deag deutsche entertainment ag annual report 2000preneurial challenges that lie ahead. after the...
Post on 04-Jun-2020
5 Views
Preview:
TRANSCRIPT
DEAGDeutsche Entertainment AG
Annual Report 2000
2 the deag group at a glance
at a glance
t h e d e a g g r o u p a t a g l a n c e
Sales (in DM millions)Domestic (in DM millions)Foreign (in DM millions)
EBITDA (in DM millions)as % of sales
EBIT (in DM millions)as % of sales
Cash flow (in DM millions)Bank debts ratioBalance sheet total (in DM millions)Equity (in DM millions)
as % of balance sheet totalEarnings per share in DM (diluted)Earnings per share in € (diluted)Employees (full-time)
506.0437.268.838.87.7
11.52.37.34.0
370.296.126.00.730.37
1,879
170.0154.315.713.47.9
10.05.94.33.3
159.035.622.40.360.19296
336.0282.953.125.4- 0.2
1.5- 3.6
3.00.7
211.260.53.6
0.370.18
1,583
Repayment of debt in years calculated by:
This annual report contains the consolidated financial statements according to IAS forDeutsche Entertainment AG, the management report and the Group management report forthe 2000 financial year as well as additional voluntary comments.
This annual report is also available in German. The English version is a translation from the German version.
You can request the consolidated financial statements of Deutsche Entertainment AG awardedan unrestricted audit certificate by our auditors as well as the German version of this annualreport free of charge from:
Deutsche Entertainment AktiengesellschaftInvestor RelationsKurfürstendamm 63D-10707 Berlin
Changes1999 / 200019992000
The DEAG share compared with NEMAX All Share
200
175
150
125
100
75
50Jan. 1, 2000 Dec. 31, 2000
Financial debtsCash flow
table of contents 3
t a b l e o f c o n t e n t s
Foreword of the Board of Management
Development of our business divisionsTheatres
Artists & Tours
Urban Entertainment
Media & Commerce
The DEAG share in the financial year 2000
Management report and Group management report
Business performance of the DEAG Group
Asset and capital structure of the DEAG Group
Group financing
Key financial ratios
Development of personnel
Situation of DEAG Deutsche Entertainment AG
Report on risk management
Risk of future development
Dependency report
Outlook 2001
Consolidated financial statements of Deutsche Entertainment AG
Remarks on financial reporting
Consolidated balance sheet
Consolidated profit and loss account
Consolidated cash flow statement
Development of equity in the Group
Development of fixed assets in the Group
Notes
Auditor’s opinion
Annual financial statements as of December 31, 2000
of Deutsche Entertainment AG (abridged version)
Report of the Supervisory Board
Personal data regarding the Board of Managementand Supervisory Board
Future-oriented statements
Financial calendar 2001
Imprint
4 - 5
6 - 136 - 7
8 - 9
10 - 11
12 - 13
14 - 15
16 - 25
16 - 17
18
19
20
20 - 21
21 - 22
23 - 24
24
25
25
26 - 52
27
28
29
30
31
32
33 - 49
50
51 - 52
53
54 - 55
56
56
57
contents
4 foreword
foreword
2 0 0 0 f i n a n c i a l y e a r : a m i l e s t o n e f o r d e a g .
Dear shareholders and business partners,
We are delighted to be able to report that the DEAG Group ended the
2000 financial year with record results.
Group earnings before interest, tax and depreciation (EBITDA) were up
190 % to DM 38.8 million. Group net income for the year was up by DM
3.5 million to DM 5.2 million. That amounts to annual growth of 206 %.
Sales were up 198 % to DM 506 million. These increases demonstrate
once more that the DEAG Group is able to achieve its own high targets.
We can report with pride that since going public in September 1998 we
have fully achieved the sales targets we set ourselves and the results that
analysts were expecting for the tenth successive quarter.
In the 2000 financial year, the DEAG share was
one of the few on the Neuer Markt that were
quoted at markedly higher than the issue price
(over 100 % above it). This trend in our view
reflects the special confidence investors have in
our group.
What is the secret of this success?
We can first report that our traditional business activities have progres-
sed highly satisfactorily. This traditional activity is in the core business
divisions Theatres, Artists & Tours, Urban Entertainment and Media &
Commerce. Each of these fields requires different areas of expertise,
involves different customer wishes and entails different growth prospects.
In the year under review we achieved the targets set in all divisions with
the exception of the Artists & Tours. The competition will only become
less intensive in the Artists & Tours division in 2001 as a result of the
conclusion of the concentration process.
In addition, the year 2000 was for the DEAG Group very much a year of
innovation and expansion. It was a year in which we were able to rea-
lise growth opportunities of strategic and long-term significance.
Borne by a strategic orientation aimed at establishing a leading service
presence at all value-added levels between artist and visitor and at bon-
ding and utilisation of content, we were able in 2000 to bring to a suc-
cessful conclusion the following substantial measures toward implemen-
ting our growth strategy:
• the acquisition of profitable parts of STELLA assets per April 1, 2000,
and successful implementation of company reorganisation within a
nine-month period;
• preparations for the stock market flotation of the new STELLA Enter-
tainment AG, which is just short of completion, and the sale of 24 % of
shares in the new STELLA Entertainment to a group of investors;
• the acquisition of a 90 % stake in Good News Productions AG, the lea-
ding live entertainment company in Switzerland, as of July 1, 2000;
( )To achieve the possible you mustconstantly attempt
the impossible.
from left to right Dietmar Glodde
Peter L. H. SchwenkowDr. Martin Fabel
Markus Fabis
foreword 5
• the one-third holding in START Ticket (soon to be Qivive AG), a joint
and equal venture with Lufthansa AG and Axel Springer Verlag, for
which there are also firm plans to go public in the course of the 2001
financial year;
• the expansion of our highly profitable catering activities by setting up
a 50-50 joint venture with Lufthansa Airport Gastronomie GmbH, one of
the leading catering companies in Germany;
• the globalisation of our Artists & Tours business division by the
establishment of DEAG Global Entertainment AG in Switzerland and
the acquisition of a 70 % stake in Entertain-
ment One AG of Switzerland, which jointly
with Marcel Avram, formerly of Mama Con-
certs, will in future be the platform for our
international Artists & Tours activities.
The individual transactions are outlined in
detail both in the segment reports and in the
management report. The Board of Management is convinced that these
significant strategic course settings established a superb starting point
for future growth. Our objective continues to be to make the DEAG
Group one of the most creative and leading European live entertainment
enterprises.
To keep pace with the corporate changes that have taken place, we
embarked in the 2000 financial year on a fundamental reorganisation of
our internal administration, especially in the areas of finance, accoun-
ting, controlling and data processing, costing roughly DM 0.6 million.
These measures will be completed in full in the second quarter of 2001.
They were accompanied by changes on the board.
By colleague consensus, the Board of Management underwent a clear
rejuvenation during the 2000 financial year. On July 1, 2000, Markus
Fabis and Dr. Martin Fabel joined the board. Markus Fabis took over res-
ponsibility for Finance and Personnel from Thomas Nedtwig, who took
on the same job at STELLA Entertainment AG, while Dr. Martin Fabel
took on the newly-created board responsibility for Media & Commerce.
A further newcomer is Dietmar Glodde, who joined the board on Octo-
ber 1, 2000 and is in charge of operations. Frank Reinhardt, previously
in charge of Urban Entertainment, and Klaus Ulrich, previously respon-
sible for Artists & Tours, left the board.
This new board stands for a young and dynamic DEAG. The Board of
Management realignment laid the personnel groundwork for dealing
successfully, energetically and in a future-related manner with the entre-
preneurial challenges that lie ahead. After the tempestuous growth that
followed DEAG’s September 1998 stock market flotation we plan in the
months ahead to concentrate on boosting efficiency in our existing
business divisions. We are working on the assumption that additional
sources of earnings and clear cost synergies can be realised now that we
are in a position, to choose, on account of our size, between a large num-
ber of options.
In addition, we will continue to sound out possible fields for expansion
and strategic options. Whenever an entrepreneurial opportunity arises
for DEAG, we will pursue it resolutely.
Content, content and content is another task for the 2001 financial year.
You do not need prophetical skills to foresee that the demand for con-
tent is set to grow enormously around the world. That is why we will
be working intensively on our core business content to bind it to us,
develop it and, finally, utilise it.
We took a first step in this direction jointly
with Richard Ogden, setting up in London in
Summer 2000 Richard Ogden Management
Ltd., an agency specialised in managing
artists.
A second, important keyword alongside
content is convergence. Sales channels are being digitalised and newly
developed, and previously separate techniques are being networked with
each other. We are already well positioned in this sector with the equal
shares that we, Lufthansa AG and Axel Springer Verlag hold in the joint
venture START Ticket GmbH, the future Qivive AG.
In view of this strategic course, we are convinced we will achieve in the 2001
financial year sales growth of 34 % to DM 680 million, an EBITDA of DM
45 million, up 16 %, and earnings per share (EPS) of DM 1.95 (+ 170 %).
The DEAG Group’s strong presence at all relevant levels along the value-
added chain of live entertainment, combined with constantly growing
demand for leisure activities, make DEAG in our view as a growth share
with high assets. It is better equipped than almost any European compe-
titor to face tomorrow’s challenges.
In conclusion, we should like to thank our staff for their contribution
toward our corporate success in 2000. We thank our shareholders and
business partners for the confidence they have shown in DEAG’s ability
to perform. You can rest assured that we will continue to pursue with
entrepreneurial passion and imagination our objective of increasing
resolutely the DEAG Group’s assets and growth prospects.
( )It is not a matter of predicting the
future but of beingprepared for it.
( )Organization andswift integration
lay the groundworkfor dynamic andqualified growth
6 theatres
theatres
The Theatres segment was the focal point of public interest in 2000. The
spectacular takeover in the first quarter of 2000 for DM 40 million of the
profitable parts of the STELLA musicals group, which was insolvent but
was acquired without inherited liabilities, was one of the largest acquisi-
tions in DEAG’s history. With STELLA in its portfolio, DEAG doubled
sales and markedly increased earnings.
Having acquired the musicals, the management’s most pressing task was
to unlock synergy potential swiftly, to motivate STELLA staff for the
common future and, finally, to implement a lean organisational structure
led by a management team work in a profit-driven fashion. The result is
an impressive achievement: a turnaround in just nine months, a profes-
sional team and a convincing musical concept.
Musical productions DEAG took over included "Cats” and "The Phantom
of the Opera” in Hamburg, Disney’s "Beauty and the Beast” and "Dance
of the Vampires” in Stuttgart, "Starlight Express” in Bochum and Disney’s
"The Hunchback of Notre Dame” in Berlin. These units were consolida-
ted on April 1, 2000, as well as the travel unit STELLA Musicalreisen
(SMR) and the in-house artists’ training facility STELLA Academy. In the
insolvency proceedings, DEAG with its promising concept prevailed over
numerous other national and international bidders. Since the insolvency
phase, rental, license and leasing agreements have been renegotiated,
saving DM 22 million in the 2000 financial year.
Despite the proven attraction of STELLA musicals (nearly 20 % of Ger-
mans plan to visit a STELLA musical in 2001), the musical company was
viewed in a dim light by German public opinion, and insolvency only
reinforced this view. Communicative efforts were and continue to be
needed to push STELLA’s positive achievements and successes to the
foreground. DEAG’s aim was to strengthen the company’s profitable core
business, producing musicals.
In addition to cutting fixed costs, DEAG implemented a program to
make the musicals more attractive. It is based primarily on musicals no
longer running seemingly forever. They now run for shorter periods at
different locations, making full use of regional visitor interest. As shown
by the announcement of plans to end shows of Disney’s "Beauty and the
Beast” in Stuttgart on December 22, 2000 and move "Cats” from Ham-
burg to Stuttgart, additional revenues can be generated by means of pull
effects.
Within the shortest of periods new musical productions have been lined
up. The realignment of the Hamburg Operettenhaus as a premiere thea-
tre with "Fosse” as its first show and the agreement to perform "Mozart!”
at the Neue Flora testify to the success of the new strategy.
In acquiring STELLA, DEAG has also achieved the critical size it needed
to successfully consolidate its market position. Together with its existing
concerts, variety theatres and venues business, DEAG with its profitable
STELLA units last year alone attracted a customer base of nearly seven
million visitors. The purchasing power thereby attained enables DEAG to
make services such as its sales network available to third parties and so
open up further sources of revenue.
h i g h l i g h t s : d e a g m a k e s t h e s t e l l a s t a r s h i n e .
Attendance at the musicals increased in 2000 to 72 % of economic
utilisation, beyond the break even point. With sales of DM 250 million,
STELLA accounts for almost 50 % of DEAG sales. DEAG’s profits were
cut by DM 7 million by one-off costs in connection with the acquisition
of the musical activities and by one-off restructuring expenditure at
STELLA. However, with EBITDA of DM 25 million, STELLA makes a sub-
stantial contribution toward DEAG’s profits.
The way into the future was set with STELLA’s upcoming listing. This
involved the acquisition of 79 % of the equity of Hegener + Glaser AG,
a company listed on the regulated market (Geregelter Markt) at the
Munich and Hamburg stock exchanges.
At the extraordinary general meeting of Hegener + Glaser AG held in
Hamburg on December 29, 2000, shareholders agreed to a change of
name to STELLA Entertainment AG and to investment in the musical
business in the form of a capital increase by means of cash and non-cash
capital contributions. DEAG is confident that once all legal deadlines
have elapsed, the share will be listed in the regulated market in the 2001
financial year. A SMAX listing is planned as soon as possible to offer
investors a higher degree of transparency in view of the stricter rules that
apply there.
This move has enabled DEAG to refinance the DM 40 million it paid for
STELLA now it has sold about 24 % of its shareholding to long-term
institutional investors. DEAG will retain a share of over 50 % and a
majority in STELLA Entertainment AG. STELLA Entertainment AG’s
access to the capital market opens up
new prospects of financing further
growth. Furthermore, it guarantees long-
term product supply and generation.
In the Theatres segment, a further increase in the number of visitors was
recorded at the three variety theatres in Berlin (Wintergarten Varieté),
Düsseldorf (Roncalli’s Apollo Varieté) and Stuttgart (Friedrichsbau
Varieté). The increase was due in part to the growing number of galas,
totalling 60 in 2000 against 43 the previous year, and in part to the
introduction of further product variations, such as the monthly Swing It!
Night in the Wintergarten Varieté. It is deliberately aimed at a younger
target group, entertained after the Friday evening show firstly in the Hin-
terhof by typical 1930s-style scenes and then dances to the music of a
superb swing orchestra such as that of jazz legend Coco Schumann.
First-rate international artists were again signed up for over 1,200 sho-
ws. Highlights included performances by ventriloquist George Schlick,
jazz professor Judy Niemack, TV star Karsten Speck, artist duo Vis Versa
and the Savoy Dance Orchestra with singer Robin Merrill. High-quality
shows and new product innovations led to capacity, which was already
high, being further increased.
Due to intensified cooperation between musical and variety theatres,
DEAG’s position in the Berlin and Stuttgart regional markets was further
improved. Joint utilisation of marketing and sales systems is set to
achieve further positive effects both regionally and nationally.
theatres 7
)(“It is an addiction, but a nice one.“
Andrea Rau from Bochumafter watching the musical STARLIGHT EXPRESS for
the 600th time. “and I am going on to
carry on.“
8 artists & tours
artists & tours
Numerous activities, startups and acquisitions in the Artists & Tours seg-
ment led to DEAG achieving market leadership in Europe as a live enter-
tainment provider in 2000, two years sooner than planned in 1999.
