Content
Letter from the Management Board ... 02
Report from the Supervisory Board ... 04
Investor Relations ... 06
Corporate Governance ... 08
For our shareholders ... 14
For our customers ... 20
For our employees ... 26
Group Management Report
Fiscal year 2004 at a glance ... 30
Economic environment ... 30
Financial position ... 32
Acquisitions ... 37
Research and development ... 37
Employees ... 37
Affiliated companies ... 38
Risk management ... 38
Forecast report ... 40
Financial reporting in accordance to IFRS ... 41
Consolidated Financial Statements
Consolidated Balance Sheets ... 44
Consolidated Statements of Operations ... 46
Consolidated Statements of Shareholders’ Equity ... 47
Consolidated Statements of Cash Flows ... 48
Notes to the Consolidated Financial Statements ... 50
Fixed assets movement telegate group ... 70
Revenues of telegate group ... 72
Audit Opinion ... 73
Glossary ... 74
Corporate Structure telegate group ... 76
Dr. Paolo Gonano
Member of the
Management Board
Dr. Andreas Albath
Chairman of the
Management Board
Ralf Grüßhaber
Member of the
Management Board
Dear Shareholders,
telegate closed in 2004 with its most successful fiscal year in the company’s history, effectively confirming its successful turnaround. Despite the ongoing difficult economic climate in Germany, revenues and earnings of the telegate group increased significantly and the company’s own forecast was
surpassed. There was a clearly double-digit growth in revenues and earnings, with earnings before
interest, taxes and depreciation (EBITDA) clearly far above the target set at the beginning of
the year.
telegate AG • Annual Report 2004
These impressive achievements have been obtained thanks to a clear portfolio strategy, where the
top line growth has been driven by the International Business, whereas the solid German Business is
delivering increasingly strong profitability results. More in details, revenues of the telegate group
were up 21 % over the previous year. Free cash flow increased by more than 23 % and was at approximately Euro 29,1 million in 2004. In total, telegate recorded a net profit of Euro 26.4 million. This
includes extraordinary earnings of Euro 7.8 million not affecting liquidity, resulting from the deconsolidation of U.S. operations. For purposes of transparency, this annual report shows the relevant key
financial figures before and after disclosure of discontinued operations which include the results of
the discontinued operations in U.K. and USA.
Developments in nearly all segments contributed to the favorable global performance of the telegate
group. Although the traditional telephone Directory Assistance business tends to be stagnating in
the German domestic market, expansion of the business customer segment – primarily through major
co-operations in mobile telecommunication – and consistent, consumer-oriented product development led even to a slight growth in revenues. telegate has continued to strengthen its role as an
innovative leader in the telephone Directory Assistance business: In Germany, 11 88 0 was the first
provider to introduce the SMS-Directory Assistance and reverse search-service. Continuous optimization of the core product, for example, enhancing the database by providing openings hours frequently requested by consumers or by offering the near-by search for subscriber data, meets the growing
requirements of a mobile society. Here, telegate sees a significant innovation and growth potential
that is already reflected in the current development: The portion of directory inquiries from mobile
networks has grown constantly over the past few years.
02
• About us
Management Report
Consolidated Financial Statements
In addition to retails users, telegate is increasingly focusing its attention on business customers in
Germany. Primarily, the task will be to market existing core competencies, for example, the provision
of state-of-the-art call center services or the processing of extensive, daily updated datasets. These
are segments with healthy growth potential into which telegate will continue to invest in 2005.
Europe itself also holds future growth perspectives for telegate. In 2004, foreign markets were
already contributing 30 percent to consolidated revenues. The outsourcing business in Italy was
successfully expanded and the 11 8 11 brand business in Spain showed that the business model and
expertise from Germany could be transferred to new markets. Continuous adjusting to market conditions and, when necessary, acting consistently is crucial to success. In the light of this background,
the telegate management decided to dispose of the U.K. subsidiary in autumn 2004 and to withdraw
from this Directory Assistance market. The current market and business development in the U.K. did
not meet the Company’s expectations. After an appropriate investment phase, consistently profitable
business was not to be expected. However, opportunities for expansion in other European countries
were emerging at the same time. Consistently with his credo of having value-creation for all shareholders as the main reason for pursuing business opportunities, the Executive Board then decided
and executed a swift and smooth exit from that country.
2004 was an exciting year in telegate’s history with many decisive moments. In November 2004, the
European Court of Justice in Luxembourg rendered a fundamental decision on the subject of data
cost. As a consequence of this decision, telegate anticipates significantly lower data costs in future.
Moreover, based on this legal decision telegate took action against Deutsche Telekom in December
2004 regarding repayment of excessive fees since 1997 amounting to Euro 70 million plus interest. In
addition, telegate is currently checking to see whether further compensation claims can be made
against Deutsche Telekom.
The company’s success was also rewarded on the capital markets in 2004. As of December 31, 2004,
with Euro 288 million, stock market valuation of telegate AG was significantly above the previous
year’s value of Euro 187 million. The company value was increased by 54 %, thus producing a very
respectable result.
To know and use one’s own strengths – and act on the basis of a clear strategy, thereby continuously
checking one’s own position and overseeing consistency and profitability. With this policy and
together with our dedicated employees – the most recent success story of telegate would not have
been possible without them – we will continue to work to increase the company’s value for you – our
shareholders in the future. We hope that you will continue to place your trust in us.
Sincerely,
Dr. Andreas Albath
Dr. Paolo Gonano
Ralf Grüßhaber
03
Herbert Brenke
Chairman of the Supervisory Board
Report from the Supervisory Board
In fiscal year 2004, the Supervisory Board performed both its statutory function and its function as
laid down in the Articles of Association. It advised the Executive Board on the management of the
Company on a continuous basis and supervised the management. The Executive Board provided it
with regular written reports as well as reporting verbally by way of elucidation, with the result that
the Supervisory Board was always kept informed on business developments within the telegate group
of companies, as well as on the most important financial data, the main concerns of management and
the risk situation. Any business developments that deviated from the approved planning and all
important business transactions were presented, explained in detail and discussed with the
Supervisory Board. It was also kept well informed on measures to strengthen telegate AG’s competitive position and its positioning in foreign markets. The company’s strategic aims were also discussed
in detail with and approved by the Supervisory Board.
In accordance with Clause 4 of the Articles of Association, in conjunction with the Law on
Codetermination (1976), the Supervisory Board of the Company has twelve members.
telegate AG • Annual Report 2004
The members elected by the AGM on October 1, 2001, namely Mr. Uwe Heddendorp and Mr. Angelo
Novati, having left the Supervisory Board on January 22 2004 and January 31, 2004 respectively, Ms.
Maurizia Squinzi and Dr. Klaus Harisch were appointed as new members of the Supervisory Board upon
proper request of the Executive Board according to § 104 of the Stock Corporation Act and by decision of the Lower District Court of Munich on March 11, 2004. Both these new members and Mr. Luca
Majocchi, who was appointed to the Supervisory Board by the Lower District Court of Munich in 2003,
were approved by vote of the AGM on May 24, 2004. Dr. Klaus Harisch resigned from the Supervisory
Board on November 30, 2004. We thank the members who have recently left the Supervisory Board for
their constructive and committed collaboration.
Four meetings of the Supervisory Board were held in 2004. No member who had been serving on the
Supervisory Board for a year or more attended fewer than half of the meetings. This also applies, pro
rata, to those members who joined or left the Supervisory Board during the year.
In compliance with § 27 Para. 3 of the Law on Codetermination the Supervisory Board appointed a
Personnel Committee and, in accordance with the Rules of Procedure of the Supervisory Board, an
Investment Committee and an Audit Committee. All the Committees had already been in existence the
previous year. The Personnel Committee held two proper meetings during 2004, the Investment
Committee four and the Audit Committee two. The flow of information between the Committees and
the plenum is assured by the regular reporting of the chairs of the respective Committees.
In fiscal year 2004, the Supervisory Board again devoted much time to discussing the suggestions
and recommendations made in the German Corporate Governance Code and their implementation at
telegate. Any deviations from them were only approved after careful consideration, particularly with
regard to the current situation and requirements of the company.
04
• About us
Management Report
Consolidated Financial Statements
The annual HGB financial statements and status report, and the US-GAAP consolidated financial
statements complying with § 292a of the HGB (German Commercial Code), including telegate AG’s
status report for fiscal year 2004, were audited by Ernst & Young AG, Auditors, Munich with the collaboration of the accounting department. No objections were raised by the auditors, who gave unconditional auditors’ certificates to both the annual financial statements and the consolidated financial
statements.
The annual HGB closing statements, including the status report, the US-GAAP consolidated financial
statements, including the status report, and the reports of the auditors were discussed in detail with
the auditors at meetings of the Audit Committee and sent in good time to all members of the
Supervisory Board. The auditors were also present at the final discussion of the financial statements
at the Supervisory Board Meeting on February 16, 2005. They reported on their audit procedure as
well as explaining a number of points during the course of discussions.
The Supervisory Board has examined both the annual financial statements of telegate AG and the status report and noted and approved the findings of the auditors. It also approves the status report
submitted by the Executive Board and telegate AG’s annual financial statements for 2004, which are
thus adopted.
The Supervisory Board has also examined the US-GAAP consolidated financial statements of telegate
AG and the status report, and noted and approved the findings of the auditors. It also approves the
status report submitted by the Executive Board and telegate AG’s consolidated financial statements
for 2004.
Ernst & Young AG, Auditors, has also examined the report prepared by the Executive Board in accordance with § 312 of the Stock Corporation Act on relationships with affiliated companies (the
dependency report), and issued the following unconditional auditors’ opinion:
“After our statutory examination and evaluation of the report, we confirm that
1. The facts as stated therein are correct,
2. In the legal transactions listed in the report payments or performance executed by the Company
were not excessively high.”
The dependency report was made available to the members of the Supervisory Board for examination.
The auditors were present when the report was discussed by the Supervisory Board. They reported on
their audit procedure, as well as supplying other information. The Supervisory Board found the report
to be in order. It agrees with the auditors’ findings and, after its final examination of the report, raises no objections to the final declaration made in it by the Executive Board.
The management and employees of the telegate group have collaborated responsibly and diligently
during fiscal year 2004. The Supervisory Board expresses its thanks and appreciation both to the
Executive Board and to all employees.
Planegg-Martinsried, February 2005
Herbert Brenke
Chairman of the Supervisory Board
05
Investor Relations
telegate shares on the upswing
The year 2004 was affected by Near and Middle east conflicts and a poor economic situation. The
insecurity arose from this slightly worsened the mood in the stock markets. In spite of this, 2004 was
an extremely successful year for telegate shares. With a net income of Euro 26.4 million recorded by
the group, 2004 has thus far been the most successful year in the Company’s history. The Company’s
success was reflected in the price of its shares. In total, telegate shares performed above average
when compared on the relevant indices (Prime All Share, TecDax) and increased by another 54 % over
the previous year. Accordingly, the market capitalization rose from Euro 187 million at the end of
2003 to Euro 288 million at the end of the 2004 reporting period.
telegate share – share price development in 2004
175%
150 %
100 %
75%
2004
J
F
M
A
M
J
J
telegate AG Shares
telegate AG • Annual Report 2004
Prime All Share Performance-Index
TecDAX
06
A
S
O
N
D
• About us
Management Report
Consolidated Financial Statements
Key figures on the telegate share
Number of Shares
Equity Capital
Earnings per Share
Free Cash Flow per Share
Equity Capital per Share
Share price at end of year*
Highest Share Price*
Lowest Share Price*
Market Capitalization (End of the Year)
Shares
Euro
2004
20,980,835
20,980,835
2003
20,954,355
20,954,355
Euro
Euro
Euro
1.26
1.39
1.61
0.36
1.13
0.73
Euro
Euro
Euro
m Euro
13.75
13.99
8.56
288.49
8.92
10.70
2.50
186.91
* XETRA Closing prices
Shareholder Structure
Due to the exercising of an employees’ share option plan in 2004, the number of shares issued by
telegate increased by 26,480 to 20.980.835 shares as of December 31. A total of 78.3% are held
directly and indirectly by the principal shareholder Seat Pagine Gialle S.p.A. The remaining 21.7% of
the shares are free-float.
Dividend Payments
In accordance with Section 58 in conjunction with Section 158 paragraph 1, No. 5 of the German
Corporation Act, dividends may only be paid from the distributable balance sheet profit. As of
December 31, 2004, telegate AG recorded an accumulated deficit of Euro 58.2 million – despite a net
income of Euro 10.0 million. Therefore, the Managing and Supervisory Boards cannot recommend
appropriation of net income in the form of distribution of dividends to the General Meeting. But in
our mid-term perspective, we are planning a dividend distribution. In order to let the shareholder participate in the group’s success, alongside with price advance, the company gives top priority to the
ability to pay dividends.
Investor Relations Activities
In the last fiscal year, 2004, communication with financial markets was further intensified. Financial
communication was to focus on the company strategy of the telegate group. With numerous
road shows, analyst conferences and regular discussions with individual investors and analysts,
telegate AG maintains a permanent dialogue with private and institutional investors, analysts and
press representatives. Up to date, open communication with all investors is an essential part of
telegate AG’s company policy. The Internet plays an increasingly important role as an information
medium here. Since the 4th quarter of 2004, for example, telegate has brought out an IR newsletter
informing specific private investors of current events, key financial figures and the telegate group
company strategy.
07
Corporate Governance
Implementation of the German Corporate Governance Code at telegate AG
The German Corporate Governance Code summarizes rules for the efficient and responsible management and
supervision of listed stock corporations in a concise and comprehensible form. The Code was first announced
in February 2002 and is continuously refined by the German Corporate Governance Code Commission.
On May 21, 2003 the Government Commission finally adopted an amendment to the German Corporate
Governance Code, which was published in the electronic edition of the German Federal Gazette on July 4,
2003. In this context, telegate sees the key aspects as being efficient cooperation between Managing Board
and Supervisory Board, attention to shareholders’ interests and openness and transparency in corporate
communications. Therefore, telegate AG periodically reviews existing standards and structures for possibly
required amendments or adjustment. At their combined meeting on December 2, 2004 the Managing Board
and Supervisory Board dealt with this subject in detail.
Clause 3.8 Own risk retention in the case of D&O insurance (liability for damage to property)
The Declaration of Compliance with the recommendations of the German Corporate Governance Code in its
version of May 21, 2003 has been available on the Internet under www.telegate.de since December 2004. In
accordance with Section 161 of the Stock Corporation Act, the Managing Board and Supervisory Board
declared that telegate has complied with the recommendations of the German Corporate Governance Code
Commission in its version of November 7, 2002 and that it will comply with the recommendations of the
government commission in its version of May 21, 2003. This applies with the following exceptions:
Clause 3.8 Own risk retention in the case of D&O insurance (liability for damage to property)
Under the Code, insurance against liability for damage to property should provide for appropriate own risk
retention for members of Management and Supervisory Boards. telegate’s DGO insurance is covered by majority shareholder SEAT Pagine Gialle’s insurance for members of executive bodies and does not provide for own
risk retention.
Clause 4.2.4 Individualized declaration of the remuneration of Management Board members
The Code recommends that consolidated groups declare the remuneration of individual Management Board
members in the notes to their financial statements. In the notes to its financial statements, telegate breaks
down the remuneration structure into fixed and variable components, plus share options for the Board as a
whole. We do not provide an individualized breakdown, as we are of the opinion that such information has
no relevance to the capital market.
telegate AG • Annual Report 2004
Clause 5.1.2 Age limit for members of the Management Board
The Code recommends that an age limit be set for members of the Management Board. An age limit has not
been set for members of the Management Board as the Company takes the view that the performance of individual Management Board members is not dependent upon their age.
Clause 5.4.1 Age limit for members of the Supervisory Board
The Code recommends that an age limit be set for members of the Supervisory Board. We see this as an inappropriate restriction on the rights of shareholders to elect the members of the Supervisory Board. We are
also of the view that Supervisory Board members’ performance is not dependent upon their age.
