches, an improved market appearance as
well as intensified acquisition activities, which led to new contracts in the period under review.
Altogether, PLAZAMEDIA recorded a satisfactory sales development and earnings in line with expectations in spite of losing the contract on the production of the base signal for the Premier and Second
German Soccer League from season 2004/2005 as well as the postponement of the season start of
the Austrian and Swiss soccer league.
Q1 2005
7 Business Unit Report
Strong market position in sports
The core business with the customers Premiere and DSF was marked in the period under review due to
a stable development: among other things, PLAZAMEDIA produced the UEFA Champions League,
Formula 1, the national basketball league as well as ice hockey on behalf of Premiere. There are productions for the DSF about the Premier and Second German Soccer league, the national handball
league or soccer internationals. While the soccer production for SAT.1 Switzerland was not extended
past April, PLAZAMEDIA continues to produce all games of the Austrian T-Mobile national league and
the Red Zac First Division on behalf of Premiere Austria. The English Premier League was converted
into a conference channel for the first time for Premiere in Germany.
Marketing successes through technical innovations
As a result of the development of innovative camera systems, PLAZAMEDIA was also able to take on
new projects in the first quarter. Among other things, the 53rd International Vierschanzentournee – four
ski-jump tournament – was produced for RTL with the high-speed camera "SpeedCam". The "SportsCam"
and "PoleCam" were used for ARD and ZDF for the broadcast of the FIS Nordic Ski World Cup in
Oberstdorf.
The fully automated broadcast of TV channels ran steadily, and with the start of the documentary channel PLANET on January 1, 2005, PLAZAMEDIA used a completely server-based transmission process for
the first time. PLANET is broadcast on Kabel Digital Home, the digital programme package of Kabel
Deutschland GmbH (KDG). Just as in the previous year, PLAZAMEDIA has also invested consistently in
innovative technologies in the first quarter 2005 – essentially in the server-supported transmission process, HDTV initial installations as well as in cameras.
Successful Entertainment Formats from the PLAZAMEDIA Studios
A further series of Hausmeister Krause was produced on behalf of Constantin Film AG for SAT.1. The
Premiere studio with live guests during the qualification matches to the 2006 FIFA World Cup™ went on
the air at the end of March. The children's studio programme Pokito continued to be recorded for RTL II
in the PLAZAMEDIA studios.
Q1 2005
8
Q1 2005
European merchandising rights for the 2006
FIFA World Cup™
Just as in the fourth quarter of 2004, EM.TV also acquired a large number of licensees for the 2006
FIFA World Cup Germany™ in the period under review and increased its licensee portfolio by the end of
March 2005 to 31 companies that stand out due to their extensive product range in the respective product categories. The numerous deals not only confirm the success of the marketing strategy of EM.TV,
but also find expression significantly in the sales of the Sports Segment in the first quarter of 2005.
Successful acquisitions and further extension of the distribution area
With C&A and the Deichmann Group, EM.TV AG succeeded at the beginning of the first quarter of 2005
by acquiring two famous retail companies as licensees for the 2006 FIFA World Cup™. The German fashion corporation C&A has acquired a non-exclusive license for non-branded textiles. The well-known
shoe retail group Deichmann has secured an exclusive product license for shoes, excluding flip-flops
and bathing sandals. Both companies will contribute decisively through their extensive network of national and international branches to the extension of the distribution areas in addition to the already existing trading platform KarstadtQuelle AG with its Official 2006 FIFA World Cup™ Shops in Germany.
Additionally, with the Official Mascot GOLEO VI and his friend Pille, NICI AG secured the exclusive licensing rights for plush products as well as a non-exclusive license for plush cushions and polyresin figures
for the 2006 FIFA World Cup™ for the European territory.
Van Dillen Asiatex GmbH extended its existing licensing agreement for home textiles to adult apparel
(non-branded). EM.TV granted the Swiss drinking-bottle manufacturer SIGG AG the exclusive licensing
rights to reusable aluminium and plastic drinking bottles, and signed the exclusive license for binoculars
with Meade Instruments Europe GmbH & Co. KG. Carromco Sport-Games Vertriebs- und Verwaltungsgesellschaft mbH acquired the exclusive product license for football table games, Jürgen Schumann
secured the exclusive licensing rights to selected pieces of jewelry. The exclusive licensing rights to the
Official Preview Guide and the Official Guide for the 2006 FIFA World Cup™ for Great Britain, France,
Italy, Spain and the Netherlands were given to the British company Focus Media Communications Ltd..
9 Business Unit Report
Entertainment
Production
The market for children's and youth programs was characterized in the first quarter of 2005 by a fundamentally more positive prevailing mood. German as well as European production companies and TV stations however continued to behave cautiously with regard to investment decisions.
The extension of the existing framework agreement with the ZDF was one of the highlights of the first
quarter. In March 2005 EM.Entertainment GmbH reached an agreement with the TV-station in the form
of a deal memo to extend the contract until 2011. The new agreement concerns the period from 2006
and refers to a total of around 625 half-hour programs including classics from the Astrid Lindgren
library. Furthermore, it is intended to extend the licensing periods for Heidi, fairytale films and a large
number of other series from the library of the EM.TV group. EM.TV and ZDF also agreed to continue
their joint co-production activities; four additional co-production seasons are planned over and above
the co-productions still outstanding under the existing contract.