Absolute top acts were the Tina Turner, Bon Jovi and another successful
world tour by Sarah Brightman.
In Autumn 2000, the European and world tour of waltz king André
Rieu got under way. It is the most extensive, longest-term tour contract
that DEAG has ever signed, an exclusive, four-year contract covering
all 200 concerts André Rieu is to give in Europe. The comprehensive
contract package also provides for galas, sponsoring and concerts
recorded for TV.
In addition to other leading stars such as Britney Spears, Sting, Joe
Cocker, BAP, Ricky Martin, Iron Maiden, Oasis, Fury in the Slaughter-
house, Destiny’s Child, Hans Klok or Elton John the number of events
was boosted by a large number of profitable appearances at smaller
venues by bands such as the Gregorians, Van Morrison, Papa Roach,
Amanda Marshall, Queensryche or Tanzzkantine. In all, nearly 2.7 million
visitors saw nearly 700 shows that formed part of over 100 tours.
Despite the successful presentation of the above-mentioned well-known
international artists, DEAG was not able to achieve its target result in the
division. This was due to increased prices in the past year as a result of
the strong competition arising as part of a pent up process of concentra-
tion. This concentration process is now complete and pressure on margins
is expected to decrease. Furthermore, acquisition and integration costs of
the resulting participations for 2000 had a one-off negative impact.
Another spectacular acquisition, finalised in July 2000, was a 90 % stake
in the Swiss Good News Productions AG. Good News, founded in 1970,
is the clear market leader for live entertainment in Switzerland with
roughly 100 events and 800,000 visitors a year, and top acts such as Joe
Cocker, Bob Dylan, Tom Jones, Pearl Jam, Elton John, Udo Jürgens or
Santana. The basis of its market leadership is an exclusive contract, held
since 1982, to stage concerts, dance shows and operas at Zurich’s Hallen-
stadion, the largest multi-purpose arena in Switzerland holding up to
12,000 spectators.
DEAG is thus also opening up considerable expertise and substantial
synergy potential. In the Swiss market, Good News covers the entire
value-added chain from event organisation and venue management to
f a s t m o v e r : d e a g e x p a n d s i n t e r n a t i o n a l l y .
sponsoring, marketing and ticketing, and does so either
itself or via cooperations.
By setting up a management company, DEAG succeeded
for the first time in August 2000 in lengthening its value-added chain
towards the direction of artists. It now holds a 45 % stake in Richard Ogden
Management (R.O.M.), managed by Richard Ogden, long-time manager of
Paul McCartney and former Senior Vice President of Sony Music Europe.
Now it has acquired the services of a manager with long experience in
this sector, DEAG can in future work even more closely with artists. The
task of the London-based company is to manage, i.e. support artists in
contract negotiations with record companies, producers, agents, organi-
zers, the media and commercial sponsors and then with building up their
careers worldwide. For the first time, DEAG now takes part in all stages
of exploiting an artist’s rights. First contracts have already been signed
with successful international artists such as Bomfunk MC’s, Vanessa Mae
and Nerina Pallot.
A crucial step in the direction of international tours was successfully
taken in December 2000 with the establishment of Global Entertainment
Holding AG in Switzerland, which holds a 70 % stake in
concert organiser Marcel Avram’s Entertainment One. In
securing the services of Marcel Avram, DEAG has made
another major move toward global player status. Marcel
Avram has decades of experience as an international producer and tour
organiser for international stars. As a result, DEAG can not only secure
the services of well-known artists for concerts in its existing established
markets but has an opportunity to engage in a wider range of inter-
national activities. Within the framework of its expansion strategy, DEAG
has thus succeeded in taking another important partner on board.
The MTV Hard Pop Days represents a first festival series for DEAG.
Young bands, mainly German, performed at six venues in one day,
delighting a total of roughly 54,000 visitors. This lucrative sector is to be
extended in the year ahead. First steps have already been taken with an
event lined up on the EuroSpeedway Lausitz.
Now that DEAG has undertaken major acquisitions in the Artists & Tours
segment, this segment accounts for roughly 30 % of DEAG sales. DEAG’s
market leadership in Europe is thus assured and forms an excellent basis
for steady growth in future.
artists & tours 9
)( An audience of 2.7 million watched700 shows on more
than 100 tours.
10 urban entertainment
urban entertainment
A range of activities in 2000 can also be reported in the Urban Enter-
tainment segment, which comprises all local services for live concerts,
such as local organisation, venue management and security.
Local concert organisers in the two
German key markets Berlin and North
Rhine-Westphalia again presented
several highlights. Outstanding artists
and bands included the Bloodhound
Gang, Eros Ramazzotti, Sasha, AC/DC,
Ayman, Van Morrison, the Buena Vista
Social Club and A-ha.
In all, over 1.7 million people attended
over 500 events in this sector. This sen-
sational, roughly 40 % increase in numbers over the previous year is
based on a further increase in the number of visitors to DEAG venues, and
in particular to events held at the Jahrhunderthalle in Frankfurt.
Having acquired the Jahrhunderthalle from Hoechst AG on November 1,
1999, DEAG can now look back on a successful 2000 season with the
new management team. For one, the Jahrhunderthalle, previously a well-
known, successful venue for classical
music and rock & pop concerts, has
increasingly been able to demonstrate
its suitability as a conference and
convention venue, as evidenced by a
large number of company and general
meetings.
For another, success was due in part
to the cooperation agreed in April
with IMG Artists, one of the largest
and leading international artists’
agencies for classical music and ballet. IMG Artists arrranged for first-
rate international artists to take part in the four series of subscription
events. Back in February, DEAG signed a long-term lease agreement for
c o m p l e t e s e r v i c e p r o v i d e r : d e a g u s e s s y n e r g y f r o m p a r t n e r s h i p s .
( )
urban entertainment 11
the Loreley Freilichtbühne in St. Goarshausen. Designed as an
amphitheatre picturesquely overlooking the Rhine River, the 18,000-
seater venue was the scene of a number of highlight events such as a
Kelly Family concert or Mozart’s Magic Flute in the first open-air season.
As the 16th venue in its portfolio, DEAG signed in June a long-term
exclusive agreement to hold concerts and festivals with the EuroSpeed-
way Lausitz. Located roughly 130 km southeast of Berlin in Brandenburg
state, the EuroSpeedway Lausitz has four different racetracks, and with a
capacity of 120,000 it can hold more visitors than any other sports venue
in Europe. In September 2001, the German 500, the CART series champ
race, will be held for the first time in Europe on the EuroSpeedway Lau-
sitz. In addition to a 25.1 % holding, DEAG is in charge of overall sta-
ging of the event, of its entertainment elements and of marketing and
ticketing. Advance bookings have begun and look highly promising.
With a total of 17 venues in 2000, DEAG established itself as market
leader in venue management in the German-speaking region. The compe-
tence and critical mass thus acquired led last year to DEAG’s first major
cooperation. In August, DEAG announced the establishment of a catering
joint venture with LSG-Airport Gastronomiegesellschaft mbH (LAG), a
subsidiary of LSG Lufthansa Service Holding AG that benefits from con-
siderable purchasing advantages and know-how in the up-market cate-
ring systems sector. As a catering service provider the joint venture will
handle all catering requirements for DEAG Group theatres and venues.
The security services sector developed according to plan, but the pressure
of competition in North Rhine-Westphalia was extremely high, so that
DEAG disposed of some of its activities. It now aims for close cooperation
with established firms that have the relevant market competence and
expertise. At the same time, DEAG is retaining its security business,
which it sees as an indispensable part of its value-added chain. By virtue
of the size it has reached, DEAG now enjoys a strong negotiating position.
In future, further synergy potential can be expected to be harnessed step
by step in the most varied sectors, with a positive effect on the Group’s
earnings structure.
12 media & commerce
media & commerce
Media & Commerce handles the exploitation of content from other DEAG
divisions in the form of sponsoring, merchandising, ticketing, e-commerce
or TV marketing. In 2000, the emphasis was on the further development of
a number of projects relating to specific start-ups or joint ventures.
Existing marketing and sponsoring activities were further expanded.
They included, for example, the large-scale sponsorship deal agreed with
debitel for the Tina Turner tour or the opening of the STELLA Entertain-
ment distribution network for outside musicals such as "Tabaluga und
Lilli”. On account of DEAG’s size, due in particular to the STELLA musi-
cals take-over, four spin-offs were implemented in the Media & Com-
merce segment.
In merchandising, DEAG became a licensor for the first time, signing a
long-term agreement with Sunburst AG as part of which an attractive
license package was awarded. It includes extensive rights in connection
with DEAG’s variety theatres, venues and tours business and is to be
exploited jointly with Sunburst by a joint venture, Real Merchandising.
What will surely be the most significant and largest-scale joint venture
was agreed in July with Axel Springer Verlag AG and Lufthansa sub-
sidiary START AMADEUS GmbH. The three equal partners are planning
on the basis of START Ticket GmbH to set up a multimedia marketplace
for events, travel and other leisure activities.
The aim is to establish a leisure brand that combines under a uniform
system interface an uncomplicated way in which both organisers and
retail customers can book tickets or travel services such as hotel bookings
etc. The participation of Axel Springer Verlag ensures extensive media
coverage. The joint venture, which is now to trade as Qivive AG, plans
s t r e n g t h i n n u m b e r s : d e a g c o n c l u d e s p r o f i t a b l e j o i n t v e n t u r e s .
to go public on the Neuer Markt in the
2001 financial year. DEAG is currently
engaged in transferring the majority of
its ticketing activities to the Qivive
system platform.
Systemwise that will pave the way for
DEAG to transform ticketing, which
today is a simple sales logistics distribu-
tion instrument, into an effective
communications tool for one-to-one marketing, encompassing a fully
electronic circuit of valuable customer data ranging from event adver-
tising and booking and billing to checking admission to the venue.
Successfully establishing Qivive will pose a major challenge to DEAG
this year.
A further promising 50-50 joint venture
was concluded with film and TV produc-
tion company MME (Me, Myself & Eye
GmbH). ShowNet.de, the first German
full-service live music portal, was laun-
ched at the international music trade fair
Popkomm in August 2000. ShowNet
offers music-loving users exclusive edi-
torial information and wide-ranging
e-commerce options (tickets, merchandi-
sing, CDs), plus attractive community features (chat channels on events
and artists, fan newsgroups). The fundamental challenge in 2001 will be
to interlock these spin-offs closely with DEAG’s core operative business,
and in particular to make e-business activities an integral part of corpo-
rate processes.
media & commerce 13
( )“A mouse click instead of a queue!
I have never bought my concerttickets so quickly. Onto the internet
and within seconds my Bon Jovitickets were ordered!“Claudia M. from Berlin
14 the deag share
the deag share
Positive development
The DEAG share price moved largely in keeping with the market in 2000.
That said, DEAG successfully resisted the negative trend on the Neuer
Markt toward the end of the year. Numerous acquisitions and joint ven-
tures bore out DEAG’s growth strategy and reflected, in a share price
increase, investors’ confidence in the company and its management.
At the beginning of March the share price reached a historic high of
€ 45.20, which can be attributed to the acquisition of STELLA’s profita-
ble assets. Investors thus honored the enormous potential that this acqui-
sition brought DEAG’s way. From March onward, the entire Neuer Markt
headed downhill. The DEAG share was no exception, being hit by a
downturn in the market price.
After the share had reached a low of € 21.80 at the end of May, the price
recovered to € 35 in the wake of a positive business trend. That was due
in part to the cooperation agreement with EuroSpeedway Lausitz, to the
90 % takeover of Swiss News Productions AG and to the announcement
of plans to float STELLA Entertainment. After the market began to sta-
bilise from April to August, a further downturn on the Neuer Markt
became apparent from September. DEAG succeeded in bucking this trend
by intensifying its investor and public relations activities. Special
emphasis was placed on the fact that DEAG is a reliable and serious cor-
poration that has so far always achieved, if not exceeded, its forecasts.
Since mid-October, the DEAG share has thus been a market outperformer.
The price may have slipped a little at year’s end, but we are working on
the assumption that the positive trend so far will continue in the current
financial year, as evidenced by a January high of € 33.55.
After a generally difficult stock market year in 2000, especially on the
Neuer Markt, analysts are expecting a markedly positive trend by the
second half of 2001 at the latest. Our business prospects are good, what
with the swifter pace of growth and the increase in value as a result of
the flotation of START Ticket, in which DEAG holds a one-third stake,
and that, subject to overall economic conditions, should make a clearly
positive mark on our share price.
Open communication strengthens investor confidence
DEAG attaches great importance to open communications with the capi-
tal market. Numerous voluntary communications in addition to the
quarterly reports for the first to the third quarter, the annual financial
o u r s h a r e : b e t t e r t h a n t h e m a r k e t a s a w h o l e .
report and ad hoc announcements in compliance with §15 of the German
Securities Trading Act (WpHG) testified to this policy of open communica-
tions. They included regular road shows held in Germany and elsewhere
last year, a total of eight analysts’ and press conferences, quarterly con-
ference calls, participation in investor fairs and almost weekly one-to-
ones with financial analysts or institutional investors.
DEAG also sets great store by its website www.deag.de/ir, which places a
great deal of useful information at the disposal of private investors in
particular. Reports can be downloaded and detailed explanations in the
ad hoc announcement and press releases, research, facts and figures or
interviews and speeches areas
provide sound support for in-
vestors’ decisions. The monthly
investor relations newsletter,
available by e-mail sub-
scription, has established itself
among private investors in
particular as a reliable and
interesting source of informa-
tion. We are planning to
increase our investor relations
activities further in the 2001 financial year so as to fit in even better with
the needs of analysts and investor groups.
Conversion to the EURO (€)
Since the introduction of the EURO on January 1, 1999, the DEAG share
has been traded and quoted in EURO on the Neuer Markt. Conversion of
the equity capital was undertaken in accordance with the resolution of
the Annual General Meeting on May 26, 1999. As part of the conversion,
amounts were rounded up to the nearest Euro cent, increasing equity
capital from corporate funds by € 968,426.53.
the deag share 15
The curve shows the development of the DEAG share from Mid-September to the beginning of October 2000.
0.192.78
6,550,200€ 44 / € 22.90
€ 32.30
€ 288 million / € 149 million
DEAG: key figures 19992000
Earnings (IAS) (in € per share)Equity capital (in € per share)No. of shares issued1)
Highest / lowest priceYear-end price 12/31/00Market capitalization at highest / lowest price
1) On June 30, 2000, 1,092,259 individual shares were issued from the approved capital.
0.376.43
7,642,459€ 45.20 / € 19.50
€ 19.50
€ 296 million / € 149 million
management report16
In the 2000 financial year, the DEAG Group successfully strengthened its competitive position. As a result of implementing important strategicdecisions, the assumption of STELLA assets and the acquisition of a 90 %share in Good News Productions AG, the DEAG Group has now reachedsufficient size to secure a leading role in national and international com-petition in the growing live entertainment market.
DEAG Group sales rose in the 2000 financial year by TDM 336,088 toTDM 506,057. With a share of 49.4 % in consolidated sales representing
TDM 250,164, the largest contribution came from STELLA musicalactivities consolidated in the Broadway Musical Management Group.