5.4.5 Remuneration of Supervisory Board members
Paragraph. 1 Committees and deputy chairmanship
The Code recommends that deputy chairmanship of the Supervisory Board and membership of Supervisory
Board Committees be taken into consideration in the remuneration of Supervisory Board members. In the
past, neither membership of Supervisory Board Committees nor deputy chairmanship were remunerated separately. We are however planning to put a draft resolution on this subject before the 2005 AGM.
08
• About us
Management Report
Consolidated Financial Statements
Paragraph 2 Performance-related remuneration
The Code recommends that the remuneration of Supervisory Board members includes both fixed and performance-related elements. We are of the view that telegate should not create a performance-related incentive
system for Supervisory Board members. The existing system of remuneration is better suited to ensuring the
independence of the Supervisory Board in the execution of its supervisory function.
Paragraph 3 Individualized declaration of Supervisory Board remuneration
The Code recommends that consolidated groups provide an individualized breakdown of Supervisory Board
remuneration in the notes to their financial statements. In the notes to its financial statements, telegate
shows the remuneration of its Supervisory Board as a whole. We do not provide an individualized breakdown,
as we are of the opinion that such information has no relevance to the capital market.
All suggestions in the German Corporate Governance Code have been implemented,
with one exception
In addition to the recommendations, the German Corporate Governance Code also provides numerous suggestions. telegate AG meets these suggestions with the following exception: We do not offer monitoring of
the shareholders’ meeting via communication media, such as the Internet, as we consider the additional
organizational and financial expense entailed is not justified.
Shareholders and Shareholders’ Meeting
Our shareholders are regularly informed of important dates in the annual and quarterly reports and on the
company’s Web site. At the Annual Shareholders’ Meeting they have the opportunity to use their right to vote
either in person or by proxy.
Close Cooperation between Managing Board and Supervisory Board
The Managing Board cooperates closely with the Supervisory Board and makes regular prompt and comprehensive reports to the Supervisory Board with regard to all relevant questions of corporate strategy, planning and business development, financial and earnings situation and corporate risks. In the case of important business transactions, rights of veto for the Supervisory Board are defined in the articles of association.
Systematic Risk Management
Good Corporate Governance also requires the company to deal responsibly with risks. Our risk management
system ensures that risks are identified and risk positions are optimized. The telegate risk management system is continuously refined and adjusted to changes in framework conditions and reviewed by auditors in
Germany and abroad.
Transparent Communication with the Capital Markets
Investors and other interested persons can obtain important corporate information, current rate charts,
analysis, financial dates, annual and quarterly reports, presentations, ad hoc and press releases as well as
facts on investor relations under www.telegate.de. All shareholders and interested readers can subscribe to
an electronic newsletter, which provides the latest Company information. Section 15a of the Securities
Trading Act requires Members of the Managing Board and the Supervisory Board of telegate AG to disclose
acquisition and disposal of telegate shares. These are publicized on the web site in the section “Investor
Relations / Directors’ Dealings”.
Financial Statements and Auditing
Transparency, both in-house and to the outside world, is an important requirement in managing a listed
company like telegate AG. telegate AG has all the necessary tools. The consolidated financial statements are
disclosed within 90 days of the end of the fiscal year and the quarterly reports are disclosed within 45 days
of the end of the reporting period. Essential information on reports, also including downloadable conference
calls with journalists and analysts, are made accessible to the general public on the Internet. It was agreed
with the auditors, Ernst & Young AG Wirtschaftsprüfungsgesellschaft, that the chairperson of the auditing
committee is to be informed immediately of findings and events revealed during auditing, which are significant to the work of the Supervisory Board. Moreover, the auditors must inform the Supervisory Board or
must comment in the audit report on any findings indicated while performing the audit, which reveal any
discrepancies with regard to the Declaration of Conformity made by the Managing Board and Supervisory
Board in accordance with Section 161 of the Stock Corporation Act.
09
• About us
Management Report
Consolidated Financial Statements
Our promise...
“The measures which led
to the turnaround in 2003 will
also determine the group’s
success in the long term.
We are ready for a marathon,
not only for a short sprint.”
telegate AG • Annual Report 2004
From the Annual Report
of telegate AG 2003
10
. . . Kept in 2004!
• Results forecast exceeded
• Liquidity increased
• Positive share performance
For our shareholders
To accomplish the turnaround and thus provide the Company with a long-term development perspective – this was the Managing Board’s declared goal when it started its work in spring of 2002. First
positive results were already achieved in fiscal 2003. Financial stability and return to profitability
created a solid foundation for further business development in the following years. Here, a clear
cost / benefit orientation guides plans and activities, as the company also wants to secure profitability in the future. After all, the successful turnaround should prove to be enduring.
telegate AG • Annual Report 2004
To create profitable growth was and is a central objective of telegate. This was impressively accomplished in 2004, with double-digit growth both in revenues and earnings. Also, the EBITDA forecast
provided by the company was readjusted upwards during the course of the fiscal year and in the end
even this was exceeded. Where profitability and growth perspectives – including a midterm perspective – did not meet company expectations, decisive and consistent actions were taken and loss projects were dropped. For the shareholder this means reliability.
telegate sees another goal in opening up growth sources and markets on its’ own strength. The basis
for this is a well-filled “war chest” or, translated into financial market language, liquidity and equity
capital. In 2004, the Company successfully succeeded here in further strengthening its position:
14
• About us
Management Report
Consolidated Financial Statements
Approximately Euro 34 million of cash and cash equivalents were available at the end of the previous
fiscal year. With an equity ratio of 37 %, telegate is well equipped with own capital and is significantly above the average of other German companies. Sufficiently available financial resources provide
the necessary entrepreneurial head room for management to make meaningful investments. This
means development potential for shareholders.
The basic motivation behind all business actions is to increase company value. For listed companies,
share price and market capitalization are the mirror of success. When compared to the end of 2003,
the telegate share gained more than 54 % in 2004, closing with a share price of Euro 13.75. At the
end of the same year, the telegate company was thus worth Euro 282 million on the German Stock
Exchange. Compared to the relevant German benchmark indices, telegate closed the stock exchange
year with an above-average performance. For the shareholder this means profit.
Our promise also holds true for the future: We want to continue to increase the value of the telegate
company in accordance with the views held by our shareholders. To this end, we will continue to
invest in 2005. Our main focus will continue to be the expansion of international business. In Italy,
a country about to be fully liberalized – continuing existing business relations with outsourcing partners and optimally benefiting from the opportunities of an open market will play a major role. In
Spain, where telegate is clearly the number two against other competition, the market position is to
be strengthened and the distance to the former monopolist Telefónica group is to be decreased.
France – an interesting Directory Assistance market in the midst of a liberalization process – should
also contribute profitably to the group’s growth on the basis of a tailored market entry strategy.
In addition to growth perspectives abroad, telegate wants to make use of potentials on the German
domestic market. Here, we have primarily invested in building a sales structure for business customer
programs, such as call centers or data services. For the first time, telegate will present itself with its
call center services operation at the leading trade exhibition in this sector, the Call Center World in
Berlin, in February 2005. Also enrichment of the Company’s own database, for example, with detailed,
customer-specific information in the so-called yellow pages business, and offering this information
on various media channels to consumer is to be intensified during the current fiscal year.
Where will this lead us? 2005 will be a year of careful investment, and as in the previous year, each
investment decision in the future will depend on whether it can serve our foremost objective – sustainable increase of company value.
15
• About us
Management Report
Consolidated Financial Statements
Our promise...
“When developing new services
and functionalities, we largely
orientate ourselves on the needs
of our customers: Our goal is
to consistently strengthen our
innovative leadership.”
telegate AG • Annual Report 2004
From the Annual Report
of telegate AG 2003
16
. . . Kept in 2004!
• Pioneer with innovative Directory
Assistance services
• Excellent service quality all over Europe
• New partnerships with business
customers
For our customers
The ability to be innovative is a key winning factor for modern enterprises – particularly in narrow
and saturated markets. Only through innovation and its classic core product “telephone Directory
Assistance” can telegate succeed in differentiating itself from the competition and convincing customers over and over again of the attractiveness of its services.
Since the liberalization of the Directory Assistance market in Germany in 1996 – incidentally, the first
country in Europe to implement the EU directives for opening markets – telegate was a pioneer with
endless new ideas for modern Directory Assistance services. How many of these have been established
as market standards in the meantime? One example: Connection after disclosure of the requested
phone number. Hardly anyone remembers that 11 88 0 introduced this almost taken-for-granted service used in Germany. And in the past few years, telegate has again repeatedly confirmed its role as a
trendsetter: With two new services – SMS Directory Assistance and reverse search – which 11 88 0
launched as the first provider on the market – respectively. It took several months before these standard became established at competitors. There were also many innovations within the comfort services. Today, via 11 88 0 hotel reservation, customers cannot only query the telephone number and
address of a hotel, but also easily book a room, and furthermore, the 11 88 0 number can help customers even better in an emergency situation. Whether with opening hours – from governmental and
local authority offices and agencies through emergency pharmacies or a near-by search for the nearest branch of a bank, restaurant or cinema with one’s favorite movie – one call to the Directory
Assistance service can solve the problem.
telegate AG • Annual Report 2004
The key word for all this is: the customer. Market analysis clearly shows that consumers today expect
“more” than just the basic service from modern Directory Assistance companies. This is where telegate’s systematic innovation management comes in. The central question is how can we utilize the
hundreds and thousands of customer contacts of our call center employees to track demands and
trends. And how can we link this optimally with product development. In 2004, we worked intensively on optimizing processes in this area. This will provide our customers with even better services in
the future.
In addition to its wide range of services and products, telegate focuses on the quality and reliability
of its services. Friendly, personal and fast services with the highest precision and provision of the
most up-to-date data have always been pre-requisites for internal quality management. Last year,
independent inspection commissions confirmed the high quality in Germany and abroad a number of
times. Most recently, the “TÜV Saarbrücken” (technical monitoring association) examined the 11 88 0
offer in Germany and with a 1.7 benchmark our offer is one of the best service companies in compar-
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• About us
Management Report
Consolidated Financial Statements
ison with others. 97 % of persons asked said that they would recommend these Directory Assistance
to others at any time. Long standing experience in Germany over many years and the expertise resulting from this are now being transferred to other European countries. Today, customers in Italy, Spain,
Austria and, in future, also France, can benefit from this premium service.
In 2004, telegate decisively succeeded in strengthening its market position in the business customer
field. More and more business customers and telecommunication providers opt for strategic partnership with telegate. The reason being that without investments in product development and infrastructure they can offer their own customers better service through cooperation. In Germany, the
partner network in mobile telecommunications has been expanded. Drillisch group, The Phone House
and E-Plus, the first German carrier, have all transferred their Directory Assistance business to
the 11 88 0 telephone Directory Assistance service during the last year. In Germany, approximately
17.4 million people have agreements with mobile telecommunication Serviceproviders (source:
Telecom Handel, August 2004). About three quarters of them are customers of one of the six mobile
telecommunication providers from the partner network of 11 88 0: A success story which telegate
also wants to repeat on an international scale abroad. In particular, the Spanish subsidiary 11 8 11
was able to position itself very successfully as a Directory Assistance expert in the telecommunications environment. Communitel became the second outsourcing partner after Jazztel in Spain.
In future, telegate also wants to convince business customers still more of its premium services
through customized product packages. They will benefit from the innovative advances and excellent
service quality. Both in the call center service field and as an expert and outsourcing partner for telephone Directory Assistance in Germany and abroad, the position of telegate must be continuously
strengthened. At present we see interesting growth perspectives for 2005.
21
• About us
Management Report
Consolidated Financial Statements
Our promise...
“We have set out to safeguard
jobs and declare our
commitment to Germany as
an industrial location.”
From the balance sheet press conference
telegate AG • Annual Report 2004
of telegate AG in February 2004
22
. . . Kept in 2004!
• Secured jobs
• Intensified training measures
For our employees
The federal state of Mecklenburg-Vorpommern is the number one location for call centers in Germany.
Here, the industry employs about 8000 experts in approximately 100 call centers. Even during the last
two years, 1,300 new jobs have been created. The region provides ideal conditions. Modern fiber networks provide the basis for an excellent infrastructure and allow for fast telephone connections. Welleducated employees speaking High German without any accent ensure high service quality for a
national and internationally operating telephone service provider. A promotion program for investors
supports companies in establishing themselves and offers interesting location benefits.
telegate has decisively stamped the development of the call center industry from the beginning: The
first telegate call center already started operation in Neubrandenburg in 1996. Today, telegate is by
far the largest employer among call center providers in the federal state, employing approximately
20 % of all call center personnel in the region. About 1,700 people work at five centers in
Mecklenburg-Vorpommern and at one center in the neighboring state of Brandenburg.
telegate AG • Annual Report 2004
telegate takes its responsibilities as the leading call center provider and major employer very seriously: We are proud that we have been able to lay the foundation for an economic turnaround together
with our employees. The short working time phases in 2003 and 2004 and the optimization of our call
center location structure during this time were professionally accompanied by the employees and
with a great deal of understanding for the requirements of the company. We want to continue to work
with this team. Therefore, the telegate Management clearly stands behind its responsible industrial
location policy in Germany.
Concretely: telegate intends to provide good framework conditions also in the future. Central locations which can be reached easily, modern technical equipment and bright, friendly workspace are
part of this, as well as further instruction and intensive training measures. For this purpose, telegate
founded the now state-recognized telegate Academy in 2001.This is an investment that pays off, as
companies can offer their customers higher service quality only with employees who are competent
26
• About us
Management Report
Consolidated Financial Statements
and motivated. This particularly plays a major role for success in the business customer field of call
center services. Customized and selective training measures serve the professional development of
employees in call centers and help the company to remain competitive.
In future, we will concentrate on placing the best employees in the appropriate positions at the right
time. The international as well as cross function cooperation of the individual locations and subsidiaries has become more and more important here. Information exchange and know-how transfer
can have a significant impact on the success of a company. The management therefore promotes personal interaction at numerous information events as well as regular management events on a national and international level.
27
Management Report
telegate AG • Annual Report 2004
telegate group
28
About us
• Management Report
Consolidated Financial Statements
Content
Fiscal year 2004 at a glance ... 30
Economic environment ... 30
Financial position ... 32
Acquisitions ... 37
Research and development ... 37
Employees ... 37
Affiliated companies ... 38
Risk management ... 38
Forcast report ... 40
Financial reporting in accordance to IFRS ... 41
29
Fiscal year 2004 at a glance
2004 was the most successful fiscal year in the company’s history. After the favorable turnaround
in 2003, telegate provided evidence of the viability of its business model during the 2004 fiscal
year. telegate achieved a record net income of Euro 26.4 million, almost quadrupling the net
profit for the past fiscal year. Revenues increased by approximately 21 % in 2004 compared to
the previous year. Further proof of the sound financial structure of telegate group is the free cash
flow of Euro 29.1 million and an equity ratio of approximately 37 %. This allows telegate to
consequently pursue its strategic objectives.
Economic environment
Overall economic conditions
In the year 2004, the world economy was adversely affected by the Near and Middle East conflicts,
weak stock markets and the high oil price. The confidence of both consumers and companies was
significantly undermined. Particularly in the Euro region, the economy underwent a disappointing
development. Due to poor domestic demand and the strong Euro/ dollar rate, economic growth in the
Euro area remained unsatisfactory. Taken as a whole, the Directory Assistance business is, to a large
extent, an industry independent of the economy. However, this market segment can also benefit from
any growing optimism on the part of both customers and companies.
Market Development
telegate AG • Annual Report 2004
Germany / Austria
Legal conditions for the Directory Assistance business have significantly improved as a result of
amendments to the German Telecommunications Act effective on June 26, 2004. In addition to providing legal security this also offers telegate opportunities for innovative product development. One
example is the so-called reverse search which allows to find names and addresses for an existing telephone number.
