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OFFON

11880 SOLUTIONS AG

(TGT)
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11880 : Annual Report 2020 (English Version)

03/30/2021 | 04:29am EDT

20

ANNUAL REPORT 2020

Financial Key Figures

Financial key figures of 11 88 0 Solutions-Group at a glance

in EUR million

12M 2020

12M 2019

Variance absolute

Variance in percent

Revenues and earnings 11 88 0 Solutions-Group

Revenues

50.8

47.7

3.1

6.6 %

EBITDA1

3.0

2.8

0.2

7.8 %

Net loss

-2.3

-3.2

0.9

27.2 %

Details Segmente

Revenues Digital

38.3

34.6

3.6

10.5 %

EBITDA1 Digital

2.8

2.4

0.3

18.3 %

Revenues Directory Assistance

12.5

13.0

-0.5

-3.8 %

EBITDA1 Directory Assistance

0.2

0.4

-0.2

-51.9 %

Statement of financial position2

Total assets

31.4

27.3

4.0

14.8 %

Cash and cash equivalents3

3.7

4.7

-1.1

-22.7 %

Equity

9.8

7.4

2.4

32.4 %

Equity ratio

31.1 %

27.1 %

4.0

14.8 %

Cash Flow

Cash Flow from operating activities

2.5

4.4

-1.9

-43.9 %

Cash Flow from investment activities

-3.6

-3.2

-0.4

-12.1 %

Cash Flow from financing activities

-0.1

2.1

-2.1

>-100.0 %

Net Cash Flow4

-1.2

2.1

-3.3

>-100.0 %

Key figures for the 11 88 0 share

Earnings per share (in EUR)

-0.1

-0.2

0.1

50.0 %

Share price at year-end (in EUR)5

1.56

1.56

Market capitalisation at year-end

38.9

32.8

6.1

18.5 %

Other KPIs

Digital cancellation rate (in percent)6

26.0

28.0

-2.0

-7.1 %

Revenue per call (in EUR)

4.17

3.71

0.46

12.4 %

Number of employees7 group

608

554

54

9.7 %

  • 1 Earnings before interest, tax, depreciation and amortisation

  • 2 Comparison value as of 31, December 2019

  • 3 Portfolio of cash and cash equivalents as well as financial assets at fair value through profit or loss

  • 4 Operating cash flow plus cash flow from investing activities minus interest expenses, adjusted for the changes in financial assets at fair value through profit or loss

  • 5 Xetra-closing prices as of last trading day

  • 6 For further information, see non-financial key figures under Group Management Report

7 Headcounts as of 31 Deccember 2020 closing date (excluding the Managment Board, trainees and dormant employment contracts)

For mathematical reasons, rounding differences amounting to +/- one unit (€, % etc.) may occur. In favour of a correct mathematical presentation, such differences are consciously accepted.

Content 5

About us

Letter of the Management Board .................................................................................... 06

Report of the Supervisory Board ..................................................................................... 08

11 88 0 Solutions AG on the capital market ....................................................................... 12

Corporate Social Responsibility

Description of the business model of 11 88 0 Solutions AG ................................................... 16

Environmental matters ................................................................................................. 16

Employee matters ........................................................................................................ 17

Social matters ............................................................................................................ 18

Respect for human rights .............................................................................................. 18

Anti-corruption matters ................................................................................................ 18

Group Management Report

Fundamental infomation about the group ........................................................................ 22

Macroeconomic and sector-specific environment ............................................................... 24

Course of business ....................................................................................................... 25

Financial situation ....................................................................................................... 26

Research and development ............................................................................................ 29

Employees ................................................................................................................. 29

Opportunity and risk management .................................................................................. 30

Report on expected developments .................................................................................. 39 Disclosures pursuant to section 315a HGB and explanatory report

in accordance with section 176 (1) sentence 1 AktG ............................................................. 40

Statement and report on corporate governance ................................................................. 41

Remuneration system ................................................................................................... 41

Responsibility statement .............................................................................................. 48

Consolidated Financial Statements

Consolidated Statement of Financial Position (IFRS) .......................................................... 52

Consolidated Income Statement (IFRS) ........................................................................... 54

Consolidated Statement of Comprehensive Income (IFRS) ................................................... 55

Consolidated Statement of Shareholders Equity (IFRS) ....................................................... 56

Consolidated Statement of Cash Flows (IFRS) .................................................................... 58

Notes to the consolidated financial statements of 11 88 0 Solutions AG for financial year 2020 ... 60

Independent auditor's report ........................................................................................ 126

Corporate Information ................................................................................................. 132

Forward-looking statements ........................................................................................ 133

Corporate Structure 11 88 0 Solutions-Group ..................................................................... 134

Financial Calendar 2021 ............................................................................................... 135

Imprint ..................................................................................................................... 135

Letter of the Management Board

Dear Shareholders, Customers and Friends of 11 88 0 Solutions AG,

The coronavirus pandemic set the agenda for the economy during the 2020 financial year. Our company deliveredabove-average per-formance during this challenging period, recording a sharp rise in the number of paying customers in the Digital business for the fourth year in a row. In 2020 our customer base grew by 5,775 pay-ing customers to reach 44,441 as of 31 December 2020, while the revenue generated by our company increased to EUR 50.8 million.

Even from a strategic perspective, we refused to let ourselves be in-timidated by the pandemic in 2020 and created another important foundation for the future growth of our company by acquiring on-line marketing agency FAIRRANK GmbH. FAIRRANK is undoubtedly an excellent fit for 11 88 0 Solutions AG as there are no overlaps and plenty of synergies. We began the integration process immediately after the acquisition and were able to implement more steps than planned by the end of 2020.

In November, just ten weeks after the FAIRRANK acquisition, we rolled out our first joint product with MEIN SEO. This marks the start of a whole series of new products that combine the expertise of both companies to offer intelligent solutions to a broader cus-tomer target group.

In our Digital business, we focused on enhancing the user-friend-liness and efficiency of our products and services in 2020. As a result, we were also able to increase traffic to our portals in a year dominated by coronavirus. werkenntdenBESTEN.de and wirfindendeinenJOB.de generated particular interest among consumers during the pandemic, with the number of reviews on werkenntdenBESTEN.de, our search engine for online reviews, passing the 100 million mark in June.

2020 was also a successful year from a customer perspective, as the coronavirus crisis showed smaller and medium-sized compa-nies that were previously not professionally represented online that an attractive online presence is essential. Compared to many other companies, we were able to grow further in 2020 as retailersand service providers were placed under even greater pressure to move their business online in order to continue operating.

We significantly improved the quality of our service in the Direc-tory Assistance business by using an innovative AI solution that analyses the mood of callers to our call centre and signals to our employees the best way to conduct the conversation. Thanks in no small part to this pleasant and productive approach to com-munication, satisfaction with our telephone services is very high among both our directory assistance customers and the customers in our call centre third-party business.

We also agreed an important collaboration in the Directory Assis-tance business in the spring of 2020, taking care of all incoming call services for the FRED 11811 directory assistance service from May onwards. FRED 11811 is operated by various publishers of the DasÖrtliche and DasTelefonbuch telephone directories, which are in publisher GbRs (partnerships under German civil law) with DTM Deutsche TeleMedien GmbH. This collaboration enabled us to in-crease our monthly directory assistance call volumes by around five percent.

In the Digital business, we also formally agreed important collabo-rations with restaurant portal speisekarte.de and small and medi-um-sized business portals DS Digitale Seiten and marktplatz-mittel-stand in order to offer our corporate customers additional valuable online marketing opportunities. With the help of our partner Micro-soft, we have been able to offer our customers significant help with their administrative tasks since the start of the 2020 financial year. All 11800.com customers who have ordered one of our four website products have access to the complete Microsoft Office 365 package, which even includes an email solution.

Collaborations, meaningful additions to our business units via mergers and acquisitions and the continuous optimisation of our processes and products are the three pillars driving the successful growth of our company. The capital increase from authorised capital

in return for cash and non-cash contributions carried out in 2020 formed another important part of this growth strategy, as united vertical media GmbH offered FAIRRANK GmbH as a non-cash contri-bution as part of this initiative. The subscription offer for the capital increase was significantly oversubscribed, which showed us that our company and 11880 Solutions shares were once again attracting interest from investors and private shareholders after the restructu-ring of the company that began in 2015.

We will continue to pursue a path based on the aforementioned three pillars in 2021. Our clear goal for the medium term is to be-come number one at providing efficient online marketing for small and medium-sized enterprises in Germany. Our employees and I do everything in our power to achieve this every day. Time and time again, it brings me pleasure to see everyone pulling together and working towards our goals with plenty of creativity and enthusiasm.

I would like to express my sincere thanks to you, our valued share-holders, for placing your trust in us and supporting our strategy. I am confident that we will be able to present rising customer and revenue figures and several new products to you over the coming financial year.

Sincerely,

Christian Maar

Chief Executive Officer

Essen, 23 March 2021

1 January 2020 to 31 December 2020

Report of the Supervisory Board

for the financial year from

Like that of every other company around the world, 11 88 0 Solutions AG's 2020 financial year was dominated by the coronavi-rus pandemic. However, the Company came through the crisis rela-tively well despite challenging circumstances, once again recording growth both inside and outside the operating business. At the end of August 2020, 11880 Solutions AG acquired Cologne-based on-line marketing agency FAIRRANK GmbH as part of a capital increase from authorised capital in return for cash and non-cash contributi-ons, thus creating an important platform for faster growth. In what has been an eventful 2020 financial year, the Supervisory Board of 11880 Solutions AG monitored the Management Board's business activities in compliance with its legal advisory and supervisory func-tion and was on hand at all times to offer advice.

Supervisory Board activities in the 2020 financial year

In the 2020 financial year, the Supervisory Board of 11880 Solutions AG carried out its duties, as provided by law and the Company's Articles of Association. Four regular meetings were held during the reporting period in addition to three extraordina-ry Supervisory Board meetings.

The Supervisory Board seamlessly monitored CEO Christian Maar's management of 11 88 0 Solutions AG. To do this, it was kept conti-nually and extensively informed about general business develop-ments, relevant financial figures, coronavirus-related issues and potential risks. The Supervisory Board was also on hand to advise the Management Board, who kept the Supervisory Board informed about financial developments and discussed all strategic and com-mercial business decisions with them, while the Supervisory Board also met regularly without the Management Board.

In addition to the efficient development of the product portfolio and the ongoing reorganisation of the internal IT infrastructure,the Company also reached important milestones on the path to faster successful growth with an acquisition and new collaborati-ons during the 2020 financial year. 11880 Solutions AG is striving to significantly enhance its market position as an all-round online marketing services provider for small and medium-sized enterprises in Germany.

In its second division, the Directory Assistance segment, 11880 Solutions AG agreed a collaboration with the FRED 11811 telepho-ne directory service in May 2020, increasing incoming directory assistance call volumes by five percent. In the call centre third-party business, the Company once again positioned itself as a high-quality provider of call centre services by expanding existing customer orders during the past financial year.

On 26 August, 2020, the Company's Management Board adopted a resolution, approved by the Supervisory Board, to implement a capital increase from authorised capital in return for cash and non-cash contributions by issuing up to 3,893,000 new shares carrying pre-emption rights. The subscription ratio was 27 to 5 and the sub-scription price was set at EUR 1.25. The main shareholder united vertical media GmbH (uvm) exercised all of its pre-emption rights and subscribed 2,813,747 new shares, paying for 2,707,200 new shares by way of a non-cash contribution by contributing Colog-ne-based FAIRRANK GmbH and by making an additional cash con-tribution of EUR 106,547. An internationally recognised auditing firm has issued a fairness opinion confirming that the subscription ratio in connection with the non-cash contribution of the FAIR-RANK equity interest was appropriate. The rights offering, which ended on 10 September 2020, was significantly oversubscribed; all 3,893,000 new shares were issued. The acquisition of FAIRRANK GmbH complements the strategic business model and accelerates the growth of 11 88 0 Solutions AG.

The Company's Supervisory Board continually supervised the ac-counting and financial reporting process and the efficiency of the internal control and risk management system during the 2020 financial year. The Supervisory Board also addressed the effecti-veness of compliance processes within the Company and pending legal disputes as well as associated potential risks. After carefully reviewing the auditor's independence and qualifications, the ser-vices provided to date and the audit fee, the Supervisory Board commissioned PricewaterhouseCoopers GmbH, Wirtschaftsprü-fungsgesellschaft, Essen, to audit the 2020 consolidated financial statements.

Organisation of the Supervisory Board's work

A reliable flow of information helps the Supervisory Board of 11 88 0 Solutions AG to perform its duties constructively. To do this, it ob-tains regular reports from the Audit Committee, the Nomination Committee and the Personnel Committee. The Audit Committee's duties include monitoring the accounting, internal control system and audit of the financial statements. It also prepares Superviso-ry Board resolutions and identifies current issues for discussion. Within the context of monitoring the auditor's independence, the Supervisory Board of 11880 Solutions AG had an approval process developed in 2016 that ensures the release of permissible non-audit services by the auditor in accordance with EU Regulation 537/2014, which took effect on 17 June 2016.

Composition and personnel of the Supervisory Board

The formation of the Supervisory Board of 11880 Solutions AG is based on the provisions of Sections 96 (1), 101 (1) AktG in conjunction with Sections 1 (1) and 4 of the German One-Third Employee Participation Act (Drittelbeteiligungsgesetz). Pur-suant to Item 4.1 (1) of the Articles of Association of 11880 Solutions AG, the Supervisory Board comprises four members elected by the Annual General Meeting and two elected by emp-loyees. The stated objective of the Supervisory Board is to focus on effectively supporting the Company in its quest to become Germany's leading provider of online marketing services for small and medium-sized enterprises. When determining the composition of the Supervisory Board, the members' professio-nal expertise in business and the digital industry are taken into account accordingly.

In the 2020 financial year, the Supervisory Board of 11880 Solutions AG comprised the following members: Dr. Michael Wies-brock (Chairman), Michael Amtmann (Deputy Chairman), HelmarHipp, Ralf Ruhrmann, Sandy Jurkschat and Leonard Kiedrowski. The other members of the Audit Committee chaired by Dr. Michael Wiesbrock were Ralf Ruhrmann and Sandy Jurkschat. The Nomina-tion Committee members were Dr. Michael Wiesbrock and Helmar Hipp. The Personnel Committee comprised Dr. Michael Wiesbrock and Michael Amtmann.

Meetings and attendance

The Supervisory Board held four regular meetings in the 2020 financial year, one in each quarter, with some held virtually due to the pandemic. All members of the Supervisory Board took part in all of the meetings. The Supervisory Board also held two ex-traordinary meetings during the 2020 financial year.

Members participated fully in the first extraordinary Supervisory Board meeting in mid-August. The Management Board informed the Supervisory Board about the synergies and potential arising from the merger of 11880.com and FAIRRANK GmbH as well as the planned parameters of the deal, taking into account key elements of the fairness opinion. Management Board remuneration issues were discussed as an additional agenda item.

All members of the Supervisory Board took part in the second extraordinary Supervisory Board meeting at the end of August 2020, with resolutions passed by telephone. Supervisory Board member Michael Amtmann is also Managing Director of uvm. In light of this, Michael Amtmann abstained from voting on the Supervisory Board resolution to approve the implementation of a capital increase using Authorised Capital 2018/II with pre-emption rights in return for cash and non-cash contributions (Resolution 1) due to a potential conflict of interest. Michael Amtmann also refrained from voting on the second resolution to approve the signing of a contribution agreement with uvm (Resolution 2) based on the exclusion of voting rights set out in Section 111b (2) of the German Stock Corporation Act (AktG). As the contribution of shares in FAIRRANK GmbH by uvm consti-tutes a transaction with a related party of 11880 Solutions AG as defined by Section 111a (1) AktG - uvm holds approximately 72.30% of the Company's shares - the Management Board requi-red the approval of the Supervisory Board to sign the contribu-tion agreement with uvm in accordance with Section 111b (1) AktG. In addition, 11 88 0 Solutions AG is a listed company, and the contribution of shares by uvm exceeds the threshold to be considered for related party transactions pursuant to Section 111b (1) AktG.

All members of the Supervisory Board took part in the third ex-traordinary Supervisory Board meeting in September 2020, with resolutions again passed by telephone. Michael Amtmann ab-stained from voting on the decision to approve the specification of details for the capital increase from Authorised Capital 2018/ II as well as the associated amendment to the Articles of Asso-ciation due to a potential conflict of interest.

The Audit Committee met four times during the 2020 financial year.

Corporate governance and remuneration of the Management Board

Following comprehensive changes to the German Corporate Governance Code (GCGC) on 16 December 2019, the declaration of compliance of 11 88 0 Solutions AG dated 01 June 2019 was modi-fied to reflect the new legal and factual regulatory framework for the management and supervision of a company.

The Management Board and Supervisory Board of 11 88 0 Solutions AG declare that they comply with all of the principles, recommen-dations and proposals of the GCGC published in the Federal Gazette on 20 March 2020.

Any deviations in the interests of the Company have been dis-closed in the joint declaration of compliance dated 17 December 2020, which can be viewed at any time on the Company's website atwww.11880.com. For further information on the implementation of the recommendations and proposals of the German Corporate Governance Code and a detailed report on the remuneration sys-tem for members of the Management Board we refer to the notes to the Group management report (see page 42 et seq.).

section 315a German Commercial Code (HGB) based on the Inter-national Financial Reporting Standards (IFRSs) applicable in the European Union (EU).

An unqualified auditor's report was issued for the annual fi-nancial statements, the management report, the consolida-ted financial statements and the Group management report as of 31 December 2020. The annual financial statements and the management report according to German commercial law, the consolidated financial statements and the management report according to IFRSs, and the auditor's reports were discussed in detail with the auditor in the Audit Committee and forwarded to all members of the Supervisory Board in due time. The auditor participated in the concluding discussion of the Company's an-nual financial statements at the Supervisory Board meeting held virtually on 29 March 2021, explaining the process of the audit and being available to provide additional information during the discussion.

The Supervisory Board examined the annual financial statements and the management report of 11 88 0 Solutions AG in detail. The Supervisory Board agreed with the auditor's findings. The Supervi-sory Board approves the management report presented by the Ma-nagement Board and the 2020 annual financial statements of the Company, which are hereby adopted. The Supervisory Board also examined the IFRS consolidated financial statements of 11880 Solutions AG and the Group management report in detail. The Supervisory Board agreed with the auditor's findings. It appro-ves the Group management report presented by the Management Board and the 2020 consolidated financial statements of 11880 Solutions AG.

Audit of the 2020 annual and consolidated financial statements

Based on a resolution adopted by the Annual General Meeting on 18 June 2020, the Supervisory Board commissioned Pricewater-houseCoopers GmbH, Wirtschaftsprüfungsgesellschaft, Essen, to audit the financial statements. The Company's annual finan-cial statements in accordance with German commercial law, the management report, the IFRS consolidated financial statements and the Group management report for the 2020 financial year were audited by PricewaterhouseCoopers GmbH, Wirtschafts-prüfungsgesellschaft, Essen. The consolidated financial state-ments for the period from 1 January to 31 December 2020 and the Group management report were prepared in accordance with

Risk early warning system

In accordance with Section 91 (2) German Stock Corporation Act, the Management Board of 11880 Solutions AG established a mo-nitoring system to identify potential risks to the Company and its subsidiaries at an early stage. The result of the auditor's audit showed that the Management Board fulfilled all of its duties as required under Section 91 (2) German Stock Corporation Act. The Supervisory Board agrees with the auditor's report.

Corporate social responsibilty

The Supervisory Board dealt extensively with the sustainability re-port (see page 16 et seq.) of 11 88 0 Solutions AG, examined it in detail and approved it unanimously.

Closing declaration

We approve the findings of the auditors, PricewaterhouseCoopers, and raise no objection after our own examinations of the annual financial statements, management report, consolidated financial statements and Group management report of 11880 Solutions AG. We accept the 2020 annual financial statements prepared by the Management Board, which are hereby adopted. We also accept the 2020 IFRS consolidated financial statements prepared by the Ma-nagement Board.

On behalf of the entire Supervisory Board, I would like to thank Christian Maar and all employees of 11 88 0 Solutions AG for their efforts and dedication in what has been a very challenging 2020 financial year. Thanks to the performance of the Management Board and the entire team, the Company has succeeded in recor-ding growth, even during the pandemic.

Essen, March 2021

Dr. Michael Wiesbrock

Chairman of the Supervisory Board

11 88 0 Solutions AG on the capital market

Shareholder structure on 31 December 2020

2020 was a year that the world will not forget in a long time. Having been regarded as a manageable problem at the start of the year, the coronavirus pandemic spread over the next few months to become the most serious crisis since the Second World War and one that will continue to have a major impact in 2021. However, the global equity market crash that was initially expected failed to materialise, and the stocks of digital companies in particular rallied spectacularly in the second half of the year, with investors primarily focusing on major international players. According to experts, economic uncer-tainty and persistently low interest rates will continue to ensure that investing in equities remains an attractive investment model.

The shares of 11 88 0 Solutions AG remained stable during the 2020 financial year. There was a high degree of uncertainty in the Ger-man equity market at the start of the first lockdown in Germany. During this period, our company's share price dropped to an an-nual low of EUR 1.09 on 18 March 2020. The share price stabilised a few weeks later and primarily moved between EUR 1.30 and EUR 1.40 until the end of the year. Investors followed the recommenda-tions of several experts to buy 11 88 0 shares at the end of the year, sending the price to an annual high of EUR 1.63 on 21 December 2020 and a year-end closing price of EUR 1.56, which is where it began the 2020 financial year.

The shareholder structure of 11 88 0 Solutions AG changed slightly in the 2020 financial year compared with the previous year.

On 26 August, 2020, the Management Board of 11880 Solutions AG adopted a resolution, approved by the Supervisory Board, to implement a capital increase from authorised capital in return for

cash and non-cash contributions by issuing 3,893,000 new shares carrying pre-emption rights. The subscription ratio was 27 to 5. The main shareholder united vertical media GmbH made its con-tribution for 2,707,200 new shares by contributing Cologne-based FAIRRANK GmbH as non-cash contribution and by making an addi-tional cash contribution for 106,547 new shares. The subscription price per share was EUR 1.25 and the subscription period ran from 27 August to 10 September 2020. The rights offering was signifi-cantly oversubscribed after the deadline.

Investor relations activities

The Management Board and commercial directors of 11 88 0 Solutions AG held a conference call with analysts and investors on the publication of the annual financial statements for 2019 and an-other for the publication of each of the quarterly results during the 2020 financial year. The Company's business performance, financial figures and future strategy were presented on these conference calls and then discussed in detail in a Q&A session.

The Annual General Meeting was held virtually on 18 June 2020. All agenda items were approved with a significant majority of 99.98 percent or 99.99 percent.

The Management Board and IR team remained in regular contact with investors and private shareholders throughout the 2020 finan-cial year, answering questions and discussing business development in regular one-on-one discussions.

On 16 and 17 November 2020, Chief Executive Officer Christian Maar and commercial director Dr. Michael Nerger presented 11 88 0

Solutions AG at the Deutsche Börse Equity Forum. In addition to the company presentation, they also held numerous one-on-one discussions with interested investors during the forum, which was held virtually for the first time.

Analysts at Mainz-based Solventis AG continued to monitor the performance of 11880 Solutions shares and published three re-search updates during the 2020 financial year. After issuing a price target of EUR 1.80 per share in their updates on the first-quarterand half-year figures for 2020, the research analysts raised their price target by EUR 0.10 to EUR 1.90 following the publication of the nine-month figures. They justified this change by citing the Company's positive operating performance as well as the impro-ved revenue forecast and additional prospects associated with the acquisition of FAIRRANK GmbH.

The baseline study and all subsequent updates can be found on the www.11880.com website.

11 88 0 Solutions share in comparison with the TecDAX and DAX 01.01.2020 - 31.12.2020

01/2020 02/2020 03/2020 04/2020 05/2020 06/2020 07/2020 08/2020 09/2020 10/2020 11/2020 12/2020

DAX

TecDAX

11 88 0 Solutions

Key figures for the 11 88 0 share

2015

2016

2017

2018

2019

2020

Number of shares

pcs.

