2.4 Position of the Company

Earnings of United Internet AG

As a pure holding company, the earnings position of United Internet AG is usually dominated by its investment and financial result.

In the fiscal year 2019, sales of the parent company amounted to € 0.3 million (prior year: € 0.01 million) and result mainly from services rendered to the Group’s subsidiaries.

Other operating income amounted to € 1.0 million (prior year: € 147.6 million) and mainly results from the reversal of accruals totaling € 0.6 million, as well as cost allocations within the Group of € 0.2 million. In the previous year, other operating income was dominated by extraordinary income in connection with the disposal of financial assets totaling € 143.8 million (scheduled exercise of a put option from 2017 for the preferred share of the former 1&1 Internet Holding SE (now: 1&1 IONOS Holding SE), as well as from other operating income of € 2.3 million in connection with cost allocations within the Group, and income of € 1.6 million relating to other periods from the reversal of accruals.

Adjusted for effects from employee stock ownership programs, personnel expenses amounted to € 0.5 million (prior year: € 0.6 million).

Other operating expenses decreased to € 12.7 million (prior year: € 36.9 million) and mostly comprise internal Group charges of € 6.5 million (prior year: € 28.7 million), as well as legal, auditing and consulting fees of € 2.2 million (prior year: € 3.8 million).

Income from profit transfer agreements of € 122.3 million (prior year: € 117.7 million) result from the profit transfers of 1&1 Mail & Media Applications SE amounting to € 70.5 million (prior year: € 93.6 million), United Internet Investments Holding AG & Co. KG amounting to € 48.9 million, United Internet Corporate Services GmbH amounting to € 2.7 million (prior year: € 24.1 million), and United Internet Service SE amounting to € 0.2 million.

Income from investments amounted to € 6.5 million (prior year: € 209.6 million) and mainly comprise the dividend of 1&1 Drillisch AG (prior year: € 189.7 million). Income from investments in the previous year not only included the dividend of 1&1 Drillisch AG but also the dividend of the former 1&1 Internet TopCo SE (now: 1&1 IONOS TopCo SE) amounting to € 19.9 million.

Expenses for loss assumptions of € 37.4 million (prior year: € 263.6 million) mainly related to the compensation expense of United Internet Service Holding GmbH amounting to € 37.2 million (prior year: € 41.3 million). In the previous year, expenses for loss assumptions also included a compensation expense € 222.2 million for United Internet Investments Holding AG & Co. KG.

The parent company’s result before taxes amounted to € 177.6 million (prior year: € 273.3 million).

Income taxes of € 58.9 million (prior year: € 68.4 million) comprise current taxes of 2019 of € 53.5 million (of which € 26.8 million corporation tax and the solidarity surcharge, and € 26.6 million trade tax), as well as € 6.8 million from previous years. Income from the reversal of deferred tax liabilities amounting to € 1.4 million had an opposing effect.

Net income in the separate financial statements of United Internet AG for the fiscal year 2019 amounted to € 118.7 million (prior year: € 204.9 million).

Assets and financial position of United Internet AG

The parent company’s balance sheet total fell from € 6,233.8 million as of December 31, 2018 to € 5,944.6 million on December 31, 2019.

Non-current assets of the parent company amounting to € 5,670.9 million (prior year: € 5,981.3 million) were dominated by financial assets. Shares in affiliated companies increased to € 3,763.4 million (prior year: € 3,668.8 million). This was mainly due to the increased stake in 1&1 Drillisch AG. Loans to affiliated companies declined to € 1,907.6 million (prior year: € 2,312.5 million). The decrease results in particular from the redemption of loans within the Group.

Current assets of the parent company amounting to € 273.6 million (prior year: € 252.3 million) comprise receivables due from affiliated companies and other assets. The receivables due from affiliated companies rose to € 216.2 million (prior year: € 207.1 million). These mainly comprise receivables within the United Internet Group’s internal cash management system. Other assets amounting to € 14.8 million (prior year: € 40.7 million) consist mainly of receivables due from the tax office.

Shareholders’ equity of the parent company amounted to € 3,352.5 million as of December 31, 2019 (prior year: € 3,617.3 million). The decrease in equity during the reporting period is mainly due to the buyback of treasury shares (€ 373.6 million), which are subtracted from equity, and the dividend payout (€ 10 million), as well as an opposing effect from net income (€ 118.7 million). The equity ratio fell from 58.0% in the previous year to 56.4% as of December 31, 2019.

The parent company’s accruals of € 54.7 million (prior year: € 80.8 million) mainly comprise accrued taxes amounting to € 51.8 million (prior year: € 76.9 million) as well as other accrued liabilities for employee stock ownership plans, legal, auditing and consulting fees, bonuses and other items totaling € 2.9 million (prior year: € 3.9 million).

The liabilities of the parent company are shaped in particular by liabilities to banks and liabilities due to affiliated companies. Liabilities to banks decreased to € 1,740.7 million in the fiscal year 2019 (prior year: € 1,943.8 million). Bank liabilities mainly comprise two promissory note loans totaling € 835.5 million, as well as syndicated loans totaling € 900.0 million. Liabilities to affiliated companies rose to € 783.9 million (prior year: € 575.0 million) and mainly comprise liabilities from balances within the United Internet Group’s cash pooling system (€ 737.3 million), from service arrangements (€ 7.9 million), and from profit transfer agreements (€ 37.4 million). Other liabilities of € 3.6 million (prior year: € 5.4 million) are mainly sales tax liabilities.

Cash flow of the parent company’s financial statements is dominated by cash flows from the profit transfer agreements, as well as the dividends of investments. There was an opposing effect under financial activities from the treasury shares purchased in the fiscal year 2019 and from the dividend payment.

Management Board’s overall assessment of the current business situation of the parent company

Due to its role as the Group’s holding company, the economic position of United Internet AG at parent company level is mainly influenced by its investment and financial result. The above statements on the Group’s economic position therefore also apply qualitatively for United Internet AG itself.