In November 2004, the European Court of Justice rendered a fundamental judgment on the subject of
data cost accounting, confirming telegate’s longstanding legal opinion regarding excessive data
prices in Germany. Accordingly, only those costs related to the pure transfer of subscriber data may
be billed to alternative assistance providers. The decision of the highest European Court is binding
30
About us
• Management Report
Consolidated Financial Statements
for German authorities and courts. Due to this decision telegate expects lower data costs. In addition, telegate took legal action against Deutsche Telekom AG for repayment of excessive fees for the
provision of subscriber data plus interest incurred.
The Directory Assistance market in Germany continues to decline slightly. However, it should be noted
that this trend has been reduced over the past few fiscal years. With a market share of more than
31 %, telegate has been able to maintain its competitive position in a difficult market environment and
is the second largest Directory Assistance provider in the German market after Deutsche Telekom AG.
Spain
The structures of the Spanish Directory Assistance market are not yet solid. In 2004, new providers
entered the market, while other providers had already withdrawn. The telegate subsidiary 11 8 11
Nueva Información Telefónica S.A.U. has managed to further strengthen its market position as the
number 2 behind the Telefónica group.
Italy
On November 3, 2004, the Italian regulatory authority Autorità per le Garanzie nelle Comunicazioni
(AGCOM) disclosed the conditions for the liberalization of the Italian Directory Assistance market.
These provide for disconnection of the monopolist number of Telecom Italia “12” as of July 1, 2005.
To help consumers, a neutral taped announcement will provide information to facilitate the transfer.
telegate is currently working on a suitable market entry strategy with the principal shareholder Seat
Pagine Gialle S.p.A. Viewed independently of this promising prospective, the outsourcing business of
Telegate Italia S.r.l. was strong in 2004.
France
The French Conseil d’Etat made a far-reaching decision in the second quarter of 2004 concerning the
opening of the French Directory Assistance market. The national regulation authority Autorité de
Régulation de Télécommunication (ART) was instructed to define the conditions for fair market liberalization within a period of six months. Precise time schedules, as well as the conditions for the
opening of the market, are expected at the beginning of 2005. To comply with the impending liberalization of the French Directory Assistance market, telegate founded Telegate France in April 2004.
This makes France a further candidate for an important telegate expansion.
31
Financial position
General Information
Due to deconsolidation of Telegate Inc. and the disposal of 11 88 66 Ltd., the result from the
two companies was recorded as discontinued operations in accordance with US-GAAP accounting
principles. This change in disclosure has no effect upon the net income of telegate group. Only the
revenues and the results from continued operations are affected by this change. As a result, the
figures of the revenue and earnings situation of continued operations are based on the adjusted
figures of last year for comparison purposes. To help clarify this, in the subsequent analysis both
revenues and earnings are explained on group and segment levels before and after disclosure of discontinued operations.
Revenues and earnings situation
In the last fiscal year, telegate recorded an extremely positive development in revenues.
Revenues before disclosure of discontinued operations increased by approximately 21 % amounting to
Euro 167.4 million compared to Euro 138.7 million in 2003. The main reason for this favorable increase was the extremely positive development of the International segment where revenues were
more than doubled in 2004 compared to 2003. The German market still has the highest revenues but
in 2004 the International segment generated almost one-third of the total revenues of telegate
group. Overall, the Company’s own objective of double-digit growth in revenues in 2004 was significantly exceeded.
After disclosure of discontinued operations, the revenues of telegate group amounted to
Euro 165.9 million in 2004 compared to Euro 136.8 million in 2003.
telegate AG • Annual Report 2004
Consolidated result
In 2004, telegate generated a record net income after taxes of Euro 26.4 million, improving the
previous year’s result by Euro 18.9 million compared to Euro 7.5 million in the previous year. This
includes a onetime non-cash book profit of Euro 7.8 million from the deconsolidation of the U.S. subsidiary. Allowing for adjustment of this effect, there is still a considerable amount of net income of
Euro 18.6 million, which corresponds to an adjusted earnings per share of Euro 0.89.
32
About us
• Management Report
Consolidated Financial Statements
Development of sales revenue and EBITDA per half year (2001-2004) in m Euro*
Revenues
EBITDA
100
85.6
90
80
70
65.6
77.8
81.8
2
1
64.3
60
60.2
55.4
60.8
1
2
1
50
40
30
20
10
0
-10
-20
1
•
01
2
•
01
•
02
•
02
•
03
•
03
•
04
2
•
04
* before disclosure of discontinued operations
Earnings before interest, taxes and depreciation (EBITDA) before disclosure of discontinued operations were significantly increased by 49 % to Euro 30.9 million in 2004 compared to the previous
year (2003: Euro 20.7 million). The EBITDA margin from revenues increased to approximately 19 % as
well (2003: 15 %). The self-imposed mid-term goal of double-digit growth in earnings as well as an
EBITDA margin from revenues of 18 % to 20 % was clearly reached. After disclosure of discontinued
operations, the EBITDA of telegate group amounted to Euro 35.0 million compared to Euro 29.1 million
in 2003. The significantly improved operational performance of telegate group is, in addition to the
above-stated increase in revenues, primarily due to measures to increase efficiency that became
effective in 2004 after the previous year’s restructuring.
The slightly decreased gross margin in 2004 is primarily due to the changed revenue ratio of the
Germany / Austria business segment and the International segment. The International segment’s contribution to the revenue and result of telegate group was relatively higher than that of the high-margin business of the Germany / Austria segment.
33
Assets and finances
Balance sheet
The company’s balance sheet total increased by 50 % to Euro 90.9 million in 2004. This results mainly from increased cash and cash equivalents of Euro 33.8 million arising out of significantly positive
cash flows compared to 9.3 million in the previous year. In addition, higher revenues, resulting from
the expanding international business of telegate, led to increasing trade account receivables and
payables under longer payment terms.
Property and equipment of telegate group significantly decreased from Euro 17.7 million to
Euro 11.8 million in 2004. This decline is due to the disposal of the U.K. subsidiary and the continued low investment activities as well as the ordinary depreciation in 2004.
The shareholder loans of Seat Pagine Gialle S.p.A. were completely repaid due to the high free cash
flow in the first quarter of the reporting period. telegate group is thus debt-free.
The shareholders’ equity of the telegate group increased by Euro 18.5 million to Euro 33.8 million,
corresponding to an equity ratio of approximately 37 % compared to 25 % in 2003.
29.1
30
Free Cash Flow in m Euro
23.7
25
2002, 2003
2004
20
15
10
5
0
telegate AG • Annual Report 2004
-5
-3.2
02
03
04
Cash flow and financing
The liquidity of telegate group was significantly increased by the extremely positive developments in
business. The operational cash flow (cash provided by operating activities) increased significantly by
approximately 26 % amounting to Euro 32.2 million in the fiscal year 2004. The free cash flow
increased by approximately 23 % to Euro 29.1 million.
Cash used from financial activities was significantly reduced to Euro 4.5 million in 2004, compared to
the previous year (2003: Euro 17.8 million). The reason for this is the higher repayment of debt in the
fiscal year 2003.
Cash and cash equivalents of Euro 33.8 million have been primarily invested in time deposits.
34
About us
• Management Report
Equity Ratio in %
Consolidated Financial Statements
40
37.2
35
2002, 2003
2004
30
25.2
25
20
15
10.8
10
5
0
02
03
04
Investments
Investments in fixed assets of the telegate group in 2004 amounted to Euro 3.1 million. Investments
were mainly in the enhancement of existing Call Center Technology of European subsidiaries, as well
as replacements and maintenance investments in Germany.
Segment report
The management of telegate group separates its business activities according to the geographic
region into the Germany / Austria and International segments. The International segment comprises
the activities in Spain and Italy, in accordance with US-GAAP accounting principles. The U.S. and
U.K. activities are consolidated and disclosed as discontinued operations, as stated above.
Germany / Austria segment
In 2004, the Germany / Austria segment clearly focused on the development and expansion of the
core business. Further development of information services played a major role here. New innovative
services, such as 11 88 0 hotel reservation service and SMS Directory Assistance services were introduced. The amendment of the telecommunication act also opened up new opportunities for product
development. In early October 2004, telegate was the first provider offering a reverse search service,
whereby addresses are found for existing telephone numbers. Strengthening and enhancing the
business customer sector plays another major role in extending core business. Cooperation with the
telecommunication companies Drillisch / VICTORVOX, E-Plus and The Phone House has shown considerable success, which in turn opened up new consumer target groups for telegate. In total, with
approximately Euro 116.3 million in 2004 of the Germany / Austria segment, revenues were slightly
above the previous year’s level.
35
The Germany / Austria segment achieved significantly higher earnings through consistent cost management and restructuring of the operations in 2002 and 2003. The margin of earnings before interest, tax and depreciation (EBITDA) from revenues increased significantly from approximately 22 % in
the previous year to more than 29 % in the reporting period.
International segment
In addition to the extension of the core business, European expansion played the second major role
in the strategic orientation of telegate group. Even after the disposal of the U.K. subsidiary in
September 2004 telegate has kept its focus on these targets. The success of the European expansion
was clearly shown in the last fiscal year. Meanwhile, almost one-third of all revenues of telegate
group are generated by the International segment. In total, revenues of the International segment
in 2004 before disclosure of discontinued operations amounted to Euro 51.1 million compared to
Euro 23.9 million in 2003, thus more than doubled compared to the previous year. After disclosure of
discontinued operations, the revenues amounted to Euro 49.5 million.
With the positive development of the outsourcing business, Telegate Italia S.r.l. continues on its
growth course. telegate expects new growth impulses from the impending liberalization of the Italian
Directory Assistance market.
At the end of the first quarter 2004, 11 8 11 Nueva Información Telefónica S.A.U. started a national
advertising campaign to further strengthen its already attained position as the second largest
Directory Assistance provider after Telefónica group. In 2004, brand awareness and market share were
increased. Due to a national advertising campaign, marketing expenses of 11 8 11 Nueva Información
Telefónica S.A.U. increased significantly compared to the previous year. In addition, the “random
messaging” method made it possible to generate revenues without advertising costs in the previous
year.
telegate AG • Annual Report 2004
In autumn 2004, the U.K. subsidiary was sold. With this step, the telegate Management has adapted
to the changed and very difficult market conditions. With the withdrawal from the U.K. Directory
Assistance market, the company will be able to focus completely on the very promising markets in
Italy and France.
Due primarily to the increased marketing expenses for establishing the brand of the 11 8 11 Directory
Assistance services, earnings before interest and taxes and depreciation (EBITDA) decreased to
Euro 1.0 million in 2004 after disclosure of discontinued operations compared to the previous year.
Before disclosure of discontinued operations, the earnings before interest, taxes and depreciation
(EBITDA) were Euro -3.3 million in 2004.
36
About us
• Management Report
Consolidated Financial Statements
Revenue per Segment before disclosure of discontinued operations (in %)
Germany/Austria 83 %
Germany/Austria 69 %
International 17 %
2004
2003
International 31 %
Acquisitions
No acquisitions were made in 2004. The subsidiaries arsmonvendi.com AG, Kim Travel Consulting AG
and Travelgate Business GmbH are still in liquidation.
Telegate Inc. was deconsolidated in April 2004.
In September 2004, the U.K. subsidiary 11 88 66 Ltd. was sold.
With respect to the impending liberalization of the French Directory Assistance market, Telegate
France was founded in April 2004.
Research and development
Research work and development are not being carried out by telegate as a sevice provider.
Employees
On December 31, 2004, the group had 2,362 employees (head count). The number of employees
decreased by approximately 6 % compared to the same period of the previous year. Primarily at
Telegate Italia and 11 8 11 Nueva Información Telefónica S.A.U., the number of employees increased
significantly due to intensified business activities. In Germany, however, the number of employees
decreased slightly. Due to deconsolidation, as of December 31, 2004, the employees of the discontinued operations (11 88 66 Ltd. and Telegate Inc.) no longer count as part of the telegate group.
37
Affiliated companies
The Managing Board has prepared a special report regarding their relations with affiliated companies
as per Section 312 of the Corporation Act. The report contains the following closing statement, “We
hereby declare that our company has received appropriate compensation for the business shown in
the report regarding the relations with affiliated companies and for other measures in the fiscal year
2004 according to circumstances that were known to us at the time under which business was conducted or measures taken, and has not been disadvantaged by taking such measures. Further measures in 2004 were either not taken or were dropped.”
Risk management
General explanations
The risk policy of telegate is oriented on sustained growth, whereby only such risks are taken, which
cannot be avoided within the framework of value creation but can be controlled. Therefore, risk management is a basic part of the planning and execution of our business strategies. The managing board
of telegate AG has put the main elements of risk management system into guidelines, which are
applicable to all companies of the group. Likewise, monitoring and controlling systems were implemented to measure, to evaluate and to control business development and the risks entailed.
Responsibility for and handling of business risks lies with the management of the operational units.
For the guidance of the company, the managing board uses a multilevel, integrated planning and
controlling system allowing the identification and analysis of monthly deviations of the actual and
planned business development. So success risks can be quickly identified and countermeasures can be
taken. The supervisory board is involved in the risk management process through regular, quarterly
written reports as well as additional reports in its meetings.
Since the laws for control and transparency of companies (KonTraG) became effective, additional systems for early recognition of risks have been introduced. A systematic and up-to-date risk management system from telegate supports detection of risks and optimization of risk positions. In addition
to ongoing risk analysis, risks are identified and evaluated each quarter at central locations. The
quarterly risk report informs the managing board of any essential risks from business operations, the
countermeasures taken and the resulting effects.
telegate AG • Annual Report 2004
Business Risks
Regulation in the telecommunications sector
The business activities of the telegate group continue to be heavily influenced by the legal framework, decisions made by legislators and regulatory authorities and public legal restrictions. These
include grant of licenses, distribution of telephone numbers, access to subscriber data, billing and
collection services regulations and the premises and charges for connection agreements. The provisions determine which telephone information services may be provided by telegate group and the
rules for assigning telephone numbers. If the assignment rules for information numbers are infringed,
telegate group could be committed by court orders to cease unauthorized services, possibly even to
38
About us
• Management Report
Consolidated Financial Statements
having an assigned number revoked, which would considerably endanger the economic existence of
the company. Delays in the regulations anticipated by telegate and possible changes to the legal
framework conditions could considerably restrict the business activities of telegate group. In particular, this applies to offering other services, conditions regarding issuing of licenses and associated
fees, relations with DTAG or other national market-dominant companies. The telecommunications
market is also continually subject to changes in legal conditions.
Third-party industrial property rights
The telegate group is not aware that it or any of its service offers infringe on any patented rights or
rights relating to intangible assets of third parties.
Risks from grants of public funds
In the past, telegate AG has received public development funds for its investments in the new Federal
German states. The public development funds between the fiscal year 1996 and 2004 amounted to
approximately Euro 11.7 million. The public development funds that have been granted were and are
bound by conditions such as creating and maintaining jobs, the fulfillment of which has to be
ensured. If the required conditions are not fulfilled or adhered to, these public development funds
may have to be repaid.
Risks from legal disputes
telegate is currently involved in numerous litigation and other disputes. These include: Liability disputes regarding the reduction of data costs due to poor quality of subscriber data, a possible obligation to specify prices for services offered, and the information on the number of usage in connection
with the subscriber data license contract with DTAG. In addition, there are asset disputes regarding
the repayment of data costs paid by telegate and affiliated companies in the years from 1997 to
2004, the damage resulting from this and a stop on providing free information on telephone numbers
on the Internet because of possible improper exploitation of a market-dominant position. The
German Federal Cartel Office is currently investigating the legitimacy of the availability of telephone
numbers free of charge on the Internet in regard to a possible improper exploitation of a marketdominant position. The outcome of these disputes, in which claims may also be made against
telegate or in which telegate may make claims against a third party, cannot be predicted.