The operating result EBITDA (Earnings before Interest, Taxes, De-preciation and Amortization) increased from TDM 13,390 to TDM38,784 and consolidated earnings rose from TDM 1,713 to TDM 5,191.Diluted earnings per share amount to DM 0.73 or €. 0.37. The numberof employees at the end of the financial year was 1,879, an increaseof 1,583.
THEATRES
In this segment, we have brought together the Broadway BerlinGesellschaft für Musical- und Eventmarketing mbH, Berlin, our varietytheatres Wintergarten Varieté Theater Betriebsgesellschaft GmbH, Berlin,and Friedrichsbau Varieté Stuttgart Betriebs- und Verwaltungs GmbH,Stuttgart, as well as our 50 % participation in the Apollo Varieté BetriebsGmbH, Düsseldorf, as an intermediate holding company.
Furthermore, we have also assigned musical activities acquired on April1, 2000 to this segment. Measured against almost all significant items ofthe consolidated balance sheet and consolidated profit and loss accountthe Theatres segment is now the most financially important businessdivision of the Group.
ARTISTS & TOURS
The Artists & Tours segment is our second largest segment at the end ofthe 2000 financial year in terms of sales. Coco Tours VeranstaltungsGmbH, Berlin, acts here as the intermediate holding company.
The division also includes Balou Entertainment Konzertagentur GmbH &Co. KG, Cologne, and La Isla Entertainment S.L., Palma de Mallorca,Spain, as subsidiaries. Furthermore, it also includes our 50 % participa-tion in Marshall Arts Ltd., London, Great Britain, and our 50 % partici-pation in Palast Management und Veranstaltungs GmbH, Berlin. In 2000,we acquired a 90 % share in Good News AG, Glattbrugg. The segmentwas further strengthened by the acquisition of a 100 % share inMillennium Concerts GmbH, Munich.
URBAN ENTERTAINMENT
In this segment, Concert Concept Veranstaltungs GmbH, Berlin, is theintermediate holding company, and it directly holds all segment sharesin affiliated and associated companies.
Our share held in associated companies is 33.3 % in each case. In addi-tion to Concert Concept Veranstaltungs GmbH itself, as a local concertpromoter, this segment also includes our other regional event and venueactivities, in particular Musikkontor NRW Veranstaltungs GmbH,Aachen, the Kultur-und Kongresszentrum Jahrhunderthalle GmbH andGastronomie Jahrhunderthalle Betriebsführungsgesellschaft mbH (for theJahrhunderthalle in Frankfurt am Main), as well as VELOMAX BerlinHallenbetriebs GmbH, Berlin.
Furthermore, we have also assigned our security services in this segment.Covered by intensive competition last year we sold our regional activi-ties in North Rhine Westfalia.
MEDIA & COMMERCE
In this segment, we have established EMC GmbH, Berlin (formerlyGive and Take Handelshaus für Kultur, Sponsoring und MarketingGmbH, Berlin) as an intermediate holding company. This segment alsoincludes bravo charlie Vermögensverwaltungs AG, Berlin.
This segment also includes activities developed in cooperation with ourpartners in merchandising (Real Merchandising GmbH), in ticketing(START Ticket GmbH) and in the internet (ShowNet GmbH).
m a n a g e m e n t r e p o r t a n d g r o u p m a n a g e m e n t r e p o r t
b u s i n e s s p e r f o r m a n c e o f t h e d e a g g r o u p
Our four Group divisions are organised as follows:
management report and group management report
17management report and group management report
As with sales, a share of approx. 90 % relates to the acquired STELLAactivities for EBITDA in the Theatres Group division. In the Artists &Tours division, the Good News Group had a considerably positive impact.The negative segment EBITDA results from a competition-related aggres-sive price policy for tours in 1999 and 2000 as well as the acquisition-related restructuring and integration costs. As DEAG has now acquiredtwo market leaders in concert promotion with the Good News Group andMarcel Avram’s Entertainment One, this price policy has, to a largeextent, been concluded, probably squeezing margins in this segment forthe last time in 2000.
In the Urban Entertainment segment, a decline in the EBITDA by 24 %was recorded. Nevertheless, the quality of the earnings increased as nonrecurring negative effects caused by the disposal of two affiliates alsohad to be taken into account.
Depreciation in the Group totals TDM 27,304 in comparison with TDM3,381 in the previous year. Musical productions account for TDM 19,007
of the depreciation of the financial year and consolidation-relatedgoodwills for TDM 4,355. The negative result from investments of TDM1,051 relates to the result from our associated company ShowNet GmbH,Berlin at TDM 1,038.
Earnings from interest, down by TDM 1,529, are due primarily to theacquisition financing of STELLA assets and to the increased amount dueto banks (+ TDM 9,646), with almost unchanged interest rates year onyear. The income from the investment of our liquid funds had a mar-ginally positive impact.
Expenditure for taxes on income fell sharply by TDM 4,504 in compari-son with the previous year. The main reason is the effects of tax losscarry forward, particularly in the holding company, and a tax benefitcoming up in connection with tax restructuring in the Group.
The consolidated profit/loss for the year without minority interests totalsTDM 5,138, compared with TDM 1,772 in the previous year.
The operating result (EBITDA) in the individual business divisions developed as follows:
+ 254,987+ 48,513+ 14,787
- 383
TheatresArtists & ToursUrban EntertainmentMedia & Commerce
Change
274,363161,76762,973
898
19,376113,25448,186
1,281
1999in TDM 2000
+ 24,564- 11,432- 1,739
+ 836
TheatresArtists & ToursUrban EntertainmentMedia & Commerce
26,604- 5,068
5,512284
2,0406,3647,251- 552
Sales growth in the Theatres segment relates, at TDM 250,164, almostcompletely to the acquired musical activities. However, the varieties con-solidated in this segment again generated clearly increased sales. In theArtists & Tours division the increase in sales resulted primarily from theinitial inclusion of the Good News Group as of July 1, 2000 andMillennium Concerts as of October 1, 2000, in our consolidated statements.
Furthermore, sales of our British affiliate Marshall Arts contributed to theconsolidated sales for the first time proportionally for the entire year.Coco Tours as the holding company of the segment also increased sales
considerably by 9.3 %. The Urban Entertainment division showed asustained increase in sales primarily resulting from internal growth. Thelocal concert promoter and venues consolidated in this segment increasedthe number of visitors significantly. This refers in particular to theJahrhunderthalle Frankfurt, Velomax, Concert Concept and MusikkontorNRW. The decline in sales in the Media & Commerce division is a resultof our business policy to develop our relevant activities together withour partners. Several spin-offs resulted from this and consequently theprincipal operating companies in this segment are accounted for atequity.
The development of sales in the business divisions is as follows:
Change 1999in TDM 2000
TDM 54,343 of the investments in intangible assets are allocated to GoodNews Productions AG, TDM 2,092 to Hegener + Glaser GmbH and TDM5,880 to other intangible assets, particularly software. Musical produc-tions relate to the investments made in Broadway Musical ManagementGmbH for musicals acquired as a result of insolvency.
Investments in tangible assets relate to land, property and rented buil-dings (TDM 2,038), investments in technical equipment, office furnitureand equipment (TDM 10,764) and advances paid on fixed assets andassets under construction (TDM 4,773). Investments in financial assetsinclude TDM 6,805 non-cash contributions allocated to our participa-tion in START Ticket GmbH and TDM 2,132 allocated to other partici-pations.
Fixed assets account for 38.6 % of the balance sheet total and 67.8 % ofthis is covered by equity. In the Group balance sheet, the share of cur-rent assets increased by 81.9 % to TDM 223,437. This was due to theincreased business volume resulting from the inclusion of STELLA andGood News AG. At TDM 24,000, the securities valued in line with IAS 25and held for sale later continue to have an impact.
TDM 12,000 is reported in other assets which we acquired in Decemberas a loan as part of the acquisition of the 70 % share in EntertainmentOne AG, Switzerland. The share of the liquid funds increased by TDM35,997 due to increased bank deposits from advance sales. Group equityincreased by TDM 60,574 and accounts for 26 % (previous year: 22.4 %)of the balance sheet total. The development of equity is shown separatelyin the consolidated financial statements. Accruals rose by TDM 7,594,particularly due to increased accrued taxes for deferred taxes from diffe-rences in the valuation between tax-related principles of statement pre-sentation and the international accounting principles.
Group liabilities increased by TDM 105,211, 47.9 % of the balance sheettotal. In addition to the rise as a result of the increased business volume,the amount contributed by short-term liabilities from the financing ofSTELLA assets is TDM 40,000.
At the time of the preparation of the balance sheet, this amount had beenreduced from current liquidity to TDM 35,000. In view of the plannedIPO of STELLA and the disposal of up to 24 % of the shares to investors,the amount due will be paid off completely.
18
The balance sheet ratios reflect the strong growth of the Group.
With an increase of TDM 211,183 to TDM 370,228, the balance sheet totalhas more than doubled. On the assets side, the consolidated fixed assets
increased by TDM 111,681 as a result of investments of TDM 146,401 incomparison with depreciation of TDM 27,304, disposals of TDM 7,239and the impact of the change of the Group’s scope of consolidation tothe amount of TDM -177 net.
62,31557,57417,5758,937
146,401
Intangible assetsMusical productionsProperty, Plant and EquipmentFinancial assetsTotal investments
in TDM
a s s e t a n d c a p i t a l s t r u c t u r e o f t h e d e a g g r o u p
Investments are as follows:
management report and group management report
19
g r o u p f i n a n c i n g
Cash flow increased by 68 % to TDM 7,282. The increase reflects theimprovement in performance as a result of the initial consolidation ofGood News AG and STELLA. Taking into account the change in net cur-rent assets, the inflow of funds amounts to TDM 67,795.
Payments for investments total TDM 146,401. Taking into account dis-investments and income from interest, the outflow of funds for invest-ments amounts to TDM 137,047.
The inflow of funds from financing activities increased by TDM 90,871to TDM 105,163. This increase was due to access to paid-up capital of theGroup as a result of the capital increase against non-cash contributionson the occasion of the acquisition of the 90 % share in Good News AGat TDM 55,279, after deduction of TDM 2,410 for costs for the procure-ment of capital.
At TDM 43,500, the financing of the acquisition of STELLA assets con-tinued to contribute to the increase in the inflow of funds. Compared withthe inflow of funds, the expenditure on interest was TDM 4,057 higher.As of December 31, 2000, the Group has liquid funds amounting to TDM86,720, which primarily relate to advanced sales and credits in trust ofTDM 13,793.
In the 2000 financial year, TDM 40,000 short-term liabilities were bor-rowed for the acquisition of STELLA activities. These funds are to berepaid by the sale of shares in a subsidiary. The contracts relating to thiswere largely concluded on December 31, 2000.
In view of the considerable growth and restructuring measures imple-mented as well as the corresponding outflow of funds for investmentsand expenditure relating to acquisitions and restructuring, the short-term external debt from working capital financing also increased byTDM 14,946. In the first quarter of 2001, the Group increased its workingcapital lines by a further TDM 5,000.
The Board of Management anticipates a marked improvement in internalfinancing for the 2001 financial year, particularly as a result of the con-tinued positive development of the musical and tours business.
According to the Board of Management, the resultant cash flow and theexpected inflow of funds from the sale of shares and the cash capitalincrease for Hegener + Glaser AG in connection with the contribution ofBroadway Musical Management GmbH will ensure an improvement ofthe liquidity position of DEAG and the Group and will also secure finan-cing in the 2001 financial year.
1999in TDM
2000in TDM
Cash flow statement of the DEAG GroupSummary
Cash flow
Net cash from operating activitiesNet cash used in activitiesNet cash from financing activitiesNet increase in liquid funds
Effects of exchange rate changesLiquid funds at beginning of year
Liquid funds at end of year
7,282
67,795- 137,047
105,16335,911
8650,723
86,720
4,337
8,727- 12,369
14,29210,650
- 15640,229
50,723
management report and group management report
20 management report and group management report
d e v e l o p m e n t o f p e r s o n n e l
As of December 31, 2000, DEAG had 1,879 full-time employees in theGroup, 1,583 more than in the previous year. With regard to this increase,the change in the scope of consolidation due to the acquisition and dis-posal of subsidiaries accounts for 1,527 employees.
As of December 31, 2000, the managing holding company had hired 39full-time employees, 12 more than in the previous year. The increaseprimarily reflects the expansion of central administration as part of ourgrowth strategy.
k e y f i n a n c i a l r a t i o s
1,713
2,3811,6476,619
12,360
105,314159,045132,179
9.3 %
5,191
4,3553,1762,115
14,837
159,045370,228264,636
5.6 %
Calculation of the total return on capital
Profit/loss for the year
+ Depreciation on goodwill+ Earnings from interest+ Expenses for income taxesAdjusted profit/loss for the year
Consolidated balance sheet total at the start of the financial yearConsolidated balance sheet total at the end of the financial yearAverage assets
Total return on capital = --------
1999in TDM
2000in TDM
The Group’s financial targets relate primarily to return on capital, capi-tal structure and external debt.
At 5.6 %, the total return on capital related to profit/loss for the year(previous year: 9.3 %) has not yet reached the target of 10.0 % set by theBoard of Management. This is due to strong growth since the IPO, parti-cularly in the past financial year.
In business terms, high growth momentum almost always results in anegative impact on original profitability as a result of one-off expen-diture.
The Board of Management is convinced that the growth-related earningspotential is already heading in the right direction in terms of total returnon capital for the coming financial year.
The equity ratio is 26 %, after 22.4 % in the previous year, an increaseof 3.6 percentage points. This is due on the one hand to extraordinarilyhigh balance sheet total increase as a result of the acquisition of STELLAassets and the corresponding expansion of business volume.
On the other hand, it is due to the initial full consolidation of Good NewsAG which was acquired through a share exchange and is to be consoli-
dated according to the purchase method in line with IAS 22 and IAS 27.This led to a net increase in the paid capital of the shareholders of DM55.3 million. According to the targets set by the Board of Management,the dynamic indebtedness is not to be more than 4–5 times that ofannual cash flow. This repayment factor for the amount due to banks is4.0 years (previous year: 4.6 years) is on target, notwithstanding thesustained and growth-related investment activities.
14,837264,636
The total return on capital in the Group for the 2000 financial year developed year on year as follows:
21
With regard to the marked increase in personnel expenditure of TDM106,594, STELLA accounts for TDM 96,836, its inclusion showing in theconsolidated financial statements no legal change in the composition ofthe Group. As part of our growth strategy, we plan to link our remunera-tion policy in a more performance-oriented manner, with greater trans-
parency and more strongly related to achieving targets. Furthermore, incentral purchasing, acquisition of artists and retail activities areas in theindividual subsidiaries, specific process and organisation analyses will becarried out to further improve the competitiveness of the business pro-cesses.
management report and group management report
DEAG Deutsche Entertainment AG is the managing holding company ofthe DEAG Group. It provides management and other central services andconsultancy for its Group and affiliated companies but also for externalbusiness partners. The holding company also manages the company
financing within the Group. The most significant income items are theearnings from dividends and profit transfer agreements with subsidiariesor affiliated companies and the earnings from the acquisition or dispo-sal of investments.