Existing projects such as the development of the Official Mascot TV series for the 2006 FIFA World Cup™
were continued in the reporting period. EM.TV had taken over the production and distribution rights to
the live-action series with puppet animation in the autumn of 2004. The third series of the animation
series Blinky Bill went to the starting post: the 26 new episodes of the series have been running on the
KI.KA station since March 14, 2005.
TV Sales
The international distribution of children's and youth programs recorded a clear upward trend in the
first quarter of 2005. The willingness of international TV stations to invest has increased, both with
regard to the demand for new productions as well as for existing programs. Above all in the key markets
important for EM.TV, i.e. Germany, Austria, Switzerland, France, Italy and Spain, existing and potential
customers again showed increased interest in already acquiring new productions at an early point in
time or already investing in new projects at an early stage.
One of the important TV deals of the first quarter was the sale of 65 half-hour programmes to Mediaset.
The Italian media group acquired the exclusive Free and Pay-TV rights to the series classics Maya the
Bee and Anne of Green Gables. TF1, with whom EM.TV has already been working together successfully
for many years, secured the French-speaking broadcasting rights to the third series of Tabaluga. In addition, France 5 acquired the Free-TV rights to the 52 episodes of the Heidi animation series.
Q1 2005
10
Q1 2005
In the Pay-TV sector EM.Entertainment succeeded in concluding a contract with AON.TV, the broadband
service provider of Telekom Austria. The Austrians acquired the exclusive Pay-Per-View rights to numerous classics from the Junior program library with a total volume of 260 half-hours. With the sale of the
series Creepschool to Nickelodeon in Latin America, the cooperation with the Pay-TV station was able to
be expanded for children.
Within the scope of the existing program supply contract, the Swiss TV station SF DRS also selected
nearly 600 half-hour episodes for the SF2 channel, on which the program block of the Junior brand has
been broadcast for many years.
Merchandising
Just as last year, the licensing market for children and youth topics was also characterized in the first
quarter of 2005 by a strong demand for licenses in the food sector as well as a great deal of interest in
promotion activities and joint marketing measures.
Owing to the great success, J. Bauer GmbH & Co KG extended the contract for children's dairy products
for a further two years. Bauer continued to expand its market position by using Maya the Bee. A licensing agreement was concluded with uniVersa Insurance that enables the company to use the green dragon Tabaluga as the eponym and role model for its new childcare concept.
The popular characters from the series Vicky the Viking, Maya the Bee and Tabaluga were also very
much in demand in the classic licenses sector. GlaxoSmith Kline Consumer Healthcare GmbH & Co.
KG, for example, acquired the rights to dental and mouth hygiene products with the well-known Scandinavian Vicky. The product line is distributed in Germany, Austria and Switzerland. EM.Entertainment
acquired two new licensees in the stationery sector just in time for the PaperWorld Trade Fair, which
took place at the end of January 2005 in Frankfurt am Main. Papstar Vertriebs GmbH & Co. KG secured the pan-European rights to party accessories with Maya the Bee and Wekre GmbH acquired a license for stationery with Tabaluga and Maya the Bee.
11 Business Unit Report
Home Entertainment
The programs from the EM.TV rights library sold successfully on DVD in the first quarter of 2005. At the
end of the audit period the second Farscape DVD box-set from Koch Media AG, which contains all episodes from the second series as well as valuable bonus material, climbed to number 16 in the Media
Control Charts in terms of sales, thus following on the heels of the success of the first series' box-set.
In the first quarter Koch Media AG also acquired the video and DVD rights for Germany, Austria and
Switzerland to the 10-part fairytale series Princess Fantaghiro. Among the most important international
deals was a licensing agreement with TF1 Video. France's leading video producer and distributor secured the exclusive exploitation rights from EM.Entertainment in the video/DVD sector to the first and
second series of Flipper & Lopaka, as well as to the TV Special Tabaluga and Leo – A Christmas
Special.
Junior Channel
EM.TV subsidiary Junior.TV GmbH & Co. KG is program supplier to the Junior family pay-TV channel,
available in Germany on the subscription TV platform Premiere. In addition to the marketing as an individual channel, it is also possible to subscribe to Junior through the packages "Premiere Plus", "Premiere
Komplett" and since November 2004 also through "Premiere Kinder". The income from the subscriptions has developed within the scope of the planning in the first quarter 2005.
Besides the exclusive distribution in Germany, Austria and South Tyrol, the agreement with Premiere
also envisages the non-exclusive distribution in German-speaking Switzerland, Luxembourg and Liechtenstein. Other partner companies in Switzerland are Cablecom GmbH and Swisscom Broadcast AG,
through whose Pay-TV Junior can also be received.
Q1 2005
12 The EM.TV Share
Q1 2005
The EM.TV share
Development of the German capital markets
The German capital markets have predominantly followed a positive development since the beginning
of the year. The SDAX advanced by 13 percent to 3,552 points. The Prime Media Index also recovered
and rose by 10 percent to 183 points.