Risks associated with business activities
The former monopolist Deutsche Telekom AG is a key supplier for telegate, which leads to a certain
economic dependency. The essential aspects of the service relationship are monitored under competitive and regulatory aspects, which puts any risk into perspective. However, the legal action taken in
the proceedings by telegate AG against Deutsche Telekom for providing Internet information to the
end consumer free of charge shows that the changeover to a competitive level playing field will be a
slow process. This poses particular risks, as the responsible authorities are not taking an active role.
In the sensitive world of telecommunications, the status quo primarily benefits the former monopolies. telegate carries out the international expansion by means of subsidiaries, and finances the
development of business activities by providing equity capital and loans. Entering new markets poses
regulatory and competitive risks, which can impair the country specific success of the business
model.
39
Forcast report
Business strategy
telegate group aims to become the leading Directory Assistance provider in Europe, focusing on profitable growth and innovation.
The company’s strategy focuses on strengthening the core business in the Germany / Austria segment.
Further development of our information services in the direction of a “smart problem solver” in all
situations of life plays a major role here. In the light of this, other consumer-oriented and innovative
services will be developed. Strengthening the business customer sector plays another important role
in expanding core business, which in turn will open up new consumer target groups for telegate.
The second pillar of telegate’s strategic orientation is the European expansion. telegate intends to fully
benefit from the opportunities provided by the ongoing liberalization and the dynamic growth of the
liberalizing European Directory Assistance markets. In November last year, the Italian regulatory
authority (AGCOM) disclosed the framework conditions for the liberalization of the Italian Directory
Assistance market. Together with the principal shareholder Seat Pagine Gialle S.p.A., telegate is currently working on a suitable market entry strategy for the Italian Directory Assistance market. After the
decision of the Conseil d’Etat relating to the opening of the French Directory Assistance market, France
is another candidate for a major expansion step by telegate.
The premise for all decisions relating to telegate’s business strategy is the medium and long-term
increase of the company’s value.
telegate AG • Annual Report 2004
Financing strategy
The financing strategy of telegate group is conservative and is primarily focused on securing liquidity in the short and medium-term. Therefore the financing strategy requires a flexible management of
group financing so that telegate is able to take advantage of short-term opportunities. In addition,
due to the complete repayment of loans in the past the opportunity is given for future value oriented growth. This growth will be primarily through the establishment of own subsidiaries, but future
acquisitions cannot be excluded.
40
About us
• Management Report
Consolidated Financial Statements
Financial reporting in accordance to IFRS
In accordance to the EU order of July 19, 2002, European companies whose securities have been
admitted to trading on a European capital market, are required to prepare their consolidated financial statements for fiscal years beginning at or after January 1, 2005 in accordance to international
financial reporting standards (IFRS).
As a company listed on the stock exchange, telegate has already started project planning with
respect to the on-time conversion of accounting to IFRS at the beginning of the 2004 fiscal year.
With the planning and conceptual phases already completed in the second quarter of 2004, complete
accounting conversion to the new requirements imposed by the new accounting principles, was
almost completed at the end of the 4th quarter of 2004.
Planegg-Martinsried, January 26, 2005
The Management Board
41
Consolidated Financial Statements (US-GAAP)
telegate AG • Annual Report 2004
telegate group
42
About us
Management Report
• Consolidated Financial Statements
Content
Consolidated Balance Sheets ... 44
Consolidated Statements of Operations ... 46
Consolidated Statements of Shareholders’ Equity ... 47
Consolidated Statements of Cash Flows ... 48
Notes to the Consolidated Financial Statements ... 50
Fixed assets movement telegate group ... 70
Revenues of telegate group ... 72
Audit Opinion ... 73
Glossary ... 74
Corporate Structure telegate group ... 76
43
Consolidated Financial Statements
telegate Consolidated Balance Sheets (US-GAAP)
ASSETS in TEUR
December 31, 2004
December 31, 2003
33,781
9,329
57
319
40,700
31,224
4,580
1,955
79,118
42,827
39
263
Current assets
Cash and cash equivalents
Restricted cash
Trade accounts receivable
net of allowance of TEUR 275
as of December 31, 2004 and TEUR 562 as of
December 31, 2003
Prepaid expenses and other current assets
Total current assets
Non-current assets
Cost method investment
Intangible assets, net
191
873
Property and equipment, net
11,550
16,548
Non-current assets
11,780
17,684
Other non-current receivables
Total non-current assets
telegate AG • Annual Report 2004
Total assets
44
19
21
11,799
17,705
90,917
60,532
About us
Management Report
• Consolidated Financial Statements
telegate Consolidated Balance Sheets (US-GAAP)
LIABILITIES AND SHAREHOLDERS’ EQUITY in TEUR
December 31, 2004
December 31, 2003
Trade accounts payable
18,099
11,643
Accrued expenses and other current liabilities
37,362
28,169
Liabilities
Turnover tax burden
1,263
319
-
4,726
Total current liabilities
56,724
44,857
Accrued pension liability
115
219
Other non-current liabilities
289
204
57,128
45,280
Common stock
20,981
20,954
Additional paid in capital
85,451
85,028
-72,609
-99,027
Current portion of loans due to shareholders
Total liabilities
Shareholders’ equity
Accumulated deficit
Accumulated other comprehensive income (loss)
Total shareholders’ equity
Total liabilities and shareholders‘ equity
See accompanying notes to the consolidated financial statements.
45
-34
8,297
33,789
15,252
90,917
60,532
Consolidated Financial Statements
telegate Consolidated Statements of Operations (US-GAAP)
Quarterly Report (unaudited)
1.10.2004 –
31.12.2004
in TEUR except for share and per share data
Revenues
1.10.2003 –
31.12.2003
1.1.2004 –
31.12.2004
1.1.2003 –
31.12.2003
42,552
40,433
165,881
136,820
Cost of revenues
-20,156
-18,770
-81,047
-63,991
Gross profit
22,396
21,663
84,834
72,829
Advertising costs
-9,186
-5,252
-24,395
-15,695
Personnel costs
-2,020
-3,036
-12,244
-11,801
Depreciation and amortization
-1,492
-1,773
-6,251
-7,907
Other administrative expenses
-2,795
-7,055
-13,158
-16,273
-15,493
-17,116
-56,048
-51,676
6,903
4,547
28,786
21,153
Total operating costs
Operating income
Interest income (expense)
207
-37
428
-432
Gain (loss) on foreign currency translation
150
212
-28
-236
Gain (loss) on disposal of property and equipment
-10
-18
146
-38
-
-
-218
-
Impairment of cost method investment
Other income (expense)
Other income (expense), net
Income before income tax
Income tax
Income from continued operations
Income (loss) from discontinued operations
telegate AG • Annual Report 2004
12-Months Report
Net income
Shares used in computing basic earnings per share
Basic earnings per share
Shares used in computing diluted earnings per share
Diluted earnings per share
See accompanying notes to the consolidated financial statements.
46
5
-22
81
-194
352
135
409
-900
7,255
4,682
29,195
20,253
-1,543
-113
-3,348
-338
5,712
4,569
25,847
19,915
-
-2,225
571
-12,438
5,712
2,344
26,418
7,477
20,969,610
20,954,355
20,958,190
20,951,506
0.27
0.11
1.26
0.36
20,983,111
20,984,593
20,980,035
20,973,570
0.27
0.11
1.26
0.36
About us
Management Report
• Consolidated Financial Statements
Consolidated Statements of Shareholders’ Equity (US-GAAP)
in TEUR
Balance at January 1, 2003
Shares of
common stock
(in 000s)
Common
stock
Additional
paid in
capital
20,944
20,944
85,288
-106,504
Accumulated
deficit
Accum. other
comprehensive income
(loss)
Total
6,750
6,478
7,477
Net income
-
-
-
7,477
-
Currency translation adjustment
-
-
-
-
1,547
1,547
-
-
-
-
-
9,024
10
10
27
-
-
37
-
-
-812
-
-
-812
-
-
525
-
-
525
Comprehensive income
Issuance of common stock
Costs for issuance of common stock
Stock option reclassification
to equity
Balance at December 31, 2003
20,954
20,954
85,028
-99,027
8,297
15,252
Net income
-
-
-
26,418
-
26,418
Currency translation adjustment
-
-
-
-
-8,297
-8,297
Minimum pension liability
-
-
-
-
-34
-34
18,087
Comprehensive income
Issuance of common stock
-
-
-
-
-
27
27
42
-
-
69
-
-
-16
-
-
-16
-
-
397
-
-
397
20,981
20,981
85,451
-72,609
-34
33,789
Costs for issuance of common stock
Stock option reclassification
to equity
Balance at December 31, 2004
See accompanying notes to the Consolidated Financial Statements.
47
Consolidated Financial Statements
Consolidated Statements of Cash Flows (US-GAAP)
in TEUR
December 31, 2004
December 31, 2003
26,418
7,477
6,728
10,437
-146
317
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Gain (loss) on disposal of property and equipment
Loss on foreign currency translation
Impairment of cost method investment
Valuation allowance for trade accounts receivable
Pension expenses
Gain (loss) due to changes in consolidated group
28
237
218
1,262
-271
280
10
29
-5,168
57
-11,741
-8,982
-1,175
-1,254
6,395
3,449
Changes in operating assets and liabilities:
Trade accounts receivable
Prepaid expenses and other assets
Trade accounts payable
Turnover tax burden
Accrued expenses and other liabilities
Cash provided by operating activities
804
-604
10,100
12,887
32,200
25,592
-2,938
-2,503
186
640
Cash flows from investing activities
Purchase of intangible assets, property and equipment
Proceeds from the sale of intangible assets,
property and equipment
Cash paid due to changes in consolidated group
telegate AG • Annual Report 2004
Cash used in investing activities
48
-365
-
-3,117
-1,863
About us
Management Report
• Consolidated Financial Statements
Consolidated Statements of Cash Flows (US-GAAP)
in TEUR
December 31, 2004
December 31, 2003
Cash flows from financing activities
Proceeds from issuance of common stock
69
37
Payments for issuance of common stock
-16
-812
Proceeds from government grants
307
738
Proceeds from shareholder loans
-
9,200
Repayment of shareholder loans
-4,726
-18,700
Proceeds from notes payable
-
1,000
Repayment of notes payable
-
-13,000
Repayment of capital lease obligation
-
-369
-370
4,133
263
-
-4,473
-17,773
Change in financial instruments
Change in restricted cash
Cash used in financing activities
Decrease in cash due to changes in consolidated group
Effects of exchange rates on cash
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
-168
-
10
-43
24,452
5,913
9,329
3,416
33,781
9,329
Supplemental disclosure of cash flow information:
Interest paid
Income taxes paid
58
801
1,219
328
397
525
Supplemental disclosures at non-cash investing
and financing activities
Stock option reclassification to equity
See accompanying notes to the Consolidated Financial Statements.
49
Notes to the Consolidated Financial Statements (US-GAAP)
1 Basis of Presentation
telegate AG, Planegg-Martinsried Deutschland, and its subsidiaries (the “Company”) provide operator and Directory
Assistance services for private and business customers in Germany and abroad. Under outsourcing agreements, these
services are also rendered for other telephone companies in Germany and in other European countries.
These Consolidated Financial Statements are in accordance with accounting principles generally accepted in the United
States (“US-GAAP”) and have been prepared in Euro (EUR). The Company thus makes use of the exemption regulation
according to Section 292a of the German Commercial Code (“HGB”). This exempts the group from being obliged to prepare consolidated financial statements in accordance with German law. This states that preparing financial statements
in accordance with German law is not required if consolidated financial statements are presented in accordance with
international (here: US-GAAP) regulations. To make use of these regulations additional notes and the group management
report have been added to the consolidated financial statements. The most significant differences between US-GAAP and
German-GAAP can be found under Note 3 “Significant differences between US-GAAP and German-GAAP”.
In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, all amounts and disclosures have been
restated to reflect only telegate’s continuing operations, except as otherwise noted. For more details, see note 6.
The Consolidated Financial Statements and Management’s Discussion and Analysis as of December 31, 2004 are being
filed with the Commercial Registries of the Munich District Courts under the number HRB 114 518 and being published
in the German Federal Gazette (“Bundesanzeiger”).
2 Summary of Significant Accounting Policies
Principles of Consolidation
The Consolidated Financial Statements include the accounts of telegate AG, its subsidiaries and second-tier subsidiaries,
which are directly or indirectly controlled. SFAS 141 “Business Combinations” (SFAS 141) requires all company mergers
to be verified in accordance with the purchase method. Any assets and liabilities acquired hereby are to be recognized
at their fair value. Any positive difference remaining after proportional disclosure of undisclosed reserves is recognized
as goodwill. In case of permanent impairment, an impairment loss is made.
Companies included in the Consolidation
This is an overview of the companies included in the consolidation as of December 31, 2004:
Additional
Registered office
Shareholding
Common stock
as of
Dec. 31, 2004
in TEUR
paid-in
capital as of
Dec. 31, 2004
in TEUR
Martinsried, Municipality of Planegg
Martinsried, Municipality of Planegg
Martinsried, Municipality of Planegg
Rostock
Turin, Italy
100 %
100 %
100 %
100 %
100 %
60.00
25.00
150.00
25.00
129.00
16.00
0.00
1,740.00
0.00
6,000.00
Madrid, Spain
Paris, France
Vienna, Austria
100 %
100 %
100 %
222.00
0.00
35.00
7,769.00
0.00
0.00
Name
telegate AG • Annual Report 2004
Datagate GmbH (*)
11 88 0.com GmbH (***)
mobilSafe AG (***)
telegate Akademie GmbH
Telegate Italia S.r.L.
11 8 11 Nueva Informacion
Telefonica S.A.U.
Telegate France SARL (**)
telegate GmbH
All significant receivables and payables, intercompany transactions and accounts, revenues and intercompany results
between subsidiary companies have been eliminated in the consolidation.
Certain companies have not been included in the Consolidated Financial Statements due to reasons explained in note 5.
(*) In 2003 “Datagate GmbH” (OLD) was merged into Telegate Anklam Gesellschaft für telefonische Informationsdienste
mbH and changed afterwards into “Datagate GmbH” (NEW) (see note 6).
(**) Common stock is EUR 1.
(***) These subsidiaries are held indirectly.
50
About us
Management Report
• Consolidated Financial Statements
Revenues
The Company recognizes revenues when services have been provided. Revenues from Directory Assistance services are
recognized based on the number and duration of calls received from end customers at the date of service provision.
Revenues generated under service agreements with telecommunication providers are recognized based on the number
and duration of calls received from end customers via the company of the respective telecommunication provider.
In compliance with Staff Accounting Bulletin No. 104 “Revenue Recognition” (SAB 104), all revenues generally are recognized when the following four criteria are met concurrently: persuasive evidence of an arrangement exists; delivery
has occurred or services have been rendered; the Company’s fee is fixed or determinable; and collect ability is assured.
Cost of Revenues
Cost of revenues primarily consists of variable and fixed line fees, variable data costs, call center rent and office costs,
maintenance and salaries paid to the telephone operators and the team managers. Depreciation is excluded, being
shown separately.
Advertising Costs
Under Statement of Position No. 93-7 “Reporting on Advertising Costs“ (SOP 93-7) advertising and marketing costs for
services provided are charged to expense as incurred.
Earnings Per Share
The Company calculates loss / earnings per share under the provisions of SFAS 128 “Earnings per Share”. Basic earnings
per share are computed based on the weighted average number of common shares outstanding during the period. The
dilutive effect of common stock equivalents is included in the calculation only when the effect of their inclusion would
be dilutive (see note 15).
Cash and Cash Equivalents
The Company considers all highly liquid assets, purchases with an original maturity of three months or less, to be cash
equivalents.
Restricted Cash
Disposal restrictions relate to cash deposits for rental agreements.