19,111,091

19,111,091

19,111,091

19,111,091

21,022,200

24,915,200

Share in capital

EUR

19,111,091

19,111,091

19,111,091

19,111,091

21,022,200

24,915,200

Share price at year-end

EUR

1.15

0.68

0.874

1.00

1.56

1.56

Highest share price1

EUR

3.35

1.17

1.283

1.285

1.895

1.63

Lowest share price1

EUR

1.13

0.68

0.422

0.946

0.962

1.09

Market capitalisation at year-end

M EUR

22.0

13.0

16.7

19.0

32.8

38.9

Earnings per share

EUR

-0.49

-0.77

-0.50

-0.16

-0.16

-0.10

Dividend or proposed dividend per share

EUR

0.00

0.00

0.00

0.00

0.00

0.00

Dividend yield2

%

0.0

0.0

0.0

0.0

0.0

0.0

  • 1 Xetra closing prices

  • 2 based on the respective Xetra closing price

Content Corporate Social Responsibility 15

Corporate Social Responsibility

Description of the business model of 11 88 0 Solutions AG .................................................... 16

Environmental matters .................................................................................................. 16

Employee matters ......................................................................................................... 17

Social matters ............................................................................................................. 18

Respect for human rights ............................................................................................... 18

Anti-corruption matters ................................................................................................. 18

Corporate Social Responsibility (CSR)

1. Description of the business model of 11 88 0 Solutions AG

2. Environmental matters

For more than two decades, the Company's offline and online brands 11880* and 11880.com have been synonymous with fast and reliable results when searching for private individuals and local and nationwide providers across all sectors. FAIR-RANK GmbH, acquired in financial year 2020, is an online mar-keting agency that supports clients from various industries in search engine marketing, and in developing and implementing their online presences and social media campaigns.

With Germany's second-largest directory assistance service under the number 11880*, 11880 Solutions AG offers personal-ised support in finding an individual, company or information. Our experienced staff also makes their telephone expertise avai-lable to other companies, taking calls and introducing customer service initiatives in the first and second-level support on behalf of major corporate clients operating across Germany.

Protecting our planet is an important part of our company's sus-tainability efforts. We contribute to the conservation of our en-vironment by focusing on and continually optimising our energy and resource efficiency both in our internal processes and in part-nership with our customers and suppliers.

11 88 0 Solutions AG has been pursuing a green IT strategy since the end of 2017. Newly defined processes and mechanisms have enabled the Company to continuously and transparently moni-tor its energy consumption since then. First, the Company in-troduced a printer concept across all of its sites based on the energy-efficient use of only a few multifunction printers. New management software and FollowMe printing help to avoid any unnecessary or duplicate printouts. This innovative concept has significantly reduced not only energy consumption but also paper and toner use.

The 11880.com online business directory and the app of the same name provide targeted information and put customers in touch with suitable providers in their preferred region. 11880.com brings consumers and suppliers together quickly and efficient-ly via specialist portals for the 20 most searched-for sectors. As small and medium-sized companies can reach their custo-mers without advertising wastage via 11880.com, they use the platform and its specialist portals to market their offering. The 11880.com portfolio offers a variety of products, from a listing service on the largest search engines to professional homepages and search engine campaigns, in order to optimise marketing for small and medium-sized enterprises in Germany. This offe-ring is supplemented by a secretarial service that is particularly popular among small companies without a back office function. With the werkenntdenBESTEN.de meta search engine, 11880 Solutions AG offers companies a unique opportunity to effecti-vely manage their reviews, while corporate clients can use the wirfindenDeinenJOB.de job portal to find suitable employees. Both portals are very popular and are growing continuously in terms of usage and content.

Two years ago, 11 88 0 Solutions AG built a new data centre infras-tructure at its headquarters in Essen that is more powerful and has a smaller footprint. But the biggest benefit is a significant reduc-tion in annual energy and cooling costs. 11880 Solutions AG is making a substantial contribution to protecting our environment with its new IT infrastructure, reduced energy use and significant-ly lower electrical waste production.

At the Rostock and Neubrandenburg sites, power consumption is continuously monitored and optimised both in technical areas and on office levels using special power distribution units for individual devices, with employees being able to see how much electricity is being consumed. In Rostock, air conditioning systems containing environmentally harmful coolants are also being dismantled.

Cologne-based online marketing agency FAIRRANK GmbH, which was acquired in August 2020 and is expected to be fully integrated into the operations of the 11880 Solutions Group by the end of 2021 at the latest, is being gradually connected to the green IT infrastructure of the Group's Essen headquarters. The contracts of

both companies are being interconnected as effectively as possible in order to reduce costs and minimise administrative expenses. To offer employees who travel long distances to work the opportunity to save on travel costs while simultaneously protecting the envi-ronment, all FAIRRANK employees have been integrated into the efficient virtual environment of 11880 Solutions AG, which ena-bles them to work from home whenever they need to.

When selecting company cars, 11880 Solutions AG makes sure that only environmentally friendly vehicles with the lowest fuel consumption from well-known manufacturers are chosen. When leases expire, hybrid or electric vehicles are now the preferred choice. In 2021, fast-charging columns will be installed in the un-derground parking garage at the Essen headquarters.

Employees without company cars are primarily booked on train journeys for business trips. Employees at our four sites hold con-ferences and meetings via telephone and video conferencing as often as possible.

11 88 0 Solutions AG offers all of its employees the option to lease a bicycle cheaply to enable them to travel to work in the most en-vironmentally-friendly way possible.

The Company works closely with Microsoft and was invited to par-ticipate in the "Get to Green" competition for Microsoft partners during the 2020 financial year. The sustainability competition crow-ned its winners by planting trees in Uganda, Burkina Faso and Brazil. 11 88 0 Solutions AG performed very well in the competition and was presented with the title of "Microsoft Sustainability Champion". One hundred trees were planted on behalf of 11880 Solutions AG in re-cognition of the Company's commitment to the initiative.

3. Employee matters

11880 Solutions AG is committed to the fundamental rights of its employees. The prohibition of discrimination and right to equaltreatment are particularly important to the Company, as are the right to collective bargaining and freedom of association.

As part of its commitment to the Diversity Charter, the Compa-ny participated in its eighth Diversity Day in May 2020. All em-ployees supported cultural diversity in internal communications and employee development by taking part in special activities organised by the Human Resources department.

The diversity of all our employees and their various skills and ta-lents opens up opportunities for innovative and creative solutions. We appreciate all employees regardless of their gender or gender identity, nationality, ethnic background, religion or belief, disabi-lity, age, sexual orientation and identity. We are striving to create a climate of acceptance and mutual trust each and every day.

Working hours and working-time models play a key role at our call centres, where our employees process directory assistance calls and handle customer service calls for small and medium-sized companies. In order to achieve the best possible work-life balance when carrying out call centre activities, we offer employees an op-timal duty roster that is particularly helpful for single parents and employees who care for underage children or family members. The responsible planners are required to take employees' preferred du-ties into account and implement these wherever these preferences fit with the needs of customers and the interests of the Company.

All of the Company's employees have the option of working from home and are equipped accordingly to take into account the tech-nical and data protection requirements of 11 88 0 Solutions AG.

Our employees receive regular training to enhance their product knowledge and telephone skills. To make telephone conversations as pleasant as possible, we introduced innovative software in our Direc-tory Assistance business that uses a caller's tone of voice to signal what mood they are in and how the employee can offer them the best possible service. This investment has created an even more pleasant

working atmosphere for our staff. Customer satisfaction has risen by 56 percent since the software solution was introduced. Almost 80 percent of our employees now rate their work as significantly more enjoyable and motivating.

promote human rights. We feel unconditionally committed to the promotion of human rights and sustainable development.

6. Anti-corruption matters

Management regularly organise health days, joint sports events and celebrations at all of our locations. Only a few employee events were held during the 2020 financial year as a result of the pandemic. Management surprised their employees with small cu-linary delights more frequently to thank them for their day-to-day commitment in a challenging year.

11880 Solutions AG pursues a zero-tolerance policy to corrup-tion, competition law breaches and other violations of applicable law. As soon as there are even indications of potential cases of this kind, the Company reacts strictly and emphatically. One im-portant element of integrity is the observance of laws and inter-nal company regulations.

Many years ago, 11 88 0 Solutions AG engaged instant counselling firm Talingo EAP, now part of INSITE-Interventions GmbH, to offer the opportunity of telephone counselling to all employees and their relatives. This professional counselling service can be used at any time free of charge in the event of money, family or addic-tion problems as well as symptoms of exhaustion.

Our company has not signed a collective wage agreement. We cul-tivate a cooperative working style with employee representatives and involve all elected bodies according to the provisions of the Works Council Constitution Act governing codetermination.

We have always paid our employees in accordance with minimum wage guidelines and beyond. Even before the statutory minimum wage was introduced, 11880 Solutions AG had decided not to take high-risk variable salary components into account when calculating the minimum wage even though the ruling subsequently handed down by the German Federal Labour Court would allow such an approach.

Specific measures include a comprehensive Code of Conduct issued by the Management Board that can be accessed by all employees on the Company's intranet, where the issue is handled in detail under its own section entitled "Corruption and bribery".

All department heads are members of a special Compliance Com-mittee that meets regularly, monitors the Company's compliance management system, develops optimisations and advises the Ma-nagement Board on all compliance issues. 11 88 0 Solutions AG's compliance management system includes wide-ranging measures and processes and provides regular online and offline training for employees on compliance, the GDPR and the German General Non-Discrimination Act. Other guidelines such as operating procedures and signature and purchasing guidelines are key elements of this compliance management system, which has already been the sub-ject of an external audit. The findings of the audit certified the high level of effectiveness of the system and required only a few marginal improvements that were implemented immediately.

As a socially responsible company, we regularly support cultural and social activities. We want to protect values, promote crea-tivity, improve cross-cultural understanding and stimulate pro-gress. As they do every year, employees at our sites in Essen and Rostock packed and donated presents for the Essen parents' ini-tiative supporting children with cancer and children of the Ros-tock food bank for Christmas 2020. Employees in Rostock also made a donation of EUR 500.00.

4. Social matters

5. Respect for human rights

Our business activities have a direct and indirect impact on many people. We are therefore aware of our responsibility to respect and

In the event of suspected corruption, the suspicion is extensi-vely and consistently investigated followed up and the internal investigation documented in detail in the system. Appropriate sanctions are imposed immediately if required.

Our company's compliance management system has always been supplemented by an effective and tight risk and opportunity ma-nagement system. For 11880 Solutions AG, "risk" means both the danger of potential losses and of lost profits. Both can be triggered by internal or external factors. Our company's risk management system contains the entirety of all organisational regulations and measures for identifying and dealing with risks associated with the Company's business activities.

* €1.99/min. from a German landline. Mobile prices may vary where applicable.

Content Group Management Report 21

Group Management Report

Fundamental infomation about the group ......................................................................... 22

Macroeconomic and sector-specific environment ................................................................ 24

Course of business ........................................................................................................ 25

Financial situation ........................................................................................................ 26

Research and development ............................................................................................. 29

Employees .................................................................................................................. 29

Opportunity and risk management ................................................................................... 30

Report on expected developments ................................................................................... 39

Disclosures pursuant to section 315a HGB and explanatory report

in accordance with section 176 (1) sentence 1 AktG ............................................................ 40

Statement and report on corporate governance .................................................................. 41

Remuneration system .................................................................................................... 41

Responsibility statement ............................................................................................... 48

Group Management Report of 11 88 0 Solutions AG for the 2020 financial year

1. Fundamental information about the Group

For the purpose of internal reporting and management control, the 11 88 0 Solutions Group divides its activities into two opera-ting segments: Digital und Directory Assistance.

In the Digital segment the 11880 Solutions Group offers online packages to give small and medium-sized enterprises (SMEs) an extensive and efficient online presence. In addition to an entry in the 11880.com classified directory and an appropriate 11880 specialist portal, these packages include listing services in addi-tional directory portals, Google Ads and Microsoft Advertising, the production of websites or a telephone secretarial service. We are also offering packages for active review management via our search engine for online reviews werkenntdenBESTEN.de. In addition, the wirfindendeinenJOB.de job portal was launched back in 2019. The integration of FAIRRANK GmbH and Seitwert GmbH into the 11 88 0 Group, has enabled the Group to offer the core services of search engine optimisation (SEO), online adver-tising, usability optimisations and website analyses. For larger companies, the 11 88 0 Solutions Group also offers stand-alone or network solutions for access to the latest digital telephone book and yellow pages database.

In its second division, the Directory Assistance segment, the 11 88 0 Solutions Group primarily offers directory assistance ser-vices. Consumers can call a service number to receive telephone numbers and addresses in Germany and worldwide via telephone, email or text in addition to other information on timetables and flight schedules, share prices, movie schedules, hotel reservati-ons and much more. Callers can also be connected directly to the desired subscribers upon request. 11880 Solutions Group emp-loyees in this division also provide customer services as part of the call centre third-party business.

Basis of presentation

In its Digital and Directory Assistance operating segments, the 11 88 0 Solutions Group uses a system of key figures for control purposes that are relevant to decision-making. In order to re-spond quickly to new developments and changes in its operating business, the Group makes use of daily reporting instruments in all business units. In the financial area these include mainly the key performance indicators revenues, profitability (EBITDA) and cash holdings. All of the key figures mentioned are determined and managed at Group level.

Different key figures are used for non-financial performance: In the Digital segment, the new and existing customer development as well as the churn rate are used as non-financial key figures. These key fi-gures make it possible to assess the level of customer loyalty and customer satisfaction. In the Directory Assistance, the non-financial key figures "call volume" and "revenue per call" play a central role.

Financial key figures

Revenue

Consolidated revenue is one of the main key performance indica-tors. Consolidated revenue consists of revenue from the Digital and Directory Assistance segments.

Within the Digital segment, revenues for the media business are generated through business with new customers and existing cus-tomers. The basis for sustainable revenue growth is an efficient sales team in new customer business and a focus in customer re-tention management on customer loyalty especially by offering products optimised for customers. The software solutions business also offers digital telephone books and yellow pages on CD-ROM and as an intranet solution, as well as database solutions. The ac-

quisition of FAIRRANK GmbH and Seitwert GmbH has enabled the Group to serve medium-sized enterprise customers with solutions, especially in the area of search engine optimisation and search en-gine advertising (SEA).

In the Directory Assistance segment, revenue in both the traditio-nal business and the new call centre third-party business is essen-tially determined as the product of call volume, call duration and price per minute. The call volume is made up of calls from landli-nes and the networks of the mobile phone operators, where the rates may vary depending on the network operator and the call centre third-party business customer.

Profitability (EBITDA):

The main key figure used by the Company to control profitability is EBITDA (earnings before interest, taxes, depreciation and amorti-sation). The 11 88 0 Solutions Group uses this key indicator to con-trol the profitability of the Group.

Cash holdings

Analysing this indicator makes it possible to evaluate the Compa-ny's financial health, among others. This information enables the 11 88 0 Solutions Group to assess, manage and optimise its finan-cial position and net assets.

Cash holdings is the sum total of cash and cash equivalents and financial assets available for sale short-term.

Non-financial key figures

The development of new and existing customers as well as the churn rate as key figures measuring customer loyalty and sa-tisfaction in the Digital segment

A high level of customer loyalty and satisfaction is of particular importance for the development of the Digital segment. This ba-sically involves making use of a customer support concept to es-tablish a long and sustainable relationship between customers and the Company. This secures future revenues and increases the profitability of the Digital segment.

The quantifiable parameters relating to customer loyalty and sa-tisfaction include the churn rate (customer migration rate) and the change in the number of new and existing customers.

Until the 2019 financial year, the churn rate was defined as a per-centage that represents the number of customers in the periodwho do not extend their contracts in relation to the number of existing customers in the same prior-year period. Due to system changes resulting in improved control options for management, starting with the 2020 financial year the churn rate has been defi-ned as the sum of all terminations in the financial year calculated on the average customer base.

Call volume and revenue per call in the Directory Assistance segment

The reason for the continuous decline in the market for directory assistance observable for many years now is the change in consu-mer usage behaviour towards the digital acquisition of informa-tion. This makes it even more important for the 11880 Solutions Group to make an accurate prediction of the development of call volume. In the Company's view, the 11 88 0 Solutions Group has an efficient reporting system, proven forecast models and many years of experience. This provides a basis for the efficient planning of re-quired personnel capacity for the call centres. Revenue per call is another important performance indicator that has a direct impact on the development of revenue in this segment.

Employee satisfaction

Our employees make a major contribution to the Company's long-term success. We want to attract and retain talented individuals and help them to continue developing. To do this, we create a working environment that inspires creativity and loyalty. The Ma-nagement Board believes that this environment is rooted in an open management culture that is based on mutual trust, respect and commitment.

The 11880 Solutions Group can rely on its dedicated staff. We believe that the staff's commitment is evident from their en-thusiasm for their work, motivation and overall attachment to our Company. We are striving to keep the employee commitment identified in the 2020 employee survey at a high level and increa-se it even further where possible. The Happy Employee Index, our measure of employee satisfaction drawn from the Group-wide employee survey in 2020, remained at a very strong 1.9 (on a scale from 1.0 = strongly agree to 5.0 = strongly disagree). Due to the pandemic, the workforce participation rate was 55% this year (2019: 80%).

In the wake of the reorganisation measures and site concentra-tion carried out since 2016, the employee survey is and remains an established feedback tool in enabling employees to help actively

shape their working environment. The results of the employee sur-vey are incorporated into the further development of our strategy. The next employee survey will be conducted in 2021 and will for the first time include the staff of FAIRRANK GmbH.

2. Macroeconomic and sector-specific environment

Macroeconomic environment

Global gross domestic product (GDP) fell by 3.6% in the 2020 fi-nancial year, well below the 2.6% growth achieved in the previous year. The coronavirus pandemic in particular had a firm grip on the global economy. GDP slumped by almost 10% in the first half of 2020 compared to the end of 2019 before growing again in the summer in line with the easing of infection prevention measures. Companies were able to increase production again based on fac-tors including the significant rise in consumer spending during this period. The retail sector recorded particularly strong growth, with the shift towards online retail accelerating markedly in 2020. Further economic development is vitally dependent upon the assumed progress of the pandemic and measures to tackle it. Based on the restrictive infection control measures set to conti-nue until March 2021 and the way in which these measures limit mobility, as well as the sharp increase in economic activity from the summer half-year onwards, particularly in the euro zone and the USA, it is assumed that GDP will grow by 5.8% in 2021 and 4.2% in 2022.

Real GDP in the euro zone is expected to decline by 7.4% this year, indicating a considerable loss of economic momentum compared to the previous year. GDP in this region had already fallen by 3.7% year-on-year in the first quarter of 2020. Economic output then slumped by 11.7% in the second quarter due to the drastic mea-sures introduced in most member states to tackle the coronavirus pandemic. This dramatic decline was only partially offset in the third quarter with a 12.5% increase in economic performance. Ta-king into account the restrictive coronavirus measures imposed in autumn 2020, a further 3% drop in GDP is expected for the fourth quarter. Economic activity is only likely to gather significant pace when restrictions are gradually eased from March 2021 onwards. The economic recovery is expected to continue in the second half of 2021, taking into account the easing of infection prevention measures due mainly to the vaccination of the population by the end of 2021. GDP is therefore expected to increase by 5.1% in the euro zone in 2021. A rise of 4.1% is anticipated for 2022, primar-ily due to the closure of open output gaps.

GDP growth in Germany weakened from 0.6% in the previous year to 5.1% on average in the 2020 financial year. The German eco-nomy recovered surprisingly quickly from the spring shutdown during the third quarter, when GDP increased by 8.5% compared to the previous quarter, its strongest rise since quarterly records began in 1970. Although there was a particularly sharp increase in value creation in areas of the economy that suffered most under government measures to limit the spread of infection, most no-tably the hospitality industry and service providers in the arts, entertainment and recreation sectors, the recovery in the manu-facturing sector was also above average. However, as the slump in the first two quarters combined was 11.5%, economic output was still lower in the third quarter than it was before the crisis started. As a result, production capacity utilisation in October was more than three percentage points below the long-term average. Nevertheless, the overall assessment of the latest trend in key economic indicators suggests that the latest shutdown in autumn 2020 temporarily halted the economic recovery and that GDP is likely to have contracted further in the fourth quarter. However, this decline is very unevenly distributed across different areas of the economy. While value creation in hospitality and among other service providers is set to record a double-digit slump, the manufacturing sector is continuing its recovery. Global industry has therefore remained intact so far, as demonstrated by the re-cent rise in incoming orders. As a result, investments and exports are expected to increase further in the fourth quarter as consumer spending in private households shrinks. The fact that this decline is not even more marked is due to the increase in VAT in January 2021, which is expected to have resulted in noticeable advance purchases at the end of the year. Assuming the lifting of all coro-navirus restrictions in summer 2021 due to sustained vaccine suc-cess among other factors, price-adjusted GDP is likely to increase by 4.2% in 2021. Economic output is set to rise by 2.5% in 2022.

The aforementioned data is taken from the ifo Economic Forecast for Winter 2020, ifo Schnelldienst 2020, December Special Edi-tion, 16 December 2020.

Sector-specific environment

In the second half of 2019, the Circle of Online Marketers (On-line-Vermarkterkreis - OVK) within the German Digital Media As-sociation (Bundesverband Digitale Wirtschaft e.V. - BVDW) worked with experts from market research firm Statista to develop a new model for calculating the size of the display advertising market in Germany.

Digital advertising is now one of the most central and essential communication channels. The importance of this market has been demonstrated by its dynamic growth in recent years and has now been confirmed by its very robust performance even amid the COVID-19 pandemic in 2020.

The digital advertising market proved its resilience during the re-cent crisis by more than offsetting the slump in revenue from the second quarter - which was primarily attributable to budget cuts to advertisers' branding campaigns - with three positive develop-ments. First, advertising revenues in the e-commerce sector rose due to the increased need for online retailing triggered by COVID restrictions. Content placed on mobile devices was another positi-ve driver of additional advertising revenue. Revenues in the digi-tal advertising market will ultimately return to the previous year's level during the summer months of this year immediately follo-wing the coronavirus lockdown. In contrast to many other areas of the economy, no long-term negative impact is expected; instead, a clear return to the growth of recent years can be assumed.

According to OVK and Statista, digital advertising revenues in Germany reached approximately EUR 3.613 billion in 2019. Taking into account the effects of the coronavirus crisis in particular, di-gital advertising investments are predicted to total EUR 3.922 bil-lion in 2020, resulting in annual growth of around EUR 300 million or 8.6% between 2019 and 2020. Stable annual growth is gene-rally apparent across all quarters from 2018 to 2020.

In terms of the trend for each individual quarter, data shows that revenue has risen steadily across almost all quarters from 2018 to 2020. The impact of coronavirus is clear in the second quarter of 2020 in particular. The forecast assumes that the pandemic will still have a slight impact on the third quarter of the year. In the last quarter of 2020, however, revenue growth is likely to be able to match the growth rates recorded at the start of the year.

3. Course of business

As in every other company around the world, the COVID-19 pan-demic and resulting restrictions on everyday life dominated the 2020 financial year for 11 88 0 Solutions AG. Compared to many other businesses, however, our company was among those that benefited from the surge in digitalisation caused by the coro-navirus crisis, with our base of paying customers in the Digital business rising by a further 5,775 new customers in 2020. Manycompanies who had never marketed their products and services online before became aware during the various lockdown peri-ods that a professional online presence is crucial for business success.

In the Digital business, the Company focused on optimising and expanding its product portfolio by teaming up with partners in 2020. We agreed collaborations with restaurant portal Spei-sekarte.de and small and medium-sized business portals DS Digitale Seiten and marktplatz-mittelstand to offer our custo-mers additional opportunities for comprehensive sector-specific online marketing. We incorporated the full Microsoft Office 365 package from our partner Microsoft into our product offering to provide our corporate customers with enhanced support for their administrative tasks.

During the 2020 financial year, our search engine for online re-views, werkenntdenBESTEN.de, was completely redesigned to optimise the user experience and more clearly emphasise the site's benefits for business owners. In mid-2020, the number of published online reviews passed the 100 million mark.

To further accelerate the expansion of the customer base in the Digital business that the Company has already spent many years striving for, 11880 Solutions AG acquired Cologne-based on-line marketing agency FAIRRANK GmbH on 26 August 2020. By acquiring an agency that has been serving primarily medium-si-zed enterprises for 16 years, the transaction expanded 11880 Solutions AG's customer structure as intended. Joint marketing to both smaller and now larger companies has the potential to accelerate the Company's growth in the future. Aside from its own products, the increased strength of the Company also offers advantages in its partnership with search engine giants Google and Microsoft. The process of integrating FAIRRANK GmbH into 11880 Solutions AG began immediately after acquisition and should be completed by the end of 2021 at the latest.

FAIRRANK GmbH was acquired with effect from 21 September 2020 by way of a contribution in kind as part of a capital increase from authorised capital in return for cash and non-cash contri-butions based on a resolution adopted by the Management Board and approved by the Supervisory Board on 26 August 2020, by issuing up to 3,893,000 new shares carrying pre-emption rights. The main shareholder united vertical media GmbH, the previous owner of FAIRRANK GmbH, made its contribution for 2,707,200

new shares by contributing the online agency as non-cash con-tribution and by making an additional cash contribution for 106,547 new shares. The subscription price per share was EUR 1.25. The rights offering was significantly oversubscribed so that all 3,893,000 new shares were issued.

ciation and amortisation within selling and distribution costs amounting to EUR 3.7 million (previous year: EUR 2.6 million) as well as depreciation and amortisation reported within general administrative expenses of EUR 0.7 million (previous year: EUR 0.7 million).