Development of the EM.TV share
The EM.TV share started the new year with price gains and broke through the Euro 3.00 mark on
January 4, 2005. With a further level of high volatility, the price rose significantly up to the middle of
March and reached a new 52-week high at Euro 6.37. It then followed a sideways movement ranging
between Euro 5.70 and Euro 6.20. The EM.TV share price closed on March 31, 2005 at Euro 5.94, with
this being equivalent to a gain of Euro 3.07 (+107 percent) in comparison with December 31, 2004.
The substantial price increase was, inter alia, accompanied by the publication of analyst studies, the
remaining acquisition of the DSF and Sport1 stakes, together with additional positive news related to
the operating business. In the first quarter of 2005, trading volumes in the share increased significantly
with the result that the EM.TV share was one of the most-traded securities of the SDAX. The trading
volume of other financial instruments of EM.TV on the market also increased significantly.
The subscribed capital of EM.TV AG amounted to approximately Euro 66.6 million as of March 31, 2005.
Of these, EM.TV AG held approximately 17.2 million of its own non-voting shares, with 15.4 million shares
being reserved for servicing certificate series. After deducting the company’s own non-voting shares
and after taking account of shares connected with the exercise of certificates and options, the entry of
which in the Commercial Register is still outstanding, there was a total of approximately 51.0 million outstanding shares as of March 31, 2005.
Xetra-closing prices of the EM.TV share in comparison with SDAX and Prime Media
77
66
55
44
33
22
11
00
January
= SDAX
= Prime Media
February
= EM.TV AG
Comparative indices indexed to the EM.TV closing price as of December 31, 2004
March
13 The EM.TV Share
Q1 2005
Shareholder structure as of March 31, 2005
Distribution of subscribed capital
Distribution of voting rights
Centaurus Capital LP
5.0%
6.6%
Centaurus Capital LP
Constant Ventures B.V.
7.3%
9.5%
Constant Ventures B.V.
83.9%
Free Float
Treasury Shares
25.8%
Free Float
61.9%
Information on the EM.TV share as of March 31, 2005
ISIN
> Ordinary share
> New share*
DE000 914720 7
DE000 A0DMK2 9
Segment
Prime Standard
Indices
SDAX, Prime Media Index
Bloomberg/Reuters
EV4 GR/EV4G.DE
Share price
Euro 5.94
52-week high/52-week low
Euro 6.37/Euro 1.89
Subscribed capital
Euro 66.6 million
Outstanding shares
51.0 million shares
Potential shares from warrants outstanding
> Certificates Series 1 (Subscription price Euro 2.50 until April 18, 2006)
> Certificates Series 2 (Subscription price Euro 3.50 until April 18, 2008)
> Warrants from bond (Subscription price Euro 3,50 until March 30, 2006)
> Others (Employee participation programms and convertible bond)
7.7
7.8
2.8
0.4
million shares
million shares
million shares
million shares
Market capitalization (based on outstanding shares)
Euro 302.9 million
Market evaluation for own issues of outstanding derivatives
Euro 61.8 million
*New shares out of exercised warrants of the bond with warrants attached have originated since the beginning of the year up to and
including July 5, 2005 (the date of the annual general meeting). The new shares will be automatically transferred to ordinary shares
after the annual general meeting.
Shares and stock options held by the Management and the Supervisory Board as of March 31, 2005
Werner E. Klatten
Rainer Hüther
Dr. Andreas Pres
Members of the Supervisory Board
Shares
Stock options*
0
0
6,000
0
23,397
23,397
23,396
0
*Within the scope of the restructuring of EM.TV & Merchandising AG into EM.TV AG, the EM.TV AG AGM voted on March 19, 2004 to grant the
merger ratio (73:10) 10/73 to EM.TV AG ordinary shareholders entitled to options under the terms of previously existing options programs
14 Economic Development
Economic development
Portfolio changes in the report quarter
On January 3, 2005, HK Beteiligungs GmbH paid the outstanding purchase price of EUR 118.0 million
for the holding of EM.TV Beteiligungs GmbH & Co. KG in Tele München Gruppe (TMG). The net sale proceeds were wholly attributable to the creditors of the zero-coupon note. In accordance with the bond
conditions, the payment was made one month after receipt of the funds, on February 3, 2005. By the
redemption of this bond, EM.TV was able to complete the final restructuring stage and simultaneously
to achieve a significant improvement in the consolidated equity ratio.
On February 1, 2005, EM.TV reached an agreement with KarstadtQuelle New Media AG for the acquisition of the 49.9 percent holding of KarstadtQuelle in Sport Media Holding GmbH. The aforesaid company itself holds 81.13 percent of the TV station DSF and the online platform Sport1. As a result,
EM.TV increased the indirect holding held by Sport Media Holding GmbH in DSF and Sport1 to 81.13
percent. The purchase price amounted to EUR 27 million.
On February 10, 2005, EM.TV announced its agreement with the Swiss investor Dr. h.c. Hans-Dieter
Cleven for the purchase of his 18.87 percent holding in DSF and Sport1. The purchase price amounted
to EUR 12.6 million.
Both transactions have already been approved from a cartel and media-law point of view. Consequently,
EM.TV AG is the indirect sole shareholder of the sports TV station and the online sports platform. At
March 31, 2005, the approvals were still outstanding and a minority documentation was still necessary
therefore.