Trade Accounts Receivables
Receivables are stated at nominal values. Necessary allowances based on the probable assumed collection risk are
included.
Government Grants
The Company received investment grants from the Wirtschaftsministerium Mecklenburg-Vorpommern, from the
Investitionsbank des Landes Brandenburg, as well as from funds of the “Gemeinschaftsaufgabe Verbesserung der
regionalen Wirtschaftsstruktur”, and connection with funds of the “Europäischen Fonds für regionale Entwicklung” (only
Mecklenburg-Vorpommern). The governmental authorities have the right to audit the use of payments received by the
Company. The grants that were given to establish and expand call centers in Germany are recorded as a reduction of the
cost basis of the related assets.
Grants received as reimbursement for wages of employees who suffered from long-term unemployment are recorded as a
reduction of the Company’s personnel costs.
Impairment of long-lived Assets
In compliance with SFAS 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”, long-lived assets are
reviewed for impairment whenever events or circumstances indicate that the carrying amount of such assets may not be
recoverable. Recoverability is determined by comparing undiscounted cash flows associated with such assets to the
related carrying value. Long-lived assets, with recorded values that are not expected to be recovered through future undiscounted cash flows, are written down at current fair value. Management believes the remaining value of its long-lived
assets are realizable and that no further impairment allowance is necessary.
Cost Method Investment
The Company holds an investment in preferred shares class C of a private company in the USA. The investment was
acquired as part of a business acquisition during 2000. As the shares are not traded on an organized market, valuation
is based on appropriate indicators showing permanent impairment. These impairments are recognized in corresponding
write-offs.
51
Intangible Assets
Acquired intangible assets are recorded at acquisition cost and amortized on a straight-line basis over the period of
their useful economic life (3 to 5 years).
The Company also capitalized costs to internally enhance the core company database for end-customer data as intangible assets (see note 9).
Property and Equipment
Property and equipment is recorded at historical cost and depreciated using the straight line method over the estimated useful life of the asset, which ranges from 3 to 10 years. Third party grants reduce historical cost. Maintenance and
repairs as well as interest cost for outside capital are not capitalized but charged to expense as incurred. Purchased software is amortized using the straight line method over its estimated useful life of three to five years (see note 10).
Trade Accounts Payable
Liabilities are stated at redemption amount.
Derivative Financial Instruments
Statement of Financial Accounting Standards FASB No. 133 “Accounting for Derivative Instruments and Hedging
Activities” establishes accounting and reporting standards for derivative instruments. This requires all derivatives to be
recognized as either assets or liabilities on the balance sheet at their fair value. All changes to the fair value of financial instruments that do not qualify as hedges, are recognized as earnings. For details, see note 19.
Accrued Expenses and other Current Liabilities
Accrued expenses include all foreseeable risks and contingent liabilities and possible litigation costs to a sufficient
degree. The significant components of accrued expenses and other liabilities relate to accruals for variable data costs,
personnel expenses, lease expenses, general administrative expenses, income tax, legal fees and consulting costs,
advertising costs, other variable costs and other fixed and variable line costs (see also note 12).
Comprehensive Income
The Company records comprehensive income/loss on its Consolidated Statements of Share-holders’ Equity in accordance
with SFAS 130 “Reporting Comprehensive Income”. Accordingly, the accumulated comprehensive income is the total of
all components of comprehensive income, including net income. The accumulated other comprehensive income/loss
refers to revenues, expenses, gains and losses that are under generally accepted accounting principles are included in
comrehensive income, but excluded from net income. For the Company, the accumulated other comprehensive
income/loss comprises foreign currency translation adjustments and minimum pension accrual.
Segment Information
The Company applies SFAS 131 “Disclosures regarding Segments of an Enterprise and Related Information”. This statement establishes standards for the reporting of information on operating segments in annual and interim financial statements and requires restatement of previous year information. Operating segments are defined as components of an
enterprise for which separate financial information is available. This is evaluated regularly by the chief operating decision maker(s) when deciding how to allocate resources and in assessing performance. SFAS 131 also requires disclosures regarding products and services and geographic areas as presented in note 20.
telegate AG • Annual Report 2004
Statements of Cash Flows
Under SFAS 95 “Statement of Cash Flows”, cash flow is divided into business, investing and financing activities. The
Company is using the indirect method.
Fair Value of Financial Instruments
The carrying value of financial instruments such as cash, investments, accounts receivable and accounts payable,
approximate their fair value based on the short-term maturities of these instruments. The carrying value of the
Company’s debt approximates its fair value, which is estimated using discounted cash flow analyses based on current
incremental borrowing for similar types of borrowing arrangements.
Principles of Currency Translation
Assets and liabilities of foreign subsidiaries, with a functional currency other than the Euro, are translated at spot rate,
whereas expense, income and earnings are translated at average rate of the period. Any differences arising are recorded
directly to accumulated other comprehensive income / loss as a separate component of equity.
52
About us
Management Report
• Consolidated Financial Statements
Income Tax
According to SFAS 109 “Accounting for Income Taxes”, deferred tax assets and liabilities are recognized for estimated
future tax consequences as attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. SFAS 109 also requires the recognition of future tax benefits of net
operating loss / carry-forwards. The deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income for the years in which those temporary differences, are expected to be either recovered or
settled. A valuation allowance is provided for deferred tax assets if it is more than likely that the tax benefit will not be
realized (see also note 18).
Stock-Based Compensation
The Company adopted SFAS 123 “Accounting for Stock-Based Compensation” which established financial accounting and
reporting standards for stock-based compensation plans and defines a fair value based method of accounting for an
employee stock option instrument (please refer to note 17 for more details).
Concentration of Credit Risk
The Company is doing business with a large number of customers. The majority of the Company’s revenues from business
with end customers in Germany (2004: 73 %; 2003: 74 %) are billed by Deutsche Telekom AG (“DTAG”).
At December 31, 2004, accounts receivable from DTAG via this service provider amounted to 57 % and 65 % of total
receivables, respectively. In addition, the Company has leased a part of the domestic line network from DTAG. The
Company receives the calls and the customer data required for directory services partly via the DTAG network. Should
DTAG no longer meet its obligations under the agreement, the Company’s operations could be adversely affected. In view
of the sound financial basis of DTAG, the obligations under the deregulation of the telecommunications market and the
emergency concepts available, this appears rather unlikely. International outsourcing customers are billed directly by
the Company.
Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the
US requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain adjustments have to be made to previous years’ data, to ensure they conform to the presentation of the current
year data. These reclassifications have no impact on previously reported net loss or shareholders’ equity.
3 Significant differences between US-GAAP and GERMAN-GAAP
Restructuring Costs
Under German-GAAP restructuring expenses can be accrued. For US-GAAP purposes, accruals for restructuring are limited
by the regulations of SFAS 146 (please refer to note 7).
Capitalization of Database Development Costs
Personnel costs incurred in connection with enhancing the core company database for endcustomer data, are treated as
intangible assets and are capitalized under US-GAAP. Under German-GAAP, these costs are charged to expense as
incurred (please refer to note 9).
Acquired Software
According to US-GAAP, acquired software is recognized within property and equipment. For German-GAAP purposes software is presented as intangible assets.
Grants received
Investment grants for the acquisition of property and equipment are recorded as a reduction of the cost basis of the
related assets for US-GAAP purposes. Under German-GAAP those grants are recorded as a special reserve. This special
reserve is reversed in the same way as the related property and equipment is depreciated. The income on reversing the
special reserve is recorded as “other operating income” for German-GAAP purposes.
Other grants decrease related expense positions under US-GAAP. For German-GAAP purposes these grants are recorded as
“other operating income” in the year of their addition.
53
Capital Lease Obligation
In Germany, the Company leased computer equipment for the infrastructure of their call centers. Differing from GermanGAAP, the lease is treated as a capital lease for US-GAAP purposes. The capital lease was amortized using the straightline method over the five-year life of the lease and terminated on September 30, 2003 (see note 10).
Accrued Pension Liability
The employee benefit plan is accounted for in accordance with SFAS 87 “Employers’ Accounting for Pensions” and SFAS
132 “Employers’ Disclosures about Pensions and Other Postretirement Benefits” under US-GAAP. In accordance with USGAAP, a discount rate of 5,0 % (2003: 5,5 %) was applied. According to German-GAAP, the 1998 mortality tables by Dr.
Klaus Heubeck are the legal basis for pension liability to the managing board of the Company pursuant to Section 6a
EStG in conjunction with Regulation 41 of the Income Tax Regulations. An interest rate of 6 % (2003: 6,0 %) has been
taken as a basis of discounting. There are no other pension plans (please see note 14 for details).
Accrual for Internal Costs of Stating the Financial Statements
The Company established an accrual for internal costs when preparing the financial statements for German-GAAP purposes. This accrual is not allowed for US-GAAP purposes and therefor was eliminated.
Derivative Financial Instruments
In accordance with SFAS 133, derivative financial instruments are recorded as assets or liabilities on the balance sheet
at their fair value (see note 19). Under German-GAAP this kind of financial instrument is generally not recognized.
Deferred Taxes
According to US-GAAP deferred tax assets and liabilities are recognized for estimated future tax consequences as attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. US-GAAP also requires recognition of deferred taxes for loss carry-forwards. An allowance is made
for deferred taxes unlikely to be recognized. Under German-GAAP deferred taxes are to be calculated between estimates
and tax consolidated income statement (timing concept). For more or less permanent differences, which are reversed
over a very long period or before disposal or liquidation of a company, deferred taxes are only recognized if reversal is
likely (see note 18).
Stock Options
The Company grants stock options to selected managers and other key employees of the Company. Under German-GAAP,
only the cash bonus equivalent, which the employee forfeits in favor of the options, is accrued. Under US-GAAP, the
options are recorded at fair value at the date of the grant and expensed over the vesting period (see note 17 for details).
Issuance Costs for Capital Increases
Under German-GAAP, the issuance costs for capital increases are recorded as other operating expenses. According to USGAAP, the issuance costs for capital increases reduce the additional paid-in capital. This analogously applies also to the
continued costs for the capital increases from 2002 to 2004.
Currency Translation
On the valuation of individual transactions denominated in foreign currencies at the balance sheet date, the corresponding actual rate prevailing at the balance sheet date is used under US-GAAP. The “lower or higher cost” principle is used
under German-GAAP.
telegate AG • Annual Report 2004
4 Recently issued Accounting Pronouncements
On December 16, 2004, the FASB issued the revised version of SFAS No. 123 “Accounting for Stock-Based Compensation”
(SFAS 123 R). This regulation excludes the alternative application of Accounting Priciples Board No. 25 (APB 25) based
on the intrinsic value valuation. The Standard is applicable to reporting periods beginning after June 15, 2005. Early
application is recommended. The company records its stock option plan according to the provisions of SFAS 123.
Adoption of SFAS 123 R is expected to have only minor effects for the Company. Furthermore, the Company will prepare
its financial statements for reporting periods after December 31, 2004 solely in accordance with the provisions of
IAS / IFRS.
On December 23, 2003 the FASB issued the revised version of SFAS No 132 “Employers’ Disclosures about Pensions and
Other Postretirement Benefits” (SFAS 132 R) to improve mandatory disclosure for agreed benefit plans. The regulation
replaces the existing disclosure provisions for pensions. SFAS 132 R companies to disclose more details of their fund
assets, pension obligations, cash flows, benefit costs and other relevant information. It also requires a description of
asset policy and strategies and intended percentage of grants or target margins for these types of assets to be recorded
in the financial statements. Cash flows should include an outlook on future social benefit payments and other pension
plans. The regulation is legally binding for fiscal years ending after December 15, 2003. The company has adopted SFAS
132 R for fiscal 2003 and has added the additional statements to the note.
54
About us
Management Report
• Consolidated Financial Statements
On December 17, 2003 the Security and Exchange Commission (SEC) published the Staff Accounting Bulletin (SAB)
104, “Revenue Recognition”. SAB 104 has updated parts of the SEC interpretive guidelines which were published under
SAB 101 and which are contained in item 13 of the pronouncements of the Staff Accounting Bulletin. SAB 104 has deleted basic interpretations, which are no longer required and, secondly, confirms basic interpretations on the basis of publications for various items of revenue recognition, including EITF 00-21. The adoption of SAB 104 has no effect on our
operating results or financial position.
In May 2003, the FASB issued the SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity.” This standard requires financial instruments, which have equity characteristics as well as borrowed capital to be attributed solely to liabilities. The standard is applicable for reporting periods beginning after June
15, 2003. For financial instruments acquired or modified after May 31, 2003 this standard is directly applicable.
Application of SFAS 150 had no effect on the company’s consolidated financial statements.
In January 2003, the FASB published FASB Interpretation 46 (FIN 46) “Consolidation of Variable Interest Entities – an
interpretation of Accounting Research Bulletin 51 (ARB 51)”, which clarifies the application of consolidation rules for
specific “Variable Interest Entities”. A “Variable Interest Entity” is a company with the legal status of a corporation, a
trust fund, a partnership or any other non-stock corporation used for business purposes and which is also characterized
by (a) the equity capital providers having no voting rights or b) the equity capital providers not providing the “Variable
Interest Entity“ with sufficient cash to perform its tasks. FIN 46 requires consolidation of a “Variable Interest Entity”
provided that the company is either exposed to the risk of bearing a material portion of possible losses of “variable
interest entities” or that the company receives the largest portion of earnings. The same is true when both criteria
apply. In October 2003, the first-time application of FIN 46 was deferred to the first fiscal year or to the first reporting
period ending after December 15, 2003. On December 17, 2003, FIN 46 was again amended by FIN 46 (R) with the effect
that the first-time application of the regulation for “variable interest entity“, presenting no “special purpose entity”;
was deferred to reporting periods after March 15, 2003. The application of FIN 46 (R) had no effect on the consolidated
financial statements as the company currently has no relations to “variable interest entities”.
5 Changes in the Consolidated Group
At balance sheet date the following three companies
•
•
•
Kimtravel Consulting AG
travelgate business GmbH
arsmovendi.com AG
are in the process of liquidation. They are not included in the consolidated financial statements as they are not operationally active and only made a minor contribution to the consolidated results. The extraordinary income of
TEUR 3 resulting from the deconsolidation of November 30, 2004 has been recorded within “other income (expense)”.
Effective September 30, 2004, all investments in the British subsidiary of telegate (11 88 66 Ltd.) were sold to the
Croftacre Holdings Ltd. investment company. Accordingly, the subsidiary had been deconsolidated from the group as of
September 30, 2004. The loss out of this transaction amounting to TEUR 2,622 has been recorded within the “income
(loss) from discontinued operations”.
Effective April 1, 2004 Telegate France SARL was founded in Paris, France and was added to the consolidated group.
Also on April 1, 2004, the shareholders’ meeting of mobilSafe AG decided to continue the existence of the company. This
resolution was filed with the commercial register on April 1, 2004.
At the end of March 2004, for Telegate Inc., USA the application for the “Delaware Dissolution”, one form of American
liquidation with similar German settlement rights, was filed with the appropriate authority. As of April 1, 2004, the company was deconsolidated from the scope of consolidation. The consolidation gain amounted to TEUR 7,787 and has been
recorded within the “income (loss) from discontinued operations”. This income had no effect on the Consolidated
Statement of Cash Flows.
Effective July 31, 2003, Datagate GmbH was retrospectively merged into telegate Anklam GmbH as of January 1, 2003.
Simultaniously, telegate Anklam GmbH was renamed to Datagate GmbH. This transaction had no effect on the consolidated result.
In the second quarter 2003, liquidation of telegate International B.V. was finalized. The loss of TEUR 57 resulting from
this transaction was shown in the income statement under “other income (expense)”.