In the Directory Assistance segment, which continues to decline in line with the market, 11880 Solutions AG has been working since May 2020 with the FRED 11811 directory assistance service, which is operated by various publishers of the DasÖrtliche and DasTelefonbuch telephone directories. 11880 employees ans-wer calls to the number 11811 and provide customers with the information they require. This collaboration enables us to in-crease annual call volumes in the Directory Assistance segment by around five percent. In the call centre third-party business, where 11880 employees process customer service calls on be-half of larger companies, we were able to further expand the scope of several existing contracts.

The essential and very extensive reorganisation of the Compa-ny's IT and CRM systems that began during the 2019 financial year made excellent progress in 2020 and should be successfully com-pleted by mid-2021. This will enable us to serve our corporate customers in the Digital business, whose numbers are rising by several thousand each year, even more rapidly and transparently.

Consolidated revenues increased by 7% compared to the prior-year period. The actual revenue volume of EUR 50.8 million sits comfortably within the range of EUR 47.8 million to EUR 51.0 million projected at the start of the year. The share of FAIRRANK GmbH and Seitwert GmbH in the 2020 revenue amounted to EUR 1.3 million. In August 2020, this original guidance was adjus-ted to a range of EUR 48.5 million to EUR 52.5 million in an ad hoc announcement due to the acquisition of Fairrank GmbH and Seitwert GmbH. We also met this amended forecast range.

Group EBITDA improved by EUR 0.2 million compared to the previous year to EUR 3.0 million, thus comfortably reaching the range of EUR 1.7 million to EUR 3.2 million anticipated at the start of the year.

The consolidated EBITDA for the financial year of EUR 3.0 million (previous year: EUR 2.8 million) results from the operating result of EUR -2.7 million (previous year: EUR -2.1 million) plus depre-ciation and amortisation reported within the cost of revenues totalling EUR 1.3 million (previous year: EUR 1.6 million), depre-

Cash and cash equivalents and available for sale financial as-sets decreased by EUR 1.0 million to EUR 3.7 million in the last financial year (previous year: EUR 4.7 million; cash flow pre-vious year: EUR +2.1 million). For the 2020 financial year, the Company forecast cash holdings of between EUR 1.6 million and EUR 2.8 million. In its ad hoc announcement of 10 September 2020 on the complete implementation of the cash and non-cash capital increase, 11 88 0 Solutions AG pointed out that as a result of the capital increase, the Company will have additional cash in the amount of EUR 1.4 million from the net proceeds of the issue.

In 2020, the average churn rate in the Digital segment based on the new calculation method described above was 26%. The Company had planned to at least stabilise or slightly improve the figure for the 2019 financial year, which based on the new calcu-lation method was an average of 28%. The customer portfolio was expected to increase again considerably in 2020, and the Company succeeded in adding 5,775 new customers, thus slightly exceeding expectations.

The negative trend in caller volume in the traditional business of Directory Assistance segment continued as expected. The Group expected the decline in call volume in 2020 to match that of the previous year (2019: 22%). The call volume actually declined by 21% in 2020. Revenue per call again increased by another 2% in 2020, which means that the anticipated slight increase was achieved.

4. Financial situation

Results of operations

Consolidated revenues in the 2020 financial year were EUR 50.8 million, compared to EUR 47.7 million in the previous year. This represents revenue growth of 7% (previous year: 11%). The increa-se was due on the one hand to the successful acquisition of new customers and sales to existing customers, and on the other hand to the acquisition of FAIRRANK GmbH and Seitwert GmbH, whose share of revenues amounted to EUR 1.3 million.

The corresponding cost of revenues in the 2020 financial year total-led EUR 29.2 million (previous year: EUR 27.3 million). This amount represents an increase of around 7% compared to the previous year. The share of cost of revenues attributable to FAIRRANK GmbH and Seitwert GmbH, the companies acquired in September, was EUR 1.1 million. In addition to the significant proportion of cost of reve-nues added by newly acquired companies FAIRRANK and Seitwert, this rise is also attributable to higher costs associated with the de-velopment and introduction of a new, non-capitalisable CRM system compared to the previous year. Other internal development activi-ties were lower as a result of this, which meant that capitalisation was significantly reduced compared to the previous year. There was also a sharp increase in variable line costs caused by taking on FRED 11811's directory assistance business from May 2020 onwards.

Selling and distribution costs grew by 11% from EUR 14.5 million in the previous year to EUR 16.1 million (previous year: 20% increa-se). The increase is primarily attributable to higher depreciation of customer contracts in line with the increased level of customer contracts capitalised due to the positive business performance of the Digital segment. Losses on receivables increased year-on-year in line with these higher incoming orders on the revenue side and the need for loss allowances on a case-by-case basis. FAIRRANK GmbH and Seitwert GmbH accounted for EUR 0.3 million of selling and distribution costs.

The general administrative expenses in the amount of EUR 8.1 mil-lion (previous year: EUR 8.0 million) primarily include the costs of corporate services such as finance, legal, human resources, tech-nology, costs of the Management Board and infrastructure costs of these units. General administrative expenses mainly consist of costs for consultancy (at prior-year level), personnel (EUR 0.1 million lower than in the previous year), maintenance (EUR 0.2 million higher than in the previous year) and depreciation and amortisation (at prior-year level). The share of general adminis-trative expenses contributed by FAIRRANK GmbH and Seitwert GmbH, which were consolidated for the first time in the 2020 fi-nancial year, amounted to EUR 0.2 million.

the previous year's figure of EUR 2.8 million. FAIRRANK GmbH and Seitwert GmbH accounted for EUR -0.2 million of EBITDA.

Net financial income in 2020 ended the year with net expenses of EUR 0.3 million, compared with EUR 0.2 million in the previous year.

In 2020, the Group incurred a positive net income tax expense of EUR 0.6 million (previous year: expense of EUR -0.8 million). The main reason for this development is the increase in tax loss carryforwards.

The net income/loss for the period amounted to EUR -2.3 mil-lion compared to EUR -3.2 million in the previous year. FAIRRANK GmbH and Seitwert GmbH accounted for EUR -0.3 million of this figure.

Segment report

Revenues in the Digital segment rose by EUR 3.7 million from EUR 34.6 million in the previous year to EUR 38.3 million. EBITDA of EUR 2.8 million was an improvement on the previous year (EUR 2.4 mil-lion). Both FAIRRANK GmbH and Seitwert GmbH were allocated to the Digital segment, with the two companies accounting for EUR 1.3 million of revenue and EUR -0.2 million of EBITDA.

The degression rate of call revenues in the traditional directory as-sistance business fell slightly on a percentage basis to 21% in 2020, down from 22% in the previous year. In the financial year ended, revenues in the Directory Assistance segment amounted to EUR 12.5 million, down only 4% compared with the previous year due to the call centre third-party business (previous year: EUR 13.0 million). EBITDA of EUR 0.2 million as of the reporting date is below the pre-vious year's level of EUR 0.4 million.

Net assets and financial position Capital expenditures

The total investments in intangible assets and property and equip-ment due to the reporting date were EUR 4.5 million (previous year: EUR 4.4 million).

Other operating expenses, after deduction of other operating in-come, amounted to EUR 0.01 million in 2020 (previous year EUR 0.02 million).

Consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA) of EUR 3.0 million was slightly higher than

In the Digital segment, the Company mainly invested in internal-ly generated intangible assets in order to make 11 88 0's product portfolio competitive. The additions to capitalised costs to obtain a contract (commissions) in the amount of EUR 3.8 million in line with the positive business trend are another key item in the Digital segment.

Only insignificant investments were made for the Directory Assis-tance segment.

As in the previous year, the 11880 Solutions Group as of 31 De-cember 2020 had no noteworthy open obligations from capital expenditures which will be incurred in financial year 2021.

se of EUR 4.1 million primarily resulted from the recognition of goodwill totalling EUR 3.3 million from the initial consolidation of FAIRRANK GmbH and Seitwert GmbH. Contractual relationships with customers totalling EUR 0.4 million were also identified as of the takeover date that were reported with a residual value of EUR 0.3 million as of the reporting date.

Statement of financial position

As of the reporting date, total assets including FAIRRANK GmbH and Seitwert GmbH, which were consolidated for the first time in financial year 2020, amounted to EUR 31.4 million, up by EUR 4.0 million compared to prior-year figure of EUR 27.3 million.

Assets

On the assets side of the statement of financial position, cur-rent assets decreased marginally from EUR 14.2 million to EUR 14.1 million. There were offsetting effects from the reduction in cash by EUR 1.1 million and the increase in trade accounts receivable, by EUR 0.9 million. The reduction in cash is primar-ily attributable to planned investments in the new CRM system. EUR 0.6 million in cash was added by initial consolidations. The EUR 0.9 million increase in trade accounts receivable from EUR 8.7 million in the previous year to EUR 9.6 million in the 2020 financial year was mainly due to ongoing customer and revenue growth in the Digital segment. A receivables portfolio of EUR 0.2 million was also incorporated from initial consolidations. As of 31 December 2020, the 11 88 0 Solutions Group had unchan-ged investments in short-term money market and bond funds that were reported as financial assets measured at fair value. The fair value of these investments remained unchanged at EUR 0.6 million compared with the previous year. Other current assets of EUR 0.7 million increased slightly by EUR 0.1 million compared to the previous year.

The Company had unutilised overdraft facilities of EUR 1.0 million (previous year: EUR 1.0 million ) with financial institutions at its disposal as of 31 December 2020.

Equity and liabilities

On the liabilities side, current liabilities increased by EUR 1.6 million to EUR 14.3 million (previous year: EUR 12.7 million). Accrued current liabilities as of the reporting date amounted to EUR 5.5 million (previous year: EUR 4.8 million) and mainly include amounts for obligations to employees and outstanding invoices. This increase was primarily due to the acquisition of accrued liabilities totalling EUR 0.4 million as part of the ini-tial consolidation as well a EUR 0.1 million year-on-year rise in liabilities for holiday accruals and a EUR 0.1 million increase as part of the bonus payments for 2020. Other current liabilities of EUR 6.5 million (previous year: EUR 5.1 million) increased by EUR 1.4 million. This rise was mainly attributable to a EUR 1.1 million year-on-year increase in contractual liabilities in line with the sharp improvement in sales performance in the Digital segment. EUR 0.2 million in other current liabilities were also incorpora-ted as part of initial consolidations. Current lease liabilities rose slightly by EUR 0.1 million compared with the previous year.

Non-current liabilities of EUR 7.4 million increased by EUR 0.1 million compared with the previous year (EUR 7.3 million). This rise was primarily due to the incorporation of the following ba-lance sheet items as part of initial consolidation: EUR 0.7 million from non-current loan liabilities, EUR 0.4 million from non-cur-rent lease liabilities and EUR 0.1 million from deferred tax liabi-lities. In contrast, deferred tax liabilities and leasing liabilities of the original Group companies decreased by EUR 1.3 million compared to the previous year. In addition, non-current provisi-ons in the Group increased by EUR 0.2 million and provisions for pensions by EUR 0.1 million compared to the previous year.

As of the reporting date, liquid assets and securities (money mar-ket and bond funds) were exclusively kept with renowned German financial institutions which are classified as investment grade by international rating firms.

As of the reporting date, the Group had non-current assets worth EUR 17.3 million (previous year: EUR 13.2 million). The increa-

Equity increased by EUR 2.4 million year-on-year to EUR 9.8 million (previous year: EUR 7.4 million). As part of the capital increase in return for cash and non-cash contributions in Sep-tember of the financial year under review, subscribed capital rose by EUR 3.9 million and capital reserves increased by EUR 0.9 mil-lion. At the same time, equity fell as a result of the net loss for the period of EUR -2.3 million in the financial year under review

including FAIRRANK GmbH and Seitwert GmbH. In addition, the actuarial losses reported in other components of equity rose by EUR -0.1 million year-on-year to EUR -0.4 million.

Cash flow & financing

The 11880 Solutions Group's financial management ensures that the Group is at all times able to meet its payment obligations and to generate an adequate return from the investment of excess liquidity.

The portfolio of cash and cash equivalents as well as financial as-sets available for sale amounted to EUR 3.7 million (previous year: EUR 4.7 million) as of December 31 2020. This figure includes cash and cash equivalents subject to drawing restrictions totalling EUR 0.1 million at the reporting date (previous year: EUR 0.1 million). Financial assets measured at fair value can be sold short-term and are available to the Company with no restrictions.

5. Research and development

During the year, the Group was again able to meet its financing needs through own funds.

When investing liquidity, the 11880 Solutions Group pursues as conservative an investment approach as possible in order to mi-nimise the risk of losses. Funds are invested short-term in money market or bond funds.

Cash flows from operations in the past financial year showed in-flows of EUR 2.5 million compared to EUR 4.4 million in the pre-vious year. The acquired companies FAIRRANK GmbH and Seitwert GmbH resulted in a cash outflow of EUR 0.3 million. The change was mainly attributable to an increase in trade accounts receivable due to the very good business performance and a decrease in trade ac-counts payable.

Cash outflows from investing activities at the 31 December 2020 reporting date amounted to EUR 3.6 million (previous year: cash outflow of EUR 3.2 million). The cash flows from investing activities in the previous year included the sale of money market funds and bond funds in the amount of EUR 1.2 million. No sales were made in the reporting year. Adjusted for these items, cash flows from in-vesting activities remained steady at EUR -3.6 million in 2020 (pre-vious year: EUR -4.4 million). Cash flows from investing activities of EUR 0.9 million represent the cash inflows from the acquisition of FAIRRANK GmbH and Seitwert GmbH.

Cash flows from financing activities amounted to EUR -0.1 million (previous year: EUR 2.1 million). The capital increase implemented in the 2020 financial year resulted in a cash inflow that was EUR 2.1 million lower than the capital increase in the previous year.

Cash flows amounted to EUR -1.2 million as of the reporting date (previous year: EUR 2.1 million adjusted for the sale of money mar-ket and bond funds).

As a service provider, the 11 88 0 Solutions Group does not carry out basic research in the original sense, and therefore no re-search costs were incurred. However, the Company did recognise development costs for internal software generation that serve to generate revenue in the Digital and Directory Assistance seg-ments. The 11880 Solutions Group's in-house development de-partment based in Essen was responsible for this again in 2020. The range of services in this area included mainly the programm-ing of applications, the development and maintenance of the klicktel.de, 11880.com and werkenntdenBESTEN.de specialist portals and online directories, and the development of user interfaces in voice-based directory assistance. The total amount recognised for internally generated intangible assets in relation to the service ranges described above was EUR 0.3 million in the past financial year (previous year: EUR 0.8 million). Amortization of capitalised development costs in the reporting period amoun-ted to EUR 0.8 million (previous year: EUR 1.0 million).

6. Employees

The development into a digital group with a focus on a compe-titive product portfolio is sustainable and positive following the change in strategy initiated in 2015.

Our workforce plays a vital role in the transformation of our group, which is why it is important for us to have the right employees in the right roles and to support their continued development in a targeted manner.

Digitalisation will completely reshape our lives and thus our work too. We are already seeing new forms of collaboration, innovative business models and a greater degree of automation of activities. As a result, it is essential for us to equip our senior executives and employees with digital skills. Ultimately, they provide the foun-dation for our success - both now and in the future. This means

that we need to ensure that we are an attractive employer for ta-lented individuals and create working environments and use tech-nology that enable us to connect with each other. The COVID-19 pandemic has significantly accelerated virtual networking, espe-cially in 2020. Management is also set to change. It will become more participatory and virtual. Decisions will need to be made even more quickly in future. Overall, digitalisation offers fantas-tic opportunities and possibilities for efficient and effective colla-boration that we want to best as effectively as possible.

As of 31 December 2020 the 11 88 0 Solutions Group had 608 em-ployees Group-wide as defined by Section 267 of the HGB (head-count; excluding the Management Board, trainees and dormant employment contracts), 54 more than a year ago (previous year: 554). Of these, 52 employees were taken over as part of the initial consolidation of FAIRRANK GmbH.

The 11 88 0 Group and its Group companies are not bound by col-lective bargaining agreements, as there is no collective agree-ment for the call centre industry. The collaboration with those representing the interests of employees in the 11 88 0 Group fully and transparently implements the regulations of section 87 (10) and (11) of the German Works Constitution Act (BetrVG).

As the industry association and interest group for the call cen-tre industry, the Call Center Verband Deutschland e.V. (CCV), of which we are a member, follows the latest political and parlia-mentary developments and legislative procedures relating to sec-tor-specific issues.

7. Opportunity and risk management

General information

The market environment and legal and regulatory framework of the 11880 Solutions Group is constantly changing. 11880 is also continuing to develop its business activities, the markets and customer groups it serves and, last but not least, by intro-ducing new collaboration models and making acquisitions. This regularly creates new opportunities and risks, while the absolute and relative extent of already-known opportunities and risks can also change.

As a result, being able to recognise, assess and manage all op-portunities and risks relevant to the Company at an early stage with the help of an effective risk and opportunity managementsystem that is constantly improving in line with market dynamics is a high priority for the 11880 Solutions Group. This helps to ensure the continued existence of the Company, supports the strategic development of the Group and promotes responsible corporate behaviour.

Risks are events or developments triggered by internal or exter-nal factors that could have a negative impact on expected finan-cial developments and thus result in a negative deviation from planning (budget) or the achievement of strategic goals.

Opportunities are events or developments triggered by internal or external factors that could have a positive impact on expected financial developments and the achievement of the Company's strategic goals.

The 11880 Solutions Group's risk management system contains the entirety of all organisational regulations and measures for identifying and dealing with opportunities and risks associated with the Company's business activities. The 11880 Solutions Group's risk management system is used for the early recogni-tion, assessment and control of internal and external risks and opportunities. As an inherent part of the risk management sys-tem, the risk early warning system is designed to identify mate-rial risks, particularly going-concern risks, in a timely manner in order to introduce appropriate countermeasures.

The risk management system of the 11 88 0 Solutions Group com-bines the Group's established risk management subsystems into an integrated, company-wide system, taking into account cor-porate objectives, vision, strategy and corporate culture. Full responsibility for the Group's risk management system lies with the Management Board of 11 88 0 Solutions AG.

Controlling / Operational areas

Compliance Committee /

Operational areasAccounting / IT / Operational areasControlling / Operational areas

  • Ongoing reporting on key KPIs

  • Budget

  • Forecast

  • Target/actual analyses

  • Investment controlling

  • Performance management

  • Special analyses

  • Guidelines/ Regulations

  • Risk and fraud prevention

  • Process optimisation

  • Fraud prevention

  • Data protection

  • Sanctions

The 11880 Solutions Group's opportunity and risk management system is reviewed for its efficiency and fitness for purpose on a quarterly basis in cooperation with those responsible for each cor-porate division. The Management Board is regularly informed of the risk situation in the 11880 Solutions Group. In addition, the Supervisory Board, particularly the Audit Committee, monitors the risk management system.

  • Accounting-related ICS

  • Document management system

  • Four-eyes principle

  • Process documentation

  • Plausibility analyses

  • IT systems

  • Audit guidelines

  • Policy competencies

  • Risk identification

  • Risk assessment

  • Risk control

  • Risk monitoring

  • Risk avoidance

  • Risk management process

  • Risk reportpresentations, the development of financial and non-financial key performance indicators (KPIs) is processed and analysed in relation to both the latest developments as well as the developments fore-cast as part of the planning process. The reports presented to the Management Board and executives from each segment include de-tailed monthly reports prepared by the Group's controlling depart-ment in close cooperation with specialist departments.

In addition to the Group-level assessment, the Digital and Directory Assistance segments are monitored at segment level.

Performance management

The early warning system established within the Company is based on differentiated, high-quality planning for each individual corpo-rate division and corresponding reporting in the form of ongoing variance analysis.

The 11 88 0 Solutions Group's opportunity and risk management sys-tem is anchored in its strategic development and is integrated in all further planning processes. For example, all business activities are reviewed and assessed for opportunities and risks at annual plan-ning meetings. Objectives are then set on this basis (particularly revenue and earnings targets) and their achievement is monitored and analysed continually by the persons responsible for planning in the Group's controlling department. As part of the monthly results

The Group's controlling department also leads weekly sales mee-tings that discuss the latest sales performance, initiatives and environment (e.g. in relation to the availability of data, the per-formance and availability of the IT systems required) in each indi-vidual business unit. In addition to executives from the individual sales units, the Management Board and executives from control-ling, IT, product management and data/BI also play an integral part in these regular meetings. As well as enabling interdiscipli-nary, crossfunctional performance management, including taking into account segment interdependencies and corresponding de-viation analysis, this also allows management to discuss and initi-ate important operational and strategic measures directly.

The Management Board reports to the Supervisory Board on the latest developments, key figures and opportunities and risks iden-tified in the form of a monthly meeting, with the Group's control-ling department also closely involved in preparations for this.

Compliance management

In simple terms, the term compliance is another word for "con-formity with the law". It means ensuring that the Company, its corporate bodies and employees observe all statutory provisions and internal guidelines and rules.

Compliance also involves creating organisational arrangements and measures within the Company that ensure that it adheres to these statutory provisions and internal guidelines and rules. All of these organisational measures, rules and processes to ensure compliance are referred to as the "compliance system".

The Company has had a Compliance Committee since 2010 to ensure responsible handling of any risks and compliance with all mandatory statutory requirements and internal regulations. This Committee advises the Management Board on all matters of compliance and continually reviews and refines the compliance system. These include suggestions on risk and fraud prevention, process improvements and possible sanctions as well as initiating and monitoring internal guidelines (e.g. the Purchasing Policy for the 11 88 0 Group). The Compliance Committee meets several times a year, and holds extraordinary meetings to address speci-fic and/or time-critical questions and issues as required.

Regular compliance work focuses on operational and organisatio-nal measures within its sales processes. The sales processes and contract completions of internal sales staff and external sales partners are constantly monitored to ensure compliance with statutory regulations and internal provisions. The commission model and resulting monthly sales commission are monitored by the Group's controlling department on a monthly basis and ana-lysed with regard to mathematical accuracy, fraud prevention and compatibility with incentives. The sales team, the Group's control-ling department and the Works Council work closely together to make any adjustments to the commission model.

In connection with the entry into force of the General Data Protec-tion Regulation (GDPR) in May 2018 and the EU Payment Services Directive (PSD II) in January 2018, the Company introduced rele-vant legal requirements.

Internal control system and internal audit

Since the parent company 11880 Solutions AG is a publicly tra-ded company as defined by section 264d HGB, the main features of the internal control and risk management system (ICS), both in respect of the financial reporting processes of the consolida-

ted companies and in respect of the Group's financial reporting process, must be described pursuant to section 315 (4) HGB.

There is no legal definition of the internal control and risk ma-nagement system with respect to the accounting process and the consolidated accounting process. 11880 Solutions AG under-stands the internal control and risk management system to be a comprehensive system and bases it on the definitions provided by the Institut der Wirtschaftsprüfer in Deutschland e. V. (Insti-tute of Public Auditors in Germany, IDA), Düsseldorf, for the in-ternal control system relevant to the financial reporting system (IDW PS 261 new version subsection 19 et seq.) and for the risk management system (IDW PS 340, subsection 4).

Accordingly, an internal control system comprises those princip-les, procedures and measures that the management employs in a company with the aim of implementing its organisational decisi-ons for the purpose of:

  • Ensuring the effectiveness and profitability of the Company's business (which includes protecting its assets, as well as pre-venting and detecting any impairment of its assets);

  • Ensuring that both the internal and the external financial re-porting processes are proper and reliable; and

  • Ensuring compliance with all statutory requirements applica-ble to the Company.

The risk management system comprises the totality of all organi-sational regulations and measures serving to detect and handle risks arising from entrepreneurial activity.

With respect to the accounting process, the Group has implemen-ted the following structures and processes:

Full responsibility for the 11880 Solutions Group's ICS lies with the Management Board of 11 88 0 Solutions AG. All of the Group's strategic business areas are integrated via a specifically defined management and reporting organisation. Meetings held once every two weeks with the department and division heads are held for this purpose to discuss all relevant key performance indicators of the operating business.

The departments and divisions involved in the accounting process are appropriately equipped, both in terms of quantity and quality. Accounting data that has been received or passed on is regularly reviewed for completeness and correctness. Dedicated software

performs programmed plausibility checks using a document ma-nagement system, for example. Information relevant to the fi-nancial reporting process is continuously exchanged between the commercial director and the Head of Accounting and communica-ted to the CFO in regularly scheduled meetings.

The dual control principle is also applied for important transac-tions, such as orders as well as invoice control and the approval of payment runs, for example. Confirmations of review and payment instructions must be signed and dated.