5,0009,718
683- 3,050- 2,5379,814
- 5,899
3,915
0508
- 2,3402,083
3503,669
10,269- 11,553
02,735
- 8,616
- 5,880
- 2,410- 3,973
1,904- 10,359
Profit and loss account on the basis of commercial law principles
SalesIncome from profit transfer agreementsIncome from investmentsExpenditure on profit transfer agreementsDepreciation on investmentsOperating result
Operating expenses
Result of portfolio management
Extraordinary earnings – stock market listing of Good News AGEarnings from interestIncome taxNet loss of the year (last year: Net income for the year)
January 1 toDecember 31, 1999
in TDM
January 1 toDecember 31, 2000
in TDM
e a r n i n g s s i t u a t i o n
s i t u a t i o n o f d e a g d e u t s c h e e n t e r t a i n m e n t a g
17,2072,742
19,949
470188
20,607
107,32718,384
125,711
1,086404
127,201
DEAG Group
RemunerationSocial security contributions
Increase from the change in the scope of consolidationRemunerationSocial security contributionsTotal
1999in TDM
2000in TDM
In the past financial year, personnel costs developed year on year as follows:
The earnings structure in comparison with the previous year is as follows:
22 management report and group management report
a s s e t s a n d c a p i t a l
2,136- 10,359- 8,223
Changes in equity of DEAG Deutsche Entertainment AG
Capital increase of 1,092,259 sharesNet loss of the yearChanges in equity
December 31, 2000TDM
The balance sheet total was up by 70.2 %, totalling TDM 104,940. Fixedassets showed an increase of TDM 18,315. Tangible assets increased byTDM 670 as a result of additions to intangible assets, particularly forcommercial software amounting to TDM 162 and tangible assets, par-ticularly for office and business equipment amounting to TDM 840,compared with the planned depreciation of TDM 330 and disposals ofTDM 2.
Financial assets increased by TDM 17,724 as a result of additions toshares in associated companies of TDM 7,667 and investments totalling
TDM 10,025. In contrast, a participation of TDM 17 was sold. Additionsto the shares in associated companies relate to the 79.21 % share inHegener + Glaser AG (future STELLA Entertainment AG) at TDM 6,782,Broadway Musical Management GmbH at TDM 10,050, the 90 % partici-pation in Good News AG acquired through a share exchange at TDM 2,761and the acquisition of Millennium Concerts GmbH at TDM 400.
Additions to the investments relate to our share in Start Ticket GmbH(future Qivive AG) (TDM 10,000) and our share in EIB EntertainmentInsurance Brokers GmbH (TDM 25).
Sales refer to consultancy services to an external corporate group.Income from profit transfer agreements relates to Wintergarten VarietéBetriebs GmbH (TDM 1,480), Concert Concept Veranstaltungs GmbH(TDM 1,732) and Friedrichsbau Varieté Stuttgart Betriebs- undVerwaltungs GmbH (TDM 458).
The income from investments relates to the dividends of Good NewsProductions AG (TDM 5,198), Broadway Musical Management GmbH(TDM 4,212) and Apollo Varieté Betriebs GmbH (TDM 1,072). Expenditureon profit transfer agreements relates to the profit and loss pooling ofCoco Tours Veranstaltungs GmbH.
At TDM 2,717, higher operating expenses relate primarily to the increasedpersonnel expenses due to higher numbers of employees and the restruc-
turing of the Board of Management (TDM 2,522). Extraordinary earningsrelate completely to the external costs for the capital increase incurredthrough the acquisition of Good News Productions AG. The marked fallin the interest result year on year is due to the increased amount due tobanks and acquisition financing for the STELLA assets.
Income from income tax relates to the amount due from taxes or incomefrom the liquidation for accruals from the previous year totalling TDM2,171, compared with investment income tax payments of TDM 264 andother taxes amounting to TDM 3. Net loss of the year at DEAG DeutscheEntertainment AG resulted primarily from the deferral in the realisationof income from the sale of 24 % of shares in Hegener + Glaser AG. Theresulting income will be realised in the 2001 financial year and is par-tially tax-free due to tax losses carried forward.
The equity ratio is 28.3%, compared with 61.5% in the previous year. Thereason for the clear decline, is the increase in the balance sheet total by1.7 times year on year as a result of the acquisitions and the considerableexpansion of the business division related to this.
With the exception of the acquisition of the STELLA assets, the remainingacquisitions have been covered by internal financing. The increase inamounts due to banks amounting to TDM 11,766 relates exclusively to
the working capital financing as a result of the considerable expansionof the business division in the whole Group.
The short-term liabilities, balanced against short-term repayments andpre-payments, increased by TDM 27,280. This is due to debt from thefinancing of STELLA assets reported as short-term liabilities to theamount of TDM 43,500, which were already reduced to TDM 35,000 byJanuary 31, 2001 and the increased financing of the Group companies.
The change in the equity of the holding company was as follows:
23
r e p o r t o n r i s k m a n a g e m e n t
management report and group management report
According to § 91 para. 2 of the German Stock Corporation Act, theBoard of Management is obliged to initiate appropriate measures, in par-ticular a monitoring system so that developments threatening the con-tinued existence of the company can be identified at an early stage. Risksare an inherent part of corporate business.
Fast growth and successful activity require strategic and operatingrisks to be identified, assessed and reported. Risk management isalways a proactive business and the responsibility of all employees. Inthe 2000 financial year, we have continued to develop our system forearly identification of corporate risks, particularly those threateningthe existence of the company. As part of this process, the Board ofManagement assumes an active role. All major business activities fromthe various divisions are discussed and documented in two to threeBoard meetings per month and clear responsibilities for processinghave been assigned.
In the strategic and operating Controlling division, 2000 saw fundamen-tal improvements to the integration of operating and strategic planningand controlling processes in order to ensure that the management isinformed about business developments in a timely manner. In Financeand Accounting, the internal control system was improved with guidelines,especially for payment processing.
General corporate risks
To minimise risks that exist due to contracts, taxation and employmentlegislation, we call upon the advice of both our own specialist personnelas well as external experts in our decision making process and whenplanning business processes. If risks are unavoidable then we endeavourto obtain appropriate insurance cover, particularly for risks associatedwith events.
With economic considerations in mind, risks associated with currenciesare taken into account by covering the necessary foreign currency withregard to the future. When making a decision on the length of interestrate commitment, interest risks are reduced or covered.
In order to guarantee the performance of our employees is both profes-sional and complies with legal requirements, there are guidelines as wellas directives in the key divisions (e.g. Payment Processing, Purchasing,Human Resources, Business Travel). In addition we carry out internal andexternal training and educational events. In the IT division, we utiliseonly standard software. Technical development, including data protec-tion is done by qualified personnel using the in-house software divisionat STELLA.
Specific corporate and industry risks
Early on the objective was diversification in order to distribute the risksat the DEAG Group throughout the entire entertainment range.Nonetheless, in addition to general business risks, there are also specificcorporate and industry risks:
Dependency on qualified personnel
To a certain extent, successful implementation of the corporate objectivesis dependent on the ability to continually find highly qualified staff inthe Management, Customer Service and Marketing divisions and to keepthem. There is strong need for qualified personnel in the industry, withthe resulting comparatively high fluctuation rate.
The Chairman of the Board of Management, Mr. Peter Schwenkow, as thepersonal contact for artists and others from the worlds of culture andfinance, has been responsible for the success of the company to a largeextent.
The company’s dependence on Peter Schwenkow is being reduced as aresult of the restructuring of the Board of Management, particularly dueto the appointment of Dietmar Glodde as the new COO. The company isproducing a dependency report with regard to the business relationshipwith the shareholder Peter Schwenkow, in accordance with § 312 of theGerman Corporation Stock Act.
Dependency on business connections
A percentage of the company’s business success and corporate risksdepend to a certain extent on the selection of artists engaged for an eventand other productions. Thus decisive factors include business connections,experience, the skill and the feel for being able to select artists and pro-ductions from the world-wide selection that will appeal to public tasteand which are suitable for generating high attendance figures.
The wrong decision when selecting artists and productions or whenagreeing fees and licences can potentially damage the future performanceof the company.
Short-term fluctuations in attendance figures
The corporate success of the DEAG Group is largely determined by atten-dance figures. Experience tells us that the number of attendees fluctuatesseasonally and is dependent on the weather with open-air events andIndoor events. Whilst the usual seasonal fluctuations simply negativelyimpact sales and income development for a period of less than twelve
24
According to § 289 para. 1 of the German Commercial Code, we are obli-gated to report any risks associated with future development. This manage-ment report and the further information on the financial year containassumptions and estimates based on the future that are associated with riskswhich can result in the actual results deviating from our expectations.
Such risks result in particular from an altered market environment,increasing competitiveness with existing and new competitors, interestand currency risks as well as other political and national economicevents that can neither be predicted nor influenced.
In the context of our report on the risks of future development, the Boardof Management would like to point out the following facts:
In connection with the acquisition of STELLA assets, DEAG decided tofloat the acquired musical business. To do this, 79.21 % of the shares inHegener + Glaser AG, Munich were acquired. The company is listed onthe regulated market on the Bavarian stock exchange in Munich and theHamburg stock exchange. At an extraordinary general meeting ofHegener + Glaser AG on December 29, 2000, a resolution was adopted totransfer the musical activities into Hegener + Glaser AG in the contextof a mixed cash and non-cash capital increase.
The value of the musical business, consisting of a management companyand six musical operating companies was calculated by experts to be DM77.0 million. External shareholders were offered the opportunity to take
part in the capital increase at a 1:8 ratio at a subscription price of € 9.70.Furthermore, it was decided the change the name of the company toSTELLA Entertainment AG. Independent of the IPO, in December 2000,DEAG concluded purchase contracts with investors covering a total 20 %and another pre-contract covering 4 % of the share capital of Hegener +Glaser AG.
Subsequent to the general meeting, four shareholders submitted actionsfor nullification against the resolutions of the general meeting. The caseis scheduled for March 29, 2001. The Board of Management and DEAG’strial lawyers are convinced that this matter can be settled in the hearingon March 29, 2001, but can not guarantee this.
In the annual financial statements of DEAG in accordance with GermanCommercial Code principles, the whole issue has not impacted earnings.This income will be realised after the capital increase has been carriedout and is partially tax-free because of the taxation losses carried for-ward at DEAG Deutsche Entertainment AG.
In the international consolidated financial statements made according toIAS 25, it is required to report securities, acquired with the intention ofselling them, in the balance sheet at the market value and to include theresultant effects on earnings. The market value to be used is consideredthe purchase price objectively agreed between contractual partners. Inthe consolidated financial statements, income realised in this context istreated as earnings from balance sheet valuation measures.
management report and group management report
months, unusually long and pleasant summers can result in sales andincome slumps in individual divisions, particularly musicals and varietyshows. In comparison, there are also opportunities to generate betterearnings at open-air events.
Potential liability risk
The company has taken out various insurance policies (e.g. against lack ofaudience interest, cancellation of events, damage to persons or propertyduring a performance etc.). To date this insurance amounts have always
been sufficient in cases of claims. However, it can not be ruled out thatthe insurance cover proves insufficient in individual cases or that certaintypes of insurance cease to be offered by the insurer. The Board ofManagement is convinced that effective risk management is possiblewith the existing system.
On the basis of this system, the management receives notification in timeof any risks arising in order to be able to implement correspondingmeasures to monitor the risk. The intention is to continue to develop thesystem in future.
r i s k o f f u t u r e d e v e l o p m e n t
25
d e p e n d a n c y r e p o r t
management report and group management report
o u t l o o k 2 0 0 1
According to estimates by the Board of Management, it is again notpossible in the 2000 financial year to rule out with certainty DeutscheEntertainment AG being seen as a company that is practically dependenton the shareholder Peter Schwenkow, Berlin. In accordance with § 312 ofthe German Stock Corporation Act the Board of Management has pro-duced a dependency report covering direct and indirect relations withPeter Schwenkow.
At the end of the report, the Board of Management declares that, as far asthey were aware at the time a legal transaction was made, the companyreceived appropriate payment for this legal transaction and was not dis-advantaged in any way. No steps were taken nor avoided on the request
of or in the interest of Mr. Schwenkow. In the context of the audit of theannual financial statements, the report was audited by our auditors.
The result of the audit showed that
- the actual information contained in the report is correct,- the company performance for the legal transactions mentioned in
the report was not inappropriately high and that disadvantageswere compensated for,
- the measures mentioned in the report show that there is no reasonfor any assessment significantly different from that of the Board ofManagement.
The 2001 financial year is the year of increasing efficiency. This is be-cause the DEAG Group has positioned itself excellently both strategicallyand organisationally compared with national and above all with inter-national competitors since its IPO, particularly in the last financial year.
Finally, the main corporate objective is the long-term increase in enter-prise value in terms of increased earnings power on a sustained basis andnot short-term success. This is particularly relevant for a company on theNeuer Markt.
Due to the courses set for the 2001 financial year that were achieved inthe past financial year, in particular the full consolidation of STELLA fortwelve months instead of for nine months, the full consolidation of GoodNews AG for twelve months instead of for six months and the integrationof Entertainment One AG together with Marcel Avram from January 1,2001, a 34 % growth rate is expected for sales and for EBITDA, 16 %.
In addition to this positive development, contributions are also expectedfrom the artist management agency jointly founded with Richard Ogdenin London, Richard Ogden Management Ltd., as well from the joint ven-ture in the Catering division with LSG-Airport GastronomiegesellschaftmbH, a subsidiary of LSG Lufthansa Service Holding AG. Because of thestrategically important preparations made for the long-term future andtaking into account the fact that one-off expenditure for acquisitions and
disinvestments will no longer apply, market entry costs in the 2000financial year of approximately DM 15.0 million and efficient originaloperations, we expect earnings per share (EPS) to be DM 1.95 DM i.e. € 1.0 euro.
Furthermore, we believe that the STELLA Entertainment AG IPO will takeplace in the 2001 financial year and that the sale of up to 24 % of theshares in DEAG to an investment group will be legally concluded.
In connection with this, there is also set to be a reduction in existingshort-term liabilities from the acquisition of STELLA assets, currently atDM 35.0 million, and an improvement of the interest result of approxi-mately DM 1.2 million.
Proposal for appropriation of earnings forDEAG Deutsche Entertainment AG
Our proposal to the Annual General Meeting is to carry forward thebalance sheet loss of DEAG Deutsche Entertainment AG.
Berlin, March 2001
DEAG Deutsche Entertainment AktiengesellschaftBoard of Management
Peter L. H. Schwenkow Dietmar Glodde Dr. Martin Fabel Markus Fabis
financial statement26 consolidated financial statements
c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s
Consolidated financial statements for the financial year from January 1, 2000 to December 31, 2000
Remarks on financial reportingConsolidated balance sheet
Consolidated profit and loss accountConsolidated cash flow statement
Development of equity in the GroupDevelopment of fixed assets in the Group
NotesAuditor’s opinion
Annual financial statements as of December 31, 2000 of Deutsche Entertainment AG (abridged version)
consolidated financial statements 27
The Board of Management of Deutsche Entertainment AG is responsiblefor drawing up individual financial statements and the consolidatedfinancial statements as well as information contained in the managementreport and the Group management report.
In addition to the individual financial statements for DeutscheEntertainment AG in accordance with the German Commercial Code(HGB), the Board of Management has produced consolidated financialstatements in line with the requirements of the International AccountingStandards Committee, London (IASC).
The management report and the Group management report were producedin compliance with German Commercial Code regulations and the appli-cable International Accounting Standards (IAS).
Consolidated financial statements have not been prepared in line withGerman Commercial Code principles since the 1999 financial year, as the
Board of Management has made use of the exemption rule of § 292aGerman Commercial Code. In accordance with the resolution of theAnnual General Meeting, the Supervisory Board appointed Deloitte &Touche GmbH, Wirtschaftsprüfungsgesellschaft, Berlin as independentauditors to audit the individual and consolidated financial statementsand the management report and Group management report.