55
6 Discontinued Operations
In 2004, the Company decided to focus on its core markets, and thus exit the operations in the United States and United
Kingdom. This plan was approved by the Company’s Supervisory Board. In accordance with SFAS 144, the following companies – which were allocated to the segment “ICS International” – are being presented in the consolidated financial
statements 2004 as “Discontinued Operations”:
1) Telegate Inc., USA
2) 11 88 66 Ltd., UK
Dissolution
By the end of March 2004, for Telegate Inc., USA, the application for the Delaware Dissolution was filed with the appropriate authority (please refer to note 5). Accordingly, the results of this subsidiary is shown in the consolidated statements of operations within the “income (loss) from discontinued operations”.
Disposal
As of September 30, 2004, all investments in 11 88 66 Ltd. were sold to the Croftacre Holdings Ltd. investment company. Accordingly, the results of this subsidiary is shown in the consolidated statements of operations within the “income
(loss) from discontinued operations” (please refer to note 5).
Income (loss) from Discontinued Operations
Telegate Inc., USA
For the year ended December 31, in TEUR
Revenues
Cost of revenues
Total operating costs, excluding
amortization and depreciation
Amortization and depreciation
Other income (expense)
Income (loss) from discontinued
operations before group-adjustement
Result from deconsolidation
Income (loss) from discontinued
operations after tax
11 88 66 Ltd., UK
total
2004
2003
2004
2003
2004
2003
0
0
992
-1,182
1,561
-3,133
847
-4,486
1,561
-3,133
1,839
-5,668
-20
-1
5
-1,193
-2,035
-1,539
-2,536
-476
6
-3,347
-495
0
-2,556
-477
11
-4,540
-2,530
-1,539
-16
7,787
-4,957
0
-4,578
-2,622
-7,481
0
-4,594
5,165
-12,438
0
7,771
-4,957
-7,200
-7,481
571
-12,438
7 Restructuring
In order to improve the efficiency of the group, various measures had been implemented in prior periods. The main focus
was to optimize the cost structure by merging existing call centers. For that reason, the Company initiated the following two restructuring plans from 2002 to 2004:
Restructuring 2004
By resolution of the Managing Board and approval by the Supervisory Board, the Company initiated in spring 2004 measures to optimize the cost structure. Main focus was the merge of existing call center in Germany. This restructuring had
been successfully completed in 2004. Minor expenses are being expected to occur in 2005 but are considered by existing accruals.
The total expense for restructuring of 2004 amounts to TEUR 1,403 (2003: TEUR 0) and is not shown separately but within the following operating costs:
telegate AG • Annual Report 2004
in TEUR
2004
Personnel costs
Rental costs
Other costs
Total restructuring expense
701
582
120
1,403
This restructuring expense solely refers to the segment ICS Germany / Austria.
56
About us
Management Report
• Consolidated Financial Statements
The following table summarizes the cost and activities related to the 2004 restructuring plan. Accruals for restructuring
are not shown separately, but are included in the “Accrued expenses and other current liabilities” (see note 12 for
details):
Personnel
costs
Rental
costs
Other
costs
Total costs
1,140
-279
-439
422
811
-92
-229
490
220
-75
-100
45
2,171
-446
-768
957
Addition to accruals
Consumption of accruals
Reversal of accruals
Balance at Dec. 31, 2004
Restructuring 2002
By resolution of the Managing Board and approval by the Supervisory Board, the Company initiated in 2002 measures to
optimize the cost structure. Main focus was the merge of existing call center in Germany and USA. The amount of call
center had been reduced in Germany from 11 to 8 and in the US from 4 to 1. This restructuring had been successfully
completed in 2004. Due to restructuring efforts, the application for the dissolution of the American subsidiary has been
filed by the appropriate authoritiy. At the same time, this company has been deconsolidated from the consolidated
group. For further details please refer to notes 5 and 6.
The total expense for the restructuring 2002 plan in 2004 amounts to TEUR 878 (2003: TEUR 4,769) and is not shown
separately but within the following operating costs:
in TEUR
2004
Rent costs
Personnel costs
Total restructuring expense
809
69
878
This restructuring expense is allocated to the following segments:
ICS
ICS Germany /
Austria
Expense of prior periods
Expense of current period
Accumulated expense as of December 31, 2004
Expected future expense
Expected total expense
4,714
878
5,592
0
5,592
ICS
International
4,348
4,348
0
4,348
Total
9,062
878
9,940
0
9,940
The following table summarizes the cost and activities related to the 2002 restructuring plan. Accruals for restructuring
are not shown separately, but are included in the “Accrued expenses and other current liabilities” (see note 12 for
details):
Personnel
costs
Rent
costs
Other
costs
Total costs
381
-381
0
412
-35
377
69
-28
418
3,069
-1,395
1,674
2,334
-614
-26
3,368
1,153
-1,005
-344
3,172
843
-755
88
2,061
-1,911
-12
226
8
-200
-8
26
4,293
-2,531
1,762
4,807
-2,560
-38
3,971
1,230
-1,233
-352
3,616
Addition to accruals
Consumption of accruals
Reversal of accruals
Balance at Dec. 31, 2002
Addition to accruals
Consumption of accruals
Reversal of accruals
Balance at Dec. 31, 2003
Addition to accruals
Consumption of accruals
Reversal of accruals
Balance at Dec. 31, 2004
57
In the additions to accruals, depreciation of call center equipment is included amounting to TEUR 1,741 and TEUR 784
for the periods 2003 and 2002 respectively.
8 Cost Method Investment
The investments are almost entirely comprised of USD investments held in a non-listed telecommunication company in
the United States. Due to permanent impairment, these investments were adjusted by TEUR 222 (2003: TEUR 1,262) in
2004. As of December 31, 2004 this results in a residual value of TEUR 39 (2003: TEUR 263). For further information
refer to note 2 to “cost method investment” and the fixed assets movement schedule in the Exhibit attached to the
notes.
9 Intangible Assets
The intangible assets are comprised as follows:
As of December 31, in TEUR
Licenses and similar rights
Internally developed database
Intangible assets, gross
Less: accumulated amortization
Intangible assets, net
2004
2003
168
2,073
2,241
-2,050
191
4,050
2,073
6,123
-5,250
873
In 2004, amortization expense of licenses and similar rights was TEUR 26 and TEUR 25 in the previous year. Due to the
deconsolidation of two group-companies, the accumulated amortization was reduced by TEUR 3,987 and is amounting to
TEUR 127 (2003: 3,984) as of December 31, 2004.
The useful economic life for licenses and similar rights is 3 to 5 years. The majority of the licenses had been fully amortized as of December 31, 2002. There were no significant purchases in 2003 and 2004. No significant additions are
planned for 2005 and 2006. The Company expects the amortization expense for the following 5 years not to exceed
TEUR 30 (per year).
The company capitalizes internal development costs for the company’s core database as intangible assets up to and
including December 31, 2002. The majority of these capitalized costs comprise internal and external programming costs.
The useful life for the activated core database is three years. In the fiscal year amortization was TEUR 657 (2003:
TEUR 698). The total amount of accumulated amortization was TEUR 1,923 (2003: TEUR 1,266) as of December 31, 2004.
As of December 31, 2002 enhancement of the database was completed and no further internal costs were capitalized.
The costs capitalized to date will be amortized by December 31, 2005. Amortization for 2005 will amount to TEUR 150.
Goodwill has a residual value of TEUR 0 (2003: TEUR 0); amortization was TEUR 3 in 2003.
10 Property and Equipment
Property and equipment is comprised as follows:
telegate AG • Annual Report 2004
As of December 31, in TEUR
Software
Technical equipment, plant and machinery
Other equipment, fixtures and fittings
Advance payments and construction in progress
Property and equipment, gross
Less: accumulated depreciation
Property and equipment, net
58
2004
2003
13,790
31,610
5,507
1,139
52,046
-40,496
11,550
13,535
34,979
7,059
292
55,865
-39,317
16,548
About us
Management Report
• Consolidated Financial Statements
As of October 1, 2003, equipment formerly leased was purchased at a residual value and reclassified to the respective
category of property and equipment. Total depreciation and amortization expenses on financing leasing in 2004 were
TEUR 0 (2003: TEUR 196). As of December 31, 2004, accumulated amortization on finance leasing was 0 TEUR (2003:
TEUR 0.)
The Company’s total depreciation and amortization expenses on property and equipment in 2004 were TEUR 6,045
(2003: TEUR 9,711).
The classification and movement of individual fixed assets and depreciation are included in the fixed assets movement
schedule in the Exhibit attached to the notes.
11 Short-term Borrowings
As of December 31, 2004 the Company has overdraft credit facilities from banks available amounting to TEUR 2,040
(2003: TEUR 3,000).
12 Accrued Expenses and Other Current Liabilities
The following overview shows the recorded “Accrued expenses and other current liabilities” in detail:
As of December 31, in TEUR
Accruals for variable data costs
Accruals for personnel expenses
Accruals for lease expenses
Accruals for general administrative expenses
Accruals for income tax
Accruals for legal fees and consulting
Accruals for advertising costs
Accruals for other variable costs
Accruals for fixed and variable line costs
Other accruals
Subtotal
Other current liabilities
Total of accrued expenses and
other current liabilities
2004
2003
9,268
7,754
5,576
4,348
2,639
2,187
996
761
687
535
5,747
7,737
6,502
2,736
338
1,705
1,027
705
531
399
34,751
2,611
27,427
742
37,362
28,169
13 Shareholder Loans
As of December 31, 2004, the Company held no loans (2003: TEUR 4,726). For further information please refer to
note 24.
14 Accrued Pension Liability
The Company maintains both defined benefit pension plans and defined contribution plans for employee company
pensions. Valuation of all pension plans is at year-end.
Defined benefit pension plans
The company has made individual commitments for company pension benefits (retirement, disabled and surviving
dependence pension) for members of the managing board since December 31, 1998.
The amount of pension commitments from defined benefit pension plans is mainly based on the period of employment
and the remuneration of members of the Managing Board.
The amount of pension obligations is computed according to projected unit credit method based on the following
actuarial assumptions.
in %
Interest rate
Pension trend
59
2004
2003
5.0
2.0
5.5
2.0
The following table sets forth the development of Project Benefit Obligation (PBO) and the reconciliation from funded
status and the amounts recognized in the Company’s consolidated financial statements.
As of December 31, in TEUR
Projected benefit obligation (PBO) at beginning of the year
Service cost
Interest cost
Actuarial loss
Retrospective plan adjustments
Effects of plan payments
PBO end of the year
Fair value of plan assets
Financial status of the obligation
Unrecognized net actuarial loss (gain), balanced
Unrecognized prior service costs
Accrued pension liability – before additional minimum liability
Additional minimum liability
Accrued pension liability – after additional minimum liability
2004
2003
202
31
5
37
32
-192
115
-115
34
-81
-34
-115
168
19
10
5
202
-202
-44
27
-219
-219
The Accumulated Benefit Obligation (ABO) was TEUR 115 (2003: TEUR 202) at balance sheet date.
In 2004, the additional minimum liability was amounting to TEUR 34 (2003: TEUR 0) and has been directly recognized
without affecting the consolidated statement of operations by reducing the accumulated other comprehensive income.
During the reporting period the Company paid severance charges of TEUR 148 to the candidates who left the company,
whereby retirement claims were settled for the benefit of the company pension plan.
Pension expenses for the fiscal year are comprised as follows:
in TEUR
Service costs
Interest costs
Amortization of actuarial losses
Expenses from retrospective plan adjustments
Income from settlements
Pension expenses
2004
2003
31
5
-1
32
-57
10
19
10
-2
2
29
Defined contribution pension plans
Since September 2004, the Company offers a subsidized contribution to the employee financed pension plan. The
amount of the Company’s subsidy depends on the contribution of the employee. The current subsidies are recorded as
expenses of the period. In 2004, the expenses for the defined contribution pension plan totaled TEUR 6.
telegate AG • Annual Report 2004
15 Earnings Per Share
The Company calculates earnings per share under the provisions of SFAS 128 “Earnings per Share”. Basic earnings per
share include no conversion rights and are computed by dividing net income by the weighted average shares of common
stock outstanding. Diluted EPS is computed by dividing net income by the weighted average shares of common stock
and common stock equivalents outstanding. The Company’s dilutive common stock equivalents result from stock options
and are computed using the treasury stock method.
60
About us
Management Report
• Consolidated Financial Statements
The following table sets forth the computation of the basic and diluted EPS computations for the years ended December
31, 2004 and 2003 respectively:
Year ended December 31, in TEUR
2004
2003
Numerator:
Income from continued operations
Income (loss) from discontinued operations
Net income
25,847,000
571,000
26,418,000
19,915,000
-12,438,000
7,477,000
Denominator:
Weighted average shares outstanding – basic
Dilutive effect of stock options
Weighted average shares outstanding – diluted
20,958,190
21,846
20,980,035
20,951,506
22,065
20,973,570
1.23
0.03
1.26
0.95
-0.59
0.36
Basic and diluted income (loss) per share:
from continued operations
from discontinued operations
from net income
16 Shareholders’ Equity
Common stock
As of December 31, 2004, the Company has 20,980,835 (2003: 20,954,355) shares issued and outstanding.
Holders of common shares are entitled to one vote per share on all matters submitted for a vote of shareholders. The
common shares are not redeemable and have no conversion rights. Dividends may only be declared and paid from the
distributable balance sheet profit determined on the basis of the Company’s annual German statutory accounts.
At the shareholders’ meeting of January 10, 2001, the Managing Board was authorized with the approval of the
Supervisory Board to raise the subscribed capital one or several times by the issuance of new shares against cash and/or
deposit in kind (conditional capital) by January 9, 2006. The total amount of increase may not exceed TEUR 6,365. The
Managing Board was also authorized to exclude, with the approval of the Supervisory Board, the subscription right of
shareholders, provided that the new shares are utilized for the acquisition of an investment or for accessing foreign
financial places.
With the resolution of the shareholders’ meeting of November 18, 2002, the subscribed capital of TEUR 12,730 was
increased by TEUR 8,214 to TEUR 20,944 by issuance of 8,214,355 new shares payable to bearer with a calculated nominal value of EUR 1 at an issuance value of EUR 3.69 per share. The new shares were authorized for subscription earnings
for the first time for fiscal 2003. The legal subscription right of the shareholders was excluded with the exception of the
subscription rights of SEAT Pagine Gialle S.p.A., Milan, Italy, and Telegate Holding GmbH, Planegg. SEAT Pagine Gialle
S.p.A. issued 1,723,778 new shares and 6,490,577 new shares were issued by Telegate Holding GmbH. These were subscribed to and accepted against deposit in kind. As depositing kind SEAT Pagine Gialle S.p.A. and Telegate Holding
GmbH have introduced partial receivables (consisting of partial loan repayment claims) against telegate AG to the
amount of TEUR 30,311. The increase of fixed capital came into effect on registration in the commercial register on
December 19, 2002.
With the solution of the shareholders’ meeting of November 18, 2002 the subscribed capital of TEUR 20,944 increased
by a maximum of TEUR 4,516 to a maximum of TEUR 25,460 against deposits in kind by insurance of a maximum of
4,515,645 individual shares payable to bearer with a calculated nominal value of EUR 1 at the issuance amount of
EUR 3.69 per share. The new shares are first-time authorized earnings for subscription in the fiscal year in which this
increase in cash capital was registered in the commercial register, not, however, before fiscal 2003. The statutory subscription right of SEAT Pagine Gialle S.p.A., Milan, Italy, and of Telegate Holding GmbH, Planegg, was excluded. With the
exception of the above mentioned companies, the shareholders of telegate AG were offered new telegate AG shares for
subscription at a ratio of 1 : 1 in accordance with their investment against payment of EUR 3.69 per share (subscription
offer), the decision of the shareholders meeting to be ineffective in the event that the new shares had not been subscribed by May 18, 2003. The shareholders authorized for subscription of shares have taken up the subscription offer of
10,000 individual shares payable to the bearer and the subscribed capital accordingly increased by TEUR 10 to
TEUR 20,954. On April 15, 2003, the cash capital increase was registered in the commercial register and became effective worldwide.
