DGAP-News: freenet AG / Key word(s): Interim Report/9-month figures freenet AG continues profitable growth trend and confirms its guidance 2016 08.11.2016 / 19:36 The issuer is solely responsible for the content of this announcement. --------------------------------------------------------------------------- freenet AG continues profitable growth trend and confirms its guidance 2016 - Increase in Group revenue of 9.8 per cent to 867.2 million euros in the third quarter (previous year: 790.1 million euros) - EBITDA1 improves significantly in the third quarter 2016 by 21.4 per cent to 118.2 million euros (previous year: 97.3 million euros) - Customer ownership rises by 263 thousand to 9.47 million by September 30, (previous year: 9.21 million) - Free cash flow2 in the first nine months 2016 up by 20.8 per cent to 262.7 million euros (previous year: 217.4 million euros) - Successful placement of a promissory note loan for 350 million euros with an average initial interest rate of 1.11 per cent - Confirmation of the outlook for financial year 2016 Büdelsdorf, November 8, 2016 - freenet AG [ISIN DE000A0Z2ZZ5] has published today its interim report per September 30, 2016 and confirms the outlook for financial year 2016. In the third quarter 2016 the company chalked up a significant increase in Group revenue (+9.8 per cent) of 867.2 million euros over the previous year (790.1 million euros). The increase is essentially the result of the inclusion of the sales contribution of the Media Broadcast Group in the amount of 70.1 million euros in the segment "TV and Media". In addition, the rising solid revenue in the Digital Lifestyle Division and the Mobile Communications core business also contributed to Group revenue. The Group revenue for the first nine months of the current financial year thus adds up to 2,424.1 million euros, equal to an increase of 5.8 per cent over the previous year (2,291.1 million euros). With stable average monthly revenue per contract customer (Postpaid-ARPU) of 21.60 euros (previous year: 21.90 euros) and a significant increase in customer ownership of 263 thousand or 2.9 per cent to 9.47 million per September 30, 2016 (previous year: 9.21 million), the freenet AG sees itself again confirmed in its strategy of focusing on high-value customer relations when acquiring new customers and on properly managing existing customers. The significant rise in customer ownership is primarily due to the postpaid customer base which increased by 197 thousand participants or 3.2 per cent to 6.43 million (previous year: 6.23 million). In the no- frills business, which covers all mobile phone tariffs distributed via the discount brands of the Group, the ARPU stood at 2.50 euros (previous year: 2.60 euros). The number of participants in this customer segment rose in comparison with the previous year by 67 thousand or 2.2 per cent to 3.04 million (previous year: 2.97 million). On the other hand, the number of prepaid SIM cards in circulation continued to drop from 3.07 million per September 30, 2015 to currently 2.59 million as a result of unused SIM cards due to disconnections by the network users, with the Prepaid ARPU coming in at the previous year's level (3.20 euros). "Our solid traditional mobile communications core business is on the one hand the foundation for our dividend strength and on the other hand also supports our ambitious growth in the TV business", explains Joachim Preisig, CFO of freenet AG. The gross profit at 234.1 million euros was significantly above the previous year's level (197.1 million euros) and came with an improved gross margin of 27.0 per cent (previous year 24.9 per cent), mainly due to the extended scope of consolidation which now includes the Media Broadcast Group. The Group EBITDA in the third quarter of 2016 registered a significant increase by 20.8 million euros or 21.4 per cent to 118.2 million euros when compared to the previous year (97.3 million euros). Of this amount, a share in the Group EBITDA of 10.0 million euros came in the reporting quarter (1st half of 2016: 6.1 million euros) from the inclusion of the cash-neutral shares of the freenet AG in the results of the associated company Sunrise Communications Group ('Mobile Communications' segment). The contribution of the segment "TV and Media" newly created in the second quarter of 2016 to the Group EBITDA in the third quarter was 8.3 million euros (1st half of 2016: 10.0 million euros). The Group EBITDA achieved in the first nine months of 2016 amounted to 311.7 million euros (previous year: 272.4 million euros). Depreciations and impairments write-downs increased in the third quarter of 2016 by 13.5 million euros to 31.9 million euros (previous year: 18.4 million euros). The increase is essentially due to the increased stock of tangible and intangible assets in connection with the acquisitions of the Media Broadcast Group and the EXARING AG as well as to the associated finalized purchase price allocations. After including the net interest result in the amount of -14.0 million euros (previous year: -9.9 million euros) and after deducting the income tax exposure in the amount of 9.2 million euros (previous year: 7.1 million euros), the Group result for the reporting quarter declined by 4.0 million to 58.0 million euros compared with the previous year (61.9 million euros). The earnings per share at 0.47 euros was slightly below that of the previous year's value of 0.48 euros. The cash flow from operating activities in the reporting quarter amounted to 80.8 million euros (previous year: 86.0 million euros), which corresponds to a decrease of 5.2 million euros from the previous year. Aside from the significantly higher EBITDA in the amount of 10.8 million euros (without including the cash-neutral shares in the result of the associated company Sunrise Communications Group AG of 10.0 million euros), the change is essentially the result of reduced tax payments in the amount of 7.4 million euros, a reduction of 2.1 million euros from the previous year. The increase in net working capital by 18.6 million euros when compared to the third quarter of 2015 counter-balanced this effect. The cash flow from investing activities in the reporting quarter was -8.9 