At the balance sheet meeting, the Supervisory Board discussed the indi-vidual and consolidated financial statements, the management reportand the Group management report as well as the respective audit reportsin some detail with the auditor. The result of this audit can be found inthe report by the Supervisory Board.
With the consolidated financial statements, the management report andthe Group management report, there is a reliable and internationallycomparable basis for the valuation of the entire Group and its potentialwhich is available to our shareholders and all other interested parties.
r e m a r k s o n f i n a n c i a l r e p o r t i n g
28 consolidated financial statements
26,7810
4,162138
31,081
16,59313,1392,853
39,4370
50,72375
122,820
5,144
159,045
80,33838,56716,1787,679
142,762
15,40525,281
33364,27324,00086,7207,425
223,437
4,029
370,228
Assets Notes
Intangible assetsMusical productionsProperty, plant and equipmentFinancial assetsFixed assets
InventoriesTrade account receivablesReceivables due from related partiesOther receivables and other assetsSecuritiesLiquid assetsDeferred taxesCurrent assets
Pre-paid expenses
Total assets
Dec. 31, 1999in TDM
Dec. 31, 2000in TDM
12,81126,15338,964-3,40335,561
223
5,41839,58445,002
19,74223,380
24828,64572,015
6,244
159,045
14,94779,28694,233
1,90296,135
3,056
16,89235,70452,596
29,38837,58245,34864,908
177,226
41,215
370,228
Equity and liabilities Notes
Deutsche Entertainment AG subscribed capital (7,642,459 no par value individual shares)Deutsche Entertainment AG capital reservePaid-up capital of shareholders of Deutsche Entertainment AG Capital earnings as of 12/31Shareholders’ equity of Deutsche Entertainment AG
Minority interests
Accrued taxesOther accrualsAccruals
Amounts due to banksTrade accounts payablesLiabilities due to associated companies and personsOther liabilitiesLiabilities
Deferred income
Total equity and liabilities
Dec. 31, 1999in TDM
Dec. 31, 2000in TDM
c o n s o l i d a t e d b a l a n c e s h e e t
15171618
19202020202123
22
24242424
2526
2728
29
30
consolidated financial statements 29
c o n s o l i d a t e d p r o f i t a n d l o s s a c c o u n t
169,969- 606
169,363
- 142,85226,511
- 20,60726,001
- 18,514- 1
13,390
- 3,3810
10,009
29- 1,6478,391
- 6,6191,772
- 591,713
0,36
0,19
506,057180
506,237
- 244,347261,890
- 127,20143,222
- 138,814- 313
38,784
- 8,297- 19,00711,480
- 1,051- 3,1767,253
- 2,1155,138
535,191
0,73
0,37
Income situation Notes
Sales Changes in inventoriesTotal operating performance
Production, material and licence expensesGross profit
Personnel expensesOther operating incomeOther operating expensesOther taxesEarnings before interest, taxes, depreciation and amortisation (EBITDA)
Amortisation/Depreciation of intangible and tangible assetsDepreciation of musical productionsEarnings before interest and taxes (EBIT)
Investment resultNet interest incomeEarnings from ordinary operations
Taxes on incomeNet profit for the year
Minority interestsGroup result
Earnings per share in DM (diluted)
Earnings per share in € (diluted)
Jan. 1, to Dec. 31, 2000in TDM
Jan. 1, to Dec. 31, 2000in TDM
6
79
10
1112
13
30 consolidated financial statements
c o n s o l i d a t e d c a s h f l o w s t a t e m e n t
1,7133,381
00
- 2,83559
1,97841
4,337
1,647- 15,122- 20,855
19,70719,0138,727
- 230- 730
00
- 12,8651,022
434- 12,369
0000
16,303- 2,081
7014,292
10,650- 156
40,22950,723
5,19127,304
- 18,982- 3,750- 5,329
-531,8501,0517,282
3,1761,189
3603,723
52,06567,795
- 62,315- 17,575- 57,574- 8,858- 1,159
7,4722,962
- 137,047
2,13655,54343,500- 2,410
9,646- 6,138
2,886105,163
35,91186
50,72386,720
Group resultDepreciation and amortisationResult from valuation in accordance with IAS 25Result from valuation in accordance with IAS 40Changes to accruals from contractual guaranteesMinority interestsDeferred taxes (net)Result from valuation of associated companiesCash flow
Net interest incomeChanges in inventoriesChanges to receivables, other assets and pre-paid expensesChanges to accrualsChanges to liabilities without financial debtsNet cash from operating activities
Outflows for investments inIntangible assetsTangible assetsMusical productionAcquisition of participations
Changes to the scope of consolidationDisposal of assetsInterest incomeNet cash used in investment activities
Capital increase at Deutsche Entertainment AGPaid-up share capital in accordance with IAS 22Financing the acquisition of STELLA assetsCosts of raising capitalChanges to financial debtsInterest expenditureMinority interestsNet cash from financing activities
Net increase in liquid fundsEffects exchange rate changesLiquid funds at beginning of yearLiquid funds at end of year
Dec. 31, 1999in TDM Dec. 31, 2000
* thereof trustee accounts TDM 13.793
consolidated financial statements 31
d e v e l o p m e n t o f e q u i t y i n t h e g r o u p
Balance as of Dec 31, 1998
Conversion of capital into in euroUnappropriated profit available for distributionChanges from currency conversionBalance as of Dec. 31, 1999
Capital increaseto acquisitionsCosts of raising capitalUnappropriated profit available for distributionChanges fromcurrency conversionBalance as of Dec. 31, 2000
28,047
- 1 ,8940
026,153
55,543- 2,410
0
079,286
DEAG Capital reserve
in TDM
10,917
1,8940
012,811
2,13600
014,947
DEAG subscribed
capital in TDM
2,183,400
4,366,8000
06,550,200
1,092,25900
07,642,459
Number of shares issued
33,989
01,713
- 14135,561
57,679-2,4105,191
11496,135
Balance as of Dec 31, 1998
Conversion of capital into in euroUnappropriated profit available for distributionChanges from currency conversionBalance as of Dec. 31, 1999
Capital increaseto acquisitionsCosts of raising capitalUnappropriated profit available for distributionChanges fromcurrency conversionBalance as of Dec. 31, 2000
Share capitalin TDM
0
01,713
01,713
00
5,191
06,904
Consolidatedearningsin TDM
0
00
-141- 141
000
114- 27
Currency adjustment items
in TDM
- 4,975
00
0- 4,975
000
0- 4,975
Generated capitalas of Jan. 1
in TDM
in TDM
Minority interests, which are to be reported separately to outside capital and share capital according to IAS 27.26, composed as follows:
223
2,886- 53
3,056
Balance as of Dec. 31, 1999
Minority interests in paid-up capitalMinority interests in resultBalance as of Dec. 31, 2000
32 consolidated financial statements
d e v e l o p m e n t o f f i x e d a s s e t s i n t h e g r o u p
45,116
146,401- 8,151
- 1623
491183,864
14,035
27,304- 2,804
3,239- 5
- 66841,101
142,763
31,081
138
8,937- 1,395
00
07,680
0
0000
00
7,680
138
0
57,574000
057,574
0
19,007000
019,007
38,567
0
185
4,773- 7
- 1780
04,773
100
00
1000
00
4,773
85
4,679
10,331- 280
- 1,83310
- 29612,611
2,087
2,376- 2511,447
- 1
- 6884,970
7,641
2,592
1,461
433- 44
491
2902,190
950
347- 10
21- 4
291,333
857
511
7,493
2,038- 1,837
1,9460
- 219,619
6,519
159- 1,831
1,8710
- 66,712
2,907
974
31,160
62,315- 4,588
012
51889,417
4,379
5,415- 712
00
- 39,079
80,338
26,781
Fixedassets
Financialassets
MusicalproductionAdvances
Other plant,office and
business fittings
Technicalplant andmachines
Land andbuildings
Intangibleassets
Fixedassets
Financialassets
MusicalproductionAdvances
Other plant,office and
business fittings
Technicalplant andmachines
Land andbuildings
Intangibleassets
Acquisitioncosts in TDM
Balance Jan. 1, 2000
AdditionsDisposalsTransfersCurrency effectsChanges to thescope of consolidationBalance Dec. 31, 2000
Depreciationin TDM
Balance Jan. 1, 2000
AdditionsDisposalsTransfersCurrency effectsChanges to thescope of consolidationBalance Dec. 31, 2000
Stated value Dec. 31, 2000
Stated value Dec. 31, 1999
consolidated financial statements 33
2 . c o n s o l i d a t i o n p r i n c i p l e s
Scope of consolidation
The consolidated financial statements include Deutsche EntertainmentAG and subsidiaries under its uniform management or where DEAG hasthe majority of the voting rights, either indirectly or directly. Companiesbought or sold over the course of the financial year are included from
the time of acquisition and up to the date of disposal respectively. Thescope of consolidation includes thirty-three fully consolidated domesticand foreign companies as of December 31, 2000. In total, eight jointventures are proportionally consolidated, six participations are valued asassociated companies according to the equity method. Two participationsare reported at acquisition cost.
1 . b a s i s o f p r e s e n t a t i o n
The consolidated financial statements of Deutsche Entertainment AG(DEAG) as of December 31, 2000 are prepared applying § 292 a GermanCommercial Code in accordance with the regulations of the InternationalAccounting Standards Committee (IASC), London, as valid on the balancesheet date. They comply with the European Union directive concerningconsolidated accounting (European directive 83/349/EEC).
The consolidated financial statements are based on the annual financialstatements of consolidated companies. These are prepared according toconstantly and uniformly applied statement presentation principles andvaluation principles and applying the German Commercial Code (HGB)and the German Stock Corporation Act (AktG). In the case of foreigncompanies, they are drawn up in accordance with the relevant nationalregulations.
Existing options are exercised to produce extensive compliance withIAS at the level of the commercial annual financial statements. Anydifferences in statement reporting and valuation are explained in thenotes. There have been no changes to the statement reporting and valua-tion principles since the previous year. Individual financial statements of
companies included are drawn up on the balance sheet date for consoli-dated financial statements.
Valuations based on fiscal regulations are not included in the consolida-ted financial statements. In accordance with the IAS rules, the transitionof valuations occurred outside the commercial individual accounts, atGroup level in Financial Statements II.
Items combined in the balance sheet and in the Group profit and lossaccount for greater clarity are explained in the notes. The break-down ofthe balance sheet and the Group profit and loss account complies withthe regulations of IAS 1. According to IAS 1, a distinction is made betweenlong-term and short-term loans. In this context, short-term is taken asmeaning liabilities and accruals due within one year.
When producing the consolidated financial statements, it is necessary tomake estimates and assumptions to a very limited degree. These canimpact the level and recognition of reported assets and debts, incomeand expenditure as well as contingent liabilities. Real values can subse-quently deviate from these estimates.
n o t e s
In addition to Deutsche Entertainment AG as the parent company, the following companies are included in the in the consolidated financial statements at thebalance sheet date, in accordance with the regulations of full consolidation:
100 %
100 %100 %100 %100 %100 %100 %100 %
Companies
Broadway Berlin Gesellschaft für Musical and Eventmarketing mbH, Berlinwith the following subsidiaries:Wintergarten Varieté Theater Betriebs GmbH, BerlinFriedrichsbau Varieté Betriebs- and Verwaltungs GmbH, StuttgartBroadway Musical Management GmbH, HamburgMusical Betriebsgesellschaft Neue Flora GmbH, HamburgMusical Betriebsgesellschaft Operettenhaus GmbH, HamburgMusical Betriebsgesellschaft Starlight Express Theater GmbH, BochumMusical Betriebsgesellschaft Stuttgart International GmbH, Stuttgart
Shareholding
34 consolidated financial statements
100 %100 %100 %100 %75 %
55,29 %100 %
100 %100 %100 %100 %
100 %100 %70 %51 %
100 %
100 %100 %100 %100 %100 %100 %90 %
100 %
100 %
Companies
Musical Betriebsgesellschaft Potsdamer Platz GmbH, BerlinBetriebsgesellschaft Music-Hall GmbH, StuttgartSMR STELLA Musical Reisen GmbH, HamburgSTELLA Academy GmbH, HamburgAdagio Gastronomie GmbHHegener + Glaser AGConcert Concept Veranstaltungs GmbH, Berlinwith the following subsidiaries:Berlin Ticket Theaterkassen GmbH, BerlinBerlin Ticket Telefonischer Kartenservice GmbH, BerlinUnicorn Entertainment Services GmbH, BerlinKultur- and Kongresszentrum Jahrhunderthalle GmbH, Frankfurt/MainGastronomie Jahrhunderthalle Betriebsführungsgesellschaft mbH, Frankfurt/MainLSG Event GmbH, Frankfurt/MainMusikkontor NRW Veranstaltungs GmbH, AachenB.E.S.T. Veranstaltungsdienste GmbH, BerlinCoco Tours Veranstaltungs GmbHwith the following subsidiaries:Balou Entertainment Konzertagentur mbH, CologneMillennium Concerts Konzertagentur GmbH, MunichB+R Event AG, Glattbrugg, SwitzerlandEM Event Marketing AG, Glattbrugg, SwitzerlandFortissimo AG, Glattbrugg, SwitzerlandLa Isla Entertainment S.L., Palma de Mallorca, SpainGood News Productions AG, Glattbrugg, SwitzerlandEntertainment Media & Commerce GmbH (previously Give & Take), Berlinwith the subsidiary:bravo charlie Vermögensverwaltungs AG, Berlin
Shareholding
50 %50 %50 %50 %50 %50 %
33,3 %33,3 %
Companies
Marshall Arts Ltd., London, Great BritainTicketnet Ltd, London, Great BritainPalast Management and Veranstaltungs GmbH, BerlinWaldbühne Schwarzenberg Betriebsgesellschaft mbH, BerlinApollo Varieté Betriebs GmbH, DüsseldorfCity Werbeconcept Gesellschaft für Werbung and Plakatierung mbH, BerlinVelomax Berlin Hallen Betriebs GmbH, BerlinCEG Veranstaltungsconcept and Verwaltungs GmbH, Berlin
Shareholding
The following companies are operated as joint ventures and incorporated according to the share of capital held directly or indirectly by Deutsche Entertainment AG in accordance with the regulations on proportional consolidation:
consolidated financial statements 35
The changes to the scope of consolidation as a result of disposals were as follows:
04/01/200004/01/200004/01/200004/01/200004/01/200004/01/200004/01/200010/01/200001/01/200001/01/200007/01/2000
Addition from incorporation
100 % of the shares in Musical Betriebsgesellschaft Neue Flora GmbH, Hamburg100 % of the shares in Musical Betriebsgesellschaft Operettenhaus GmbH, Hamburg100 % of the shares in Musical Betriebsgesellschaft Starlight Express Theater GmbH, Bochum100 % of the shares in Musical Betriebsgesellschaft Stuttgart International GmbH, Stuttgart100 % of the shares in Musical Betriebsgesellschaft Potsdamer Platz GmbH, Berlin100 % of the shares in Musical Betriebsgesellschaft Music- Hall GmbH, Stuttgart100 % of the shares in STELLA Academy GmbH, Hamburg
75 % of the shares in Adagio Gastronomie GmbH, Berlin50 % of the shares in EIB European Insurance Brokers GmbH, Hamburg50 % of the shares in ECM Entertainment Center Management GmbH, Berlin50 % of the shares in ShowNet GmbH, Berlin
Balance sheet dateof initial consolidation
Disposal by sale and other disposals
SSS Special Security Service GmbH, BonnASK Gesellschaft für Alarm-, Sicherheits- and Kommunikationssysteme GmbH, DürenCTS Betriebs GmbH, Berlin
07/01/200007/01/200007/01/2000
10/01/200004/01/200007/01/200007/01/200007/01/200007/01/200009/01/200001/01/200012/31/2000
Addition from acquisition
100 % of the shares in Millennium Concerts GmbH, Munich100 % of the shares in SMR STELLA Musical Reisen GmbH, Hamburg
90 % of the shares in Good News AG, Glattbrugg/Opfikon, Switzerland100 % of the shares in EM Event Marketing AG, Glattbrugg/Opfikon, Switzerland100 % of the shares in B+R Event AG, Glattbrugg/Opfikon, Switzerland100 % of the shares in Fortissimo AG, Glattbrugg/Opfikon, Switzerland
55,29 % of the shares in Hegener + Glaser AG, Munich25 % of the shares in Palast Management GmbH, Berlin33 % of the shares in START Ticket GmbH, Bad Homburg
Balance sheet dateof initial consolidation
In comparison with the previous year, the scope of consolidation changed as follows:
50 %50 %50 %50 %49 %
33,3 %
Companies
ECM Urban Entertainment Center Management GmbH, BerlinDouble e GmbH, BerlinShowNet GmbH, BerlinEIB Entertainment Insurance Brokers GmbH, HamburgReal Merchandising GmbH, BerlinSTART Ticket GmbH; Bad Homburg
Shareholding
The following companies are included at equity in the consolidated financial statements:
Balance sheet dateof disposal
36 consolidated financial statements
Of consolidated sales, sales of TDM 30,188 relate to the period that theGood News Group was included in the scope of consolidation. Earningsafter tax relating to the Good News Group amount to TDM 3,510 for the
period of inclusion. The changes to the scope of consolidation from dis-posals did not have a material impact on Group assets.