In November 2004, the employees of the company exercised allocated stock options as part of the stock option plan of
telegate AG. The stock capital of telegate AG increased by EUR 26,480 to EUR 20,980,835. For further information please
refer to note 17).
61
Conditional capital
With the solution of the shareholders’ meeting of May 24, 2004 the amount of the conditional capital increase was
reduced from EUR 200,000 to EUR 36,000. The conditional capital increase solely serves for the issuance of up to 36,000
shares for the holder. The conditional capital increase is only carried out to the extent that the holder of subscription
rights utilizes their right to subscribe to shares of telegate AG. telegate AG does not grant specific shares to meet subscription rights or their obligation towards the optionee or otherwise meets its obligation towards the optionee.
In November 2004, employees of the company exercised previously allocated stock options as part of the stock option
plan of the Company. The conditional capital decreased by EUR 26,480 to EUR 9,520 (see note to 17).
Additional paid-in capital
As of December 31, 2004, the additional paid-in capital was TEUR 84,451 (2003: TEUR 85,028). The additional paid-in
capital was reduced by TEUR 423, compared to the amount on December 31, 2003. Changes mainly result from reclassification of accruals for bonuses as part of the stock option plans (TEUR 397) – see note 17 –, the exercise of stock
options (TEUR 43) and of capital increase costs (TEUR 17).
Additional paid-in capital items are valued at their nominal amount.
17 Stock Option Plans
The Company has reserved 9,520 shares of common stock for issuance under its stock option plan. The Company grants
selected executives and other key employees stock option awards at an exercise price not less than the fair market value
of the common stock at the date of grant. In exchange for the granting of these options, the employees to whom the
options were granted forfeited a cash bonus. In the event an employee leaves the Company prior to the vesting of the
options, the employee can recover the cash amount forfeited. The fair value of the granted options is therefore shown
as accrued until the time an employee no longer has the right to receive bonuses in cash. After that the accrual is
reclassified to the additional paid-in capital (in 2004: TEUR 397, in 2003: TEUR 525).
Optionees can exercise options only when the final price of the Company’s share in the “XETRA Handel der Deutsche
Börse AG” has better performed than the Prime All Share Index within the period the option is granted and exercised.
After expiration of the vesting period (blocking period) the option rights may be exercised entirely or partly at any time
until their expiration, which is five years after the rights were granted.
Option transactions under the plan are summarized as follows:
Number of
Shares
telegate AG • Annual Report 2004
Outstanding at December 31, 2002
Forfeited 2003
Cancelled 2003
Outstanding at December 31, 2003
Forfeited 2004
Cancelled 2004
Exercised 2004
Outstanding at December 31, 2004
46,045
-2,990
-550
42,505
-185
-9,630
-26,480
6,210
Weighted
Average
Exercise
Price
in EUR
5.45
27.00
69.33
3.11
114.22
2.62
2.62
2.73
All options outstanding were still within the contractual blocking period at balance sheet date and could therefore not
be exercised. The 185 options that were outstanding as of December 31, 2003 could not be exercised and forfeited after
reaching their expiry date in June 2004.
Exercise Price
EUR
2.73
Number of
Weighted Average
Options
Contractual Life Remaining
EUR
Years
6,210
1.6
The Company accounts for the fair value of its stock option plans in accordance with SFAS 123 “Accounting for StockBased Compensation”. Compensation expense recorded in 2004 was TEUR 4 (2003: TEUR 184).
62
About us
Management Report
• Consolidated Financial Statements
Stock options were granted last in 2002. Utilizing the Black-Scholes option-pricing model and the following assumptions, the estimated fair values were EUR 1.51 per option on the grant dates.
Tranche 2002
Risk free interest rates
Expected life
Expected volatility
Expected dividends
4.6 %
2.25 Jahre
123.4 %
-
There are no other stock option plans.
18 Income Taxes
The Company’s income tax expense for 2004 and 2003 amounts to TEUR 3,348 and 338 respectively and refers to the following geographical regions:
Germany
Other European countries
2004
2003
-1,731
-1,617
-3,348
-338
-338
In Germany, taxes from income are comprised of corporation tax, trade tax and solidarity surcharge. The corporation tax
rate for distributed and retained income is uniformly 25.00 % in Germany. An effective corporation tax rate of 22.45 %
plus and effective trade tax rate of 14.89 % was applied to calculate deferred taxes. The corporation tax rate is based on
the future uniform tax rate of 25.00 %, a solidarity surcharge of 5.50 % and the deductibility of the trade tax at an average rate of assessment of 350.00 %.
Below the tax reconciliation, beginning with the expected tax expense of the period and the actually recorded tax
expense. To determine the expected tax expense, the total tax rate of 37.34 % (2003: 37.34 %) is multiplied by the
income before tax.
in TEUR
Expected income tax expense
Increase (decrease) of income taxes resulting from:
Changes in valuation allowance
Non-deductible losses and expenses
Foreign tax rate differential
Prior-year adjustment of taxable base
Effect of deconsolidation
Other differences
Actual income tax expense
2004
2003
-10,901
-2,918
12,219
-98
-284
-7,245
3,098
-137
-3,348
6,988
-2,145
-2,263
-338
Deferred tax assets and liabilities are determined based on the differences between the financial report and tax bases of
assets and liabilities. These are measured by applying the enacted tax rates and laws in effect for the years in which
such differences are expected to reverse.
Deferred taxes are attributable to the following:
As of December 31, in TEUR
Deferred tax assets, gross:
Tax loss carryforwards
Intangible assets
Property and equipment
Accrued expenses
Less: Valuation allowance
Deferred tax assets, net
Less: Deferred tax liablities:
Internally developed database
Accrued expenses
Deferred tax liabilities
Net deferred tax assets
63
2004
2003
19,410
19
67
5,847
-25,223
120
37,845
0
166
0
-37,414
597
-56
-64
-120
-
583
-14
-597
-
As of December 31, 2004, the Company had cumulative tax loss carry-forwards of approximately EUR 115 million (2003:
EUR 113 million), of which EUR 104 million relate to German subsidiaries (2003: EUR 78 million), EUR 11 million to
European subsidiaries (2003: EUR 21 million) and EUR 0 million to Telegate Inc., USA (2003: EUR 14 million). Under
German tax law, the German loss carry-forwards may be off-set against future profits, provided that both the from 2004
valid minimum taxation and the conditions for the utilization of tax losses in merger situations are met. Restrictions for
loss carry-forward, based on different European tax laws, have to be considered. Under German tax law, tax losses may
be carried forward without time limitation.
19 Derivative Financial Instruments
As an international company with subsidiaries in Germany and abroad, telegate AG is also exposed to risks from changes
of foreign exchange rates. To minimize the risk of future currency impact from financing processes, the company started
to utilize derivative financial instruments in April 2001. Expected movement in cash flows from countries with foreign
currency in which the company operates (U.K. and USA), were hedged. With the withdrawal of the company from these
markets in 2004, forward exchange contracts were correspondingly cancelled. The forward exchange contracts were solely used as currency hedging contracts and not for speculation purposes.
As the above stated measures did not meet the regulations of hedge accounting under SFAS 133, these forward exchange
contracts were accounted for with their fair value at the respective balance sheet date. Income or losses from these contracts were recorded within “gain (loss) on foreign currency translation” in the respective period in which income or
losses of the underlying financial transactions were recorded.
The derivative financial instruments recorded at balance sheet days are set forth in the table below:
Nominal amount
December 31
Forward currency contract – TGBP
Fair value
2004
TEUR
2003
TEUR
2004
TEUR
2003
TEUR
0
8,250
0
137
As of December 31, 2004 the Company states no derivative financial instruments. At December 31, 2004, the nominal
amount was TEUR 8,250. It represents the aggregate gross amount of all purchases and sales agreed upon between the
parties, and, therefore, is not a direct measure of the Company’s exposure through its use of derivates. Opportunities and
risks are reflected by the fair value, which corresponds to the estimated amount that would have been received or paid
if the derivative financial instrument had been settled at fiscal year end. In the previous year, fair value was TEUR 137.
The Company recorded a net loss from these settled contracts and underlying foreign currency exposures of approximately TEUR 507 in 2004. In the previous year, the Company recorded a currency gain of TEUR 137. The fair value of these
forward foreign exchange contracts have been recorded within “Prepaid expenses and other current assets” at TEUR 0
(2003: TEUR 167) and within the “Accrued expenses and other current liabilities” TEUR 0 (2003: TEUR 30) respectively.
The forward currency contracts had a maturity of 5 to 11 months and were due in December 2004.
20 Segment Information
The Company operates in two segments, both of which are strategic businesses and are managed separately. The
Company currently views its business as being in two segments, primarily determined by geographic region.
telegate AG • Annual Report 2004
The segments and a description of their businesses are as follows: Information & Call Center Services (ICS) Germany /
Austria includes information services and related outsourcing activities to the deregulated German market. Information
& Call Center Services (ICS) International includes subsidiaries formed or acquired in an attempt to expand information
services in Italian and Spanish markets.
All carried out services of the central functions for ICS International are calculated at fair market prices.
During 2003, the Company changed its segment reporting to reflect the focus on providing information services in
Europe. The segments were defined geographically.
Management’s dominant measurements are consistent with the Company’s consolidated financial statements and,
accordingly, are reported on the same basis herein. Management evaluates the performance of its segments and allocates
resources to them primarily based on operating income and free cash flow. Inter-segment sales are generally accounted
for at amounts comparable to sales to unaffiliated customers and are eliminated in consolidation.
64
About us
Management Report
ICS Germany / Austria
As of December 31, in TEUR
Revenues from external customers
and inter-segment sales
Inter-segment revenues
Total consolidated revenues
Depreciation and amortization
Operating profit (loss)
EBITDA
Total expenditures for additions to
long-lived assets
Total of long-lived assets, net
• Consolidated Financial Statements
ICS International
Total
2004
2003
2004
2003
2004
2003
116,475
129
116,346
5,059
28,936
33,995
114,798
31
114,767
6,430
19,036
25,466
49,535
0
49,535
1,192
-150
1,042
22,053
0
22,053
1,477
2,117
3,594
166,010
129
165,881
6,251
28,786
35,037
136,851
31
136,820
7,907
21,153
29,060
2,155
8,163
331
11,346
997
3,578
998
3,274
3,152
11,741
1,329
14,620
21 Revenues
The revenues for the years 2004 and 2003 are presented more detailed in the Exhibit and are subdivided in accordance
with the segments ICS Germany / Austria and ICS International.
In June 2003, the customer base of Telegate Inc. USA was sold to an external Directory Assistance company. Under the
agreement, the company was to receive 10 % of the revenues generated by the transferred customers for a period of 12
months based on monthly invoices generated by the company. The company received the agreed revenue portions until
deconsolidation, the first time for the month September 2003.
22 Personnel Costs
The table below shows personnel costs for the years ended December 31, 2004 and 2003 respectively:
in TEUR
Wages and salaries
Social security
Pension expenses
2004
2003
37,811
5,560
31
43,402
36,238
6,104
29
42,371
Personnel costs related to call center employees are recorded in the Statement of Operations within cost of revenue.
23 Number of Employees
The number of employees excluding Managing Board, Executive Management, trainees and persons in maternity leave for
2004 is as follows:
As of December 31, 2004
Continued operations
Total
Of which operators
Absolute
Full-time
employees
Absolute
Full-time
employees
2,362
2,175
1,656
1,472
2,406
2,225
1,682
1,506
0
0
0
0
76
68
67
59
2,362
2,175
1,656
1,472
2,482
2,293
1,750
1,565
Discontinued operations
Total
Of which operators
telegate group
Total
Of which operators
Annual average
As of December 31, 2003, the telegate group had 2,508 employees (expensed in full-time: 1,801). The average number
of persons employed annually was 2,514 persons (expressed in full-time employees: 1,836).
65
24 Related Party Transactions
At year-end, SEAT Pagine Gialle S.p.A., Milan / Italy holds a 100 % interest in Telegate Holding GmbH and includes telegate AG as parent company of the greatest scope of consolidation under full consolidation in the their consolidated
financial statements. In its letter dated November 28, 2000 SEAT Pagine Gialle S.p.A. informed telegate AG of the
acquired indirect controlling interest in telegate AG in accordance with Section 20 paragraph IV of the Corporation Act.
Telegate Holding GmbH, Planegg, holds a majority interest (61.87 %) in telegate AG. On January 5, 2001, Telegate
Holding GmbH informed telegate AG in writing of their acquired direct majority interest in telegate AG in accordance
with Section 20 paragraph IV of the Corporation Act.
In 2003, SEAT Pagine Gialle S.p.A was created during the split from the original parent company of the same name of
telegate AG. The majority was acquired from Silver S.p.A., Milan, Italy. In the course of the split the transferring company was renamed “Telecom Italia Media S.p.A.”. SEAT Pagine Gialle S.p.A. holds a 16.43 % direct interest in and a
61.87 % indirect interest in telegate AG via Telegate Holding GmbH.
On August 29, 2003 Silver S.p.A., Milan / Italy informed telegate AG in writing of the transgression of the 5 % threshold
and of 75 % of the voting rights in telegate AG in accordance with Section 21 paragraph 1 of the Corporation Act. This
notification was also sent out to Spyglass S.p.A., Milan / Italy, Sub Silver S.A., Luxembourg / Luxemburg, and Société de
Participations Silver S.A., Luxembourg / Luxemburg which are the parent companies of Silver S.p.A. The above notification was also sent to the shareholders of Société de Participations Silver S.A. In the meantime, SEAT Pagine Gialle
S.p.A. has merged with Silver S.p.A. and Spyglass S.p.A. The company name SEAT Pagine Gialle S.p.A. continues to exist.
In December 2004 Sub Silver S.A. and Société de Participations Silver S.A. were divided into five independent companies, respectively.
In 2003, Telecom Italia S.p.A., Milan/ Italy, (formerly: Ing. C. Olivetti & C. S.p.A.; the former Telecom Italia S.p.A. was
merged into Ing. C. Olivetti & C. S.p.A. and renamed Telecom Italia S.p.A.), holding a majority interest in SEAT Pagine
Gialle S.p.A. On September 3, 2003 Telecom Italia S.p.A. informed telgate AG in writing that a majority interest no
longer existed in telegate AG in accordance with Section 21 paragraph I of the Corporation Act. Since August 8, 2003,
Telecom Italia S.p.A. is no longer entitled to direct or indirect voting rights for telegate AG.
In accordance with the fixed capital increase in December 2002 and a proportional repayment and conversion in 2003
the loan volume was reduced to TEUR 4,726 as of December 31, 2003. The remaining loan was repaid in May 2004. There
are no loan obligations towards SEAT at year-end 2004. For the year 2004, SEAT charged telegate AG interest to the
amount of TEUR 31 (2003: TEUR 427).
Since February 2004, telegate AG is investing cash in deposit accounts at SEAT’s. As these deposits have a maturity of
less than three months and the option of withdrawal at any time, the cash in the deposit accounts is recorded under
cash and cash equivalents. The resulting interest income for 2004 was TEUR 423 (2003: TEUR 0).
telegate AG • Annual Report 2004
The part of revenue of Telegate Italia, that has been generated directly with SEAT, amounts to EUR 6.0 million (in 2003:
EUR 4.4 million).
66
About us
Management Report
• Consolidated Financial Statements
25 Rental and Lease Equipment
The Company rents equipment under long-term operating leasing contracts. Future minimum payments from non-cancellable operating leasing contracts with an original term of one year or more are as follows:
For the years ending December 31, in TEUR
Operating lease
2005
2006
2007
2008
2009
thereafter
5,155
4,044
2,922
1,089
259
238
13,707
At December 31, 2004 total rental expenditure of the Company was TEUR 3,528 (2003: TEUR 8,900).
The leasing contract for computer equipment for the Callcenter expired on September 30, 2003. The equipment was purchased at residual value and is mainly recorded as technical equipment.