Invoices received are also submitted to the relevant departments in line with the dual control principle by means of a document management system to ensure that these are factually and math-ematically correct. This principle states that no single person alone may be responsible for all process steps. Instead, sufficient-ly qualified individuals must be involved in the process in order to recognise and remedy possible deviations and control weaknesses. Specifically, this means that the party placing the order must pro-vide a signature to confirm that the goods were received or the service was rendered according to the order specifications.

personnel, the use of appropriate software and clear legal and in-ternal company specifications form the basis for a proper, uniform and continuous accounting process. The clear definition of areas of responsibility, as well as various control and review mechanisms, as described in more detail above, make it possible to ensure cor-rect and responsible accounting. Specifically, this ensures that business transactions can be recorded, processed, documented and recognised immediately and correctly in the accounts in ac-cordance with legal requirements and internal guidelines. At the same time, it ensures that assets and liabilities are appropriately recognised, reported and measured in the annual and consolida-ted financial statements, and that reliable and relevant informa-tion is provided promptly and in full.

Risk management system

The risk management system of the 11 88 0 Solutions Group is ope-rationally managed by the commercial director also responsible for risk controlling in their role as the Head of Controlling, under the overall organisational responsibility of the Management Board. As part of the Group's management system, the Group's controlling department primarily has the following responsibilities:

Orders must be checked immediately and passed on to the super-visor or cost centre manager along with a cost centre account number so that payment can be authorised. As a final means to ensure correctness, two authorised signatories with power of at-torney release payment.

In addition to the ICS in the individual subsidiaries, these levels of control are also implemented at group level. Group-wide con-trols are managed by centralised entities such as Finance, Per-sonnel or the Legal Affairs department, and are also documented centrally. A typical example of this is the centralised manage-ment and control of outgoing payments.

The ICS is supported by IT systems, for example SAP, that are re-gularly checked for their efficiency. IT systems used in accoun-ting are standard software to the extent possible. These systems are protected against unauthorised access by appropriate secu-rity and authorisation concepts.

  • Conceptually designing and developing a risk management sys-tem that is structurally consistent and binding for all corporate divisions, in close cooperation with the Management Board.

  • Organising, initiating and coordinating the regular recognition, assessment and communication of risks by the risk managers.

  • Supporting risk managers with the assessment of identified risks and the plausibility of assessment results.

  • Critically reviewing the risk managers' assessments of risks in individual areas of responsibility.

  • Monitoring statutory risk management regulations and ad-justing processes, templates and methods where appropriate.

  • Monitoring the crossfunctional consistency of risk assess-ments and analysing (potential) crossfunctional interdepen-dencies of individual risks.

  • Aggregating the 11 88 0 Solutions Group's risks across all de-partments and risk types.

  • Preparing and coordinating the risk report with the Manage-ment Board.

The aim of the internal control and risk management system with respect to the accounting process, the main features of which are described above, is to ensure that business facts are consistently recorded, processed and recognised correctly in the accounting and incorporated in the external financial reporting. The right

The executives below the Management Board are considered as direct risk managers. They are responsible for identifying, as-sessing, managing, monitoring, documenting and communica-ting significant risks as well as the measures introduced to redu-ce risks in their respective departments. The executives in each

department are supported by the area controllers responsible for their business segment. The risk managers are responsible for communicating risks to the risk controlling team at specific intervals (regularly when preparing the budget and forecasts as well as ad hoc if new risks are identified or if known risks mate-rially increase).

The risk report is prepared by the Group's controlling department based on the risks recorded by the risk managers and reported to risk controlling, and is coordinated with the Management Board, which in turn reports to the Supervisory Board, as part of budget planning and rolling forecasts. Where significant risks or even those jeopardising the continued existence of the Group are identified, these are immediately and directly reported to the Management Board regardless of ongoing budget or forecasting processes. This ad hoc reporting obligation is also manifested in the Group's risk management manual.

The following risk types are differentiated within the risk manage-ment system of the 11 88 0 Solutions Group:

  • Market risks

  • Financial and liquidity risks

  • Personnel risks

  • Litigation risks

  • Regulatory risks

  • Legal risks

  • Technology risks

The chosen differentiation between types of risk helps the Group to identify and investigate risks systematically. Based on the pre-defined structure, risk managers are required not to limit the risk inventory to the types of risks typically found in their departments but must also selectively and systematically focus their analysis on risk types that are less common for their departments.

Individual risks are assessed in a multi-stage process.

terms of their potential significance and discussed in the relevant corporate bodies and reports where necessary.

  • iii. For each risk, measures are developed to prevent or re-duce the risk, and the resulting reduction in the poten-tial amount of damage, or the remaining amount of damage after the measures are taken, is calculated (net calculation).

  • iv. Taking into account the probability of occurrence for the net risks, the risk is then assessed in the form of the pro-bability-weighted EBITDA risk in the budget.

The assessed risks are then categorised according to their risk level in order to present the overall risk. The Group currently differentia-tes between the categories of "significant" (risk > EUR 1.0 million), "moderate" (from EUR 0.5 to 1.0 million), "low" (EUR 0.1 to 0.5 million) and "very low" (< EUR 0.1 million) with regard to risk level.

Overall summary of the current risk position

The assessment of the overall risk position of 11 88 0 Solutions Group is the result of the consolidated analysis of all material in-dividual risks. Although new risks were added as a result of the coronavirus pandemic, in connection with the ongoing integra-tion of FAIRRANK GmbH after its acquisition in 2020, and due to changes to the regulatory environment compared to the previous year, the extent of risks already recognised was reduced due to the implementation of relevant measures and/or new insight and experiences.

Overall, the 11 88 0 Solutions Group has only been moderately af-fected by the negative impact of the coronavirus pandemic so far compared to other sectors due to its diversified customer base and target group as well as a business model largely focused on the di-gitalisation of small and medium-sized businesses. The measures introduced since the outbreak of the pandemic are taking effect, and the simulations conducted since Q2 2020 to predict the scope of the coronavirus pandemic's potential effects have so far proven to be accurate overall.

  • i. First, the risks are recorded and described in the abstract.

  • ii. Building on this, the amount of damage that would re-sult if the risk were to occur if no risk mitigation mea-sures were taken (gross risk) is assessed. The effect on earnings (EBITDA) during the budget year is used as a benchmark for this. If it is not possible or not yet possi-ble to quantify isolated risks, these risks are assessed in

Despite the additional market risks caused by the global corona-virus pandemic, the overall risk position remains largely unchan-ged overall compared to the previous year. From the Management Board's perspective, there were no risks either as of the reporting date or at the time the financial statements were prepared that, severally or together, could threaten the continued existence of the Group or the subsidiaries included in consolidation as going concerns.

As in the previous year, while the risks that currently exist are re-garded as manageable, their occurrence (like the opportunities that generally correspond with them) could affect our ability to meet our approved budget. However, it is not currently possible to conclusively assess whether and to what extent the corona-virus lockdown, which was still ongoing at the time the financial statements were prepared, could have a more pronounced impact than before on the business activities of the 11880 Solutions Group, in particular on the acceptance of products and services offered on the market as well as the creditworthiness of existing customers. This applies to both the risks to the 11 88 0 Solutions Group associated with the pandemic as well as the potential op-portunities that could result from the increasing trend towards digitalisation.

The following overview shows the current assessments of the se-verity of the individual risk types and a comparison with the as-sessment of risk severity made in the previous year's annual finan-cial statements.

CORPORATE RISKS

CURRENT RISK PROFILE

RISK PROFILE PREVIOUS YEAR

Market risks

Significant

Significant

Financial and liquidity risks

Low

Low

Personnel risks

Low

Low

Process risks

Low

Low

Regulatory risks

Very low

Very low

Legal risks

Very low

Very low

Technology risks

Very low

Very low

Appropriate risk management measures are also designed to fur-ther reduce the probability of occurrence and the effect on ear-nings in the event of occurrence. In addition, we do not expect all individual risks to occur simultaneously, if at all, due to the heterogeneous nature of these risks.

Presentation of fundamental opportunities and significant in-dividual risks

For classification purposes and to improve the comprehensibility of the key individual risks presented below, we will first provide a brief overview of the latest market developments in the Directory

Assistance and Digital segments and material opportunities wit-hin these segments. This is followed by the results of the assess-ment of individual risks: Based on the risk assessment conducted, none of the individual risks outlined below are classified as being in the "significant" or "moderate" cluster with regard to their level of risk. In fact, based on the risk assessments currently available for each individual risk, all individual risks are classified in the "low" or "very low" risk level clusters.

Market development, risks and opportunities in the Digital segment

This segment relevant to the Group is still expected to see dyna-mic market growth in the coming years, and current trends, par-ticularly the trend towards the digitalisation of our (potential) customers' business models, are expected to continue. This trend could even be reinforced due to factors such as the coronavirus pandemic, creating additional opportunities for the 11 88 0 Group.

With a high number of commercial search queries again in finan-cial year 2020, the 11880 Solutions Group has secured an excel-lent position for itself in this market with its 11880.com online directory and the complementary specialist portals.

This large number of search queries and the leads generated from these in a commercial environment are key assets for the 11880 Solutions Group when selling online ad products to SMEs. With its products for website creation, the sale of prominently-placed ad-vertisements and the adoption of search engine optimisation mea-sures, the 11 88 0 Solutions Group has established itself as one of the leading providers of all-in-one services for regional online ad-vertising targeting SMEs in Germany in terms of customer figures. Further operational opportunities arise from boosting producti-vity of sales in the digital business by employing more efficient tools. Conversely, should sales productivity perform less well than expected, this would constitute a risk.

Should the Group exceed the expected guidance regarding custo-mer satisfaction and therefore customer loyalty, this would trans-late into positive effects for the development of revenue and ear-nings. Conversely, there is a corresponding risk if the churn rate is higher than forecast.

The acquisition of FAIRRANK GmbH presents an additional oppor-tunity to focus increasingly on serving larger medium-sized ent-erprises with individual product offerings and thus substantially expand the 11 88 0 Group's business model and relevant market.

Market development, risks and opportunities in the Directory Assistance (DA) segment

Due to the shift in media usage from traditional media to digital media, the traditional directory assistance market has been on the decline for years. The resulting downward trend in call volume has been accounted for in the budget planning for 2021 and subse-quent forecast years. However, there is a chance - albeit a small one - that the market will shrink to a lesser degree than projected.

Due to the steady decline in call volume in the traditional direc-tory assistance business (branded DA), both opportunities and risks in terms of absolute revenue and earnings effects continue to taper off gradually.

The third-party business within the Directory Assistance segment referred to as Call Center Services (CCS) has grown considerably in recent years and is being driven forward in a focused manner with innovative approaches and very high-quality service. This presents additional opportunities for future development. The potential risks here primarily concern the loss of existing major CCS customers. At present, there are no specific indications that such risks have a high probability of occurrence. This risk is also declining gradually due to the increasing duration of our success-ful collaborations with major customers.

Due to structural process and organisational changes, customer base management in the Digital segment has shown continued im-provement over the last few years. Increased customer satisfaction and its effects on customer loyalty has enabled successive reducti-ons to the churn rate in recent years. Due to risks associated with the coronavirus pandemic in relation to the creditworthiness of existing customers and their willingness to extend contracts, a slightly hig-her customer loss has been assumed for the 2021 financial year as part of the budget planning process than in the 2020 financial year.

The key individual risks are outlined in brief below. First, it should be noted that all individual risks are in the "low" or "very low" risk clusters in their own right. Individual risks with a risk level of less than EUR 50 thousand are only mentioned if they relate to FAIRRANK GmbH, which we acquired in 2020.

Market risks

At present, the most significant individual risk is the potential im-pact on revenue and earnings that may arise for the 11880 Group

as a result of the coronavirus pandemic. In particular, these risks result from the fact that sales performance in new customer busi-ness could decline in several sectors or contract extensions and upselling initiatives among existing customers could be less suc-cessful than planned. There is also the risk of an increase in co-ronavirus-related insolvencies or business shutdowns among the Group's existing customers, which would then have an indirect negative impact on the churn rate in the 11 88 0 Solutions Group's Digital segment. As it is not currently possible to reliably determi-ne the level and probability of occurrence of these coronavirus-re-lated risks, the Group's risk management efforts place a particular focus on analysing the corresponding key figures and leading indi-cators on an ongoing basis.

In the Digital segment, products are sold in outbound. This sales channel is in line with current legislation. However, there is the risk that legislators could restrict telephone contacts to corporate cus-tomers in future. This would inevitably have a negative impact on opportunities to acquire new customers and thus on revenue and margins in this segment. The 11880 Solutions Group's legal depart-ment is closely involved with this subject and is working on counte-racting this risk by developing comprehensive measures to increase legal certainty. In addition, this risk is countered by actively obtai-ning "opt-ins"; that is, gaining consent from potential customers to contact them.

There is a risk of an increase in the churn rate for media products in the Digital segment if we are unable to meet customer expectations about the products on offer. To reduce this risk, the 11880 Solutions Group introduced comprehensive and professional customer commu-nications to improve the transparency surrounding the performance of its products. The Group is also working consistently to steadily improve the quality and customer benefit of its products and is intro-ducing comprehensive quality controls. Intensive product training courses for sales employees and analysis of sales negotiations also help to minimise this risk.

corresponding development of key account management (KAM), it may also be necessary to purchase a larger quantity of leads on the external market, at least temporarily.

The significant risks in the Directory Assistance segment primar-ily result from price and call volume risks. There is a risk here of increased price competition in the market for traditional direc-tory assistance services or an acceleration in the decline in volu-mes that has been observable for many years now. However, the greatest individual market-related risk in this segment is the risk of losing major customers in the Directory Assistance segment's call centre third-party business. Appropriate customer retention measures are being implemented to counteract this risk. Sales activities aimed at acquiring new customers in CCS are also being continuously expanded.

As in the previous year, market risks are considered significant overall.

Financial and liquidity risks

The Group is constantly optimising its funding base and limits its financial risk with the aim of safeguarding the Group's financial independence. The financial risks are part of the risk manage-ment system and are also monitored by way of rolling monthly finance planning and financial analysis within the context of li-quidity management. In 2020, the Group continued to initiate suitable countermeasures in the form of structural measures and sustainable cost discipline and implemented a system aimed at continually monitoring outgoing and incoming payments.

As of 31 December 2020, the 11880 Solutions Group had cash and cash equivalents and short-term money market and bond funds of EUR 3.7 million (previous year: EUR 4.7 million) at its disposal to finance its further business activities. The 11880 Solutions Group also has an overdraft facility with financial in-stitutions of EUR 1.0 million (previous year: EUR 1.0 million).

The 11880 Solutions Group manages its sales activities respecti-vely customer contacts in the Digital segment mainly in outbound. There is the risk of a bottleneck in lead purchasing, which could arise due to higher lead purchasing costs or increased competi-tion. To minimise this risk, the 11880 Solutions Group is continu-ally optimising its campaign management and seeking to reduce the scope of the inorganic leads required by increasing organic traf-fic. As part of the ongoing integration of FAIRRANK GmbH and the

A resolution passed by the Annual General Meeting on 18 June 2020 authorised the Management Board to increase share ca-pital by up to EUR 2,866,664 (Authorised Capital 2020). Taking into account the authorised capital of up to EUR 3,751,436 that was resolved by the 2018 Annual General Meeting and was still outstanding as of 31 December 2020 (Authorised Capital II), the Company has authorised capital totalling up to EUR 6,618,100 as of 31 December 2020. The Annual General Meeting on 18 June

2020 also decided to implement a conditional capital increase of up to EUR 2,000,000.00 (Conditional Capital 2020) to service bonds (convertible bonds and/or options or participation rights) that may be issued by 17 June 2025 in accordance with the aut-horising resolution under agenda item 8 letter (a) of the Annual General Meeting on 18 June 2020.

In addition, 11 88 0 Solutions AG's main shareholder, united ver-tical media GmbH, Nuremberg (uvm), made a binding commit-ment in July 2020 to provide the principal bank of Internet Ser-vices AG with EUR 2 million as security for a credit line of at least the same amount for the benefit of 11880 Internet Services AG and for the purposes of ensuring liquidity. uvm provided this se-curity by pledging a time deposit account. According to the prin-cipal bank, the binding credit facility can be set up at any time without a longer lead time in line with the agreed framework conditions. However, to avoid unnecessary commitment inter-est, the credit facility based on the security from uvm should, if at all necessary, only be set up if a corresponding financial requi-rement is more likely than not within the next six months. As part of the Group's short and medium-term liquidity management, the financial requirements expected for the coming months are continuously monitored to ensure that any necessary measures can be implemented in a timely manner.

Excluding risks that are not currently discernible, management rates the risk of insolvency caused by illiquidity and thus the threat to its continued existence as extremely low.

The share purchase completed by united vertical media GmbH during the 2019 financial year could mean that the tax loss carryforwards are not recoverable or are not fully recoverable. This would mean that the use of these tax loss carryforwards of 11 88 0 Internet Services AG would not be fully recognised by the tax authorities in future. To minimise this risk, the 11 88 0Group has commissioned a big-four auditing firm to prepare a suitable report in accordance with IDW S1 that is to be submitted to the tax authorities. Based on the latest findings of the ongoing pro-ject, the risk of a significant loss of hidden reserves is now con-sidered to be low.

Personnel risks

There is a risk that insufficiently qualified employees could be hired in the sales department, which could cause us to fall short of targets. The Group primarily addresses this risk by working inten-sively with recruiters as well as by acquiring external call centre capacity and carrying out its recruitment efforts across a broad geographical area. New sales approaches are also being tested, particularly in the form of home working opportunities to expand the potential employee base.

In addition to personnel risks in sales, there are also additional personnel risks in the other corporate divisions. Unplanned and exceptionally high fluctuations in qualified employees would, in particular, lead to cost risks associated with the need to fill vacan-cies and, where necessary, outsource work to external providers. Overall, this risk to the 11 88 0 Group, including FAIRRANK, is cur-rently classified as being "very low".

Litigation risks

The two significant risks in the litigation risks category are that expenses for the FAIRRANK integration will exceed the amounts budgeted for 2021, and that any negative press will have an adver-se impact on sales contract conclusion rates.

There is a risk of sales employees becoming unsettled and acting cautiously in sales negotiations due to negative press on the sub-ject of selling techniques and product promises. This would result in lower contract conclusion rates in the new customer business. To prevent this, the Group has implemented a series of precauti-ons, which are also anchored within the structure of its corporate processes and organisation. The first aim of these measures is to ensure that customer expectations are met, thus already mini-mising the risk of negative press. The key measures here are in-tensive and regular training for sales employees, comprehensive compliance management with consistent sanctions for breaches of statutory and internal requirements, and strict quality controls. On the other hand, these organisational measures are designed to equip sales employees with appropriate rules and lines of ar-gument in the event of actual individual cases of negative press, either justified or unjustified. Due to the measures outlined above, this risk is classified as "very low" overall.

A further litigation risk is that the ongoing integration process for FAIRRANK could be delayed if, for example, any technical or proce-dural restrictions identified are more significant than is currently known and was assumed when preparing the budget. As a result, this risk could cause expenses, particularly those relating to the procurement of necessary consulting services, to exceed current expectations. This risk is currently classified as "low".

Regulatory risks

The business activities of the 11 88 0 Solutions Group depend to an extent on the decisions of legislators and regulatory authorities. Among others, these include regulations concerning the mandato-ry provision of subscriber data and obligations to announce prices for chargeable calls. As part of the amendment to the German Telecommunications Act (TKG) currently under discussion, some provisions deviating from those currently applicable are being di-scussed that could have a negative impact on the business model of the 11880 Solutions Group. The Group's legal department and specialist departments are working closely with associations and external advisors to exert an influence on these upcoming deci-sions by raising awareness of the relevant issues. Alternative sce-narios for areas such as the future procurement of subscriber data are also being developed in the event that the pending changes to regulatory requirements turn out to be to 11880's disadvantage. However, based on current estimates, the potential risks associa-ted with the new TKG regulations would not have a material nega-tive impact on the 11880 Group until 2022 at the earliest if ap-propriate transition periods are applied. In particular, repealing the currently applicable exemption for price announcements in the traditional directory assistance sector could cause an additio-nal significant decline in call volumes in the directory assistance business from 2022 onwards that could only be partially offset by price increases.

Another regulatory risk results from applicable regulations gover-ning specific advance payments currently made by Deutsche Tele-kom for 11 88 0 Group and numerous other companies, particularly those relating to setting up connections and switching transit ser-vices when setting up connections to directory assistance and va-lue-added services as part of existing NGN interconnections. Based on the agreements concluded with Deutsche Telekom (DTAG) via the VATM (Association of Telecommunications and Value-Added Services Providers), DTAG will provide the relevant services until the end of 2024, charging the current (regulated) fee until the end of 2022. 11880 Solutions AG is party to the agreements conclu-ded via the VATM, which entered into these agreements with DTAG on behalf of all acceding companies. Measures to reduce the risk for the as-yet-unregulated period from 2025 onwards are already being developed.

Legal and technology risks

As indications suggest that the legal risks identified would have very minor financial effects, either severally or together, no detai-led presentation of individual risks is provided. This applies analo-gously to the group of technology risks.

8. Report on expected developments

The statements made here are based on the 11880 Solutions Group's operations planning for the 2021 financial year, as adop-ted by the Management Board and Supervisory Board in December 2020. The planning is based on the objectives of the Digital and Directory Assistance segments and of the Group. Planning for the 2021 financial year is based on a corporate structure that includes FAIRRANK GmbH and Seitwert GmbH, the two companies acquired in September 2020. The business development at the beginning of the 2021 financial year has so far confirmed the plans made at that time.

Corporate strategy

In the 2021 financial year, the 11 88 0 Solutions Group will conti-nue to pursue its successful strategy of recent years and will focus on collaborations, meaningful additions to its business units via mergers and acquisitions and the continuous optimisation of its processes and products.

This strategy is also supported by its majority shareholder, united vertical media GmbH.

Digital segment

In our Digital business, we focused on enhancing the user-friendliness and efficiency of our products and services in 2020. As a result, we were also able to increase traffic to our portals in a year dominated by coronavirus. werkenntdenBESTEN.de and wirfindendeinenJOB.de generated particular interest among consumers during the pandemic, with the number of reviews on werkenntdenBESTEN.de, our search engine for online reviews, passing the 100 million mark in June. The Company also focused on optimising and expanding its product portfolio by teaming up with partners.

In the area of new customer business, the Group will again be wor-king on a moderate increase in the 2021 financial year.

The 11880 Solutions Group assumes that its business with exis-ting customers will achieve low levels of growth at best in 2021. In 2020, the average churn rate was 26%, thus remaining at the prior-year level, as planned. A slight increase in this key figure is expected for 2021.

The optimisations being implemented significantly improve the online presence of portfolio customers. The slight increase in the customer portfolio should also serve as the basis for upselling and contract renewal revenue. Customer growth should, among other things, be ensured through the sale of sustainable pro-ducts with a focus on user-friendliness and efficiency.

Directory Assistance segment

In the Directory Assistance segment, the 11880 Solutions Group anticipates that the declining trend with respect to call volumes in Germany will also persist in 2021 and the rate of decline will be around 21%, as in the past financial year 2020.

To partially offset the effects of this downturn in revenue, the Group continued to work on increasing revenue per call. In 2020, these efforts resulted in an increase of just under 3% per call. The Group expects to be able to increase revenue per call by around 2% in 2021. In addition to further expanding the call centre third-par-ty business, the Company is continually reviewing - and in some cases also testing - new business models and collaboration op-tions in order to offset decreases in business volume and ensure long-term success.

11880 Solutions-Group - Overall assessment of the Manage-ment Board

As a result of different trends prevailing in the two segments, Digital and Directory Assistance, the Group continues to evolve into a digital company. The Group will continue to push its Digital segment in 2021. However, the Company is also working on long-term strategies and on further expanding its call centre third-par-ty business in the traditional Directory Assistance segment.

At Group level, the 11 88 0 Solutions Group expects to post reve-nues of EUR 54.8 million to EUR 60.6 million in 2021. In compari-son, revenues were generated in the amount of EUR 50.8 million in 2020. With respect to profitability, the Group expects EBITDA in 2021 to be in the range of EUR 3.1 million to EUR 4.3 million. In comparison, the Company generated EBITDA in the amount of EUR 3.0 million in 2020.

The Group showed cash holdings and available-for-sale financial assets of EUR 3.7 million in the financial year ended.

The Company expects cash holdings at the end of 2021 to amount to EUR 1.5 million to EUR 2.3 million.

Finance strategy

The 11 88 0 Solutions Group's finance strategy aims to secure liqui-dity in the long term and to provide financial support for develo-ping the digital business.

The decline in volumes in the Directory Assistance segment is in-creasing pressure to accelerate improvement in profitability in the Digital segment and the call centre third-party business.

Appropriate strategic measures are improving the cost structure and thus the cash flow sufficiently to ensure the availability of adequate liquidity. At the same time, cooperation options are also being reviewed continually and the call centre business is expan-ded to avoid liquidity risks as much as possible.

9. Disclosures pursuant to section 315a HGB and explanatory report in accordance with section 176 (1) sentence 1 AktG

Composition of subscribed capital

As of 31 December 2020 11880 Solutions AG's subscribed capital was composed of 24,915,200 no-par value ordinary bearer shares (no-par value shares) (previous year: 21,022,200 shares). As of 31 December 2020, 24,915,200 of these shares were outstanding (previous year: 21,022,200 shares).