In addition to changes to the scope of consolidation, the acquisition ofthe material assets of STELLA AG significantly impacted the asset andincome situation. As of April 1,2000, net assets worth TDM 40,000
were acquired for the equivalent amount in cash from the insolvencyestate of what was STELLA AG. The acquisition was fully financed byoutside capital.
-2,785554
-2,231
Loss in the individual financial statement from sale of participationExtra earnings in the GroupDeconsolidation earnings in the Group
Acquired net assets
Fixed assetsTrade receivablesOther assetsLiquid assetsPre-paid expensesAccrualsTrade account payablesOther liabilitiesDeferred income
Goodwill
Total impactAcquisition-related outflow of fundsChanges to net liquidity
Goodwill relates to the difference between acquired net assets and the market value of the 1,092,259 shares issued for this purpose. According toIAS 22, the difference impacted the paid-up capital of the Group by the same amount.
8251,6591,007
22,488144314771
1,45619,1814,401
54,343
58,7440
22,488
The acquisition of Good News Productions AG impacted the asset and income situation as follows:
The following effects were produced with regard to the income situation:
Changes to the scope of consolidation due to the acquisition of 90 % ofthe shares in Good New AG produced a significant impact.
Effective July 1, 2000, DEAG AG acquired 90 % of the shares in GoodNews AG as part of a share swap. The remaining changes did not have amaterial impact on the consolidated financial statements. The acquisition
of the assets from the insolvency estate of what was STELLA AG does notrepresent any change to the scope of consolidation in a legal sense.
However, due to its economic significance, any amounts relating toSTELLA activities are reported in the corresponding notes on materialpositions on the balance sheet and the statement of earnings.
in TDM
in TDM
consolidated financial statements 37
3 . f o r e i g n c u r r e n c y t r a n s l a t i o n
In the individual financial statements, short-term receivables and liabili-ties as well cash at banks in foreign currencies are translated intoDeutschmarks using the middle rate on the balance sheet date. Businessactivities in Euro are translated at the official translation rate of DM1,95583 = EUR 1.
We regard our subsidiaries in Switzerland and Great Britain as indepen-dent companies active in their own economic areas and each with theirown currency.
Currency translations for foreign financial statements into Deutsch-marks takes place in accordance with IAS 21 on the basis of the con-cept of a working currency at the middle rates on the balance sheetdate.
The working currency is the relevant national currency. Differences dueto changes in exchange rates arising when valuing net assets againstvalues from the previous year are not treated as income. Currency dif-ferences are reported as a special item in the equity position.
4 . s u m m e r y o f s i g n i f i c a n t a c c o u n t i n g p r i n c i p l e s
Notes on the balance sheet
Intangible assets purchased for cash are reported in the assets section ofthe balance sheet at acquisition cost and, where depreciable, are writtenoff according to their scheduled economic useful life on a straight-linebasis. Intangible assets produced in the company are not capitalised.
Acquired goodwill in connection with acquisitions are reported asassets on the balance sheet and written off using the straight-linemethod in accordance with IAS 22. Useful life is taken to be eight totwenty years.
Tangible assets are valued at acquisition or production costs plus ancil-lary costs, less rebates and in the case of depreciable goods less depre-ciation due to wear and tear. The costs of financing are not capitalised.Depreciation is booked applying the straight-line method and accordingto scheduled useful life, unless actual usage makes diminishing balancedepreciation more appropriate. Moveable assets with acquisition costs ofup to DM 800 (low-value assets) were written off in full in the year ofacquisition.
Any necessary maintenance costs are shown as expenditure, providedthey do not represent any significant alteration or extension to the possi-bilities of usage.
Methods of consolidation
With capital consolidation, the acquisition costs of participations are setoff against equity at the time of incorporation or acquisition of the sub-sidiary in question.
Depreciation of subsidiaries value-adjusted over the previous years wasnot included again for the purposes of consolidation. Ancillary costs inconnection with the acquisition of participations reported as assets in theindividual financial statements, are included in the Group as expenditure.Inter-group profit and losses from the sale of participations within theGroup are not included.
Differences from the capital consolidation are posted as goodwill in theDeutsche Entertainment AG consolidated balance sheets, to the extentthat there are non-appropriable hidden reserves or charges for individual
assets or debts. With indirect participations, goodwill is calculated in thecontext of proportional consolidation. Goodwill is written of by thestraight-line method over the scheduled useful life of eight to twentyyears. In individual cases, goodwill was written off fully in the year of itsaccrual.
Receivables and corresponding liabilities/accruals between the consoli-dated companies are offset against each other. Interim earnings frominter-Group services were eliminated. The participation in an associatedcompany valued by the equity method, is booked at the proportionalequity in accordance with the book value method.
In the context of proportional consolidation, the respective assets anddebts were included in the consolidated financial statements accordingto the share of the capital held by the parent company. Consolidationfollows the same method.
9,723386
14,8893,014
79311,14910,042
Consolidation-related goodwillFixed assetsCurrent assetsAccrualsFinancial debtsOther liabilitiesNet assets
in TDM
54,772- 53,756- 1,167- 151
IncomeExpensesGoodwill depreciationNet income for the year
in TDM
At the balance sheet date, joint ventures impacted Group assets and debts, income and expenses as follows:
38 consolidated financial statements
Tangible assets used on the basis of leasing contracts are reported asassets and written off in accordance with IAS 17 if the conditions of”Capital Leasing” are met. In 2000, there were no items to be posted asassets in accordance with the regulations of 17.
Capitalised musical productions relate to production costs that have arisenfor the musicals to be staged. The amounts reported as assets are writtenoff over the scheduled residual run of the musicals and thereby pro ratatempores. From the reported book value on the balance sheet date, TDM9,515 relate to the musical ”Starlight Express”, TDM 12,329 to the musi-cal ”The Hunchback of Notre Dame” and TDM 13,760 to ”Dance of theVampires”. Distribution costs and outside capital interest were not reportedas assets.
Shares in non-consolidated companies are reported in the balance sheetat acquisition cost. In accordance with IAS 28, shares in associated com-panies are reported in the balance sheet at the proportional nominalvalue of the shares plus the proportional results less dividends received.
For the allocation of differential amounts from the initial consolidationthe same principles apply as for full consolidation. The valuation ofinventories was done at acquisition costs. If the value to be used on thebalance sheet date is below the acquisition cost, the corresponding valueadjustments are made.
Receivables, other assets and liquid funds are reported in the balancesheet at nominal value. Any necessary individual value adjustments,which depend on potential risk of default, are taken into account.
Pre-paid expenses and deferred income were reported with amounts paidin advance. Accruals are reported at the amount estimated by soundcommercial judgement to be needed on the balance sheet date to coverfuture payment obligations, identifiable risks and uncertain obligations.
Since January 1, 1996, deferred taxes have been based on different taxamounts from assets and liabilities in the commercial balance sheet andtax statement, on circumstances in the context of the Financial State-ments II, on consolidation methods and on realisable losses carried for-ward. Adjustments were not made for previous years.
Deferred taxes on the asset side are shown separately in the balance sheet.Deferred taxes on the liabilities side are included in accrued taxes. Liabili-ties are entered on the liabilities side at nominal value or the repaymentamount, if greater. Advances received include pre-payments from localconcert organisers for artists fees and for galas. Advance payments relateto concerts after the balance sheet date. Valuation is at nominal value.
Deferred income includes income from pre-paid ticket sales for concertsand theatres as well as variety performances after the balance sheet date.The amount reported is at nominal value.
According to IAS 25, short-term financial investments are valued at themarket value. Short-term financial investments are assets, which can berealised at any time because of their nature and are not intended to beheld for more than one year. The market value used is the amount that acontractual buyer is prepared to pay.
Income from the valuation of the market value are reported in accor-dance with IAS 25.42, affecting earnings accordingly. When preparingthe consolidated financial statements, we have already applied IAS 40”Investment Properties” voluntarily. It is mandatory to apply the standardfor financial years beginning after December 31, 2000.
According to IAS 40, land and buildings (referred to as investment pro-perties) can be reported in the balance sheet at market value. Statementpresentation of this kind calls for any profit from value increases to bereported, affecting income accordingly.
Note on profit and loss account
Sales includes all income for payment already received. Performance fora concert, a show or a tour is considered rendered at the end of the con-cert or show. With a tour, this is proportional for concerts already held.
Revenue recognition is booked when performance has been rendered.Interest and other costs on loans are booked as current expenditure.
Moreover, as a consolidated holding company DEAG also generated salesin the 2000 financial year as in previous years.
In particular, sales include amounts connected with consultancy andmanagement services provided outside the Group. Sales also includeamounts relating to external Group transactions in the participation di-vision. This relates to income of TDM 24,000 resulting from the applica-tion of IAS 25.
Musical productionsBuildingsTechnical plant and machinesOperating and office equipment
2 to 5 years7 years5 years
3 to 8 years
Scheduled depreciation of property, plant and equipment and the musical productions is based in principle on the following useful lifes:
consolidated financial statements 39
5 . s e g m e n t r e p o r t i n g
In accordance with the rules of IAS 14, individual financial statementsare split into segments according to divisions and regions of operation,with presentation based on our internal reporting. Segment reporting is
to clarify earnings power and future prospects for individual businessactivities within the Group. The DEAG Group divides its business activi-ties into four segments, described in the management report in detail.
Notes on segments
Segment data was determined as follows:
Internal sales relate to payments between Group companies within a seg-ment. The exchange of performance between segments and between seg-ments and the holding company is adjusted in the consolidation column.Moreover, the consolidation column also contains DEAG holding com-pany performance. Performance is calculated on the basis of prices in
line with the market and corresponds to prices charged to third parties.The segment earnings (EBIT) include depreciation of goodwill and otherfixed assets as well as income from the liquidation of contractualwarrantee accruals.
Investments include tangible assets, intangible assets and external parti-cipation values. Return on sales is calculated from segment earnings(EBIT) divided by segment sales. Return on net assets is determined fromsegment earnings (EBIT) divided by net assets.
in TDM
SalesOther revenue- thereof internal revenueTotal income
Segment result (EBIT)
Result of associated companiesInterest resultMinority interests
Depreciation- of goodwill- of other fixed assetsBook value of segment assetsSegment loansinvestmentsFull-time employees as of Dec. 31, 2000
Return on salesReturn on net assets
Theatres2000 1999
274,363 19,37616,806 4,572
50 140291,169 23,948
4,537 1,218
0 0- 861 - 60
138 0
600 53021,467 292
125,124 8,150107,654 8,19975,494 2201,677 186
1.7 % 6.3 %26.0 % > 100 %
Artists & Tours2000 1999
161,767 113,2542,238 6,6821,430 940
164,005 119,936
- 8,920 4,999
0 0224 - 636
- 355 0
3,435 1,241417 124
109,097 70,956111,891 72,515
886 9,32738 25
- 5.5 % 4.4 %< 0 % > 100 %
Urban Entertainment2000 1999
62,973 48,18623,414 15,7042,690 4,493
86,387 63,890
4,457 6,090
1 01,425 - 1,425
270 - 59
320 610735 551
62,457 68,64758,445 55,736
490 715118 386
7.1 % 12.6 %> 100 % 47.2 %
Media & Commerce2000 1999
898 1,2812,339 41
31 903,237 1,322
282 - 555
- 1,052 2910 - 340 0
0 02 3
1,182 5792,575 1,1791,322 100
6 5
31.4 % - 43.3 %> 100 % < 0 %
Segmentdata
40 consolidated financial statements
Transition from segment data to Group data
Other information
The transition statements shows the elimination of internal Group sales, receivables and liabilities, expenses and income as well as DEAG Holdingincome and expenses.
in TDM
SalesOther incomeThereof internal salesTotal income
Segment earnings (EBIT)Income and expenses not allocated (incl. consolidation effects)Operating result (EBIT excluding extraordinary income)
Result of associated companiesInterest resultResult from ordinary operations
Income taxExtraordinary incomeNet income/loss for the year
Minority interests Consolidated earnings
Total for Segmente 2000 1999
500,001 182,09644,797 26,999
4,201 5,663544,798 209,095
Consolidation2000 1999
6,056 - 12,127- 1,575 - 998- 4,201 - 5,6634,481 - 13,125
Group2000 1999
506,057 169,96943,222 26,001
0 0549,279 195,970
356 11,75211,124 - 1,74311,480 10,009
-1,051 29- 3,176 - 1,6477,253 8,391
- 2,115 - 6,6180 0
5,138 1,772
53 - 595,191 1,713
in TDM
Book value of segment assetsShares in associated companiesAssets not allocatedConsolidated assets
Segment loansNon-allocated loans
Consolidated loans
Net assets
Full-time employees as of Dec. 31, 2000Return on salesReturn on net assets
Group2000 1999
297,860 148,3336,993 108
65,375 11,115370,228 159,556
280,565 137,629- 9,529 - 20,613
271,036 117,016
99,192 42,540
1,879 2962,3 % 5,9 %
11,6 % 23,5 %
consolidated financial statements 41
113,254
15,6960
70,956
10,6590
161,767
38,56830,188
109,097
5,68623,635
in TDM
Sales from the Artists & Tours segmentthereof:Marshall Arts (Great Britain)Good News AG (Switzerland)
Book value of Artists & Tours segment assetsthereof:Marshall Arts (Great Britain)Good News AG (Switzerland)
19992000
The return on sales at the Group level is calculated from the operatingresult (EBIT before extraordinary income) divided by consolidated sales.The return on net assets for the Group is calculated from the operatingresult (EBIT before extraordinary income) divided by consolidated net
assets. The regional breakdown of segment data is shown below. TheGroup companies are the Good News Group in Switzerland and MarshallArts Ltd. (Great Britain), acquired in 2000.