million euros compared to -5.7 million euros in the third quarter of 2015. The change is essentially due to higher cash outflows for investments in intangible and tangible assets in the amount of 4.7 million euros after netting out the payment receipts from the disposal of these assets. The investments with effect on the cash position were financed completely from equity capital and concerned mainly tangible assets of the Media Broadcast Group. The cash flow from financing activities changed in the third quarter of 2016 by -0.7 million euros over the previous year to -15.4 million euros. The outflow of funds from financing activities in the reporting quarter is essentially associated with the preparation of the final purchase price allocation of the Media Broadcast Group. In the first nine months of the financial year 2016 the company obtained a free cash flow that was 20.8 per cent higher than the previous year (262.7 million euros versus 217.4 million euros). On the other hand, in the third quarter of 2016 the company showed a free cash flow of 71.3 million euros, 9.9 million euros less than the previous year (81.1 million euros), which is essentially due to a delayed payment (valuation date effect). The leverage3 per September 30, 2016, which is based on the net financial debts4 in the amount of 787.7 million euros, was 1.9 and therefore within the strategic bandwidth of 1.0 to 2.5. The net financial debts resulted mainly from the promissory note loans due between 2017 and 2026 as well as the syndicated bankers' loans taken out in March 2016. In order to partly refinance the syndicated bankers' loan freenet AG successfully placed an long-term promissory note loan with five tranches for 350 million euros which was disbursed on November 08,2016. The transaction, which was accomplished under customary market conditions, was handled by the Bayerische Landesbank, the Landesbank Baden-Württemberg, the Norddeutsche Landesbank and the ING Bank. The subscription for the entire volume took place at the lower end of the respective sales margins with an initial average interest rate of 1.11 per cent p.a. and maturities between four and eight years. Specifically, the promissory note loan consists of two four-year tranches with a fixed coupon and/or a variable coupon of 1.00 per cent p.a., a six-year tranche with a fixed coupon of 1.28 per cent p.a., a six-year tranche with a variable coupon of 1.20 per cent p.a. and an eight-year tranche with a fixed coupon of 1.68 per cent p.a. The transaction confirmed the investment grade status of freenet. The outlook for financial 2016 is confirmed. Accordingly, the Management continues to aim for moderately rising Group revenue, an EBITDA of slightly over 400 million euros and a free cash flow of approximately 300 million euros. The current outlook does not even include the expected EBITDA contribution or the dividends flowing to the Group from the equity interest in the Sunrise Communications Group AG. The targets given for the growth of the performance indicators Postpaid-ARPU and Customer Ownership in financial 2016 remain unchanged: The company expects a further stabilisation of the Postpaid-ARPUs at the 2015 level and a slightly rising customer number in Customer Ownership compared to financial 2015. Regarding dividend policies the Management plans to continue distributing between 50 and 75 per cent of the annually achieved free cash flow to its shareholders. In support of the sustainability of the business model the Management intends to recommend to the Supervisory Board and the Annual General Meeting in 2017 again a dividend in the amount of 1.60 euros per no par-value share eligible for a dividend for financial year 2016. In spite of the refinancing that took place in March as a result of the acquisitions of companies there are no plans to change the current financial strategy. The Management therefore continues to adhere to a debt factor within the communicated target range (between 1.0 and 2.5). The complete interim report as of September 30, 2016 is available for downloading from www.freenet-Group.de/investor, and the conference call will be broadcast there on November 9, 2016 starting at 10:00 CET via Webcast. 1) Group result before interest, taxes on income, depreciation and impairment write-downs, including shares of associates accounted for using the equity method, excluding depreciation and deferred taxes from the subsequent accounting regarding shadow purchase price allocation (element of the result of associates accounted for using the equity method). 2) Free cash flow (FCF) is defined as cash flow from operating activities minus investments in property, plant and equipment and intangible assets, plus proceeds from the disposal of property, plant and equipment and intangible assets. 3) Ratio of the financial debts less liquid funds, less the share of the listed for the Sunrise Communications Group AG (Source: stock data: Bloomberg) to the corporate EBITDA obtained in the last 12 months. 4) Financial debts less liquid funds, less the share of the price listed for the Sunrise Communications Group AG (Source: stock data: Bloomberg) Investor Relations Contact: freenet AG Investor Relations Deelbögenkamp 4c 22297 Hamburg Germany Phone: +49 (0) 40 / 513 06 778 Fax: +49 (0) 40 / 513 06 970 E-mail: [email protected] --------------------------------------------------------------------------- 08.11.2016 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG. The issuer is solely responsible for the content of this announcement. The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Archive at www.dgap.de --------------------------------------------------------------------------- Language: English Company: freenet AG Hollerstraße 126 24782 Büdelsdorf Germany Phone: +49 (0)40 51306-778 Fax: +49 (0)40 51306-970 E-mail: [email protected] Internet: www.freenet-group.de ISIN: DE000A0Z2ZZ5, DE000A1KQXU0 WKN: A0Z2ZZ , A1KQXU Indices: TecDAX Listed: Regulated Market in Frankfurt (Prime Standard); Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Hanover, Munich, Stuttgart, Tradegate Exchange End of News DGAP News Service --------------------------------------------------------------------------- 518623 08.11.2016