General, accounting and valuation principles
The quarterly report has been drawn up in compliance with IAS 34. According to the regulations of the
Prime Standard of Deutsche Börse and IASB, consolidated financial statements have been drawn up as
at March 31, 2005 in compliance with International Financial Reporting Standards (IFRS).
In the present financial statements at March 31, 2005, IFRS 2 (share-based payment) was applied for
the first time in comparison with the annual financial statements of EM.TV AG at December 31, 2004
and this led to an adjustment in the previous year’s figures.
There were no major changes in the consolidation group of the EM.TV Group in the first quarter of 2005.
Q1 2005
15 Economic Development
EM.TV changed the segment reporting in the first quarter of 2005. For greater transparency purposes,
“Others” are shown which inter alia include the income and costs of EM.TV AG as the holding company.
The holding company was previously attributed to the Entertainment Segment. The former Consumer
Products Segment was also included under “Others”. Previous year details relating to this Segment
have been adjusted in order to ensure full comparability.
Sales and earnings
The EM.TV Group showed a positive development of its business in the first three months of 2005
which was well above expectations. Consolidated sales amounted to 51.0 million and were 7.1 percent
higher than in the same quarter of the previous year (EUR 47.6 million). The sales growth is mainly attributable to the positive development of income of the Entertainment sector and from the marketing of
merchandising rights for the 2006 FIFA World CupTM. 87 percent of Group sales were generated in the
Sports Segment and 13 percent to the Entertainment Segment (children and youth programs).
Other operating income amounted to EUR 4.3 million in the first three months and was below the equivalent amount in the corresponding quarter of the previous year (EUR 6.0 million). The cost of materials
developed roughly as planned at EUR 25.3 (first quarter of 2004: EUR 30.6). Personnel expenses
increased by 11.1 percent from EUR 11.7 million to EUR 13.0 million. Other operating expenses rose on
a period comparison basis from 8.6 million to EUR 9.3 million (8.1 percent).
The sales growth and a general development of costs below budget resulted in earnings before interest,
taxes, depreciation and amortization (EBITDA) of EUR 7.8 million which was substantially higher than
the level in the first quarter of 2004 (EUR 2.8 million) and also higher than budgeted. After taking
account of amortization and depreciation, the EM.TV Group shows earnings before interest and taxes
(EBIT) of EUR 4.1 million (2004: EUR -0.3 million). Net financial expenses were slightly negative at EUR 0.7 million compared with a positive balance of EUR 0.4 million in the corresponding period of the previous year. It should, however, be taken into account that no interest expenses were incurred for the
bond with warrants attached of 2004/2009 in the previous year’s quarter.
Unlike the prior year period when EM.TV AG made a substantial one-off gain of EUR 94.4 million from
the restructuring of the convertible bond 2000/2005, there were no one-off incomes or expenditure in
the reporting period. In the first quarter the earnings before taxes (EBT) amounted to EUR 3.3 million
compared with EUR 94.4 million in the same quarter of 2004. Positive minority interests amounted to
EUR 0.5 million (2004: negative minority interests of EUR 0.2 million) and were mainly attributable to
DSF and Sport1. Despite of the fact that EM.TV acquired the shares of the co-shareholders KarstadtQuelle
Q1 2005
16 Economic Development
and Dr. h.c. Hans-Dieter Cleven thereby increasing the holdings in the TV station and the online sports
platform to 100 percent in both cases all the necessary approvals from the supervisory authorities had
not been received on the balance sheet date of March 31, 2005 and consequently the relevant transactions could not be completed.
Including the shares of minority interests, the EM.TV Group shows consolidated net earnings of EUR 2.3
million (2004: a consolidated loss of EUR 0.9 million after adjusting for the one-off gain). This is equivalent to (undiluted) earnings per share of EUR 0.05.
The Sports Segment generated sales of EUR 44.2 million in the first three months with this therefore
being on the same level as in the previous year period (EUR 44.1 million). In the case of DSF, the unchanged difficult market environment for classical TV advertising had a dampening effect on the development of sales. This effect has been more than compensated by increased T-Commerce sales and cost
savings. As anticipated, the production company PLAZAMEDIA nonetheless showed a total output which
was below the corresponding level of the previous year, with this being mainly attributable to the lack of
production of the base signals for the German Premier and Second Soccer League with effect from the
2004/2005 season. In the first quarter PLAZAMEDIA nonetheless shows a satisfactory development of
sales in the first quarter and recorded earnings in line with expectations. Sport1 benefited from an
improved cost structure and generated a positive earnings contribution. Income from the marketing of
merchandising rights for the 2006 FIFA World Cup™ developed well above expectations in the first quarter. Earnings achieved by the Sports Segment amounted to EUR 5.5 million, i.e. an increase of 25.0
percent in comparison with the first quarter of 2004 (EUR 4.4 million).
The Entertainment Segment generated sales of EUR 6.8 million in the first three months, thereby doubling the sales achieved in the corresponding quarter of the previous year (EUR 3.4 million). The positive
segment results amounted to EUR 0.7 million compared with a negative earnings contribution of EUR
2,2 million in the first quarter of 2004. Both operating segments of the Group generated a positive earnings contribution in the reporting period.
