Balance Sheet
There were no material changes to the net assets in the 2006/2007 fiscal year. The balance sheet total increased by just under one million from EUR 57.5 million to EUR 58.4 million. In particular the acquisition of the Xara Group and of the remaining shares in m2any GmbH and the investment of cash and cash equivalents in other financial assets brought about a reduction in liquid funds to EUR 17.4 million. The extremely stable structure was retained. The equity ratio remains at the very high level of 80.2%.
Trade receivables dropped slightly by EUR 0.5 million and amounted to EUR 9.9 million as of September 30, 2007. With regard to non-current assets, intangible assets rose from EUR 8.7 million to EUR 11.7 million due to the acquisition of the Xara Group. With regard to property, plant and equipment, only minor investments in the technical infrastructure were necessary in 2006/2007 thanks to the investments in the prior year. There was also a claim to a tax refund in the amount of EUR 0.6 million.
Trade payables were pushed down by around EUR 0.9 million to EUR 1.2 million in the course of the reporting period. Non-current liabilities increased from EUR 0.1 million to around EUR 1.5 million because the Group had to issue a financial guarantee for the earn out within the scope of the Xara acquisition. Furthermore, deferred tax liabilities climbed from around EUR 0.5 million to EUR 1 million.
In comparison to 2005/2006, the total of other current liabilities and provisions was pushed down by EUR 0.5 million. Provisions of EUR 0.5 million were reversed. As one of these items is recorded in USD, the Group profited from the decline in the price of the US dollar. In addition to this, provisions for customer bonuses were reversed. In addition, trade payables fell by EUR 0.8 million. Tax payables fell by EUR 0.3 million.
Cash Flow
Despite falling revenue, operating cash flow continued to develop positively over the reporting period. In comparison to the prior year, operating cash flow dropped by just under EUR 4.6 million to EUR 1.6 million. Advance payments on income tax in the amount of EUR 2.2 million became due as a result of the large profits in fiscal year 2005/2006. These advance payments are, however, offset by the claim to tax refunds amounting to EUR 0.6 million which will be deducted from future tax payments.
Depreciation and amortization on non-current assets increased, as this was the first time that the customer base and the software development of the Xara Group was reported. Furthermore, additional intangible assets were capitalized through MAGIX AG and MAGIX Development GmbH.
At the same time, interest income rose due to the increase in cash and cash equivalents in the course of the IPO. Trade receivables were reduced by EUR 0.5 million, on the other hand.
Total net cash flow used for investing activities increased from EUR 3.9 million to EUR 19.4 million. This includes EUR 4.7 million for the acquisition and stepping up of shares in subsidiaries. In addition to this, EUR 3.4 million was invested for non-current assets. These can primarily be broken down into additional capitalization of intangible assets.
In the prior year, the cash flow from financing was materially characterized by the cash flows in connection with the IPO. Adjusted to exclude this effect, there was no material change in this respect in the fiscal year.
Research and Development
The Group’s past fiscal year was very much characterized by the expansion of Internet services. The past few years revealed a clear move towards using the Internet more intensely to access digital content in the fields of photography, video and music. In the future, it will be increasingly possible to use applications directly via the web. Consequently, it is imperative for the Group to invest in the area of Internet services to maintain its competitiveness. In the past fiscal year, the development focused on the two online portals, “myGoya” and “mufin”. Additionally, the new media market place “Catooh” and the multimedia knowledge community “magix.info” have been completed.
Alongside this, one major concern in the field of software development was to maintain and continue to expand the Group’s position as a leading developer of sophisticated multimedia solutions. As the entertainment electronics landscape is constantly undergoing change, it is necessary to constantly adapt the MAGIX Group’s range of products to the developments in the field of multimedia. The Group obtained, through the acquisition of the Xara Group, core competencies in the field of graphics. Specialists consider products produced by Xara to be the fastest graphics software worldwide.
Here are some of the developments in fiscal year 2006/2007 that deserve special mention:
Online services:
- myGoya Online Desktop
- mufin
- Catooh
- magix.info
- Online Album Flash Version
Software products:
- mufin Music Finder
- Xara Xtreme Pro
- Video deluxe Audio & Effect Edition
- Xtreme Foto and Grafik Designer
- Speed
- Total Media Converter
- Music Maker Rock Edition
Employees
The Group actively implements personnel development and adapts its activities in this field to the specific circumstances arising from the current economic situation. The number of employees rose from 303 to 319 in the course of the reporting period. This constitutes a rise of just under 5 percent on the prior year. Of the 15 new employees, 12 can be attributed to the Xara Group, which was acquired in January. It was possible to reduce its workforce by 7 employees due to synergy effects. New members of staff were recruited in particular in the Research and Development division, where 180 employees were working at the end of the reporting period. In addition to this, it was necessary to expand the Administration division from 42 to 52 employees; part of this increase is, however, similarly a result of the Xara acquisition. On the other hand, the number of employees in the Distribution division dropped to 87. The Management Board continues to have three members.
Thus, personnel expenses increased by 11% to EUR 10.9 million in comparison to fiscal year 2005/2006.
Group Structure
The following overview shows the structure of the MAGIX Group as of September 30, 2007.
The following changes occurred in the course of the fiscal year:
1.) The Group assumed a 100% shareholding in Xara Group Ltd. on January 30, 2007. The purchase price can be broken down into three tranches. The first totaling EUR 1.5 million became due upon signing of the purchase agreement. The second payment totaling EUR 1.5 million will be made on September 30, 2009, together with the third tranche; this amount of this payment will depend on the future development of revenue and results.
2.) The MAGIX Group assumed the remaining 34% in m2any GmbH on July 26, 2007. The purchase price totaled EUR 1.8 million and was paid in part with 139,000 treasury shares.
3.) In order to handle transactions with Catooh, the newly introduced online service, the Group formed Catooh Corp. in Las Vegas, Nevada, USA, on March 27, 2007, which was registered in the local commercial register on April 5, 2007. This company’s equity amounts to USD 100.