Restrictions affecting voting rights and the transfer of shares

The Management Board of 11 88 0 Solutions AG is not aware of any restrictions pertaining to the share voting rights.

Holdings in the Company's capital of more than 10 percent of the voting rights

As of the reporting date, there were the following holdings in the Company's capital of more than 10% of the voting rights:

  • united vertical media GmbH: 72.3 % (*)

(*) The percentage results from the latest WpHG notifications available to 11 88 0 Solutions AG and takes into account the capital increases implemented in Sep-tember 2019 and August 2020. As these notifications only have to be disclosed if shareholders exceed or fall below certain thresholds, it cannot be ruled out that the ownership ratios within the threshold intervals have changed since the latest notification.

Shares with special rights conferring powers of control

There are no shares with special rights conveying powers of control.

Nature of voting control where employees have an equity inter-est and do not directly exercise their control rights

Employees who hold shares as part of a stock option plan may exercise control rights, like other shareholders, directly in accor-dance with legal requirements and the provisions of the Articles of Association.

Appointment and dismissal of members of the Management

Board

The Management Board of 11880 Solutions AG is comprised of at least one member. The appointment of deputy members of the Ma-nagement Board is permitted pursuant to Art. 3.1 (1) of the Artic-les of Association. The Supervisory Board determines the number, the appointment and the dismissal of the ordinary and the deputy members of the Management Board, and may also appoint a Ma-nagement Board chairman.

Amendment of the Articles of Association

Pursuant to section 179 AktG, amendments to the Articles of As-sociation shall be passed by resolutions of the Annual General Meeting. Pursuant to Art. 4.5 of the Articles of Association, the Supervisory Board is authorised to resolve amendments to the Ar-ticles of Association that only affect the wording.

Authorisations of the Management Board, in particular per-taining to the possibility to issue or buy back shares

A resolution passed by the Annual General Meeting on 18 June 2020 authorised the Management Board to increase share capital by up to EUR 2,866,664 until 17 June 2025 (Authorised Capital 2020). Taking into account the authorised capital of up to EUR 3,751,436 that was resolved by the 2018 Annual General Meeting and is still outstanding until 31 December 2021 (Authorised Ca-pital II), the Company has authorised capital totalling up to EUR 6,618,100 as of 31 December 2020. The Annual General Meeting on 18 June 2020 also decided to implement a conditional capital increase of up to EUR 2,000,000.00 (Conditional Capital 2020) to service bonds (convertible bonds and/or options or participation rights) that may be issued by 17 June 2025.

Significant agreements entered into by the Company providing for a change of control following a takeover bid

No significant agreements exist as of 31 December 2020.

Compensation agreements for the event of a takeover bid 11 88 0 Solutions AG does not have any compensation agreementswith members of the Management Board or employees for the event of a takeover bid (change of control).

10. Statement and report on corporate governance

The statement on corporate governance (sections 289f, 315d HGB) contains elements such as the declaration of compliance pursuant to section 161 AktG, disclosures on corporate governance practi-ces, the description of the working practices of the Management Board and Supervisory Board and disclosures on the equal partici-pation of women and men (diversity).

All information can be found on the 11 88 0 Solutions AG website at: https://ir.11880.com/corporate-governance/ erklaerung-zur-unternehmensfuehrung.

11. Remuneration system

The remuneration report summarises the principles and methods used to determine the total remuneration of the member(s) of the Management Board of 11880 Solutions AG and explains the structure as well as the remuneration received by the Management Board member(s). Christian Maar was the sole member of the Ma-nagement Board in the 2020 financial year. The principles and the amount of remuneration received by the members of the Supervi-sory Board are also described.

As the regulations for preparing the remuneration report of 11 88 0 Solutions AG for the 2020 financial year in accordance with Section 162 of the German Stock Corporation Act (AktG) do not yet apply, this remuneration report will be prepared based on the corre-sponding recommendations of the German Corporate Governance Code published on 24 April 2017 as amended on 7 February 2017, corrected by notice on 19 May 2017 ("GCGC 2017"), in compli-ance with the applicable provisions of HGB and IFRSs and using the reference tables provided for this purpose in GCGC 2017. As explained in the joint declaration of compliance with the German Corporate Governance Code dated 17 December 2020 made by the Management Board and Supervisory Board of 11 88 0 Solutions AG in accordance with Section 161 AktG ("Declaration of Complian-ce 2020"), the remuneration arrangements for the Management Board and Supervisory Board have deviated and will continue to deviate from the individual recommendations of GCGC 2017 and the current German Corporate Governance Code as amended on 16 December 2019, which was published in the German Federal Ga-

zette on 20 March 2020 ("GCGC 2019"). These deviations are listed once again in the remuneration report.

Principles of Management Board remuneration

The Supervisory Board advises and regularly reviews the struc-ture of the remuneration system for the Management Board and on the recommendation of the Personnel Committee de-termines the total remuneration of the individual Management Board member(s). The committee also regularly reviews the re-muneration system for the Management Board. In doing so, it makes vertical and horizontal remuneration comparisons.

The remuneration model for the Management Board should be attractive and appropriate to compete for highly qualified ma-nagement personnel. Criteria for the appropriateness of the re-muneration are in particular the responsibilities of the respecti-ve Management Board members, their personal performance, the performance of the Management Board, as well as the economic situation, the success and future prospects of the Company in comparison with other companies in its sector.

Remuneration system

GCGC 2017 recommended that the Chairman of the Supervisory Board inform the Annual General Meeting once about the princi-ples of the remuneration system and subsequently of any chan-ges thereto. GCGC 2019 no longer contains this recommendation. Deviating from this, the Chairman of the Supervisory Board of 11 88 0 Solutions AG informs the Annual General Meeting about the principles of the remuneration system each year at the re-gular Annual General Meeting in order to take into account the information requirements of new shareholders attending their first Annual General Meeting.

General information on the components of Management Board remuneration

The total remuneration for the members of the Management Board of 11880 Solutions AG consists basically of monetary remunera-tion components, which are divided into non-performance-related and performance-related components. The performance-related components consist of fixed remuneration components and fringe benefits, and pension commitments. Performance-related compo-nents include variable remuneration components.

Fixed remuneration components

As a basic remuneration that is independent of annual perfor-mance, the fixed portion is paid out as a monthly salary and isbased on an income plan stipulated by the Supervisory Board. It takes into consideration the Company's situation and medium-term objectives, as well as the criteria relevant pursuant to section 87 (1) AktG and the German Corporate Governance Code.

Variable remuneration components

Variable remuneration components have upper limits and consist of performance-related and qualitative components. The perfor-mance-related components have a multi-year orientation in order to take account of the sustainable development of the Company.

Other components of remuneration, fringe benefits, obligati-ons or benefits from third parties

If contractually agreed, other components of the total remune-ration of Management Board members are pension awards, other awards, especially in the event of termination of activity, fringe benefits of all kinds and benefits from third parties which were promised or granted in the financial year with regard to Manage-ment Board work.

Management Board remuneration in 2020

Fixed and variable remuneration

In the 2020 financial year, 11880 Solutions AG followed the recommendations of GCGC 2017 and, as of the date of the 2020 Declaration of Conformity, of GCGC 2019 with regard to the structure of Management Board remuneration, with the excep-tion of the deviations outlined below. The remuneration struc-ture continues to be focussed on the sustainable growth of the Company. Monetary remuneration components include fixed and variable components, with variable components generally based on performance over several years and primarily designed to be forward-looking. In addition to the long-term incentive (LTI) agreed with the Management Board over a period of 3.0 years (2019 to 2021), variable remuneration components are in part invested in multi-year deferrals (phantom stocks) as goals are met.

The relevant share price of the phantom stocks at the time of the conversion is the arithmetic mean of the closing price in Xetra trading on the Frankfurt Stock Exchange on stock exchange trading days in the three months preceding the adoption of the annual financial statements for the financial year for which the targets were agreed.

Following a vesting period of two years after the conversion into the respective deferrals, the value of the phantom stocks is de-

termined and the deferral is paid out. The share price relevant for determining the value is the arithmetic mean of the closing price in Xetra trading on the Frankfurt Stock Exchange on stock exchange trading days in the three months preceding the ad-option of the annual financial statements for the respective next financial year but one. Any dividends distributed to share-holders during the vesting period are added to the value of the deferral thus determined. This results in the total value of the deferral to be paid out after the vesting period has expired. Ho-wever, independent of the share price performance and/or any dividends, the total value of the deferral may not exceed 120% of the starting value of the virtual shares calculated based on the arithmetic mean upon conversion into the deferral. If the total value of the deferral after the vesting period has expired is less than 50%, the deferral is not paid out and the retained performance bonus thus reduced to zero.

The variable remuneration granted in this way therefore deviates from the recommendation in Art. G.10 GCGC 2019, whereby the variable remuneration granted to the Management Board mem-ber should primarily be invested in shares or should be similarly share-based, and the Management Board member should only have access to the long-term variable components of their remu-neration after four years. However, the Supervisory Board does not believe that this provides the Management Board with any ad-ditional incentive when carrying out their role for the Company.

the entire previous contractual term in order to reflect typically

In addition, 11880 Solutions AG deviates from the recommen-dation in Art. G.8 GCGC 2019, which excludes any subsequent changes to targets or comparison parameters for variable remu-neration, in relation to the effects of the COVID-19 pandemic to enable the Company to react quickly to changes in the market situation and the Company's business development.

There is also a deviation from the recommendation in Art. G.11 GCGC 2019, which states that the Supervisory Board should have the opportunity to take proper account of exceptional develop-ments and that variable remuneration should be withheld or can be reclaimed in justified cases. The director's contract of Christian Maar deviates from this, as the Supervisory Board considers the existing remuneration regulations to be sufficient to encourage the Management Board to act in the interests of the Company in the long term. The Company was also able to adjust the targets for variable remuneration in connection with the effects of the COVID-19 pandemic, even without a corresponding basis in the director's contract.

Other components of remuneration, fringe benefits, obligati-ons or benefits from third parties

The German Corporate Governance Code recommended in Art. 4.2.3 (4) of GCGC 2017 that the severance payment cap should be calculated on the basis of the total remuneration paid for the pre-vious financial year and, if appropriate, should take into account the expected total remuneration for the current financial year. 11880 Solutions AG has deviated from this recommendation. However, 11880 Solutions AG does not deviate from the revised recommendation contained in Art. G.13 GCGC 2019.

In the director's contract of Christian Maar, reference is made to the variable remuneration of only the financial year just ended and not also to that of the current financial year in addition to a reference value formed from the average fixed remuneration (i.e. average of the fixed monthly salary paid until the ending date) in order to calculate the severance payment cap.

The Supervisory Board was and is of the opinion that the recom-mendation contained in Art. 4.2.3 GCGC 2017 to also refer to the current financial year when measuring the severance payment cap has little practicality for the reference value related to the variable remuneration, because it is frequently difficult to de-termine whether an interim or proportionate goal has been met. In contrast, for fixed remuneration, the measurement is based not only on the average of the last financial year, but also on

lower fixed remuneration payments in previous years.

The exclusion of the current financial year can in individual cases theoretically result in a higher severance payment amount thanthe remuneration to be realised until the end of the contractu-al term, because any reduction in the variable remuneration in the current year will not be factored in. Considering the difficul-ty of determining the amount of variable remuneration for the current financial year during the course of the year and in light of the lower amount of fixed remuneration that flows into the severance payment, the Company considered this theoretically possible deviation from Art. 4.2.3 (4) sentence 1 GCGC 2017 tobe justified.

For the existing Management Board contracts, the severance payment cap is equal to 18 times the average fixed monthly re-muneration for the entire contract period (reference value I) and 18 times one-twelfth of the variable remuneration earned in the last financial year (reference value II).

The severance payment amount is limited to a maximum of 18 times the applicable reference value in each case (severance cap).

If the remaining term of the contract is less than 18 months, the severance payment cap is limited to the number of months of the remaining term.

As in 2019, members of the Management Board did not receive any defined contribution post-employment benefits in 2020. There were no defined benefit pension obligations in accordance with IFRSs in 2020 (previous year: EUR 0 thousand). Details can be found in the notes accompanying the consolidated financial state-ments in the section entitled "Pension obligations".

The current and former members of the Management Board were granted phantom stocks (deferrals) from both 2016 to 2020. De-tails can be found in the notes to the consolidated financial state-ments under "Share-based payment".

No advances or loans were granted to the Management Board member during the reporting year.

The sole member of the Management Board received no payment or promises of payment from third parties in the past financial year in respect of his activities as a member of the Management Board. No remuneration was or is paid for Management Board and Supervisory Board positions at the subsidiary 11880 Inter-net Services AG.

Remuneration of the Management Board

The benefits granted to and received by the members of the Ma-nagement Board in the 2020 financial year as defined by GCGC 2017 were as follows:

Benefits granted

Member of Management Board

in EUR thousand

2020

2019

Fixed remuneration

401

401

Fringe benefits

35

34

Total

436

435

One-year variable remuneration (excluding deferral), bonus

106

106

(Minimal 0 to maximum 127)

Multi-year variable remuneration (deferral - 2 years)

2019

34

34

(Minimal 0 to maximum 41)

LTI (annual share, at least over 3 years)

200

400

(Minimal 0 to maximum 400)

Total

340

540

Total remuneration

776

975

Benefits received

Member of Management Board

in EUR thousand

2020

2019

Fixed remuneration

401

401

Fringe benefits

34

34

Total

435

435

One-year variable remuneration (excluding deferral), bonus

92

92

Multi-year variable remuneration (deferral - 2 years)

40

0

LTI (annual share, at least over 3 years)

0

0

Total

132

92

Service cost (defined contribution pension fund)

0

0

Total remuneration

567

528

In accordance with Section 314 (1) no. 6a of the German Commer-cial Code (HGB), the Management Board was granted the follo-wing total remuneration in the 2020 financial year:

Benefits granted

Member of Management Board

in EUR thousand

2020

2019

Fixed remuneration

401

401

Fringe benefits

34

34

Total - non-performance-related

435

435

One-year variable remuneration (excluding deferral), bonus

106

106

Multi-year variable remuneration (deferral - 2 years)

2019

34

34

LTI (annual share, at least over 3 years)

200

400

Total - performance-related

340

540

Total remuneration

775

975

A deferral of EUR 24 thousand was paid to former Management Board member Michael Geiger during the 2020 financial year after the contractually agreed vesting period expired.

A two-stage severance provision applies if the Company revokes the appointment of a Management Board member prematurely, entitling both the Company and Management Board member to terminate the employment contract, or in the event of a termi-nation following a resignation for good cause. In the first stage, the Management Board member receives a severance payment based on their previous average monthly fixed salary in accor-dance with their employment contract. The average monthly fixed salary (to be) paid until the termination date is used as Re-ference Value I. This reference value is multiplied by the number of months remaining on the employment contract (pro rata in the case of incomplete months) to determine Severance Payment I. If the employment relationship is terminated prematurely, the Management Board member also receives Severance Payment II if they have a claim to variable remuneration for the last finan-cial year completed before the termination of the employment contract in accordance with the aforementioned agreement. Re-ference Value II for Severance Payment II is equivalent to one-twelfth of the variable remuneration for the previous financial year. This reference value is multiplied by the number of months remaining on the director's contract (pro rata in the case of in-complete months). An LTI bonus is not taken into account when calculating Reference Value II. The severance payment amount is limited to a maximum of 18 times the applicable reference value in each case (severance cap). The above provisions do not apply if the appointment is revoked in accordance with Section 84 (3) of the German Stock Corporation Act (AktG) for good cause at-tributable to the Management Board member. In this case, the Company is also entitled to terminate the employment contract for good cause. The Management Board member is not entitled to a severance payment in accordance with the above provisions in such cases. If the Management Board member resigns their position without good cause, the Company can extraordinarily terminate the employment contract. Similarly, the Management Board member is not entitled to a severance payment in such cases.

Contract terms

The Supervisory Board of the Company on 29 June 2018 adop-ted a resolution to reappoint Mr. Maar as a member of the Ma-nagement Board with effect from 1 January 2019 until 31 March 2022. The employment contract was amended accordingly.

Remuneration of the Supervisory Board

The remuneration of the Supervisory Board is regulated in Art. 4.6 of the Articles of Association. It is based on the duties and

responsibilities of the Supervisory Board members. The remu-neration regulation was modified when the amendment of the Articles of Association adopted at the Annual General Meeting on 24 June 2015 became effective.

No advances or loans were granted to any members of the Supervi-sory Board during the reporting year.

Essen, 23 March 2021

Each member of the Supervisory Board received a fixed annu-al remuneration of EUR 15 thousand (previous year: EUR 15 thousand), in addition to reimbursement for any expenses. The remuneration is payable in each case after the Annual General Meeting that resolves upon formally approving of the actions of the Supervisory Board for the financial year ended. The re-muneration for the Chairman of the Supervisory Board increa-sed to triple this amount and that of the Deputy Chairman to 1.5 times this amount. Members of the Supervisory Board who had only served on the Supervisory Board for part of the finan-cial year received a pro-rated remuneration, based on length of service on the Supervisory Board. If a Supervisory Board member had not participated in at least 75% of the Supervisory Board meetings in a financial year, the member's remuneration was reduced by 50%.

In addition to the basic remuneration, members of a Supervisory Board committee were paid an annual lump sum of EUR 1 thou-sand. The remuneration of committee chairs increased to double this amount. This payment was subject to the requirement that the committee has convened during the financial year and that the respective committee member has actually attended at least one of the committee meetings.

Art. 5.4.6. (3) of GCGC 2017 recommended an individualised breakdown of Supervisory Board remuneration. This recommenda-tion is no longer included in GCGC 2019; from the financial year 2021, disclosures on Supervisory Board compensation will be made in accordance with section 162 of the German Stock Corpo-ration Act (AktG). However, 11 88 0 Solutions AG below shows the total remuneration for the Supervisory Board as a whole and for committee activities. An individualised breakdown is not provided, as the Company believes that this is of no relevance to the capital market. The Supervisory Board members received remuneration totalling EUR 141 thousand in the 2020 financial year (previous year: EUR 125 thousand).

No members of the Supervisory Board received any additional remuneration or benefits in the financial year for services perso-nally rendered, in particular for consultancy and agency services.

The Management Board

Christian Maar

Responsibility statement

"To the best of our knowledge, and in accordance with the appli-cable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the Group management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the material opportunities and risks associated with the expected development of the Group."

Essen, 23 March 2021

The Management Board

Christian Maar

Content Consolidated Financial Statements

Consolidated Financial Statements

Consolidated Statement of Financial Position (IFRS) .......................................................... 52

Consolidated Income Statement (IFRS) ........................................................................... 54

Consolidated Statement of Comprehensive Income (IFRS) ................................................... 55

Consolidated Statement of Shareholders Equity (IFRS) ....................................................... 56

Consolidated Statement of Cash Flows (IFRS) .................................................................... 58

Notes to the consolidated financial statements of 11 88 0 Solutions AG for financial year 2020 ... 60

Independent auditor's report ........................................................................................ 126

Corporate Information ................................................................................................. 132

Forward-looking statements ........................................................................................ 133

Corporate Structure 11 88 0 Solutions-Group ..................................................................... 134

Financial Calendar 2021 ............................................................................................... 135

Imprint ..................................................................................................................... 135

Consolidated Financial Statements

Consolidated Statement of Financial Position (IFRS)

in EUR thousand

Notes

31 December 2020

31 December 2019

ASSETS

Current assets

Cash and cash equivalentes

B1

2,922

4,090

Restricted cash

B1

134

67

Trade accounts receivable

B2

9,614

8,743

Current tax assets

4

19

Financial assets at fair value through profit or loss

B3

610

582

Other financial assets

B4

180

97

Other current assets

B5

663

556

Total current assets

14,126

14,154

Non-current assets

Goodwill

B6

3,717

416

Intangible assets

B7

6,666

6,051

Property and equipment

B8

1,034

921

Capitalized right-of-use IFRS 16

B9

5,360

5,583

Other non-current assets

B10

483

218

Total non-current assets

17,259

13,189

Total assets

31,385

27,343

in EUR thousand

Notes

31 December 2020

31 December 2019

LIABILITIES AND EQUITY

Current liabilities

Trade accounts payable

B12

713

1,262

Accrued liabilities

B13

5,458

4,824

Provisions

B14

0

35

Short-term lease liabilities

B15

1,541

1,426

Other current liabilities

B16

6,545

5,140

Total current liabilities

14,256

12,687

Non-current liabilities

Provisions

B14

839

651

Provisions for retirement benefits

B17

581

477

Other non-current liabilities

B18

656

0

Long-term lease liabilities (IFRS 16)

B15

4,653

4,920

Deferred tax liabilities

B11

648

1,245

Total non-current liabilities

7,377

7,293

Total liabilities

21,633

19,980

Equity

Share capital

B19.1

24,915

21,022

Additional paid in capital

B19.2

34,473

33,598

Retained earnings

B19.3

-49,240

-46,927

Other components of equity

B19.4

-397

-330

Equity attributable to owners of the parent

9,752

7,363

Total equity

9,752

7,363

Total liabilities and equity

31,385

27,343

B: See corresponding section in the notes to the consolidated statement of financial statements.

Consolidated Income Statement (IFRS)

in EUR thousand

Notes

1.1. - 31.12.2020

1.1. - 31.12.2019

Revenues

G1

50,802

47,668

Cost of revenues

G2

-29,242

-27,289

Gross profit

21,560

20,379

Selling and distribution costs

G3

-16,071

-14,478

General administrative expenses

G4

-8,139

-7,988

Other operating income

G7

6

0

Other operating expense

G8

-17

-23

Operating income (loss)

-2,661

-2,110

Interest income

24

28

Interest expense

-32

-34

Interest expenses from lease liabilities (IFRS 16)

-308

-335

Gain (loss) from marketable securities

28

94

Gain (loss) on foreign currency translation

-1

0

Financial income (loss)

G9

-289

-247

Income (loss) before income tax

-2,950

-2,357

Deferred income tax

638

-821

Income tax

G10

638

-821

Net income (loss) from continuing operations

-2,312

-3,178

Net income (loss)

-2,312

-3,178

Attributable to:

Owners of the parents

-2,312

-3,178

-2,312

-3,178

Earnings per share for net income (loss) for the reporting period attribu-table to ordinary equity holders of the parent (in euro)

G11

-0.10

-0.16

G: See corresponding section in the notes to the consolidated income statement.

Consolidated Statement of Comprehensive Income (IFRS)

in EUR thousand

Notes

1.1. - 31.12.2020

1.1. - 31.12.2019

Net income (loss)

-2,312

-3,178

Other comprehensive income (loss)

Items that will not be reclassified to profit or loss

Actuarial gains (losses) from pensions and similar obligations, net

-98

-305

deferred tax on acturial gain (losses) from pensions and similar obligations, net

31

96

Items that can be reclassified subsequently to profit or loss

Other comprehensive income (loss) after tax

B19.4

-67

-208

Total comprehensive income (loss)

-2,379

-3,386

Attributable to:

Owners of the parent

-2,379

-3,386

-2,379

-3,386

B: See corresponding section in the notes to the consolidated statement of financial statements.