The segment results from “Others” amounted to EUR -2.2 million compared with EUR -2,5 million in the
corresponding quarter of the previous year.
Q1 2005
17 Economic Development
Financial position of the group and cash flow
At EUR 320.3 million, the consolidated balance sheet total of the EM.TV Group at March 31, 2005 was
EUR 106.3 million lower than the equivalent amount at the end of 2004 (EUR 426.6 million). The reduction in the balance sheet total was mainly attributable to the execution of the sale of the 45 percent holding in TMG already agreed in December 2004. The net proceeds arising from the sale was paid to the
holders of the zero-coupon notes on February 3, 2005. The zero-coupon note was completely repaid
with the onward transmission of the sale proceeds to the former bondholders. On the assets side of the
balance sheet, the execution of the sale was the main cause for the reduction in the level of total assets
by EUR 116.1 million to EUR 20.9 million as at March 31, 2005. Film rights and EDP programs were
EUR 3.2 million lower in comparison with the previous year and amounted to EUR 90.7 million on
account of the ordinary depreciation of film assets. At March 31, 2005 liquid funds of EUR 110.1 million (cash on hand, credit balances at banks and short-term interest-bearing securities) were higher
than at the end of 2004 (EUR 106.0 million).
On the liabilities side of the balance sheet, long-term, non-interest-bearing liabilities fell by EUR 113.4
million to EUR 0. This downturn reflects the complete repayment of the zero-coupon note as a result of
the sale of the holding in TMG. The consolidated shareholders’ equity at March 31, 2005 amounted to
EUR 156.5 million compared with EUR 153.1 million at the end of 2004. This is equivalent to an equity
ratio of 48.9 percent which is well above the corresponding level at December 31, 2004 (35.9 percent)
on account of the reduction in the balance sheet total.
Cash flow
The EM.TV Group shows a positive operating cash flow of EUR 0,5 million for the first three months of
the reporting period compared with a negative cash flow of EUR 4.1 million in the corresponding period
of the previous year.
Investment activities gave rise to a positive cash flow of EUR 116.2 million (2004: an negative cash
flow of EUR 2.6 million). This is attributable to the sale of the holding in TMG which was executed in the
reporting period. This is offset by the payment for the redemption of the zero-coupon note for which the
selling price for the TMG holding was used. The Group showed a negative cash flow from financing
activities at the amount of EUR 112.9 million therefore (2004: negative cash flow of EUR 1.7 million).
The total of the individual cash flows resulted in an increase of EUR 3.8 million in net liquid funds in the
first quarter compared with an increase of EUR 58.8 million in the previous year’s period which was, however, marked by the effect of the deconsolidation in the amount of EUR 67.2 million, mainly TMG.
Q1 2005
18 Economic Development
Personnel
The EM.TV Group had an average of 612 employees in the period from January to March 2005, compared with 618 employees in the corresponding period of the previous year. The number of employees
has remained constant therefore.
Financial position of EM.TV AG
The financial statements of EM.TV AG which have been drawn up in accordance with the provisions of
the German Commercial Code (HGB) showed a balance sheet total of EUR 295.5 million at March 31,
2005 which was almost unchanged in comparison with the amount at March 31, 2004 (EUR 295.0 million). Liquid assets amounted to EUR 69.0 million (December 31, 2004: EUR 74.6 million).
The shareholders’ equity of the AG amounted to EUR 164.7 million at the end of March 2005, with this
being equivalent to 55.7 percent of the balance sheet total compared with the equity of EUR 162.1 million at the end of the previous year (equity ratio: 54,9 percent). EM.TV AG still had no liabilities to banks
on the balance sheet date of March 31, 2005.
Others
In its meeting on March 18, 2005, the Supervisory Board of EM.TV AG extended the contract of CFO
Dr. Andreas Pres by a further three years to December 31, 2008.
Q1 2005
19 Economic Development
Outlook
After the restructuring of the Company had been successfully completed in the 2004, EM.TV is concentrating its activities on the expansion of its operating business with the two pillars Sports and Entertainment. Increasing profitability basically has priority over volume growth.
EM.TV started 2005 successfully; the development of business in the first three months was above expectations. Both operating segments made a positive earnings contribution. As far as the whole year is
concerned, it should, however, be taken into the account that the TV advertising market is still showing
no significant upward turn in its general development. In view of this counter-development, the Management Board confirms its previous statements with regard to the whole year: The Management board will
strive to achieve a growth of group sales expressed at least a single-figure percentage and to show positive group earnings before taxes. This statement is subject to start-up costs and investments which the
company may have to bear in connection with sports betting and gaming in which EM.TV envisages
major sales and earnings potentials in the medium to long-term and on the scope of which decisions
still have to be made.
