Transformation of business model well on track
Munich, May 7, 2008 – During the first quarter of 2008 telegate made good progress with the strategic repositioning of its business. A vital contribution toward this end was the complete takeover of a majority of shares in klickTel AG that had been announced in February 2008 and finalized per April 1, 2008. The integration of the two companies is making good and gratifying progress and amply underlines telegate's drive in the planned transformation from a directory assistance to a leading 'Local Search' provider as well as the associated growth perspectives for the Group.
Financial result
The capital expenditures made toward the operative repositioning of the business are reflected in the key financial figures as already communicated for the current fiscal year 2008. Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) of telegate Group came to 8.6 million Euro in the first quarter 2008 and were thus below the corresponding quarterly figure of the record year 2007 (Q1 2007: 11.0 million Euro). Adjusted by the one-time expenses for the acquisition and integration of klickTel AG (Q1 2008: 0.5 million Euro) as well as the one-time income received in connection with the data cost litigation (Q1 2007: 0.9 million Euro), EBITDA for the first quarter 2008 totaled 9.1 million Euro (Q1 2007: 10.1 million Euro). The net income for the reporting period came to 5.8 million Euro (Q1 2007: 7.3 million Euro). This downward development was mainly due to the contraction of the classic core business in Germany and France, above all in the fixed network sector with its strong margin. At the same time, lower advertisement expenses in these two markets had made a positive contribution to earnings.
The income generated from the business with advertisement entries more than doubled in comparison with the same period of last year, even though it could not fully compensate the decrease in the classic core business of telegate Group. All in all, the Group generated first quarter sales of 39.7 million Euro (Q1 2007; 44.0 million Euro).
The contributions of klickTel AG will be consolidated into the Group earnings of telegate AG from the second quarter onward, as the transaction was completed per April 1, 2008.
As of March 31, 2008, telegate held cash and cash equivalents of 67.0 million Euro (Q1 2007: 28.5 million Euro) and was thus invested with an excellent financial platform. At the end of the first quarter, the company's equity ratio stood at 57.4 percent (Q1 2007: 53.4 percent).
Segment review
During the first quarter of 2008 telegate was able to master well the expected challenges in the respective markets of all three business segments. Even though sales revenues in the segment Germany/Austria declined by 9 percent to 25.9 million Euro compared with the same period of the previous year, the growth sectors of added-value DA services and advertisement entries continued to record a significant upward trend. In addition, a more efficient advertisement strategy enabled the company to cut expenses for this sector substantially. Thus, earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter of 2008 totaled 8.1 million Euro. (Q1 2007: 11.0 million Euro).
In the segment Italy/Spain the company managed to strengthen its market position still further as marginally higher sales revenue of 9.8 million Euro show (Q1 2007: 9.6 million Euro). However, earnings were temporarily down due to advertisement costs climbing against the last year, so that EBITDA closed out at 0.6 million Euro (Q1 2007: 2.4 million Euro). For the coming quarters the company expects to see more or less stable earnings for this segment and in line with last year.
Further capital expenditures into the product portfolio were also made in France. Here the focus was on further developing the Internet offer as well as preparing the business with advertisement sales. With sales down to 4.0 million Euro (Q1 2007: 5.9 million Euro) EBITDA came to -0.2 million Euro, which was a significantly better result than for the same period of last year (Q1 2007: -2.4 million Euro).
Outlook 2008
telegate will not be able to repeat the 2007 record level in fiscal year 2008. The transformation of the business model will necessitate further capital expenditures into product development and marketing of advertisement. At the same time, the declining call volumes will bring down income from the classic Voice Directory Assistance business despite its great profitability. The company reckons that this will have a significant effect on earnings (EBITDA) in the current fiscal year 2008. The sales revenues from the sale of advertisement entries are envisaged to make a significant contribution toward earnings (EBITDA), however, so that they will level out above 40 million Euro over the mid-term. Over the long term, the transformation of the business model will allow the company to secure its growth dynamic and profitability.
Press contact:
Claudia Strixner
telegate AG
Head of Public Relations
Fraunhofer Str. 12a
82152 München-Martinsried
Phone: 089/ 8954-1188
Fax: 089/ 8954-1189
e-mail: presse@telegate.com
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