Consolidated Statement of Shareholders Equity (IFRS)

Equity attributable to owners of the parent

in EUR thousand

Share capital

Additional paid in capital

Retained earnings

Other components of equity

Balance at Janurary 1, 2020

21,022

33,598

-46,927

-330

Net income (loss)*

-

-

-2,312

-

Actuarial gains (losses) from pensions and similar obligations

-

-

-

-98

Deferred tax on acturial gains (losses) from pensi-ons and similar obligations

31

Other comprehensive income (loss)

0

0

0

-67

Total comprehensive income (loss)

0

0

-2,312

-67

Issue of new shares

3,893

Share Premium

973

Tansaction costs

-144

Deferred tax on transaction costs

45

Balance at December 31, 2020

24,915

34,473

-49,240

-397

Balance at Janurary 1, 2019

19,111

32,059

-43,472

-123

Adjustments due to first-time application of IFRS 16

0

0

-277

0

Balance at January 1, 2019 after first-time adoption of IFRS 16

19,111

32,059

-43,749

-123

Net income (loss)

-

-

-3,178

-

Actuarial gains (losses) from pensions and similar obligations

-

-

-

-305

Deferred tax on acturial gains (losses) from pensi-ons and similar obligations

96

Other comprehensive income (loss)

0

0

0

-208

Total comprehensive income (loss)

0

0

-3,178

-208

Issue of new shares

1,911

Share Premium

1,586

Tansaction costs

-69

Deferred tax on transaction costs

22

Balance at December 31, 2019

21,022

33,598

-46,927

-330

(*) The result for the period includes the result of FAIRRANK GmbH and Seitwert GmbH for Q4

Total

Total equity

7,363

7,363

-2,312

-2,312

-98

-98

31

31

-67

-67

-2,379

-2,379

3,893

3,893

973

973

-144

-144

45

45

9,752

9,752

7,575

7,575

-277

-277

7,299

7,299

-3,178

-3,178

-305

-305

96

96

-208

-208

-3,386

-3,386

1,911

1,911

1,586

1,586

-69

-69

22

22

7,363

7,363

Consolidated Statement of Cash Flows (IFRS)

in EUR thousand

Notes

01.01. - 31.12.2020

01.01. - 31.12.2019

Cash flow from operating activities

Income (loss) before income tax

-2,950

-2,357

Adjustments for:

Amortisation and impairment of intangible assets

G6

4,147

3,460

Amortisation and impairment of capitalized-rights-of-use IFRS 16

G6

1,194

1,124

Depreciation and impairment of property and equipment

G6

291

283

Gain (loss) on disposal of property and equipment

5

17

Interest income

G9.1

-24

-28

Interest expense

G9.1

340

369

Gain (loss) from marketable securities

G9.2

-28

-94

Gain (loss) on foreign currency translation

G9.3

1

0

Valuation allowance for trade accounts receivable

B2

165

55

Gain (loss) from pension provision

B17

38

-24

Impairment of other non-current assets

G2

166

124

Gain (loss) on disposal of subsidiaries

0

2

Changes in non-current provisions

B14

189

467

Changes in non-current other and financial assets

-437

-153

Cash inflows before changes in operating assets and liabilities

3,098

3,245

Changes in operating assets and liabilities:

Trade accounts receivable

B2

-864

498

Miscellaneous current assets

B5

-102

-1

Trade accounts payable

B12

-886

784

Current provisions

B14

-35

0

Accrued expenses and other current liabilities

B13

1,243

-178

Income taxes received / paid

15

52

Cash inflows from operating activities

2,469

4,400

in EUR thousand

Notes

01.01. - 31.12.2020

01.01. - 31.12.2019

Cash flow from investing activities

Purchase of intangible assets excl. customer contracts

-427

-861

Purchase of customer contracts with contract period > 1 year

-3,845

-3,360

Purchase of property and equipment

-192

-186

Proceeds from sale of property and equipment

5

0

Disposal of financial assets at fair value through profit or loss

B3

0

1,210

Interest received

6

0

Cash transfer from initial consolidation FAIRRANK

870

0

Cash outflows from investing activities

-3,583

-3,197

Cash flow from financing activities

Interest paid

-2

-4

Interest expenses for leases in accordance with IFRS 16

-307

-335

Payments from the repayment of lease liabilities (IFRS 16)

-1,128

-1,105

Proceeds from issue of new share

1,384

3,497

Proceeds for security deposit

0

27

Cash outflows / cash inflows in financing activities

-54

2,080

Change in cash

-1,168

3,283

Cash at the beginning of the reporting period

4,090

807

Cash and cash equivalents for the purpose of the cash flow statement at the end of the period

2,922

4,090

Cash at the end of the reporting period

2,922

4,090

Cash and cash equivalentes with and without restricted cash as well as financial assets at fair value through profit or loss at the end of repor-ting period

3,666

4,740

G: See corresponding section in the notes to the consolidated income statement.

B: See corresponding section in the notes to the consolidated statement of financial statements.

For further information, see Notes to the consolidated financial statements

Notes to the consolidated financial statements of 11 88 0 Solutions AG for financial year 2020

General principles

11880 Solutions AG (hereinafter also referred to as the Compa-ny) is a listed stock corporation under German law and the parent company of the 11880 Solutions Group. The Company is domi-ciled in Hohenzollernstraße 24, 45128 Essen, Germany, and has been registered in the Commercial Register of the Essen Local Court, Germany, under registration number HRB 29301.

The consolidated financial statements of 11880 Solutions AG and its subsidiaries were prepared in accordance with the Inter-national Financial Reporting Standards (IFRSs) - as applicable in the European Union - as of 31 December 2020.

The business operations of the 11880 Solutions Group (herein-after also referred to as the 11 88 0 Solutions Group / the Group), consisting of 11880 Solutions AG, Essen, and its subsidiaries comprise the provision of online marketing services for small and medium-sized enterprises (SMEs). They provide companies with an online presence with products such as corporate web-sites, Google Ads or Microsoft Advertising, Google My Business and Facebook company pages and supports them in the plan-ning and implementation of their digital advertising efforts. The integration of FAIRRANK GmbH and Seitwert GmbH into the 11 88 0 Group, has enabled the Group to offer the core services of search engine optimisation (SEO), online advertising, usability optimisations and website analyses. The Group's companies also provide company entries (product: advertisement entry) on its 11880.com online business directory and on partner portals as well as on the 11880.com app (and partner apps). The Group also offers werkenntdenBESTEN.de, Germany's first and so far only search engine for online reviews.

1. Presentation of the consolidated financial statements

In addition, the Digital segment includes the Software Solutions product area, which comprises digital telephone directories and yellow pages on CD-ROM and intranet solutions, as well as data-base solutions.

The directory assistance segment comprises directory assistan-ce and operator services for private and business customers in Germany and abroad. These services are also provided to other telephone companies in Germany on the basis of outsourcing ag-reements. Additional services offered include a secretarial ser-vice and further services in the call centre third-party business.

All International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) as well as the interpre-tations of the IFRS Interpretations Committee (IFRIC) and the interpretations of the Standing Interpretations Committee (SIC) whose application was mandatory as of the reporting date were taken into account.

The consolidated annual financial statements were supplemen-ted by specific disclosures in accordance with article 4 of the Di-rective (EC) no. 1606 / 2002 of the European Parliament and of the Council of 19 July 2002 in conjunction with section 315a HGB (German Commercial Code).

The Group currency is the euro. Unless stated otherwise, all va-lues were rounded to thousands of euros (EUR thousand). For computational reasons, rounding differences of the mathemati-cally exact values may occur in tables and references.

As a rule, the consolidated financial statements were prepared on a historical cost basis unless stated otherwise in section 2 "Summary of significant accounting policies".

The consolidated financial statements and the Group manage-ment report prepared as of 31 December 2020 were submitted with the publisher of the Federal Gazette and published electro-nically in the Federal Gazette. 11 88 0 Solutions AG is included in the consolidated financial statements of united vertical media GmbH, Nuremberg, which are published in the Federal Gazette.

The consolidated financial statements of 11 88 0 Solutions AG for the 2020 financial were released for publication by the Manage-ment Board on 23 March 2021.

1.1 Basis of consolidation

These consolidated financial statements comprise the separate financial statements of 11880 Solutions AG and the separate fi-nancial statements of all of its direct and indirect subsidiaries over which 11 88 0 Solutions AG exercises control according to IFRS 10.7. These financial statements are prepared as of the reporting date of the consolidated financial statements - i.e. 31 December 2020 - using uniform accounting principles in accordance with IFRSs.

Below is a statement of the shareholdings of the Group as of 31 December 2020 in accordance with section 313 (2) HGB (German Commercial Code):

Company Name

Registered Office

Share in capital

11 88 0 Internet Services AG

Essen, Germany

100 %

WerWieWas GmbH 1

Essen, Germany

100 %

FAIRRANK GmbH

Cologne, Germany

100 %

Seitwert GmbH 1

Cologne, Germany

100 %

1 The shares in this company are held indirectly.

Effective as of 21 September 2020, 11880 Solutions AG acqui-red FAIRRANK GmbH, Cologne, and its wholly owned subsidiary Seitwert GmbH, Cologne. These two companies were thus added to the basis of consolidation comprising fully consolidated sub-sidiaries (cf. section 6).

1.2 Consolidation methods

Acquisition accounting was based on the acquisition method in accordance with IFRS 3 Business Combinations. This involved measuring the identifiable assets acquired and the liabilities assumed at their acquisition-date fair values. The cost of a busi-ness combination is the sum total of the consideration assigned, which is measured at the acquisition-date fair value. Costs incur-red in connection with a business combination are recognised as an expense.

Goodwill as of the acquisition date is measured as the difference which is the excess of the consideration assigned over the Group's identifiable assets acquired and liabilities assumed. If this consi-deration is less than the fair value of the net assets of the acquired subsidiary, the difference is recognised in profit or loss.

Subsidiaries are companies which are directly or indirectly con-trolled by 11880 Solutions AG. According to IFRS 10, control applies where an investor has decision-making rights and is ex-posed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The consolidation of a subsidiary begins on the date on which the Group obtains control over this subsidiary. It ends when the Group loses control over this subsidiary. Assets, liabilities, in-come and expenses of a subsidiary which is acquired or disposed of during the reporting period are recognised in the consolida-ted financial statements from the date on which the Group ob-tains control over this subsidiary up to the date on which this control ends. The subsidiaries' financial statements are prepared as of the same reporting date as the financial statements of the parent company, subject to uniform accounting policies. Where necessary, the accounting policies applied in the subsidiaries' fi-nancial statements are adapted in line with those applied for the Group's financial statements. Receivables and liabilities, expen-ses and income as well as interim earnings between the group

companies are eliminated within the scope of consolidation in accordance with IFRS 10.B86.

Upon loss of control, a gain or loss on disposal of the subsidiary is recognized in the consolidated statement of comprehensive income for the difference between (i) the proceeds from the disposal of the subsidiary, the fair value of interests retained, the carrying amount of non-controlling interests and the cumu-lative amounts of other comprehensive income attributable to the subsidiary, and (ii) the carrying amount of the subsidiary's disposed net assets.

2. Summary of significant accounting policies

2.1.1 Digital 2.1.1.1 Media

Most customer contracts in the Media segment comprise seve-ral promises to transfer goods or provide services to customers. However, only one contractual performance obligation can es-sentially be identified per contract. A factor here is that it might be impossible to sell products separately and therefore the cus-tomer cannot derive any separate benefit from this product in-dividually (IFRS 15.27). Furthermore, the contractual promises are also not separately identifiable in the context of the contract, since the individual goods and services included in a contract are highly interrelated. This means that only one performance obligation can be identified (IFRS 15.29).

The significant accounting policies used for the preparation of these consolidated financial statements are explained below. The policies described were applied consistently to the reporting peri-ods covered by these notes. Exceptions to this are the amendments to International Financial Reporting Standards required to be ap-plied by the Group as at 1 January 2020 listed in section 4 "Changes in accounting policies". Accounting and measurement were carried out on going concern basis.

2.1 Revenue from contracts with customers

Disclosures on revenue recognition by the 11 88 0 Group are pro-vided below.

Digital revenues, which make up the majority of revenues produ-ced, include the Media and Software segments and are generated in a mass market with a large number of small and medium-sized enterprises. Revenues generated in the Directory Assistance segment relate mainly to directory assistance services and the third-party call centre business.

Revenue is recognised when the performance obligation agreed in the contract is fulfilled. A performance obligation is fulfilled when the customer obtains control over the good or service transferred. The time period or point in time at which the performance obli-gations are fulfilled is determined when the contract is entered into. In the Media segment, contractual performance obligations are fulfilled in accordance with IFRS 15.35 based on the consistent provision of services over the term of the contract, generally over a period of time.

2.1.1.2 Software

Revenues in the Software business relate to the conventional sale of information databases on data storage media on the one hand and to the provision of online information databases on the other hand. The revenues generated are recognised at the time the service is provided, i.e., recognised in profit or loss as of the shipping date or the date access to the software transfers to the customer. Target groups in this segment are generally cor-porate customers.

The 11880 Group recognises revenues depending on the way in which the promised goods or services are transferred, both over periods of time and at points in time. If contractual considera-tion includes a variable component (right of return, discount, credit), the Company estimates the amount of consideration likely to be received. The variable consideration is estimated as the expected value from the sum of probability-weighted amounts at the start of the contract (see section 3.1.3) until it is sufficiently probable that the Company has a claim to this amount. This estimate is updated at the end of each (interim) period. For additional information on accounting for assets from rights of return and refund liabilities, see section 2.16.

2.1.2 Directory Assistance

The performance obligation in a contract with a customer in the directory assistance business comprises provision of the agreed directory assistance services and subsequent transfer of cont-rol over the information to the customer (IFRS 15.B34, 15.B35). Because this performance obligation is therefore not provided by the telecommunications company responsible for billing, the 11 88 0 Group acts as principal in this case. As a result, revenues are recognised in the amount of the gross consideration to which the Group is entitled for the transfer of the information to the customer. The gross amount is based on the number and duration of calls made by the customer via the telecommunications com-

pany and recognised in profit or loss as of the date of rendering the service.

Contracts with customers in the call centre third-party business generally include phone services, such as the performance of after-sales services and the resolution of various types of custo-mer inquiries. In this context, the related revenues are recogni-sed by the Group in an amount based on the number and duration of the call volume handled.

2.1.3 Payment terms and financing components

The 11 88 0 Group offers standard market payment terms generally not exceeding a period of 30 days.

A certain share of customer contracts generally include a finan-cing component due to partial prepayments made on agreed contractual consideration. Due to the fact that the time elapsed between the transfer of a promised good or a promised service to the customer and the payment for this good or service by the customer is no more than year as a rule, the Group does not in-clude these financing components when recognising revenue for practical reasons (IFRS 15.63).

2.2 Recognition of interest income

Interest income is recognised when interest has accrued. Interest income is calculated based on the outstanding investment and the interest rate agreed with the contracting partner. Income interest is accrued.

2.3 Foreign currency translation

Foreign currency transactions in the Group are accounted for in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates.

Foreign currency transactions are recognised initially at the ex-change rate applicable at the date of the transaction. At each end of the reporting period, monetary assets and liabilities de-nominated in a foreign currency are translated into euros (IAS 21.23a) using the exchange rate applicable at this day (closing rate). The resulting translation differences are recognised in profit or loss for the period. In accordance with IAS 21.23b, non-monetary assets and liabilities denominated in a foreign cur-rency that are measured in terms of historical cost in a foreign currency are translated into euros using the exchange rate ap-plicable at the date of the transaction. In accordance with IAS 21.23c, non-monetary assets and liabilities that are measured

at fair value in a foreign currency are translated are translated using the exchange rate at the date when the fair value was determined.

2.4 Advertising costs

In accordance with IAS 38.69c, advertising and marketing costs are recognised as an expense in the period in which they are incurred.

2.5 Cash and cash equivalents

In accordance with IAS 7 Statement of Cash Flows, the 11880 Solutions AG considers as cash or cash equivalents (IAS 7.6) all immediately available balances with financial institutions, cash and short-term deposits with a remaining term of three months or less counted from the date of acquisition. Deposits with a term of up to three months are allocated to cash equivalents if the risk of fluctuations in value is insignificant. The carrying amount of cash and cash equivalents corresponds to their fair value.

2.6 Financial instruments

The following section includes disclosures on accounting for finan-cial instruments in accordance with IFRS 9 Financial Instruments.

2.6.1 Definition

A financial instrument is a contract that simultaneously results in a financial asset at one company and in a financial liability or equi-ty instrument at another company.

Financial assets include in particular cash and cash equivalents, trade accounts receivable as well as other loans and receivables granted, held-to-maturity investments and derivative and non-derivative financial assets held for trading. Financial liabilities normally give rise to a contractual obligation to deliver cash or another financial asset. These include trade accounts payable in particular. The Group had no derivative financial instruments at the reporting date.

2.6.2 Classification and measurement at initial recognition and subsequent measurement

Financial assets and financial liabilities are recognised in the statement of financial position as of that date on which the cor-responding Group company becomes a party to the contractual provisions of the financial instrument (IFRS 9.3.1.1).

All regular way purchases and sales of financial assets are recog-nised at the trade date, i.e. the date on which the Company com-mits itself to purchase or sell an asset. Regular way purchases and

sales are purchases and sales of financial assets that provide for the delivery of the assets within a period determined by market provisions or conventions.

Financial assets or financial liabilities are initially recognised at their fair value (IFRS 9.5.1.1) - Incidental acquisition costs are only recognised as an asset if a financial instrument is subse-quently not measured at fair value through profit or loss.

Trade accounts receivable without significant financing compo-nents are measured at their transaction price upon initial recog-nition in accordance with IFRS 15.46 et seq.

For the purpose of subsequent measurement, financial assets are divided into the following measurement categories upon initial recognition according to IFRS 9.4.1.1:

  • at fair value through profit or loss (FVTPL)

  • at fair value through other comprehensive income (FVOCI) with/without recycling of accumulated gains and losses

  • at amortised cost (AC).

Assignment to the aforementioned measurement categories is based on the cash flow characteristics of the individual instruments and the Company's business model for managing financial assets.

Financial liabilities are subsequently recognised at amortised cost. There were no exceptions to this principle as defined in IFRS 9.4.2.1 as of the reporting date.

For subsequent measurement, the Group's financial assets and liabi-lities are classified as follows:

2.6.2.1 Financial assets at fair value through profit or loss (FVTPL)

Financial assets measured at fair value through profit or loss ge-nerally include financial assets held for trading, financial assets classified as fair value through profit or loss on initial recogni-tion (with gains and losses reported in the profit or loss for the period) or financial assets required to be reported at fair value (derivatives).

11880 Solutions AG invests in funds that invest in short-term, low-risk money market instruments and bonds. The assets of the bond funds are mainly invested in fixed- and variable-inte-rest bonds by European issuers with investment-grade credit ra-tings as well as in time deposits and liquid money market instru-ments. The returns are derived from changes in price and annual distributions.

The securities held by 11 88 0 Solutions AG are initially measured at fair value in accordance with IFRS 9.5.1.1 and subsequently as-signed to the FVTPL category in accordance with IFRS 9.4.1.4 after examining the cash flow criterion. As a result, the gains and losses resulting from changes in their fair value are recognised immedia-tely in net profit or loss for the period.

Under IFRS 13, fair value is the price that would be obtained on the principal market or, if the principal market is not available, on the most advantageous market for the sale or transfer of an asset or liability. Based on the inputs used in the valuation techniques for measuring fair value, all assets and liabilities for which a fair value is determined or reported in the financial statements are classified in the fair value hierarchy described below:

  • Level 1: Inputs are quoted (unadjusted) prices in active markets accessible to the Company for identical assets and liabilities. The securities allocated to level 1 concern investment fund units whose fair value corresponds to the nominal value multiplied by the quoted (redemption) price on the balance sheet date. The quoted (redemption) prices are based on the net asset value of the corresponding investment fund published daily and can be realised by the 11 88 0 Group by returning them.

  • Level 2: Inputs are quoted market prices other than those in Level 1 that are observable for the asset or liability either di-rectly or indirectly.

  • Level 3: Value of the asset or liability is based on unobserva-ble inputs.

If inputs of different levels are used to determine the fair value, the classification is based on the lowest level input significant to the ent-ire measurement.

On subsequent measurement, the inputs are reviewed to determine whether reclassification to a different level is necessary.

Information from third parties such as pricing services and apprai-sers are analysed to determine whether the evidence used meets the requirements of the IFRSs.

2.6.2.2 At fair value through other comprehensive income (FVOCI)

As of the reporting date, the Group does not hold any financial assets classified within this category.

2.6.2.3 Financial assets measured at amortised cost (AC)

Financial assets whose cash flows consist exclusively of interest and principal payments on the outstanding principal amount and which are held as part of a business model to collect the contractual cash flows are measured at amortised cost using the effective interest method. For financial assets in this category, impairment losses for expected credit losses are recognised. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

The financial assets of the Group measured at amortised cost comprise cash and cash equivalents, trade accounts receivable and other current financial assets (Other receivables).

Because the carrying amount of the financial assets represents a suitable approximation of the fair value, no additional informa-tion is provided about fair value.

Trade accounts receivable are assigned to financial assets be-cause they represent a contractual right to receive cash funds at a future date from another company. Receivables without sig-nificant financing components are initially recognised at their transaction price (IFRS 15.46 et seq.) in accordance with IFRS 9.5.1.3 and subsequently recognised at amortised cost (by ap-plying the effective interest method), less allowances for credit losses expected over their remaining term. Gains and losses are recognised in net profit or loss for the period, if the receivables are impaired or derecognised, as well as through the amortisa-tion process (IFRS 9.5.7.2).

2.6.2.4 Financial liabilities measured at amortised cost

As a rule, financial liabilities are subsequently measured at amor-tised cost as long as the exceptions permitted by IFRS 9.4.2.1 are not applicable. At the reporting date, the 11880 Group had no financial liabilities that would not fulfil the conditions for measu-rement at amortised cost.

The financial liabilities in the Group measured at amortised cost comprise trade accounts payable and other current financial liabilities.

Because the carrying amount of the financial liabilities represents a suitable approximation of the fair value, no additional informa-tion is provided about fair value.

Trade accounts payable are assigned to financial liabilities be-cause they represent a contractual obligation to pay cash fundsat a future date to another company. Trade accounts payable are initially recognised at fair value and subsequently at amortised cost using the effective interest method. Gains and losses from derecognition or amortisation are recognised in profit or loss in accordance with IFRS 9.5.7.2.

2.6.2.5 Impairment of financial assets

As a rule, the Group recognises impairment losses for expected credit losses for all financial assets not subsequently measured at fair value. A credit loss is defined as the difference between all contractual cash flows that are due to an entity in accordance with the contract and all the cash flows that the entity expects to re-ceive, discounted at the original effective interest rate (i.e. the effective interest rate calculated at initial recognition) or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets.

The amount of the loss and interest revenue are calculated depen-ding on the allocation of the financial asset to one of the following three stages:

  • If there is no significant deterioration in credit quality since in-itial recognition, the expected losses must be recognised as an expense in the amount of the present value of the expected cre-dit losses that could result from possible default events in the twelve months following the reporting date. Interest revenue is calculated based on the gross carrying amount in accordance with the effective interest method (Stage 1).

  • If credit risk has increased significantly, but there is no ob-jective indication of impairment, the loss allowance is in-creased to the amount of the lifetime expected losses. The method for calculating interest revenue corresponds to that of Stage 1 (Stage 2).

  • If the credit risk increases significantly and there is objective indication of impairment at the reporting date, the loss all-owance is also measured as the present value of the lifetime expected credit losses. Interest revenue is calculated diffe-rently, i.e. based on the net carrying amount (gross carrying amount less the loss allowance) of the instrument (Stage 3).

Objective evidence of impairment include aspects such as major financial difficulties of a debtor; high probability of insolvency proceedings against a debtor; elimination of an active market for the financial asset; a significant change in the technological, eco-nomic or legal environment or the market environment of the is-suer; a sustained decrease in the fair value of the financial asset to below amortised cost. The group first assesses whether objective

evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for fi-nancial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, asset is allocated to a group of financial assets with similar credit risk characteristics and collectively assessed for impairment. As-sets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a portfolio-based assessment of impairment.

In the case of trade accounts receivable transferred as part of true factoring, the contractual rights to receive the cash flows are transferred to the factoring service provider and derecognised at the time of transfer of all opportunities and risks (IFRS 9.3.2.6).

In accordance with IFRS 9.3.3.1, a financial liability is derecogni-sed upon performance, cancellation or expiration, and therefore satisfaction, of the underlying obligation. No financial liabili-ties were transferred or replaced by others in the financial year ended.

On each reporting date, the Group determines whether credit risk has increased significantly since initial recognition of the instru-ment. The credit risk is then measured as the credit loss expected over its lifetime based on the likelihood of default.

The carrying amounts of the financial assets are restated using a loss allowance account and the effects recognised in profit or loss as either an impairment loss or again.

2.6.2.7 Offsetting financial assets and financial liabilities

Financial assets and financial liabilities are not generally reported at the net amount; they are offset only when there is a right of set off regarding the current amounts and there is an intention to settle the amounts on a net basis.

Financial assets and financial liabilities were not offset according to IAS 32.42 as at the reporting date.

Loss allowances for trade accounts receivable and contract as-sets are determined using a simplified impairment model. Ac-cordingly, the assets concerned are allocated to Stage 2 upon initial recognition and transferred to Stage 3 if there is objec-tive evidence of impairment. There is no allocation to Stage 1. Expected credit losses anticipated over their term are recogni-sed for trade accounts receivable and contract assets allocated to Stage 2.

The expected credit losses for these assets at the balance sheet date are determined using a provision matrix. The provision mat-rix is based on the age structure of overdue trade accounts recei-vable, observed historical default and loss rates taking into ac-count future-related estimates, general economic conditions and customer-specific factors. The observed, historical default rates and assumptions on which the provision matrix is based are ana-lysed and updated at every reporting date. The provision matrix applied as of the reporting date is presented in the notes on trade accounts receivable.

2.6.2.6 Derecognition of financial assets and financial liabilities

As soon as an asset is identified for derecognition, an estimate is prepared according to IFRS 9.3.2.4 to determine whether the con-tractual rights to cash flows from the financial asset have expired or whether the asset was transferred and whether the transfer ent-itles the Group to derecognise the asset.

2.7 Business combinations and goodwill

Business combinations are recognised on the basis of the acqui-sition method according to IFRS 3. This entails recognition of all identifiable assets and liabilities of the acquired business at fair value.