Unterföhring, May 2005
The Management Board
Q1 2005
20 Consolidated Financial Statements
Q1 2005
Consolidated balance sheet Assets
Assets at March 31, 2005 in EUR ‘000
Non-current assets
Film and merchandising rights, EDP-programs
Goodwill
Advance payments
Land, property rights and buildings
Technical equipment and machinery
Other equipment, factory and office equipment
Advance payments and assets under construction
Investments in associated companies
Other investments
Other loans
Long-term receivables
Deferred taxes
Current assets
Finished goods and merchanside/work in process
Trade receivables
Receivables due from associated companies
Receivables due from joint ventures
Other assets
Deferred charges and prepaid expenses
Marketable securities
Cash on hand and at bank
Total Assets
31/3/2005
31/12/2004
90,696
8,906
138
1,495
4,569
1,650
394
2,696
265
67
12,696
4,600
128,172
93,915
8,906
141
1,617
3,965
1,702
73
2,768
258
64
12,761
4,895
131,065
110
52,192
4,479
21
20,912
4,320
46,469
63,653
192,156
66
46,991
4,346
0
136,991
1,203
0
105,961
295,558
320,328
426,623
21 Consolidated Financial Statements
Q1 2005
Consolidated balance sheet Equity and liabilities
Equity and liabilities at March 31, 2005 in EUR ‘000
Equity
Subscribed capital
Deposit paid in respect of approved capital increase
Capital reserves
Special reserves
Reserves for share based payment plans
Other reserves
Consolidated accumulated loss
Own shares
Minority interests
Contribution in connection with share-issues
which have not yet been registered
Long-term liabilities
Long-term accruals and provisions
Non-interest bearing liabilities
Interest bearing liabilities
Deferred taxation
Short-term liabilities
Bonds
Payments received on account of orders
Trade accounts payable
Liabilities due to associated companies
Liabilities due to joint ventures
Other liabilities
Deferred income and accrued charges
Other accruals and provisions
Tax provisions
Total equity and liabilities
31/3/2005
31/12/2004
66,601
0
100,897
50
105
5
-5,652
-17,170
11,656
156,492
65,617
983
100,631
50
87
-104
-7,937
-17,317
11,090
153,100
1,556
0
2,949
0
69,192
7,204
79,345
3,100
113,439
68,496
7,316
192,351
30
4,645
19,828
62
1,851
34,340
1,472
16,112
4,595
82,935
30
3,100
18,759
0
1,675
35,915
596
16,871
4,226
81,172
320,328
426,623
22 Consolidated Financial Statements
Q1 2005
Consolidated profit and loss account
January 1 to March 31, 2005 in EUR ‘000
1/1 to
31/3/2005
1/1 to
31/3/2004
Sales
Own work capitalized
Total output
50,958
27
50,985
47,557
209
47,766
Other operating income
Cost of materials
Personnel expenses
Amortization and depreciation
Other operating expenses
Earnings before interest and taxes
4,308
-25,263
-12,980
-3,698
-9,279
4,073
5,969
-30,587
-11,747
-3,138
-8,586
-323
Financial result
Result from restructuring activities
-733
0
393
94,366
Earnings before taxes
Taxes
3,340
-514
94,436
-1,099
Earnings before minority interests
Profit/loss of minority interests
2,826
-541
93,337
163
Consolidated profit
2,285
93,500
Consolidated loss brought forward
Withdrawal from special reserves
Withdrawal from capital reserves
Consolidated accumulated loss
-7,937
0
0
-5,652
-2,139,987
24
28,660
-2,017,803
50,985
7,771
4,073
3,340
47,766
2,815
-323
94,436
Total output
EBITDA
EBIT
EBT
Earnings per share (undiluted), in EUR
Earnings per share (diluted), in EUR
Average number of shares in circulation (undiluted)
Average number of shares in circulation (diluted)
0.05
0.03
–*
–*
49,983,272
69,262,204
–*
–*
*In respect of the complex capital restructuring of EM.TV AG that took place in Q1 2004, it has not been possible to determine group
earnings per share on a diluted and undiluted basis, as all company shares were kept within the group.
23 Consolidated Financial Statements
Q1 2005
Consolidated cash flow statements
January 1 to March 31, 2005 in EUR ‘000
1/1./ to
31/3/2005
1/1 to
31/3/2004
Consolidated result for the period under review
2,285
93.500
Cost of materials due to utilisation-related disposal of assets
Write-down of fixed assets
Gains/losses on disposals of fixed assets
Deferred taxes
Restructuring result
Other non cash items
Net change in stock, receivables and all other assets which are not
investing activities or financing activities
Net change in provisions and accruals
Net change in liabilities and all other liabilities which are not
investing activities or financing activities
Minority interest
Operating cash flow
721
3,771
-54
127
0
-119
202
3.350
-10
807
-94.366
-1.686
-9,559
-984
-6.881
-1.144
3,776
541
505
2.265
-163
-4.126
Investments to intangible assets
Investments to tangible assets
Investments to financial assets
Proceeds from disposals of intangible assets
Proceeds from disposals of tangible assets
Proceeds from disposal of financial assets
Cash flow from investing activities
-382
-1,478
-10
4
56
118,000*
116,190
-1.759
-872
-39
48
0
21
-2.601
0
67.202
494
-113,439
0
-1.695
-112,945
-1.695
3,750
58.780
Net funds at the beginning of the financial year
Net funds at the end of the financial period
Effects of foreign currency differences
Changes in net funds
105,961
110,122
411
3,750
47.573
106.623
270
58.780
Cash and cash equivalents
Short-term bank liabilities
Short-term net funds at the end of the financial period
110,122**
0
110,122
106.738 **
-115
106.623
Cash flow from changes in liquid funds through deconsolidation
Proceeds from capital increases and allowances by shareholders
Repayment of long-term liabilities
Cash flow from financing activities
Free cash flow for the financial period
Changes in liquity funds
Changes in short-term bank liabilities
4,161
0
-21.604
-80.654
*In view of its investment character, the selling price claim of TEUR 118,000 relating to the sale of the TMG holding is included in the cash-flow from
investment activities and not in the cash-flow from operational activities.
