4.3 Forecast report

Expectations for the economy

In its global economic outlook published in January 2020, the International Monetary Fund (IMF) updated its forecasts for the development of the global economies in 2020 and 2021. All in all, the IMF expects the global economy to recover in the current and following year with global growth of 3.3% and 3.4% in the years 2020 and 2021 – compared to 2.9% in 2019.

The IMF is thus more optimistic than other experts, although it remains slightly more pessimistic than in its own forecast of October 2019. The Fund justifies its cautious optimism with the de-escalation of the trade dispute between the USA and China, the strengthening of consumer spending due to the ongoing expansionary monetary policy of the central banks, and the fact that a disorderly exit from the EU by the UK government is currently less likely again. At the same time, however, the IMF points to numerous risks, such as a renewed escalation of the trade dispute, or geopolitical tensions such as those between the USA and Iran. Anti-government protests such as those in Chile could also be detrimental to the economy.

The latest IMF forecasts for United Internet’s target markets in North America (the USA, Canada, and Mexico) are as follows: following growth of 2.3% in 2019, the US economy is expected to grow by just 2.0% in 2020 and by 1.7% in 2021. The Canadian economy is expected to grow by 1.8% in both 2020 and 2021 – following growth of 1.5% in 2019. The economy in Mexico is also expected to grow again, by 1.0% in 2020 and 1.6% in 2021, following a year of stagnation in 2019.

The IMF anticipates stronger growth of 1.3% and 1.4% in the eurozone in 2020 and 2021 – following growth of 1.2% in 2019.

The IMF expects diverging economic trends in United Internet’s main European markets (France, Spain, Italy, and the non-euro country UK): following growth of 1.3% in 2019, the IMF forecasts a further increase of 1.3% in both 2020 and 2021 for France. Growth in Spain is expected to reach just 1.6% in 2020 and 2021, compared to growth of 2.0% in 2019. The IMF forecasts growth in Italy of 0.5% and 0.7% in 2020 and 2021, following growth of 0.2% in 2019. And after growing by 1.3% in 2019, the IMF forecasts growth for the UK of 1.4% and 1.5% in 2020 and 2021.

For United Internet’s most important market, Germany, the IMF forecasts economic growth of 1.1% in 2020 and 1.4% in 2021 – following 0.5% in 2019. With expected growth of 1.1% for 2020, the IMF is in line with the German government’s own forecast of 1.1% growth in price-adjusted GDP, as published in its Annual Economic Report 2020.

Market forecast: GDP development of most important economies for United Internet

Source: International Monetary Fund, World Economic Outlook (Update), January 2020

Sector/market expectations

The industry association Bitkom expects the ICT market in Germany to grow by 1.5% (prior year: +2.0%) to € 172.2 billion in 2020.

With an increase of 2.7% (prior year: + 2.9%) to € 95.4 billion, the IT market is expected to show the strongest growth again in 2020. Within this sector, growth in the software segment will once again be the fastest with an increase of 6.4% (prior year: +6.3%) to € 27.6 billion. IT services – which include project business and IT consulting – are also expected to reach growth of 2.4% again (prior year: +2.4%) to € 41.9 billion. By contrast, the IT hardware segment is expected to decline by 0.4% (prior year: +0.5%) to € 25.9 billion.

A further strong decline of 7.0% (prior year: -7.7%) to € 8.0 billion is forecast for sales of consumer electronics.

The most important ICT markets for United Internet’s business model are the German telecommunications market (broadband connections and mobile internet) for its mostly subscription-financed Access division, and the global cloud computing and German online advertising markets for its subscription- and ad-financed Applications division.

Telecommunications market in Germany

The industry association Bitkom forecasts further growth for the German telecommunications market in 2020. Sales are expected to grow by 1.0% (prior year: 2.0%) to € 68.8 billion.