6 . m a t e r i a l e x p e n s e s
The total cost of materials amounts to TDM 244,347 (previous year: TDM143,458). TDM 15,101 (previous year: TDM 40,895) relates to materialsused and TDM 229,246 (previous year: 102,563) to purchased services in
connection with events held. The increase in material costs is, at TDM49,951, mainly the result of the acquired musical activities of STELLA,thereof TDM 36,741 relating to license expenditure.
7 . p e r s o n n e l e x p e n s e s
Personnel costs rose by TDM 106,595 in 2000. The increase was due solely to the acquisition of the musical theaters.
17,6772,930
020,607
108,41318,789
0127,202
RemunerationSocial security contributions- thereof pensions
Overall personnel costs are broken down as follows:
From the TDM 106,594 increase in personnel expenditure, TDM 96,836 relate to STELLA.
1999in TDM 2000
42 consolidated financial statements
8 . a v e r a g e n u m b e r o f e m p l o y e e s o v e r t h e y e a r
18625
3865
24626
1,89334
3874
382,357
“Heads“
TheatresArtists & ToursUrban EntertainmentMedia & CommerceHolding (DEAG)Group
1999in TDM
2000in TDM
9 . o t h e r o p e r a t i n g i n c o m e
Other operating income amounts to TDM 43,222 (previous year: TDM26,001). The most significant items relate to income from the liquidationof accruals at TDM 6,526 (previous year: TDM 11,358), insurance pay-ments at TDM 105 (previous year: TDM 5,551), profit contribution andcontribution to the costs at TDM 11,182 (previous year: TDM 1,388), rentalincome from subletting at TDM 919 (previous year: TDM 1,277), incomefrom the disposal of fixed assets at TDM 5,761 (previous year: TDM 847),income from canteen at TDM 1,678 (previous year: TDM 0), contributi-ons from collaborations and advertising at TDM 5,102 (previous year:TDM 340), income from the valuation of assets in accordance with IAS40 at TDM 3,750 (previous year: TDM 0), other consolidation effects at
TDM 2,744 (previous year: TDM 730) and other operating income at TDM5,455 (previous year: TDM 4,107).
The TDM 5,326 item shown in the reporting year from the liquidation ofaccruals relates to accruals for contractual guarantee obligations inconnection with an acquisition performed in 1999. At the time of acqui-sition, the contractually assumed risks were valued by the contractualparties. At the balance sheet date, we have performed a revaluationfrom the point of view of continuity and based on new information.This resulted in the accruals of TDM 5,326 being liquidated.TDM 16,049 is allocated to STELLA.
As of December 31, 2000, the Group employed 1,879 full time employees (FTE; Dec. 31, 1999: 296).
1 0 . o t h e r o p e r a t i n g e x p e n s e s
Other operating expenditure at TDM 138,812 (previous year: TDM18,476) include rent and associated costs at TDM 21,039 (previous year:TDM 6,424), consultancy fees at TDM 6,690 (previous year: TDM 2,734),sales and advertising costs at TDM 50,382 (previous year: TDM 2,646),insurance premiums at TDM 1,573 (previous year: TDM 736), travelexpenses at TDM 4,059 (previous year: TDM 1,245), communication costsat TDM 2,426 (previous year: TDM 1,013), losses from the disposal offixed assets at TDM 2,884 (previous year: TDM 867), value adjustments
on inventories at TDM 4,555 (previous year: TDM 1,723), expenditureoutside the period at TDM 567 (previous year: TDM 678), repairs andmaintenance at TDM 6,664 (previous year: TDM 1,245), other consolida-tion effects at TDM 1,792 (previous year: TDM 378), other personnelcosts at TDM 3,000 (previous year: TDM 78), canteen materials at TDM1,203 (previous year: 0 TDM) and other operating expenditure at TDM3,1978 (previous year: TDM 5,561).TDM 92,187 is allocated to STELLA.
1 1 . i n v e s t m e n t r e s u l t
The reported amount of TDM – 1,051 (previous year: TDM 29) mainly relates to the proportional earnings from ShowNet GmbH, Berlin at TDM –1,038,reported in the consolidated financial statements as an associated company.
consolidated financial statements 43
1 2 . n e t i n t e r e s t i n c o m e
Earnings from interest include:
Higher interest expenses of TDM 1,529 resulted largely from higher indebtedness.
1 3 . t a x e s o n i n c o m e
The determination of the taxes on income position in line with IAS 12covers the calculation on deferred taxes on different valuations of assetsand liabilities in the commercial and tax balance sheet, consolidation
procedures and on loss carry forwards which can be realised. A discountis made on prepaid taxes if the realisation of the expected tax advantagesis considered improbable.
According to origin, taxes on income break down as follows:
The tax rate of 29.2 % is subject to various factors described below.
In Germany as a result of existing profit transfer agreements, the resul-ting losses were used optimally in regards of taxation, with no taxesbeing paid on earnings. The tax amount resulted almost entirely fromcorporate tax credit due to the change in company form.
The tax incurred in Switzerland relates to the earnings from ordinaryoperations from the Good News Group acquired by us in 2000. Deferredtaxes assumed tax rate 40 % on the loss carry forward of DEAG wascalculated in line with IAS 12 using the future tax rates. It is assumed
here that this loss carry forward is utilised completely over the nextthree years.
At TDM 9,200 deferred taxes from consolidation procedures relates todeferred taxes on the liabilities side and TDM 1,127 on the assets side. Inaddition there is an increase due to the depreciation in goodwill in theconsolidated earnings.
This does not produce a deduction against tax and at the same timeaccording to IAS 12.15 cannot be included in the deferred taxes positiondue to the differences in the time period.
434- 2,081
- 1,647
2,962- 6,138- 3,176
Other interest and similar incomeInterest and similar expenses
- 4,64000
- 1,553- 425
- 6,618
1,205- 1,473
3
6,223- 8,073
- 2,115
Taxes paid/owedGermanySwitzerlandGreat Britain
Deferred taxesfrom loss carry forwards from consolidation adjustments
Total
1999
1999
in TDM 2000
in TDM 2000
44 consolidated financial statements
1 4 . e a r n i n g s p e r s h a r e
6,550,2001,092,2597,642,4597,071,330
Number of shares on January 1, 2000Issue of new bearer shares on July 1, 2000Number of share on December 31, 2000Weighted average of shares (previous year: 4,730,700 shares)
Shares
Earnings per share is calculated by dividing the unappropriated profitavailable for distribution by the weighted number of outstanding shares.
As of December 31, 2000 and December 31, 1999 there were no sharesoutstanding to potentially dilute the earnings per share.
1 5 . i n t a n g i b l e a s s e t s
The classification and development of intangible assets can be seen from the consolidated schedule of assets.
1 6 . p r o p e r t y , p l a n t a n d e q u i p m e n t
The breakdown and development of property, plant and equipment canbe seen from the consolidated schedule of assets. In the financial year2000, investments totalling TDM 17,575 (previous year: TDM 730) weremade in property, plant and equipment.They concern- TDM 2,038 on land/buildings
- TDM 433 on technical equipment and machinery- TDM 10,331 on other equipment, office and business equipment- TDM 4,773 on advances paid on fixed assets and assets under constructionAs of December 31, 2000 there were property, plant and equipmenttotalling TDM 11,130 from the acquired STELLA activities.
The increase in goodwill results from the acquisition of stakes in theGood News Group, Millennium Concerts, Hegener + Glaser AG and PalastManagement Veranstaltungs GmbH, Berlin. Additions of derivativegoodwill in the initial consolidation total TDM 56,998 (previous year:TDM 10,607).
This was offset by disposals of TDM 2,801 in the framework of thedeconsolidation of Special Security Services GmbH. Total depreciationon goodwill resulting from consolidation amounted to TDM 4,355 (previous year: TDM 2,381).For STELLA there are pro rata book values of TDM 3,133.
21326,567
126,781
2,36577,456
51780,338
Licenses, trade marks and patentsGoodwillAdvances paidTotal
December 31, 1999in TDM December 31, 2000
The calculation of the number of shares to determine undiluted earnings per share according to IAS 33 is as follows:
The book values are divided as follows:
consolidated financial statements 45
The development of financial assets is shown in the consolidated schedule of assets. TDM 6,993 (previous year: TDM 108) are shares inassociated companies and TDM 686 (previous year: TDM 30) two parti-
cipations which were not booked at equity since they are not material tothe Group's assets, liabilities and net income.
1 8 . f i n a n c i a l a s s e t s
Incomplete projects include personnel costs and other costs for projects in 2001.
With the acquisition of the STELLA activities, musical productions havebeen capitalised for the first time. Due to the material nature and inde-pendent character this position is booked separately.The net book value of TDM 38,567 posted as of December 31, 2000
includes the following:- TDM 9,515 for the musical "Starlight Express"- TDM 12,329 on Disney's "The Hunchback of Notre Dame"- TDM 13,760 on "Dance of the Vampires".
1 7 . m u s i c a l p r o d u c t i o n s
1 9 . i n v e n t o r i e s
2 0 . o t h e r r e c e i v a b l e s , o t h e r c u r r e n t a s s e t s a n d s e c u r i t i e s
Other current assets includes at nominal value amounts due to our con-tract partner of TDM 15,167 (previous year: TDM 26,333) in the"Jahrhunderthalle" project. This position concerns outstanding paymentsof the contractually warranted risk compensation. This amount due is tobe paid by October 31, 2001.
Amounts due to the tax authorities of TDM 7,706 and loan claims ofTDM 12,946 are booked. There are amounts due from insurance compa-nies from insurance claims totalling TDM 843 (previous year: TDM2,385) which are also booked under other current assets.
Receivables include TDM 946 of long-term receivables with a remainingterm of more than one year (previous year: TDM 12,89). In the consoli-dated financial statements of the financial year short-term financial
investments in securities and land are value at market value in line withIAS 25 and IAS 40 respectively. The market value for the valuation of theshort-term financial investments has been determined on the basis ofcontracts agreed and provisional agreements. This produces the marketvalue of the sales revenues to be generated.
The change in market value, i.e. the difference between acquisition costsand the current value has been booked as TDM 27,750, a figure whichimpacts the profit and loss account.
Of this TDM 24,000 is for securities and TDM 3,750 for land. Set offagainst this is expenditure from the sale of the respective assets of TDM5,018. After deferred taxes this has a net result of TDM 13,639. In mattersof realisation, refer to our remarks in the management report.
2 1 . l i q u i d a s s e t s
Liquid funds include moneys for outstanding artists tax from the RollingStones tour in 1998 (TDM 13,793). These are held in USD in trusteeaccounts (restricted cash). The corresponding liabilities are booked under
other liabilities in DM. In line with contracts made the currency risk fromthis position is to be covered by the Rolling Stones. The group is also setto receive interest income from the USD investments.
0355372
15,86616,593
29250
1,56713,55915,405
Raw materials, supplies and purchased goodsWork in progressFinished products and goodsAdvances madeInventories
December 31, 1999in TDM December 31, 2000
46 consolidated financial statements
2 2 . p r e - p a i d e x p e n s e s
In the prepaid expenses position the insurance premiums, rents paid in the reporting year and prepaid third-party tickets are booked. The totalamount impacts the statement of earnings in the 2001 financial year.
2 3 . d e f e r r e d t a x e s
Last year there were prepaid taxes of TDM 75 resulting exclusively frommatters relating to consolidation. In the current year prepaid taxes von
TDM 6,223 resulting from the loss carry forward deferred taxation are tobe booked, plus TDM 1,127 from matters relating to consolidation.
2 4 . s h a r e h o l d e r s ’ e q u i t y
The share capital of Deutsche Entertainment AG totals € 7,642,459. Byresolution of the annual general meeting on May 26, 1999 the sharecapital was increased by € 968,426.53 from company funds to round offthe share amount to full cents per share.
At the same time the shares were converted from a notional value of DM5.00 to EUR 1.00. Share capital is now divided into 7,642,459 shares.
The capital reserve contains the premium from the issue of shares byDeutsche Entertainment AG, reduced by the capital increase from com-pany funds to adjust the share capital due to the conversion to the Euro.The addition of TDM 53,133 booked in the consolidated financial state-
ments concerns a TDM 55,543 difference from the consolidation of theacquisition of Good News AG at the current value (IAS 22), reduced bythe costs of procuring capital of TDM 2,410 (SIC 17). The capital generatedincludes results posted in the past for companies included in the scopeof consolidation of the consolidated financial statements and the conso-lidated earnings of the current financial year. As of December 31, 2000,authorised capital totalled € 2,182,841.
The currency adjustment position relates to the changes of the foreignexchange rates in translating the annual financial statements of foreigncompany. The change in equity capital is shown in the schedule of con-solidated equity.
2 5 . a c c r u e d t a x e s
Accruals relates to expected taxes for the 1999 financial year and for the previous year. There are also deferred taxes totalling TDM 9,700 relatingentirely to matters of consolidation.
2 6 . o t h e r a c c r u a l s
Other Accruals include the contractual warranties from the acquisition ofthe Jahrhunderthalle at TDM 12,000 (previous year: TDM 21,489), theshortfall at concert concept resulting from subletting their premises ofTDM 898 (previous year: TDM 1,098) and outstanding invoices, risksfrom ongoing operations and personnel expenses. As at the balance sheetdate TDM 12,306 of the posted accruals concern the business operationsof the STELLA Group.
To continue the musical business Broadway Musical Management GmbH(BMM) also acquired the ticket sales system Ticket Plus from the liqui-dator from the insolvency proceedings. Due to the fact that the liquida-tor did not reconcile this sales system with the financial account of the"old STELLA " for the 1999 financial year and the period of insolvencyup to March 31, 2000, there was no general reconciliation of the system
as at December 31, 2000 and the differences from the period before April1, 2000 were not completely clarified. Income and expenses in the BMMstatement of earnings were fully reconciled. As at the balance sheet dateof December 31, 2000 there was a liability of DM 2.7 million in the BMMfinancial accounting where it was not possible to book individual posi-tions. For reasons of prudence this amount was booked as an accrual inthe BMM balance sheet.
The liquidator confirmed to us that he has receivables totalling nomore than DM 1.5 million. As of the date for the preparation of theannual financial statements, no concrete claims to this accrual hadbeen made. With the nature of the business of BMM it is clear thatonly short-term claims can be asserted. Accruals of TDM 6,000 are duein periods after 2001.
consolidated financial statements 47
2 7 . a m o u n t s d u e t o b a n k s
Amounts due to banks cover only current account liabilities with banks. The agreed rates of interest are between 5.5 % and 8.0 %. Terms of up toone year have been agreed.
2 8 . t r a d e a c c o u n t s p a y a b l e s
Trade payables continue to include advance payments received of TDM7,032 (previous year: TDM 9,864). These relate to guarantee payments made
by local organisers for tours in 2001 and advance payments for future galaevents by variety companies. All the liabilities are due within a year.
2 9 . o t h e r l i a b i l i t i e s
TDM 20,840 (previous year: TDM 20,613) of other liabilities relate to taxliabilities and TDM 3,151 (previous year: TDM 441) liabilities for social
security costs. There is a tax liability of TDM 13,793 for taxes for theRolling Stones tour in 1998. All liabilities are due within one year.