26 Commitment and Contingencies
As of December 31, 2004, the Company had outstanding commitments for purchase orders of TEUR 4,951. These are
expected to be incurred in the beginning of 2005.
The Company has entered into contracts for marketing and data processing services. Future minimum payments under
non-cancellable contracts with initial terms of one year of more are as follows:
For the years ending December 31,
TEUR
2005
2006
2007
2008
2009
thereafter
2,392
185
131
4
3
1
Management is not aware of any further matters which could give rise to significant liabilities having a material adverse
effect on Company’s assets, finances and earnings.
67
27 Information on Corporate Bodies of telegate AG
Supervisory Board of telegate AG
Herr Herbert Brenke
Other Assignments:
Chairman of Supervisory
Board (since Jan. 1, 1999)
Management consultant,
Essen
•
•
•
•
•
•
Frau Birgit Labs
Herr Dr. Joachim Dreyer
Herr Otmar Dürotin
Herr Dr. Klaus Harisch
Herr Dr. Martin Hartl
Herr Uwe Heddendorp
Herr Jürgen Heinath
Deputy Chairwoman
(since February 20, 2001)
Employee, Chairwoman of Works
Council in the Neubrandenburg branch,
Neubrandenburg,
Chairwoman of Works Council,
Neubrandenburg
Since Jan. 10, 2001,
Dipl.-Physiker,
Heiligenberg
Since July 18, 2001,
Project Manager, ver.di.
Hamm
From March 11, 2004 to November 30,
2004, Diplom-Physiker, Chairman of the
Managing Board, varetis AG
Since Jan. 10, 2001,
Lawyer,
Rome, Italy
Until 22. January 2004, Dipl.-Wirtschaftingenieur, Managing Director of
Loyalty Partner GmbH, Munich
Since Jan. 30, 2001,
Head of the Neubrandenburg branch
•
•
•
•
Frau Daniela Lübbert
telegate AG • Annual Report 2004
Herr Luca Majocchi
Herr Angelo Novati
Since January 30, 2001,
Works council, employee,
Greifswald
Since November 6, 2003,
Works council, employee,
Schwedt
Since November 4, 2003,
Managing Director, SEAT Pagine Gialle
S.p.A., Turin, Italy
Until January 31, 2004,
CFO, SEAT Pagine Gialle S.p.A.,
Turin, Italy
Heidelberger Druckmaschinen AG,
Heidelberg, Supervisory Board
•
Interact Tele Service AG,
Neubrandenburg, Supervisory Board
Telemarketing Initiative M-V e. V.,
Schwerin, Advisory Board
--
--
•
TDL Infomedia Ltd., London,
UK, Chairman
•
TDL INFOMEDIA Ltd., London,
UK, Director
(until 20.1.2004)
CONSODATA S.A., Paris, France,
Managing Director (until 22.1.2004)
MATRIX S.p.A., Milan, Italy,
Director
--
•
Frau Maurizia Squinzi
Since Jan. 30, 2001,
employee, Rostock
From 11. March 2004,
CFO, SEAT Pagine Gialle S.p.A.,
Turin, Italy
68
Veronas Dreams AG, Düsseldorf,
Chairman of Supervisory Board
•
•
Frau Ilona Rosenberg
Deutsche Anlagen AG, Göttingen,
Member of Advisory Board
EnBW AG, Stuttgart, Member
of Advisory Board
--
--
•
Frau Katrin Küther
SHS Informationssysteme AG,
Munich, Supervisory Board
QSC AG, Cologne,
Deputy Chairman of Supervisory Board
ASKK Holding AG, Hamburg,
Chairman of Supervisory Board
ASR Auto-Stern von
Russland AG, Moscow, Russia,
Supervisory Board
EUKA AG, Zurich, Switzerland,
Vice President of the Board of
Governors (until Nov. 2004)
Küttner GmbH & Co. KG, Essen,
Member of Advisory Board
Arbeitsgemeinschaft Unabhängiger
Betriebsangehöriger (AUB)
(Consortium of independent
employees)
•
TDL Infomedia Ltd., London,
UK, Director
(since January 23, 2004)
About us
Management Report
• Consolidated Financial Statements
Managing Board
Herr Dr. Andreas Albath
Supervisory Board Assignments
Chairman of the Managing Board,
Solicitor,
Munich,
•
•
•
responsible for areas
Germany / Austria,
Marketing and Technical strategy /
Coordination, Legal,
Regulation, Personnel and
Corporate Communication
Herr Dr. Paolo Gonano
Member of the Managing Board
Master of Business Administration
Turin,
•
•
•
•
•
responsible for international areas
•
Herr Ralf Grüßhaber
Member of the Managing Board,
Dipl.-Betriebswirt (FH),
Munich,
•
responsible for Finance and Purchase
•
•
•
IBV-Leasing-Fonds 1, Nuremberg,
Chairman of the Board of Governors
Interactive AG, Bochum,
Supervisory Board
mobilSafe AG, Martinried,
Supervisory Board
arsmovendi.com AG i.L., Martinsried,
Supervisory Board
KIM Travel Consulting AG i.L.,
Martinsried, Supervisory Board
Telegate Inc. i.L.,
City of Wilmington, USA, Director
Telegate Italia S.r.L.,
Turin, Italy, Director
11811 Nueva Información
Telefónica S.A.U., Madrid,
Spain, Director
Telegate France SARL,
Paris, France, Director
Telegate Italia S.r.L., Turin, Italy,
Director
Telegate France SARL,
Paris, France, Director
KIM Travel Consulting AG i.L.,
Martinsried, Supervisory Board
Telegate Inc. i.L.,
City of Wilmington, USA, Director
Remuneration of the Supervisory Board and the Managing Board of telegate AG
For the Managing Board the total remuneration in fiscal 2004 amounted to TEUR 1.042 (2003:TEUR 2.013). This amount
consists of fixed and variable salary, respectively TEUR 577 (2003: TEUR 563) and TEUR 465 (2003: TEUR 1,450). It
includes compensation for former members of the Managing Board amounting to TEUR 149 (2003: TEUR 818), which
relates to previous fiscal years, and was paid out in 2004.
In 2004, no stock options were granted.
As of December 31, 2004, pension accrual for former members of the Managing Board amounts to TEUR 0
(2003: TEUR 79).
In 2004, remuneration of the Supervisory Board amounted to TEUR 64 (2003: TEUR 64).
28 Corporate Governance Codex
MUTUAL DECLARATION OF COMPLIANCE
by the Managing Board and Supervisory Board of telegate AG in accordance with § 161 of the
Stock Corporation Act relating to the German Corporate Governance Code
On February 26, 2002, the “Regierungskommission Deutscher Corporate Governance Kodex” adopted the German
Corporate Governance Code, which was amended on May 21, 2003. It sets out the main statutory regulations for the
management and supervision of German listed companies (corporate governance) and contains internationally and
nationally accepted standards for good and responsible governance.
In December 2004, in accordance with Section 161 Corporation Act, the Managing Board and Supervisory Board mutually declared that they comply with the recommendations of the Government Commission’s German Corporate
Governance Code baring few exemptions. The exact wording is provided on the Company’s website www.telegate.de.
Planegg-Martinsried, January 26, 2005
The Management Board
69
Fixed assets movement telegate Group (US-GAAP)
Acquisition cost and cost of production
Jan.
01, 2004
in TEUR
Additions
Disposals
Transfers
Foreign
currency
translation
Discontinued
Operations
Dec.
31, 2004
I. Investments
1. Cost method Investment
1,398
-
-2
-
-109
-
1,287
1,398
0
-2
0
-109
0
1,287
13,535
637
-429
125
4
-82
13,790
34,979
1,145
-806
-
124
-3,832
31,610
7,059
415
-364
-
43
-1,646
5,507
II. Property and equipment
1. Software
2. Technical equipment,
plant and machinery
3. Other equipment, fixtures
and fittings
4. Advance payments and
construction in progress
292
972
-
-125
-
-
1,139
55,865
3,169
-1,599
0
171
-5,560
52,046
21,508
-
-
-
480
-20,738
1,250
6,123
1
-
-
104
-3,987
2,241
27,631
1
0
0
584
-24,725
3,491
III.Intangible assets
1. Goodwill
telegate AG • Annual Report 2004
2. Other intangible assets
70
About us
Management Report
Accumulated depreciation and amortization
Jan.
01, 2004
Additions
Disposals
Foreign
currency
translation
Transfers
• Consolidated Financial Statements
Book value
Discontinued
Operations
Dec.
31, 2004
Dec.
31, 2003
Dec.
31, 2004
1,135
218
-
-
-105
-
1,248
263
39
1,135
218
0
0
-105
0
1,248
263
39
9,707
1,950
-420
-
-
-17
11,220
3,828
2,570
25,025
3,508
-786
-
40
-1,882
25,905
9,954
5,705
4,585
587
-353
-
38
-1,486
3,371
2,474
2,136
0
-
-
-
-
-
0
292
1,139
39,317
6,045
-1,559
0
78
-3,385
40,496
16,548
11,550
21,508
-
-
-
480
-20,738
1,250
0
0
5,250
683
-
-
104
-3,987
2,050
873
191
26,758
683
0
0
584
-24,725
3,300
873
191
71
Revenues of telegate Group
in TEUR
Information and Call Center Services
Data Services
Call-by-Call
Internet Information Services
ICS Germany / Austria
ICS International
Continued operations
Discontinued Operations
telegate AG • Annual Report 2004
telegate group – total
72
2004
2003
112,463
916
2,967
0
116,346
112,407
784
1,548
28
114,767
49,535
22,053
165,881
136,820
1,562
1,839
167,443
138,659
About us
Management Report
• Consolidated Financial Statements
Audit opinion
We have audited the consolidated financial statements, comprising the balance sheet, the income statement and the
statements of changes in shareholders’ equity and cash flows as well as the notes to the financial statements, prepared
by telegate AG, Martinsried-Planegg, Germany, for the fiscal year from January 1 to December 31, 2004. The preparation
and the content of the consolidated financial statements are the responsibility of the Company’s management board. Our
responsibility is to express an opinion whether the consolidated financial statements are in accordance with the US
Generally Accepted Accounting Standards (US-GAAP), based on our audit.
We conducted our audit of the consolidated financial statements in accordance with the German auditing regulations
and the generally accepted German standards for the audit of financial statements promulgated by the Institut der
Wirtschaftsprüfer [in Deutschland] (IDW). Those standards require that we plan and perform the audit such that it can
be assessed with reasonable assurance whether the consolidated financial statements are free of material misstatement.
Knowledge of the business activities and the economic and legal environment of the group and evaluations of possible
misstatements are taken into account in the determination of audit procedures. In the course of the audit the documentation supporting the carrying amounts and disclosures in the consolidated financial statements is examined on a test
basis. The audit includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements give a true and fair view of the net assets, financial position,
results of operations and cash flows of the group for the fiscal year in accordance with US-GAAP.
Our audit, which also extends to the group management report prepared by the management board for the fiscal year
from January 1 to December 31, 2004, has not led to any reservations. In our opinion, on the whole the group management report together with the other disclosures in the consolidated financial statements provides a suitable understanding of the group’s position and suitably presents the risks to future development. In addition, we confirm that the consolidated financial statements and the group management report for the fiscal year from January 1 to December 31,
2004 satisfy the conditions required for the Company’s exemption from its obligation to prepare consolidated financial
statements and the group management report in accordance with German law.
Munich, January 28, 2005
Ernst & Young AG
Wirtschaftsprüfungsgesellschaft
G. Müller
Public Auditor
F. Ruschmeier
Public Auditor
73
Glossary
AGCOM
Autorità per la Garanzie nelle Communicazioni – authority which regulates the telecommunications market in Italy
AktG
German Stock Corporation Act
ART
Autorité de régulation des télécommunications – authority which regulates the telecommunications market in France
Call Center Services
Call centre services are versatile. They range from Directory Assistance- and informationservices,
to intelligent field service control and customer service as well as telesales.
Call number lane
Subsection of telephone numbers, to which a certain digit sequence is assigned. Thus, for example, all call numbers for
directory enquiries in Germany begin with the digits 118. In its allocation regulations for directory enquiry services, the
regulatory authority for telecommunications and post (RegTP) states that “all call numbers for directory enquiry services are structured as follows: directory enquiries code = 118, provider code = XY [...]. Directory enquiry numbers always
contain five digits.“
Cash-Flow
Financial income of a company or the net increase in liquid funds usually during a financial year
CMT
Comisión del Mercado de Telecomunicaciones – authority which regulates the telecommunications market in Spain
Continued Operations
Business unit, which is continued.
Corporate Governance Kodex
Essential legal regulations for managing and supervising German companies listed on the stock exchange
Discontinued Operations
Discontinued operations, i.e. a part of the business, which is already disposed or intended for disposition.
DTAG
Deutsche Telekom AG
FASB
Financial Accounting Standards Board – independent organisation which develops US standards
for balancing accounts, evaluation and disclosure
EBIT
Earnings before interest and taxes
telegate AG • Annual Report 2004
EBITDA
Earnings before interest, taxes and depreciation
HGB
German Commercial Code
IAS
International Accounting Standard – accounting regulations
ICS
Abbreviation for the telegate AG Information and Call Centre Services business segment
i-mode
A mobile service for mobile telephones similar to the internet. It provides colour texts and
graphics. i-mode was launched by E-Plus at the 2002 CeBit in Germany.
74
About us
Management Report
• Consolidated Financial Statements
Capital increase
The increase of shareholders’ capital in a company: in the case of capital companies, by increasing
the nominal value against the issue of new shares.
Outsourcing
The transfer of tasks / subtasks to external companies or service operators
Outsourcing partner
Companies for which telegate performs directory enquiries services in the context of outsourcing agreements
(e.g. e-plus, Arcor and ventelo)
Private Equity
Private equity – capital which is made available in the medium to long term to companies not listed
on the stock exchange
RegTP
Regulatory authority for telecommunications and post – authority which regulates the telecommunications
market in Germany
Reverse Search
An unacquainted telephone number can be identified with name and address by the reverse search.
Random Messaging
Recorded message, which is switched on when the monopoly directory enquiries number is called; the
customer is informed of all new directory enquiries numbers, each treated equally (in alternating order)
SEC
Securities Exchange commission – US share dealing supervisory authority
SFAS
Statement of Financial Accounting Standards – accounting regulations
SPG
Seat Pagine Gialle
UMTS
Universal Mobile Telecommunications System A mobile telephone standard of the European Special Mobile
Group, which approves broadband data transfer quotas with a transfer speed of up to two megabytes per second.
US-GAAP
Generally Accepted Accounting Principles – American accounting regulation; developed by the FASB
Telecom Italia
Former Italian monopolist
Telefónica
Former Spanish monopolist
Venture Capital
Risk capital; as a rule, private equity capital, mostly for new companies or companies still in the founding phase
WpHG
Securities Trading Act
75
Corporate Structure telegate group
telegate AG
Martinsried,
Germany
telegate
Akademie GmbH
Rostock,
Germany
100 %
Datagate GmbH
Martinsried,
Germany
100 %
11 8 11 Nueva
InformaciÓn
TelefÓnica S.A.U.
Madrid, Spain
100 %
arsmovendi.com
AG i.L.
Martinsried,
Germany
100 %
11 88 0.com GmbH
Martinsried,
Germany
100 %
Telegate Italia S.r.L.
Turin, Italy
100 %
Travelgate
Business GmbH i.L.
Martinsried,
Germany
100 %
mobilSafe AG
Martinsried,
Germany
100 %
Telegate
France SARL
Paris, France
100 %
Kim Travel
Consulting AG i.L.
Martinsried,
Germany
100 %
ICS
International
telegate AG • Annual Report 2004
The segments of telegate Group:
telegate GmbH
Vienna, Austria
100 %
76
ICS
Germany /
Austria