If the initial accounting for a business combination has not yet been completed at the end of a reporting period, provisional amounts will be indicated for items thus accounted for. If new in-formation becomes known during the measurement period of not more than one year from the date of acquisition which provides greater clarity regarding the situation as of the date of acquisition, the amounts recognised on a provisional basis will be corrected or additional assets or liabilities will be recognised.

Goodwill results from the acquisition of subsidiaries and, in ac-cordance with IFRS 3.32, represents the difference resulting from the sum total of consideration transferred, the amount of all non-controlling interests in the acquiree, and the fair value of the pre-viously held equity interest in the acquiree less the fair value of the acquired net assets.

Goodwill is not amortised but tested for impairment as specified in IAS 36 at least once every year. For this purpose, goodwill has been assigned to a cash generating unit or a group of cash gene-rating units starting at the transfer date (IAS 36.80). In this con-

text, the carrying amount of a cash-generating unit or group of cash-generating units is compared to its recoverable amount, i.e. the higher of fair value less costs to sell and value in use. If the carrying amount of the cash-generating unit or group of cash-generating units exceeds its recoverable amount, the difference is recognised as an impairment loss directly in profit or loss.

An impairment loss recognised for goodwill may not be reversed in a subsequent period.

2.8 Internally generated intangible assets

Internally generated intangible assets (specialist and other por-tals, website) are recognised in accordance with the provisions of IAS 38 Intangible Assets. Expenditure for an internal project, which are defined as research costs in accordance with IAS 38.56, is recognised as an expense when it is incurred.

Development costs of internal projects are capitalised if the Group can demonstrate all of the following:

  • the technical feasibility of completing the intangible asset so that it will be for use internally or sale;

  • the intention and the ability to complete the intangible asset and use or sell it;

  • how the intangible asset will generate probable future eco-nomic benefits;

  • the availability of technical, financial and other resources to complete the development and to use or sell the intangible asset;

  • the ability to measure reliably the expenditure attributable to the intangible asset during its development.

According to SIC 32.7-8 in conjunction with IAS 38.8, the assets mentioned above are recognised as an internally generated intan-gible asset if, in addition to the general criteria for recognition of intangible assets pursuant to IAS 38.21, they also satisfy the special criteria for internally generated intangible assets in IAS 38.57. In accordance with SIC 32.9, costs must be capitalised in the development stage. The useful life is determined pursuant to SIC 32.10 in conjunction with IAS 38.88 et seq., IAS 38.95 as the period during which an entity receives an inflow of economic benefits;

From the date of completion, internally generated intangible assets are carried at cost less accumulated amortisation and im-pairment losses.

The company only has internally generated intangible assets with a specified useful life, which are amortised using the straight-line method over their useful lives.

2.9 Acquired intangible assets

Acquired intangible assets such as software etc. are initially recog-nised at cost in accordance with IAS 38.24. Cost according to IAS 38.27 to IAS 38.30 also includes all other costs required for brin-ging the asset to the condition necessary for it to be capable of ope-rating in the manner intended by management. Third-party grants reduce cost according to IAS 20.24 in conjunction with IAS 20.27.

Intangible assets with finite useful lives (with the exception of goodwill, there are no intangible assets with indefinite useful lives as at the reporting date) are amortised on over their useful life using the straight-line method in accordance with IAS 38.97 and IAS 38.98. The amortisation period and the amortisation method for intangible assets with a finite useful life are reviewed and, if necessary, adjusted at the end of each financial year in ac-cordance with IAS 38.104.

An intangible asset is derecognised when it is disposed of or when no further economic benefits are expected from its use or dis-posal. Gains and losses arising from the derecognition of an in-tangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

2.10 Costs to obtain a contract

The Group generally pays sales commissions for each contract entered into and for corresponding contract extensions. The amount of the sales commission depends mostly on clearly sti-pulated thresholds. If these are achieved, a percentage of the contract value is paid as commission.

The additional costs arising from obtaining a customer contract (IFRS 15.91, 15.92) are recognised as an intangible asset in the amount of the sales commission paid at the time the economic claim arises and are amortised over the estimated average cus-tomer retention period (IFRS 15.99). Costs that would have ari-sen regardless of whether the contract was entered into, or that cannot be directly charged to the customer, are expensed when they are incurred in accordance with IFRS 15.93. Furthermore, capitalised costs for which the amortisation period would be less than a year are recognised as an expense as outlined in IFRS 15.94. If the carrying amount exceeds the remaining portion of

the consideration that the Company expects in exchange for the goods or services to which these costs relate, less the costs di-rectly attributable to the delivery of the goods or performance of the services that were not expensed, an impairment loss is recognised in profit or loss.

2.11 Contract assets

A contract asset is a legal claim by a company to consideration for goods and services transferred by a company to a customer as long as this claim is conditional on something other than the passage of time (IFRS 15.107).

The company's claim to consideration from the customer is ge-nerally not conditional on other factors, i.e. it is solely conditio-nal on the passage of time. For this reason, no contract assets were reported as of the reporting date.

met: the costs are directly attributable to an existing or anticipated contract, the costs generate or enhance resources, and the costs are expected to be recovered. Costs are capitalised in the amount outlined in IFRS 15.97 and mainly include direct labour and mate-rial costs, costs allocated directly to the contract, costs explicitly chargeable to the customer under the contract, and other costs in-curred only when the Company entered into the contract.

Costs to fulfil a contract are amortised on a straight-line basis over the average customer retention period of the underlying contracts in accordance with IFRS 15.99. If the carrying amount exceeds the portion of the consideration that the Company ex-pects in exchange for the services to which these costs relate, less the costs directly attributable directly to the performance of the services, an impairment loss is recognised in profit or loss (IFRS 15.101).

2.12 Property and equipment

Items of property and equipment are initially measured at costs in accordance with IAS 16.15. Cost in accordance with IAS 16.16b also includes any costs directly attributable to bringing the asset to the environment and condition intended by manage-ment. After initial recognition, items of property and equipment are measured at depreciated cost in accordance with IAS 16.30.

Items of property and equipment are depreciated over their ex-pected useful life using the straight-line method, taking into account any impairment necessary. The residual value and de-preciation period are reviewed and, if necessary, adjusted at the end of each financial year in accordance with IAS 16.51. Property and equipment will be derecognised upon disposal or if the con-tinued use or disposal of the asset can no longer be expected to provide any economic benefit. The gains or losses resulting from the disposal of the asset will be recognised through profit or loss.

For property and equipment acquired through company acqui-sitions, their remaining useful life will be determined, in parti-cular, on the basis of the above-mentioned useful lives as well as the useful lives which have already elapsed as of the date of acquisition.

2.13 Costs to fulfil a contract

The costs arising while fulfilling a contract with a customer are re-cognised as costs to fulfil a contract under other non-current as-sets in accordance with IFRS 15.95 if the following conditions are

2.14 Impairment of non-financial assets

Non-financial assets are tested for impairment on each closing date if there is an indication that the carrying amount of the asset can no longer be recovered.

An impairment loss is recognised in the amount by which the car-rying amount of the asset exceeds its recoverable amount. If the recoverable amount cannot be determined for an individual asset, the recoverable amount of the cash generating item to which the asset belongs is determined in accordance with IAS 36.22. The re-coverable amount of an asset is the higher of its fair value less costs to sell and its value in use. In determining the value in use, the estimated future cash flows are discounted to the present value based on a current market-determined pre-tax rate that ref-lects the risks of the asset that are not taken into account in the cash flows. If the determined recoverable amount of an asset or a cash generating unit is lower than its carrying amount, the carry-ing amount of the asset or cash generating unit is reduced to its recoverable amount. Impairment losses are immediately recogni-sed in profit or loss in accordance with IAS 36.60.

If the reason for a previously recognised impairment loss no lon-ger exists, the impairment loss is reversed through profit or loss to depreciated cost (IAS 36.114 in conjunction with IAS 36.117). This does not apply to goodwill.

2.15 Contract liabilities

If the customer has already fulfilled the contractual obligation

(payment) before the Company transfers the goods or performs the services, a contract liability must be recognised in accor-dance with IFRS 15.106. These are primarily prepayments re-ceived. They are reported in the statement of financial position under other current liabilities. Contract liabilities are recog-nized as revenue as soon as the Group has met its contractual obligations.

2.16 Refund liabilities and right of return assets

A refund liability is recognised if there is an expectation that consideration received or expected from a customer will be re-funded in whole or in part (IFRS 15.55). The refund liability is carried at the amount of the consideration (to be) received to which the Company is potentially not entitled. When products with a right of return are transferred (and in the case of certain services provided subject to a refund), the following is taken into account in accordance with IFRS 15.B21: No revenues are re-cognised for the portion of the products transferred or services provided for which a refund is anticipated. In addition, refund liabilities are recognised for the payments already made by the customer and assets (including the required restatement of the cost of revenues) are generally recognised relating to the right to reclaim products from the customer upon settlement of the refund liability. Changes in the measurement of the refund lia-bilities are corrected at the end of the relevant reporting period, taking into account the changes in expectations regarding re-fund amounts. The adjustments are recognised as an increase or decrease in revenues.

An asset representing the right to reclaim a product already transferred or a service already performed is normally recogni-sed initially at the carrying amount of the asset transferred pre-viously, less anticipated costs for the return including impair-ment losses (IFRS 15.B25). At the end of each reporting period, this measurement is corrected taking into account the changes in expectations regarding products returned. As a rule, the asset is reported separately from the refund liabilities. Due to the in-significance of the amount of right of return assets relating ex-clusively to software in the Digital segment at the reporting date, no further information is provided.

2.17 Accrued current liabilities

In accordance with IAS 37.11 these liabilities are liabilities to pay for goods or services that have been received or supplied but have not been paid, invoiced or formally agreed with the

supplier. They differ from trade accounts payable because these have been invoiced by the supplier or formally agreed. The Group shows liabilities under this item which result from sup-plier invoices not yet received and from obligations towards employees.

2.18 Provisions

In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, provisions are recognised to the extent that there is a current obligation vis-à-vis a third party arising from a past event which will probably lead to a future outflow of resources and the amount of this obligation can be reliably estimated (IAS 37.14). Provisions which do not lead to an out-flow of resources in the following year are carried at the amount required to settle the respective obligation, discounted as of the reporting date. For this purpose, the settlement amount most li-kely to arise is presumed for individual obligations. Discounting is based on market interest rates. The settlement amount also comprises the expected cost increases. Provisions are not offset against claims for reimbursement.

In accordance with IAS 37.72, provisions for restructuring ex-penses are recognised if the Group has prepared a detailed for-mal plan for the restructuring which was communicated to the parties concerned.

2.19 Pension obligations

Retirement benefit plans at the Group are accounted for in ac-cordance with IAS 19 Employee Benefits and is dependent on a plan's classification as being a defined contribution or defined benefit plan.

Defined benefit retirement plans constitute obligations of the 11880 Solutions Group arising from pension entitlements of former Management Board members and their surviving dependants.

The provision for defined benefit plans shown in the statement of financial position under the item "Provisions for retirement benefits" corresponds to the present value of the defined benefit obligation on the reporting date, less the fair value of the plan assets. Should the value of the plan assets exceed the corre-sponding pension obligations, the excess amount is shown under the item "Other non-current assets", taking into account the asset ceiling.

The defined benefit obligation is calculated annually by an in-dependent actuary using the projected unit credit method. Demographic assumptions (e.g. fluctuation rate) and financial assumptions (e.g. interest rate, salary and pension increase trends) are included in the valuation of the present value of the defined benefit obligation using this method.

Actuarial gains and losses resulting from empirical adjustments and changes in actuarial assumptions are recognised in other comprehensive income as incurred.

case of a possible but unlikely outflow of resources as defined in IAS 37.86, the individual risks and their potential financial ef-fects are disclosed as a contingent liability.

Contingent assets may not be recognised (IAS 37.31), but inste-ad must be disclosed in accordance with IAS 37.89 if the future inflow of economic benefits is probable. However, if the realisa-tion of income is virtually certain, the general recognition crite-ria for assets apply (IAS 37.33) and the item can be recognised as a receivable.

Past service costs are immediately recognised in profit or loss.

In accounting for defined benefit plans, net interest is recogni-sed in net financial income.

For defined contribution plans, the Group pays contributions to public or private pension insurance entities as required by statutory or contractual provisions. Other than making the con-tributions, the Company has no other benefit obligations.

The contribution payments incurred are recognised as an ex-pense under cost of revenues, selling and distribution costs and general administrative expenses in the period in which they be-come due.

2.20 Share-based payment

A portion of the annual performance-based variable remunera-tion of the Management Board is converted as variable remune-ration invested for the long term into phantom stocks of 11880 Solutions AG (deferrals). The phantom stocks are recognised in accordance with IFRS 2 Share-based Payment as cash-settled sha-re-based payment transactions.

2.22 Leases

The Group leases different offices and storage rooms, parking spaces, vehicles, data lines and other office equipment. Leases are generally entered into for fixed periods of between one and eight years, but may include extension options.

The 11880 Group recognises leases on the basis of the lease standard IFRS 16 Leases.

Accordingly, for all leases where the Group is a lessee, in princip-le assets are recognised in the statement of financial position for the rights of use for the leased assets while liabilities are recog-nised for the payment obligations entered into. These assets and liabilities are recognised at their present values. Finance costs are recognised through profit or loss over the term of the lease, giving a constant interest rate on the remaining term of the liability for each period. The right-of-use asset is depreciated on a straight-line basis over the shorter of the useful life and the term of the lease.

The lease liabilities generally comprise the following lease payments:

Cash-settled share-based payment transactions are to be re-corded as non-current provisions in the amount of the expense (IFRS 2.30). The expense is recognised in full in the financial year for which the phantom stocks are granted. The amount of the provision is to be adjusted through profit or loss to the respecti-ve fair value of the obligation for the period until the respective phantom stocks are paid out.

2.21 Contingent liabilities and assets

If it is likely that fulfilment will entail the possibility of an out-flow of resources embodying economic benefits, the risk to which the Company is exposed is taken into account accordingly in the consolidated financial statements by means of provisions. In

  • Fixed payments less any lease incentives receivable;

  • Variable lease payments that depend on an index or a(n) inte-rest rate;

  • Amounts expected to be payable by the lessee under residual value guarantees;

  • The exercise price of a purchase option if the lessee is reaso-nably certain to exercise that option; and

  • Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

Lease payments are discounted at the interest rate implicit in the lease, if that rate can be readily determined. Otherwise, the

lessee's incremental borrowing rate, i.e. the rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of similar value to the right-of-use assets in a similar economic environment, is used to discount the lease payments.

Right-of-use assets are measured at cost and comprise:

  • The amount of the initial measurement of the lease liability;

  • Any lease payments made at or before the commencement date, less any lease incentives received;

  • Any initial direct costs incurred by the lessee; and

  • An estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

Vehicle leases which the Group enters into with external leasing companies are recognised in accordance with IFRS 16. In case of contracts which are subsequently entered into between 11880 and its employees, no further assessment is made of whether this constitutes a sublease. The provision of a company car is con-sidered as a portion of the total remuneration received by the respective employee and is treated as an "employee benefit" in accordance with IAS 19. The depreciation charge resulting from capitalisation according to IFRS 16 is reported under deprecia-tion and amortisation.

The 11880 Solutions Group makes use of the exemptions pro-vided for in IFRS 16 for short-term leases (12 months or less) as well as the exemption for leases where the underlying asset has a low value. Payments for leases of low-value assets are re-cognised as an expense in profit or loss on a straight-line basis. Examples of low-value assets are IT equipment and other opera-ting equipment. Leases (except for office premises) with a term of less than 12 months (short-term leases) are also recognised in profit or loss on a straight-line basis.

As of the reporting date, no contractual restrictions or obligations are applicable which have a significant effect on the leases recog-nised in the Group.

There were no leases where the Group was a lessor in the reporting period.

Extension and termination options

Some leases include extension options and/or termination op-tions. With regard to the exercise of extension options in de-termining the term of a lease, the Group considers all facts and circumstances that create an economic incentive for the lessee to exercise extension options or not to exercise termination op-tions. Changes in the term of the lease arising from the exercise of extension options or termination options are only included in the term of the contract if it is reasonably likely that the lessee will exercise an option to extend the lease or not exercise an op-tion to terminate the lease. Most of the existing real estate lea-ses include bilateral termination options, which results in the term of these contracts being limited to the respective duration of the termination period.

2.23 Income taxes

Income taxes comprise all actual and deferred taxes on the basis of the taxable profits reported in the financial year. The calcula-tion is based on the tax rates and laws applicable in the Group's respective tax jurisdictions.

Income taxes are recognised in the amount which is expected to be paid to the tax authorities. This requires assessments by the management which may differ from the view of the tax authorities. If changes in income taxes thus result for past periods, these will be made up for in the period in which there is sufficient evidence to support a restatement.

Deferred taxes are recognised due to temporary differences bet-ween the carrying amounts of assets and liabilities and their tax base. They also include the measurement of tax loss carryforwards. In deviation from this principle, deferred taxes will not be recog-nised on temporary differences where

  • the deferred tax liability results from the initial recognition of goodwill or an asset or a liability arising through a trans-action which is not a business combination and which, on the date of this transaction, does not affect either the net profit or loss for the period pursuant to IFRSs or the taxable profit or loss, and

  • the deferred tax liability results from taxable temporary dif-ferences which result in connection with interests held in subsidiaries, if the timing of the reversal of the temporary differences can be controlled and these temporary differences are not likely to be reversed in the foreseeable future.

Deferred tax assets are recognised to the extent that it is probable that taxable income will be available in the future against which the deductible temporary differences or tax loss carryforwards can

be utilised. As well as deferred liabilities, tax planning calculati-ons and realisable tax strategies will also be taken into considera-tion in order to assess whether positive income is available.

2.25 Earnings per share

The Group calculates earnings per share in accordance with the pro-visions of IAS 33 Earnings per Share.

The carrying amount of the deferred tax assets will be reviewed on each reporting date and reduced insofar as it is no longer probable that a sufficient taxable profit will be available against which the deferred tax asset can be at least partially used. Unre-cognised deferred tax assets will be reviewed on each reporting date and will be recognised insofar as it is now probable that fu-ture taxable income will enable the realisation of the deferred tax asset.

Deferred taxes are measured on the basis of the tax rates appli-cable at the time that the liability is settled or the asset is re-covered, provided that these tax rates are already stipulated by law or the legislative process has been substantially completed.

Where items are directly recognised in other comprehensive in-come within equity, the resulting income taxes will likewise be directly included in equity.

Deferred tax assets and deferred tax liabilities will be offset against one another if the Group has an enforceable right to set off its actual tax refund claims against its actual tax liabilities and these relate to income taxes levied on the same taxable entity by the same tax authority.

2.24 Non-current assets held for sale and discontinued operations

In accordance with IFRS 5 Non-current Assets Held for Sale and Di-scontinued Operations, non-current assets or disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through conti-nuing use. IFRS 5.15 requires such assets to be measured at the lower of carrying amount and fair value less costs to sell. Property and equipment and intangible assets classified as held for sale are not depreciated or amortised.

Income and expenses of discontinued operations as a rule are recognised separately from income and expenses of continuing operations in the income statement for the reporting period and comparative period and are shown separately as post-tax profit or loss of discontinued operations (IFRS 5.33).

In accordance with IFRS 5.26, assets that were classified as held for sale but no longer meet the applicable criteria are no longer classified as held for sale.

Basic earnings per share in accordance with IAS 33.10 are calcula-ted by dividing the net income or loss for the period attributable to ordinary shareholders of the parent entity (the numerator) by the weighted average number of ordinary shares outstanding (the de-nominator) during the period.

For the purpose of calculating diluted earnings per share in accor-dance with IAS 33.31, the net income or loss for the period attribu-table to ordinary shareholders of the parent entity and the weighted average number of shares outstanding are adjusted for the effects of all dilutive potential ordinary shares.

The calculation diluted earnings per share corresponds to the calculation of basic earnings per share because the Group did not issue any ordinary shares that have a potentially dilutive effect.

2.26 Statement of cash flows

The 11 88 0 Solutions Group presents its statement of cash flows in accordance with IAS 7 Statement of Cash Flows. Cash flows from operating activities are presented by choosing the option of using the indirect method in accordance with IAS 7.18b. Ho-wever, for the presentation of cash flows from investing and financing activities, IAS 7.21 requires the use of the direct met-hod, which has been applied accordingly.

2.27 Summary of measurement principles

The assets and liabilities in the consolidated statement of financial position are valued as follows, assumed there are no impairments:

Balance sheet item

Measurement

ASSETS

Cash and cash equivalentes

Amortised cost

Restricted cash

Amortised cost

Trade accounts receivable

Amortised cost

Current tax assets

Expected payment from the tax authorities based on tax rates applicable on the reporting date or in the near future

Financial assets at fair value through profit or loss

Fair value through profit or loss

Other financial assets

Amortised cost

Other assets

Amortised cost

Goodwill

Impairment-only

Intangible assets

Amortised cost

Property and equipment

Amortised cost

Capitalized rights of use (IFRS 16)

Amortised cost

Deferred tax assets

Undiscounted measurement at tax rates valid in the period in which an asset is realized or a liability settled

LIABILITIES

Trade accounts payable

Amortised cost

Accrued liabilities

Amortised cost

Provisions

Expected discounted amount that will lead to outflow of resources

Lease liabilities (IFRS 16)

Amortised cost

Other liabilities

Amortised cost

Provisions for retirement benefits

Expected discounted amount that will lead to outflow of resources

Deferred tax liabilities

Undiscounted measurement at tax rates valid in the period in which an asset is realized or a liability settled

3. Material estimates and discretionary decisions

Determining the carrying amounts of some assets and liabilities re-quires estimation of the effects of uncertain future events. The pre-paration of the consolidated financial statements therefore requires management to make discretionary decisions, estimates and as-sumptions that affect the Group's net assets, financial position and results of operations. Due to the uncertainty associated with these assumptions and estimates, actual results in future periods could lead to significant restatements in the carrying amounts of the as-sets or liabilities concerned. The COVID-19 pandemic has affected the uncertainty relating to assumption and estimates in connection with the measurement of assets and liabilities. No estimates or un-derlying discretionary decisions with a significant impact in con-nection with the COVID-19 pandemic arose for the 11 88 0 Group in the 2020 financial year. The key assumptions concerning the future, and other major sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material restatement of the carrying amounts of assets and liabilities within the next financial year are disclosed below.

3.1 Revenue from contracts with customers

The Group made the following discretionary decisions with a material influence on determining the amount and timing of the recognition of revenue from contracts with customers:

3.1.1 Identification of performance obligations in contracts with customers

Identifying individual performance obligations in contracts with customers is relevant particularly in cases where separate per-formance obligations are identified in a contract and one per-formance obligation is fulfilled at a particular point in time, but another performance obligation is fulfilled over a specified period of time or the periods of the performance obligations differ. The timing of revenue recognition is different in these cases.

For each contract with a customer in the Digital segment, the Group essentially identifies only one contractual performance ob-ligation under which the transfer of goods or services to customers takes place over a uniform period of time. Due to the contractual agreements, revenue from contracts in this area is recognised on a monthly basis.

payment of an annual invoice in equal instalments each month. The Group came to the conclusion that contracts where the cus-tomer decides to pay in advance generally include a financing component based on the period of time between payment for the service by the customer and its transfer. As a rule, however, the time period in question amounts to no more than one year. The-refore, the Group makes use of the practical expedient of IFRS 15.129 in conjunction with IFRS 15.63 and does not recognise this financing component.

3.1.3 Variable consideration

Certain contracts for the sale of software include a right of re-turn that constitutes variable consideration. In addition, variab-le consideration in the form of credit notes is taken into account in the Media business. In estimating the variable consideration, the Group must either apply the expected value method or a met-hod to determine the likeliest amount. The method that must be selected is the one with which the Group can most reliably de-termine the consideration owed.

Since the estimated variable consideration arising from rights of return is not material to the presentation of the consolidated financial statements as at the reporting date, no further infor-mation is provided here. When determining the transaction price, the variable consideration from expected credits is taken into account in accordance with the expected value method.

3.2 Loss allowances on trade accounts receivable and contract assets

The Group recognises loss allowances on trade accounts recei-vable and contract assets in order to take expected losses into account that may result from non-receipt of customer payments. In order to take into account the potential credit risk, historical default and loss rates are determined that are adjusted using forward-looking estimates and estimates of general economic conditions and customer-specific factors. The key factors influ-encing the amount of the loss allowances is the estimate of the likelihood of occurrence of insolvencies and the estimate regar-ding changes in the technological, economic and legal environ-ment, particularly the market environment. For changes in loss allowances, see section 2. under the notes to the consolidated statement of financial position.

3.1.2 Financing components

In the Digital segment, the Group offers two main payment opti-ons: Payment of an annual invoice after the contract is signed or

3.3 Impairment of goodwill

The Group tests goodwill for impairment at least once a year. This requires estimating the recoverable amounts of those cash

generating units to which the goodwill has been allocated. The recoverable amount is the higher of the cash-generating unit's fair value less costs to sell and its value in use. Determining the recoverable amount is based on estimates and discretionary de-cisions in particular as regards expected cash flows of the cash generating units and an appropriate discount rate.