**thereof EUR 8,895 thousand ( Y. 2004: ‘000 EUR 8,040) bound for security reasons.
24 Consolidated Financial Statements
Q1 2005
Segment reporting Q1 2005
Segment information by business sectors January 1 to March 31, 2005 in EUR ’000
Entertainment
Sports
Others
Reconciliation
Group
6,751
27
834
-6,870
-2,804
44,183
0
1,933
-40,569
-662
24
0
2,198
-4,438
-232
0
0
-657
-657
0
50,958
27
4,308
-51,220
-3,698
Segment results
742
5,547
-2,216
0
4,073
Period result of associated companies
-73
0
0
0
-73
Sales
Own work capitalized
Other segment income
Segment expenses
thereof amortization and depreciation
Non-allocated operational elements:
Depreciation on financial fixed
and current assets
Interest expenses
Interest income
-3
-1,652
995
Operating income
3,340
Additional segment information
Segment assets
Segment liabilities
Segment investments
128,883
18,632
216
96,069
32,702
1,639
87,748
29,925
15
0
0
0
312,700
81,259
1,870
Segment information by region January 1 to March 31, 2005 in EUR ’000
Sales
Period results of associated companies
Segment assets
Segment investments
Germanspeaking
Rest of
Europe
Rest of
World
Group
49,906
527
525
50.958
0
301,498
1,741
-66
6,785
0
-7
4,417
129
-73
312,700
1,870
25 Consolidated Financial Statements
Q1 2005
Segment reporting Q1 2004
Segment information by business sectors January 1 to March 31, 2004 in EUR ’000
Entertainment
Sports
Others
Reconciliation
Group
Sales
Own work capitalized
Other segment income
Segment expenses
thereof amortization and depreciation
3,415
209
3,050
-8,898
-2,236
44,142
0
2,297
-42,083
-638
0
0
622
-3,077
-264
0
0
0
0
0
47,557
209
5,969
-54,058
-3,138
Segment results
-2,224
4,356
-2,455
0
-323
-10
0
0
0
-10
Period result of associated companies
Non-allocated operational elements:
Interest expenses
Interest income
-274
677
Result from restructuring activities
94,366
Operating income
94,436
Additional segment information
Segment assets
Segment liabilities
Segment investments
217,228
92,914
1,644
82,068
35,698
1,025
924
228
0
0
0
0
300,220
128,840
2,669
Segment information by region January 1 to March 31, 2004 in EUR ’000
Sales
Period results of associated companies
Segment assets
Segment investments
Germanspeaking
Rest of
Europe
Rest of
World
Group
45.834
1,158
565
47,557
0
283.492
2.281
0
11,465
0
-10
5.263
388
-10
300,220
2,669
26 Consolidated Financial Statements
Q1 2005
Changes in consolidated equity
in TEUR
Subscribed
capital
Solved
capital
increase
Capital
reserves
Special
reserves
Reserves
for stock
option
plans
146,054
0
1,968,527
581
30
As per 1/1/2004
Cash increase from convertible bonds
Accumulated
losses
brought
Other
forward
reserves
-2.139.987
40 -2,139,987
Own Minority
shares interests
0
0
7,202
17
-17,553
17
14
Employee benefit expenses according to IFRS 2
Withdrawal from special reserve
for repayment of convertible loan
Total
0
Withdrawal from capital reserve for end
of conversion right for the convertible bond
14
-24
-28,660
24
0
28,660
0
0
Capital reduction as a result
of the merger (73 : 10)
16.624
126,062
-126,062
Capital increase from issueing
of shares to the former bondholders
28,265
Transfer of own shares
17,343
0
40
28,265
-17,343
0
3,184
Capital increase from bonds
3,184
0
Adjustments in equity
36
0
Currency conversion differences
-84
-84
-3
33
-163
93,337
0
93,500
Consolidated net profit for the period
As per 31/3/2004
65,617
983
0 2,069,113
As per 1/1/2005
65,617
983
983
-983
Cash increase from options
100.6
Capital increase from options
100,631
557
44
76
-2,017,803
-17,343
6,952
107,213
50
87
-104
-7,937
-10
-17,317
11,090
153,100
0
266
147
18
Employee benefit expenses according to IFRS 2
18
25
Changes in consolidated entities
109
Currency conversion differences
66,601
0
100,897
50
105
5
25
109
2,285
Consolidated net profit for the period
As per 31/3/2005
413
-5,652
-17,170
541
2,826
11,656
156,492
27 Consolidated Financial Statements
Q1 2005
Information on the Initial Application of IFRS 2
(Share based payments)
1. Stock option compensation program
On the strength of the resolution of the annual general meeting of the former EM.TV & Merchandising
AG held on July 22, 1999 which was amended by the resolution passed by the annual general meeting
held on July 26, 2000, the Management Board was empowered to issue a stock option program for the
employees and Management Boards of the Group companies with the approval of the Supervisory
Board. In connection with the merger of EM.TV & Merchandising AG into EM.TV AG, the options were
transferred to EM.TV AG in an adjusted form.