Slight growth of 0.4% (prior year: 0.0%) to € 48.8 billion is anticipated for telecommunication services. Sales of TC devices are set to grow by 2.5% (prior year: 11.1%) to € 12.8 billion, while the telecommunication infrastructure business is forecast to grow by 2.0% (prior year: + 1.5%) to € 7.2 billion.

Market forecast: telecommunications market in Germany

Source: Bitkom, Annual press conference, January 2020

Global cloud computing market

In an update of its study “Forecast Analysis: Public Cloud Services, Worldwide”, Gartner forecasts global growth for public cloud services of 16.9% (prior year: 15.8%), from $ 227.80 billion to $ 266.36 billion in 2020.

Market forecast: global cloud computing

Source: Gartner, November 2019

Online advertising market in Germany

Advertisers continued to display a strong willingness to invest in online advertising activities in 2019. And experts forecast further growth for 2020. PricewaterhouseCoopers expects an increase of 6.6% (prior year: 6.9%) to € 9.07 billion. The strongest growth is expected for mobile online advertising and video advertising with increases of 22.7% and 10.1%, respectively.

Market forecast: online advertising in Germany

Source: PricewaterhouseCoopers, German Entertainment and Media Outlook 2019 – 2023, October 2019

Expectations for the Company in 2020

Forecast for the fiscal year 2020

Against the backdrop of uncertain macroeconomic conditions due to the growing spread of the coronavirus (see comments in sections 4.1 “Risk Report” and 3 “Subsequent Events”), United Internet expects sales and EBITDA in the fiscal year 2020 to be approximately on a par with the previous year. This forecast is subject to considerable uncertainty, as an exact assessment of the duration and impact of the corona crisis is not currently possible.

Due to its role as a holding company, the earnings of United Internet AG at parent company level are mainly influenced by its investment result (profit transfers and dividends) and the interest result. Against this backdrop, the Management Board expects strongly positive net income for fiscal year 2020 (subject to possible special items).

United Internet AG intends to maintain its shareholder-friendly dividend policy based on continuity in the coming years. Dividend payouts will continue to represent approx. 20-40% of adjusted net income from continued operations after minority interests (adjusted net income attributable to “shareholders of United Internet AG” – according to the consolidated statement of comprehensive income) in the future. The prerequisite, however, is that funds are not required for further Company development.

Management Board’s overall statement on the anticipated development

The Management Board of United Internet AG is upbeat about its prospects for the future. Thanks to a business model based predominantly on electronic subscriptions, United Internet believes it is largely stable enough to withstand cyclical influences. And with the investments made over the past few years in customer relationships, new business fields and internationalization, as well as via acquisitions and investments, the Company has laid a broad foundation for its planned future growth.

United Internet will continue to pursue this sustainable business policy in the coming years.

• In the Consumer Access segment, the main focus in 2020 will be on marketing mobile internet products and winning high-quality customer relationships. The Company also plans to leverage the strong positioning of its broadband products to generate further growth.
• In the Business Access segment, the Company’s own fiber-optic network is to be expanded in 2020 with the connection of further locations. Activities for business and wholesale customers will also be expanded.
• In fiscal year 2020, the key topics in the Consumer Applications segment will again be the repositioning and revamping of the GMX and WEB.DE portals (including the associated reduction in ad space), as well as the concurrent establishment of data-driven business models.
• In the Business Applications segment, the focus will continue to be on expanding business with existing customers and gaining new high-quality customer relationships in 2020.

Following a successful start to the year (at the time of preparing this Management Report), the Company’s Management Board believes that the Company is on track to reach the forecast presented above in the section “Forecast for the fiscal year 2020”.

Forward-looking statements

This Management Report contains forward-looking statements based on current expectations, assumptions, and projections of the Management Board of United Internet AG and currently available information. These forward-looking statements are subject to various risks and uncertainties and are based upon expectations, assumptions, and projections that may not prove to be accurate. United Internet AG does not guarantee that these forward-looking statements will prove to be accurate and does not accept any obligation, nor have the intention, to adjust or update the forward-looking statements contained in this report.