3 0 . d e f e r r e d i n c o m e
This position shows moneys taken from customers for concert and theatre tickets for events in 2000.
Contingent liabilities from guaranties, almost entirely made to third parties are:
The guarantees chiefly relate to obligations to banks.
48 consolidated financial statements
3,7536,838
December 31, 1999in TDM December 31, 2000
3 2 . c o n t i n g e n t l i a b i l i t i e s n o t i n c l u d e d i n t h e b a l a n c e s h e e t
3 1 . f i n a n c i a l i n s t r u m e n t s
According to IAS 32 financing instruments are contractual financialtransactions which include a claim to cash. As of the balance sheet date,the balance sheet contains only primary financial instruments in theform of currency receivables and trade payables, which contain not onlya credit and default risk, but also a currency risk.
The credit or default risk results from the danger that the business partnersdo not fulfil their obligations. As offsetting with our customers is ruled out,
the total currency receivables represent the maximum default risk. Thecurrency risk concerns the potential diminution of value of a receivableor the potential increase of an amount due as a result of changes in cur-rency rates.
Closed positions are considered to be receivables in a particular cur-rency which are matched by an equivalent payable in terms of timeand amount.
6,95000
6,950
Foreign currency risks in receivablesForeign currency risks in payablesClosed positionsRemaining currency risk carried by the company
in TDM December 31, 2000
The balance sheet shows the following totals:
Guarantees
consolidated financial statements 49
3 3 . o t h e r f i n a n c i a l o b l i g a t i o n s
In addition to the accruals and liabilities in the balance sheet and the contingent liabilities, there are the following financial obligations:
3 4 . l i t i g a t i o n r i s k s
Deutsche Entertainment AG and its subsidiaries are currently involved invarious cases to recover receivables and to assert licenses and trade marks.
According to the Board of Management, the risks regarding the outcomeof the litigations are in each case less than 50 %. Appropriate valueadjustments and accruals for cost risks have been made. The total valueof the cases being pursued is DM 1.0 million.
Pursuant to the provisions of the agreements with the Rolling Stones,Coco Tours Veranstaltungs GmbH is conducting a suit against theGerman tax authorities to assert exemption from artists tax pursuant to§ 50 a of the German Income Tax Act.
The cost risk is being borne by the Rolling Stones. The tax amounts havebeen booked in full under other liabilities.
For retired board members there were payments of TDM 1,377.
After the balance sheet date there were no events of material importance.
in TDM
20012002-2005Total
Obligations Rent
34,512138,994173,506
Leasing
1,2463,5234,769
Licenses
1,0803,2424,322
Total
121,706145,759267,465
3 5 . i n f o r m a t i o n o n t h e s u p e r v i s o r y b o a r d
a n d t h e b o a r d o f m a n a g e m e n t
3 6 . e v e n t s a f t e r t h e b a l a n c e s h e e t d a t e
1082,190
1083,426
Remuneration of the Supervisory BoardRemuneration of the Board of Management
19992000
Berlin, March 2001
Deutsche Entertainment AGBoard of Management
84,8680
84,868
in TDM
50 consolidated financial statements
a u d i t o r ’ s o p i n i o n
"We audited the consolidated financial statements produced by DEAGDeutsche Entertainment AG, Berlin consisting of balance sheet, state-ment of earnings, statement of changes to the scope of consolidation,cash flow statement and notes for the financial year from January 1,2000 to December 31, 2000. The company Board of Management is responsible for the preparation and content to the consolidated financialstatements. It is our responsibility to assess, on the basis of the audit thatwe perform, whether the consolidated financial statements comply withthe International Accounting Standards (IAS).
We have performed our audit of the consolidated financial statements inaccordance with German auditing regulations and in line with theGerman principles set by the German Institute of Auditors (IDW) relatingto correct auditing as well as in accordance with the InternationalStandards on Auditing (ISA). These standards require that the audit beplanned and performed in such a way that it is possible to judge withsufficient confidence whether the consolidated financial statements arefree of any material misstatements.
When determining the audit approach, knowledge about business activi-ties and the economic and legal environment of the Group is taken intoaccount along with expectations relating to potential errors. In the con-text of the audit, evidence for amounts and disclosures in the consolidatedfinancial statements are assessed on the basis of random samples. Theaudit includes assessment of the principles of statement presentationsand the key estimates by the Board of Management as well asacknowledgement of the overall presentation of the consolidated financialstatements. We are of the opinion that our audit provides a sufficientlysound basis for our assessment.
We believe that the consolidated financial statements, in accordancewith the IAS, present a true and fair view of assets, the financial andincome situation of the Group as well as flow of liquid funds for thefinancial year.
Without limiting this assessment, we refer to the following:
- as of December 31, 2000, minority interests, acquired with the intentionof selling them later, are reported under current assets securities and areincluded in the balance sheet at the market value to be settled on thebasis of concluded contracts, in accordance with IAS 25. The validity ofthe contracts depends on a non-cash contribution being made and pay-
ment of cash contributions as well as registration of the correspondingcapital increase in the German Register of Companies. Furthermore, onecontract contains a right of recission to June 2001. In another contractit is not possible to make a conclusive assessment with regard to theextent of agreed payment.
- it is not possible to sufficiently report the balance and entirety ofreceivables acquired from a ticket sales systems and other assets, accrualsand liabilities. Amounts booked and still unsettled are shown as balancedwith approximately 2,7 million in accruals. For reporting, explanationand impact of these circumstances we refer to the illustration by theBoard of Management in the notes and the management report of DEAGDeutsche Entertainment AG and the Group.
Our audit, which applies to the management report produced by theBoard of Management for the financial year from January 1, 2000 toDecember 31, 2000 covering DEAG Deutsche Entertainment AG and theGroup, has found no grounds for objection. We believe that the manage-ment report of DEAG Deutsche Entertainment AG and the Group to-gether with other information from the consolidated financial statementsoffers an accurate depiction of the situation of DEAG DeutscheEntertainment AG and the Group and accurately represents the risks offuture development.
Furthermore, we confirm that the consolidated financial statements andthe management report by DEAG Deutsche Entertainment AG and theGroup for the financial year from January 1, 2000 to December 31, 2000satisfy the requirements for exempting the company from producingconsolidated financial statements and a Group management reportaccording to German law. The audit of compliance of the consolidatedaccounting with the 7th EU directive relating to exemption from consoli-dated accounting obligation according to German Commercial Code wascarried out on the basis of the guidelines through DRS 1 ’Exemption ofconsolidated financial statements according to § 292a GermanCommercial Code’.”
Berlin, March 29, 2001
Deloitte & Touche GmbHWirtschaftsprüfungsgesellschaft
signed Corzilius signed LammersWirtschaftsprüfer Wirtschaftsprüferin
a u d i t o p i n i o n
We have awarded the following unrestricted audit certificate with a supplementary note, signed on March 29, 2000, for the consolidated financialstatements and the management report of DEAG Deutsche Entertainment GmbH and the Group for the financial year from January 1, to December31, 2000, as set out in appendix 1:
consolidated financial statements 51
s h o r t v e r s i o n o f t h e b a l a n c e s h e e t
December 31, 1999in TDM
December 31, 2000in TDM
December 31, 1999in TDM
December 31, 2000in TDM
2785,0355,313
56,34213
56,355
61,668
12,81126,153- 1,02137,943
2,357
12,5108,858
21,368
61,668
Intangible assets and Property, Plant and EquipmentFinancial assetsFixed assets
Receivables, prepaid expenses and securitiesLiquid fundsCurrent assets
Total assets
Shareholders’ equityCapital reserveNet loss of the yearEquity
Accruals
Amounts due to banksOther liabilities Liabilities
Total liabilities
94822,76023,708
79,9211,311
81,232
104,940
14,94726,153
- 11,38029,720
3,699
24,27647,24571,521
104,940
Assets
Equity and Liabilities
a n n u a l f i n a n c i a l s t a t e m e n t s a s o f d e c e m b e r 3 1 , 2 0 0 0 o f d e u t s c h e e n t e r t a i n m e n t a g ( a b r i g e d v e r s i o n )
52 consolidated financial statements
For a copy of the annual financial statements of DEAG Deutsche Entertainment Aktiengesellschaft with the audit certificate of Deloitte & ToucheGmbH, Certified Public Accountants, please contact the Investor Relations department.
January 1 to December 31, 1999in TDM January 1 to December 31, 2000
s h o r t v e r s i o n p r o f i t a n d l o s s a c c o u n t
SalesPersonnel expensesDepreciationOther operating incomeOther operating expensesOperating result
Earnings from investmentsEarnings from interestResults of ordinary operations
Extraordinary income Taxes on income and other taxesNet loss of the year (previous year: Net income for the year)
Loss carried forwardNet loss of the year
5,000- 4,224
- 692,749
- 6,890- 3,434
7,351508
4,425
0- 2,3422,083
- 3,104- 1,021
350- 6,746
- 3307,026
- 8,566- 8,266
2,386- 3,973- 9,853
- 2,4101,904
- 10,359
- 1,021- 11,380
report of the supervisory board 53
r e p o r t o f t h e s u p e r v i s o r y b o a r d
Throughout the last financial year the Supervisory Board closely studiedthe situation and development of the company. On the basis of the Boardof Management's written and verbal reports, the Supervisory Boardconstantly monitored the Company. The Supervisory Board did not formany committees. At six meetings the Supervisory Board discussed indetail the business situation, planned investments, in particular relatingto the expansion strategy of the company, scheduled disposals, financialplanning, the development of costs and earnings and examined thesematters with the Board of Management. All business transactions requiringthe consent of the Supervisory Board according to the articles of associa-tion were closely studied in the meetings.
The Supervisory Board thus confirmed the proper management of thecompany.
As mandated by the Supervisory Board the annual financial statements,the consolidated financial statements and the management report andGroup management report for the 2000 financial year were audited byDeloitte & Touche GmbH, Certified Public Accountants, Berlin, and givenan unrestricted audit certificate. The consolidated financial statementscontain a supplementary note. The auditors attended the meeting in whichthese reports were examined by the Supervisory Board and reported onthe key results of the audit.
According to the concluding result of the examination by theSupervisory Board no objections remain which must be raised. Theannual financial statements are approved. The financial statements arethus complete. The consolidated financial statements and the Groupmanagement report were examined by the Supervisory Board. TheSupervisory Board supports the proposal made by the Board ofManagement for the distribution of profits.
The Board of Management submitted the report pursuant to § 312 of theGerman Stock Corporation Act on relations to group companies whichhad been examined by the auditor. The Supervisory Board agrees to theresults of the audit which ends with the unrestricted audit certificate:
"According to our audit which we have conducted in accordance withprofessional standards, we confirm that
1. the actual information of the report is correct,2. with the transactions reported in the report, the performance of
the company was not unreasonably high nor that disadvantageshave been compensated,
3. with the measures taken in the report that are no circumstanceswhich would be in favour of a materially different assessmentthan that of the Board of Management."
With effect from July 1, 2000 the Supervisory Board appointed Mr MarkusAlexander Fabis, with responsibility for Finances and Personnel and Dr.Martin Fabel, with responsibility for Media & Commerce to the Board ofManagement. With effect from October 1, 2000 it also appointed Mr DietmarGlodde to the Board of Management, with responsibility for Operations.
With effect from October 15, 2000 Mr Frank Reinhardt and with effectfrom December 31, 2000 Mr Thomas Nedtwig and Mr Klaus Ulrich retiredfrom the Board of Management. The Supervisory Board would like tothank them for their work.
Berlin, March 2001
The Supervisory BoardSigned Prof. Dr. Peter RaueChairman
p e r s o n a l d a t a r e g a r d i n g t h e b o a r d o f m a n a g e m e n ta n d t h e s u p e r v i s o r y b o a r d
54 personal data
Dietmar GloddeBerlinMember of the Board of Management Operations-appointed for Entertainment One AG,Switzerland
2,660 shares
Dr. Martin FabelBerlinMember of the Board of ManagementMedia & Commerce-appointed as member of Qivive AG Supervisory Board
2,660 shares
Markus Alexander FabisGroß GlienickeMember of the Board of ManagementFinances and Personnel-appointed for DEAG Global Entertainment AG,Switzerland
2,660 shares
Board of Management
NameResidenceProfessionResponsibility in the Group Other Supervisory Board positions Positions in the Group
DEAG shares held on December 31, 2000
NameResidenceProfessionResponsibility in the Group Other Supervisory Board positions Positions in the Group
DEAG shares held on December 31, 2000
NameResidenceProfessionResponsibility in the Group Other Supervisory Board positions Positions in the Group
DEAG shares held on December 31, 2000
NameResidenceProfessionResponsibility in the Group Other Supervisory Board positions Positions in the Group
DEAG shares held on December 31, 2000
Peter L.H. SchwenkowBerlinChairman of the Board of Management Strategic Development -Chairman of the Supervisory Board at Hegener + Glaser Aktiengesellschaft,Munich; appointment as Vice Chairman of Qivive AG Supervisory Board
2,603,911 shares
personal data 55
Prof. Dr. Peter RaueBerlinChairman Lawyer and notaryMember of the Supervisory Board at Hebbel Theater GmbH, Berlin
-
-
Michael von SperberWulfsenVice ChairmanAuditor, tax consultant, lawyer-
-
-
Supervisory Board
NameResidence Position in the Supervisory BoardProfessionOther Supervisory Board positions
Positions in the GroupDEAG shares held on December 31, 2000
NameResidence Position in the Supervisory BoardProfessionOther Supervisory Board positions
Positions in the GroupDEAG shares held on December 31, 2000
Willy WeckIngolstadtMember of the Supervisory BoardManaging DirectorMediamarket SpA, Italy
-
-
NameResidence Position in the Supervisory BoardProfessionOther Supervisory Board positions
Positions in the GroupDEAG shares held on December 31, 2000
f i n a n c i a l c a l e n d a r 2 0 0 1
56
March 29, 2001: Balance sheet press conferenceMarch 30, 2001: DVFA conference on the 2000 financial yearMay 22, 2001: Interim report 1Q 2001July 05, 2001: Annual General Meeting August 23, 2001: Interim report 2Q 2001November 22, 2001: Interim report 3Q 2001
f u t u r e - o r i e n t e d s t a t e m e n t s
We would like to point out that the annual report contains future-orientedstatements and other forecasts relating to the future development ofDEAG and the Group.
This information and the forecasts represent estimates by the Board ofManagement, made of the basis of all information available at the current
point in time. Should the assumptions on which the forecasts are basedon not be valid or the risks described in the risk report actually occur,then the actual results could deviate from the results currently expected.
DEAG does not undertake to update or revise publicly deviations in the results.
In the 2000 financial year DEAG operated with the artists shown, either directly or indirectly via subsidiaries or cooperation partners as sole or jointtour agent/promoter, national and/or local concert promoter.
i m p r i n t
Produced by:Deutsche Entertainment AG
Edited by:Corporate Communications Department
Graphic design and production:Mattheis Werbeatelier, Berlin
Photos:Bildschön Claudia Buhmann Fotografie,
DEAG Deutsche Entertainment AG
DEAG Deutsche EntertainmentAktiengesellschaft
Kurfürstendamm 63D-10707 Berlin
Tel: +49 (0) 30 810 75 0Fax: +49 (0) 30 810 75 519
internet: http://www.deag.de
Deutsche Entertainment AG | Kurfürstendamm 63 | D-10707 Berlintel +49(0)30 810 75-0 | fax +49(0)30 810 75-519 | public@deag.de | www.deag.de
top related