The terms and conditions for the option plan envisage, inter alia, that a maximum of 50 percent of the
option rights may be granted at the earliest 2 years after their issue (Tranche 1) and the remaining 50
percent at the earliest 4 years after their issue (Tranche 2). Non-exercised option rights lapse 10 years
after their issue.
For all options granted with effect from 2000, this gives rise to the exercise price plus an uplift of 10
percent on the reference price as the earnings objective for Tranche 1 option rights and an uplift of 20
percent for Tranche 2 option rights (Reference Price Method).
Based on the obligatory application of IFRS 2 , No. 53, all share options which were granted after
November 7, 2002 and which are not yet vested on January 1, 2005 have been included in the balance
sheet in accordance with IFRS 2.
There is only a disclosure obligation for options which were issued prior to November 7, 2002 or for
which the vesting period is already expired.
Issued Options
Date
November 15, 1999
August 3, 2000
March 1, 2001
January 31, 2002
June 7, 2002
December 20, 2002
Reference
price after
the merger
in EUR
Number of
authorized
options
357.55
381.43
47.45
16.64
9.42
6.64
348,000
2,500
184,500
1.043,000
119,000
58,000
Outstanding Outstanding
at the at the end
Number of beginning of
of the
shares
period
the period
47,671
342
25,273
142,876
16,301
7,945
348,000
2,500
184,500
1,043,000
119,000
58,000
348,000
2,500
184,500
1,043,000
119,000
58,000
28 Consolidated Financial Statements
Q1 2005
2. Effects of the initial application
In accordance with IFRS 2, No. 55, an adjustment has to be made in the comparative information and,
if appropriate, in the opening balance sheet amount of revenue reserves for the earliest reporting period
shown. The following adjustments have therefore been made in the profit and loss account and also in
the balance sheet for the previous year.
Effects of the initial application in EUR
P&L-effects
Q1/2005
Q1/2004
Balance sheet-effects
Personnel
expenses
Deferred
taxes
Adjustment
Reserve
Accumulated
loss
17,506
14,269
6,565
5,351
0
30,336
0
-18,960
Information on the consolidated companies
The following company has been included in the consolidated financial statements for the first time in
the current financial year and has been consolidated in full:
EM.TV Sport Management GmbH, Ismaning
This company has been included in the consolidated financial statements with effect from January 1,
2005. The company is developing new operating models in the Sports Segment. It was not included in
the consolidated financial statements at December 31, 2004 for immateriality reasons. The share
capital of the company is EUR 25,000.
A net loss for the year of TEUR 258 was incurred in the present reporting period with sales of EUR 0.
Long-term assets amount to TEUR 10 and short-term assets to TEUR 1,231 constitute the total group
assets. The company shows liabilities of TEUR 18 which are all short-term.
EM.TV had to record no outflow of funds as a result of the initial consolidation. The company had miscellaneous assets of TEUR 50 and liquid funds of TEUR 61. Minority interests of TEUR 25 and other
liabilities of TEUR 86 were acquired in this process.
Q1 2005
Corporate calendar
Finance calendar
July 5, 2005 Annual General Meeting (AGM) for 2004 business year
August 23, 2005 Report for the second quarter of 2005
November 22, 2005 Report for the third quarter of 2005
Note: Analysts conference calls will usually be on the release day of the annual report and
the quarterly reports respectively.
Event calendar
June 11 – 15, 2005 Shanghai TV Festival
June 21 – 23, 2005 Licensing International, New York
June 23 – 25, 2005 DISCOP, Budapest
July 3 – 5, 2005 ISPO, Munich
July 27 – 29, 2005 Visions of Football, Munich
September 21 – 22, 2005 licensing.forum, Munich
September 21 – 25, 2005 Cartoon Forum, Kilding/Denmark
September 28 – 29, 2005 Online Marketing Day, Düsseldorf
October 19 – 23, 2005 Bookfair, Frankfurt
October 15 – 16, 2005 MIPCOM Junior, Cannes
October 17 – 21, 2005 MIPCOM, Cannes
October 26 – 28, 2005 Medientage, Munich
Production Credits
Published by
EM.TV AG, Beta-Straße 11, 85774 Unterföhring, Germany, Tel. +49 (O) 89 99 500 - 0, Fax +49 (0) 89 99 500 -111
E-Mail [email protected], www.em.tv, HRB 148 760 AG Munich
Edited by
EM.TV AG Communications/Investor Relations, Frank Elsner Kommunikation für Unternehmen GmbH, Westerkappeln
Designed
EM.TV AG Graphics
EM.TV AG
Beta-Straße 11
85774 Unterföhring, Germany
Tel. +49 (0) 89 99 500 -0
Fax +49 (0) 89 99 500 -111
E-Mail [email protected]
Internet www.em.tv
HRB 148 760 AG München