3.4 Property and equipment and intangible assets

Property and equipment and intangible assets are initially mea-sured at cost. Property and equipment and intangible assets with a limited useful life are depreciated and amortised on a straight-line basis over their assumed economic life following their initial recognition. Their assumed economic life is based on past experience and is subject to significant uncertainty, in particular in relation to unforeseen technological development.

Purchase price allocation carried out upon the initial consoli-dation of FAIRRANK GmbH in financial year 2020 resulted in the identification of customer contracts as intangible assets and their recognition at fair value. Based on management's assess-ment, the amortisation period was fixed at up to 4 years and the straight-line method of amortisation was chosen. Determining the amortisation period was based on the estimate of probab-le future cash flows from these intangible assets and the dis-counting rate to be used for determining the present values of these cash flows. As of 31 December 2020, the carrying amounts of these acquired customer contracts amounted to EUR 309 thousand.

3.5 Contract costs

Contract costs (costs to obtain and fulfil a contract) are recogni-sed as an asset only if they meet the criteria for recognition set out in IFRS 15 and mentioned in section 2.10 and it is expected that the corresponding costs will be recovered in accordance with IFRS 15.95.

In determining the amount of sales commission to be capitalised (costs to obtain a contract), the commission paid is not recog-nised if the amortisation period would amount to less than one year in accordance with the expedient in IFRS 15.94. The amount of the sales commission to be recognised in each case (costs to obtain a contract) is generally based on the contractual com-mission agreements entered into. Furthermore, when employee commission is capitalised, a premium is calculated based on the employer contributions to social security due on the commission payment.

The amount capitalised for customer websites (costs to fulfil a con-tract) includes direct labour costs (employees who work on produ-cing the websites), direct material costs and allocated overhead costs such as depreciation, for example.

Capitalised contract costs (costs to obtain and fulfil a contract) are amortised based on the average customer retention period. In determining the average customer retention period terms of the underlying contracts, expected contract extensions were taken into account. Capitalised contract costs are subject to an annual impairment test, in which primarily the future recovery of costs in accordance with IFRS 15 and the average customer retention period are tested.

3.6 Deferred taxes on tax loss carryforwards

In principle, the acquisition of more than 50% of the shares in 11880 Solutions AG by united vertical media GmbH, Nuremberg, in September 2019 jeopardises the legal existence of all of the cor-porate income tax and trade tax losses in the accrued by 11880 Solutions AG and its subsidiary, 11880 Internet Services AG, up to this date.

Taking into consideration the IFRIC 23 rules, the management assumes the most probable value for its estimate of the legal existence of tax loss carryforwards. Accordingly, on the basis of sections 8c/8d of the German Corporate Income Tax Act (Körper-schaftsteuergesetz) it is assumed that 11880 Solutions AG's cur-rent losses arising up to the date on which the investment was ac-quired or its loss carryforwards have been forfeited legally and can thus no longer be used. Only the current losses which have arisen since the transfer date have been included in the determination of the income tax positions. On the other hand, the assessment for the loss carryforwards and the current losses of 11880 Internet Services AG is that they remain legally usable as a hidden reserve clause on the basis of section 8c of the German Corporate Income Tax Act.

Insofar as loss carryforwards exist from a legal point of view, in principle deferred taxes will be recognised for them in accordance with IAS 12.34. These are recognised to the extent that it is pro-bable there will be taxable profit in the future against which the un-used tax loss carryforwards can be utilised. Management bases its assessment of probability on the criteria set forth under IAS 12.36.

The gross value of deferred tax assets on tax loss carryforwards (before loss allowance) amounted to EUR 10,210 thousand as of

the reporting date (2019: EUR 9,084 thousand); see also section 11 in the notes to the consolidated statement of financial position.

3.7 Provisions

A provision will only be established if the Group has a legal or constructive obligation due to a past event, the outflow of re-sources embodying economic benefits is probable in order to fulfil this obligation and the amount of this obligation can be reliably estimated. Such estimates are subject to significant uncertainty.

3.8 Litigation

The Group uses discretion in disclosing ongoing litigation in its financial statements. Significant risks and rewards are assessed by including assessments made by external legal advisers. For more information see also note 5 in other notes and disclosures.

3.9 Pension obligations

The present value of the pension obligations depends on multiple factors that are based on actuarial assumptions. The assumptions applied in the determination of net expenses (or income) for pen-sions include the discount rate. Every change to these assumpti-ons will have an impact on the carrying amount of the pension obligations.

The Group determines the appropriate discount rate at the end of each financial year. The discount rates applied are determined on the basis of yields that are realised on the reporting date for senior, fixed-interest corporate bonds with a corresponding term and currency. Please refer to note 17 in the notes to the consolida-ted statement of financial position for further information on this.

3.10 Leases

3.10.1 Incremental borrowing rate of interest

Within the scope of application of IFRS 16 Leases, the lease pay-ments outstanding as of the acquisition of the asset are discounted over the term of the lease, using the interest rate implicit in the lease. If this interest rate is not readily determinable, the incremen-tal borrowing rate of interest, i.e. the rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of similar value to the right-of-use assets in a similar economic environment, is used to discount the lease payments.

The incremental borrowing rate of interest is essentially determined using a credit tool provided by the development bank KfW. A custo-mer-specific price class is determined on the basis of the borrower's

credit standing and the fair value of collateral, taking the economic environment of the underlying asset into consideration. This price class, in conjunction with the contract term, is subsequently used to determine the loan interest rate, depending on the KfW programme chosen. On the basis of the above criteria, interest rates of between 1.4% and 7.4% are applicable.

3.10.2 Extension, termination and purchase options

Some of the leases for buildings entered into by the 11 88 0 Group are subject to automatic contract extensions. However, as both parties have the right to terminate the leases an enforceable contract exists only for the duration of the notice period. Any assessment regarding the exercise of the above-mentioned opti-ons is therefore no longer relevant.

In the case of vehicle leases, it is generally assumed that these are not extended beyond the originally agreed term, as this usually entails higher costs. We also assume that these leases will neither be terminated prematurely nor will purchase options be exercised.

3.11 Accounting for business combinations

Business combinations are accounted for using the acquisition method. Goodwill resulting from a business combination is ini-tially recognised at cost, which is the excess of the cost of the company's acquisition over the fair values of the acquired identi-fiable assets, liabilities and contingent liabilities.

Determination of the fair values of the acquired assets and lia-bilities as of the date of acquisition is subject to significant es-timation uncertainty. For the identification of intangible assets, depending on the type of intangible asset and the complexity of the process for determining its fair value either independent opi-nions published by external valuers will be used or else the fair value will be determined internally by means of an appropriate valuation method for the respective intangible asset, which is normally based on the forecast of the overall cash which is ex-pected to be generated in future. These valuations are closely linked with the assumptions and estimates which the manage-ment has made regarding the future development of the respec-tive assets as well as the applicable discount rate.

4. Changes in accounting policies

The accounting policies described in section 2 which are applied in the consolidated financial statements are consistent with those applied in the consolidated financial statements for the 2019 fi-nancial year, except for the changes explained below.

Application for annual

Anticipated effects on the presentation of the 11 88 0

Standard

Changes

periods

Group's net assets, finan-

beginning on

cial position and results of

or after

operations

Conceptual FrameworkIFRS 3

IAS 1, IAS 8

IFRS 9, IAS 39, IFRS 7

IFRS 16

Revised Conceptual FrameworkThe Conceptual Framework sets out the fundamen-No material effects tal concepts for financial reporting that guide the

IASB in developing IFRS Standards. The Conceptu-al Framework also assists companies in developing accounting policies when no IFRS Standard or Inter-pretation applies to a particular transaction. The re-vised Conceptual Framework contains a new chapter on measurement, provides updated definitions and guidance, and clarifies a number of terms.

Amend-ment: Defi-nition of a BusinessThe amended definition of a business clarifies that a business is an integrated set of activities and as-sets that is capable of being conducted and mana-ged for the purpose of providing goods or services to customers, generating investment income or generating other income from ordinary activities. A business consists of the input of economic re-sources, the processes that contribute to the gene-ration of outputs, and the result of the inputs, i.e., the output.

Amend-ment: De-finition of Materiality

The concept of materiality has been redefined as follows: "Information is material if omitting, missta-ting or obscuring it could reasonably be expected to influence decisions that the primary users of gene-ral purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." These amendments provide a more uniform and precise de-finition of what makes information in the financial statements material.

Interest rate benchmark reform

The amendments to IFRS 9 and IAS 39 provide for a number of practical expedients that are applicable to all hedging relationships affected by modifica-tions that are directly required by the interest rate benchmark reform. Such hedging relationships can be identified by uncertainty about the timing and/or amount of interest rate benchmark-based cash flows of the hedged item or hedging instrument arising from the reform.

COVID-19-Related Rent Concessions

The amendments provide practical relief to lessees when applying the requirements of IFRS 16 to ac-count for changes in a lease (lease modifications) arising as a result of the COVID-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a COVID-19-related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any qualifying change in lease payments resulting from the COVID-19-related rent concession the same way it would account for the change under IFRS 16 if the change were not a lease modification.

01.01.2020

01.01.2020

No material effects

01.01.2020

No material effects

01.01.2020

The 11 88 0 Group does not currently implement any hedge accounting.

01.06.2020

No material effects

5. Future changes in accounting policies

Adoption of the following standards newly issued or amended or amendments issued by the IASB is not yet mandatory as at the re-porting date. For this reason, they were not applied to these con-solidated financial statements for the period ended 31 December 2020. The Group usually does not adopt amended standards prior to the effective date, even if individual standards permit this.

At the present time, we do not expect the amendments listed below to materially affect the Group's net assets, financial posi-tion and results of operations.

Clarification of classifying liabili-ties as current or non-current

IAS 1

IFRS 3

IAS 16

Classification of Liabilities as Current or Non-current

Reference to the Con-ceptual FrameworkProceeds before Intended UseIAS 37

Onerous Contracts - Costs of Fulfilling a Contract

  • 01.01.2023No material effectsUpdating a reference to the newly amended conceptual framework.

  • 01.01.2022No material effects

    Amendment to accounting for the cost of property, plant and equipment in relation to the treatment of sales proceeds from test runs.

  • 01.01.2022No material effects

    Specification of which costs an entity needs to include when assessing whether a contract is onerous or loss-making.

  • 01.01.2022No material effectsIFRS 9, IAS 39,

    IFRS 7, IFRS 4,

    IFRS 16

    Interest Rate Bench-mark Reform (Phase 2)

    Amendments to Phase 2 of the IASB's IBOR project.

  • 01.01.2021No material effectsIFRS 1, IFRS 9,

IFRS 16, IAS 41

Annual improvementsClarifications of individual IFRSs.01.01.2022 (2018-2020 cycle)

6. Initial consolidation of acquired companies

Based on the takeover and contribution agreement of dated 26 August 2020, 11 88 0 Solutions AG directly acquired 100% of the equity interest in FAIRRANK GmbH and indirectly 100% of the equity interest in its subsidiary Seitwert GmbH by means of a capital increase through contributions in kind on September 21, 2020. From a strategic point of view, with the acquisition of theNo material effectsonline agency FAIRRANK GmbH the 11 88 0 Solutions AG was able to create an important basis for the future growth of the 11 88 0 Group.

The acquisitions were accounted for using the acquisition method in accordance with IFRS 3 and should still be considered provisio-

nal with regard to the identification of assets and their measure-ment. The presentation of the fair value of the assets and liabi-lities in the statement of financial position at the time of initial consolidation should also be considered provisional due to ongo-ing accounting-related integration activities. Initial consolida-tion was made effective 30 September 2020.

FAIRRANK GmbH is an online marketing agency active in Ger-man-speaking countries. Its core services are search engine op-timisation (SEO), online advertising and usability optimisation. Seitwert GmbH uses SEO tools to perform website analyses. The goodwill has been allocated to the Digital segment as part of the preliminary purchase price allocation.

The acquired assets and liabilities of the FAIRRANK GmbH subgroup were included in the consolidated financial statements with the following provisional fair values as part of the initial consolidation:

Acquired net assets

Cash

Restricted cash

Trade accounts receivableOther current assetsIntangible assetsProperty and equipment

Total Assets

Trade accounts payableAccrued current liabilitiesOther current liabilitiesOther non-current liabilitiesDeferred tax liabilities

Total Liabilities

The Company's main shareholder, Nuremberg-based united ver-tical media GmbH, was granted the right under the terms of the non-cash capital increase to make its contribution for 2,707,200 New Shares as a non-cash contribution by contributing Cologne-in kEURbased FAIRRANK GmbH. The purchase price for the equity invest-ment in FAIRRANK GmbH was set at EUR 3,384 thousand.

870

67Since the purchase price was settled through the issue of new

35490

shares within the scope of the non-cash capital increase, the Group has gained liquid funds as a result of the acquisition. As well as this cash, the Group has assumed non-current loan liabi-

490lities of EUR 0.8 million. The fair value of the transferred consi-

217deration and the net cash inflow comprises the following items:

2,088

Transferred consideration

337351

Cash purchase price

Fair value of the transferred consideration

449(2,707,200 shares in 11 88 0 Solutions AG)

750Transferred consideration

117

2,004Cash flow from investing activities

in kEUR

03,384 3,384

in kEUR

Net Assets at fair value

83

The provisional difference resulting from the acquisition of the FAIRRANK GmbH subgroup has so far been defined as other goodwill and is shown in the consolidated financial statements of 11 88 0 Solutions AG as follows:

Goodwill

in kEUR

Consideration transferred

3,384

Net assets at fair value

-83

Goodwill

3,301

The not-tax-deductible goodwill is attributable above all to values that cannot be separated such as the expected synergy effects, strategic advantages and employee know-how.

Assumed cash

Net inflow of cash

870 870

In addition to cash and cash equivalents, the Group received res-tricted cash of EUR 67 thousand as a result of the acquisition.

The acquired receivables have a gross value of EUR 382 thousand with impairment losses of EUR 28 thousand.

Due to the initial consolidation of the FAIRRANK subgroup, re-venues have increased by EUR 1.3 million and earnings have decreased by EUR 0.3 million in the 2020 financial year. If these companies had already been initially consolidated on 1 January 2020, consolidated revenues would have increased by EUR 4.4 million and consolidated earnings would have decreased by EUR 0.1 million.

Notes to the Consolidated Income Statement

1. Revenues

Consolidated revenues in the 2020 financial year amounted to EUR 50,802 thousand (2019: EUR 47,668 thousand).

and thus charged to cost of revenues in the year under review in the amount of EUR 166 thousand (2019: EUR 124 thousand).

In the financial year, revenue of EUR 4,167 thousand was recog-nised from contract liabilities existing as of 31 December 2019 (2019: EUR 4,353 thousand).

Revenues increased significantly by 7% compared to the previous year. The increase in revenues is attributable to the 11% growth in revenues in the digital business. Both FAIRRANK GmbH and Seitwert GmbH were allocated to the Digital segment, and their revenue share from the acquisition date in September 2020 was EUR 1.3 million. In contrast, revenues in the Directory Assistan-ce segment fell by 4% compared with the previous year. Further explanations on the development of revenues can be found in the Group management report and in the presentation by operating segment in section 2 under Other notes and disclosures.

2. Cost of revenues

The cost of services rendered in order to generate revenues of EUR 29,242 thousand (2019: EUR 27,289 thousand) primarily consisted of capacity and infrastructure costs of the Digital and Directory Assistance segments, for example personnel and IT in-frastructure costs.

3. Selling and distribution costs

The selling and distribution costs of EUR 16,071 thousand (2019: EUR 14,478 thousand) mainly included the costs of the Company's own staff in the digital business, amortisation of capitalised costs to obtain a contract, the costs of receivables management, inclu-ding losses on receivables, as well as fixed costs for the locations used. Selling and distribution costs also contain expenses from additions to loss allowances on trade accounts receivable and in-come from the reversal of such loss allowances.

The significant increase is mainly attributable to the increase in losses on receivables and personnel expenses. Growth on the re-venue side in particular has also resulted in an increase in the cost items for selling and distribution costs.

EUR 3,845 thousand in selling and distribution costs (2019: EUR 3,360 thousand) for obtaining customer contracts were capitali-sed in the past financial year, reducing cost of revenues by that same amount. Conversely, amortisation attributable to the costs to obtain a contract increases selling and distribution costs by EUR 3,064 thousand (2019: EUR 2,055 thousand).

The increase in the cost of sales of around 7 % results, besides from the additional share of the cost of sales of the acquired com-panies FAIRRANK GmbH and Seitwert GmbH of EUR 1.1 million, mainly from increased costs in the context of the development and introduction of a new CRM system that cannot be capitalised.

In the past financial year, EUR 432 thousand (2019: EUR 153 thou-sand) in cost of revenues was capitalised as costs to fulfil a con-tract for the creation of websites for customers, which resulted in an equivalent decrease in cost of revenues. In return, capitalised costs to fulfil a contract were amortised over a period of 36 months

4. General administrative expenses

The general administrative expenses in the amount of EUR 8,139 thousand (2019: EUR 7,988 thousand) primarily included the costs of corporate services such as finance, legal, human re-sources, IT, as well as the management board and infrastructure costs of these units. Furthermore, this item includes consulting fees incurred for company-wide consulting projects. The share of general administrative expenses contributed by FAIRRANK GmbH and Seitwert GmbH, which were consolidated for the first time in the 2020 financial year, amounted to EUR 0.2 million.

5. Staff costs

The following employee benefit expenses were included in the costs of corporate services:

in EUR thousand

2020

2019

Wages and salaries

19,034

17,770

Social security costs

3,574

3,501

Pension costs

11

3

Multi-year variable remuneration

168

426

Total

22,786

21,700

The rise in personnel expenses compared with the previous year resulted primarily from the increase in the average number of employees in administration; see also section 6 under other notes and disclosures.

6. Depreciation, amortisation and impairment

Depreciation and amortisation included in costs of revenue, sel-ling and distribution costs and other administrative expenses were composed as follows in the reporting year from 1 January 2020 to 31 December 2020:

In EUR thousand

Cost of revenues

Selling and dis-tribution costs

Other administ-rative expenses

Total

Amortisation of intangible assets

945

3,157

45

4,147

Depreciation of property and equipment

49

23

219

291

Depreciation of capitalised right-of-use assets

282

490

423

1,194

Total

1,276

3,670

687

5,632

Depreciation and amortisation included in costs of revenue,

selling and distribution costs and other administrative expen-

ses were composed as follows in previous year from 1 January

2019 to 31 December 2019:

In EUR thousand

Cost of revenues

Selling and dis-tribution costs

Other administ-rative expenses

Total

Amortisation of intangible assets

1,233

2,166

60

3,459

Depreciation of property and equipment

58

30

195

283

Depreciation of capitalised right-of-use assets

270

442

413

1,125

Total

1,561

2,638

668

4,867

7. Other operating income

Other operating income amounted to EUR 6 thousand (2019: EUR 0 thousand).

8. Other operating expenses

in EUR thousand

2020

2019

Loss on disposal of non-current assets

5

17

Other

12

6

Other operating expenses

17

23

9.Net financial income 9.1 Net interest income

in EUR thousand

2020

2019

Other interest and similar income

24

28

Interest and similar income

24

28

Interest expense from lease liabilities

-308

-335

Interest expense for bank overdrafts and guarantees

-3

-5

Other interest and similar expenses

-29

-29

Interest and similar expenses

-340

-369

Net interest income

-316

-341

Interest income results mainly from compounding of lease liabilities.

9.2 Net income from marketable securities

in EUR thousand

2020

2019

Gain on sale of marketable securities and from fair value measurement

28

94

Net income from marketable securities

28

94

The net income from the sale of securities results from the sale of shares and measurement investment fund units. Sales are re-cognised in the statement of financial position on the trade date.

9.3 Net income from foreign currency translation

in EUR thousand

2020

2019

Gains on foreign currency translation

0

0

Loss on foreign currency translation

-1

0

Net income from foreign currency translation

-1

0*

*The amounts are less than EUR 1 thousand

9.4 Net gains/losses on financial instruments by measure-ment category

in EUR thousand

31 December 2020

31 December 2019

Cash and cash equivalents

-2

-3

Loans and receivables

-1,988

-1,388

Financial assets measured at fair val

28

94

Total

-1,962

-1,297

Net income from loans and receivables mainly included changes in loss allowances, losses from derecognition, gains from subse-quent payments received and the reversal of valuation allowances previously recognised on trade accounts receivable.

10. Income taxes

The tax rate applicable for the past financial year comprises, for Germany, corporate income tax, the solidarity surcharge applica-ble on corporate income tax as well as trade tax. In view of the ap-plicable tax trade multipliers, the overall tax rate for the 11880 Solutions AG tax group is 31.6% (2019: 31.6%). There is a slight discrepancy in the trade tax rate for 11880 Internet Services AG as well as FAIRRANK GmbH and Seitwert GmbH, which is due to different rates of assessment.

in EUR thousand

2020

2019

Current income taxes

0

0

Deferred income taxes

638

-821

Recognised income/expense from income taxes

638

-821

The following fiscal reconciliation shows why the tax expense re-cognised for the current year does not correspond to the expected tax income when earnings before taxes are multiplied with the Group tax rate of 31.6% applicable for the full 2020 financial year (2019: 31.6%):

in EUR thousand

2020

2019

Net loss before taxes

-2,950

-2,358

Applicable tax rate

31.6 %

31.6 %

Expected income from income taxes

932

745

Increase / reduction by:

Change in loss allowance on deferred taxes

-231

-1,576

Income tax rate differences

-19

-26

Tax effects on expenses (permanently) non-deductible for tax purposes / tax-free income

-38

-29

Prior-period tax expense/income

0

67

Other

-5

-2

Recognised expense (-) / income (+) from income taxes

638

-821

Calculated as the ratio of income tax expense/income shown to the net loss for the period before taxes, the effective tax rate was 21.6% (2019: -34.8%).

The change in the effective tax rate mainly resulted from tax ef-fects on loss carryforwards for which no deferred tax assets were recognised. The previous year saw the one-off recognition of high impairment losses on account of 11 88 0 Solutions AG's forfeiture of corporate income tax and trade tax losses in September 2019 (cf. chapter 3.6).

As of 31 December 2020, the current tax assets totalled EUR 4 thou-sand (2019: EUR 19 thousand) and mainly comprised receivables from the tax authorities related to withholding tax on investment and the solidarity surcharge on withholding tax on investment.

The 11 88 0 Solutions Group shows deferred tax assets after offset-ting in the amount of EUR 0 thousand as of 31 December 2020, as in the previous year. The recognition of deferred tax liabilities after offsetting decreased from EUR 1,245 thousand (as of 31 De-cember 2019) by EUR 597 thousand to EUR 648 thousand; see also note 11 to the consolidated statement of financial position.

11. Earnings per share

Financial year ended on 31 December, in EUR

2020

2019

Earnings per share based on the net income attributable to ordinary shareholders of the parent

-0.10

-0.16

The calculation of earnings per share for the financial years ended on 31 December was based on the following data:

Financial year ended on 31 December, in EUR thousand

2020

2019

Net income attributable to ordinary shareholders of the parent applicable for calculating earnings per share

-2,312

-3,178

Financial year ended on 31 December, in thousand units

2020

2019

Weighted average number of ordinary shares for calculating earnings per share

22,099

19,666

Notes to the consolidated statement of financial position

1. Cash and cash equivalents

Cash and cash equivalents were composed as follows as of the reporting date:

Financial year ended on 31 December, in EUR thousand

2020

2019

Bank balances and cash

2,921

4,089

Short-term deposits

1

1

Restricted cash

134

67

Total

3,056

4,157

As of the reporting date, bank balances and short-term deposits were exclusively kept with renowned German financial institutions which are classified as investment grade by international rating firms. Restricted cash serve to collateralise rental guarantees.

The fair value of cash and cash equivalents amounted to EUR 3,056 thousand (2019: EUR 4,157 thousand) and thus corresponded to their carrying amount.

The 11880 Solutions Group had overdraft facilities of EUR 1,000 thousand (2019: EUR 1,000 thousand) with financial institutions at its disposal as of 31 December 2020. Use of these facilities is not restricted.

2. Trade accounts receivable

The amounts presented in the statement of financial position are amounts after impairment charges that were recognised in order to account for potential expected losses over the remai-ning term.

in EUR thousand

31.12.2020

31.12.2019

Trade accounts receivable, gross

11,533

10,457

Less loss allowances

-1,919

-1,714

Trade accounts receivable, net

9,614

8,743

As a rule, trade receivables were due within 8 to 90 days.

The following trade accounts receivable were impaired with an amount of EUR 1,919 thousand (2019: EUR 1,714 thousand) as of 31 December 2020. Changes in the allowance account were as follows:

In EUR thousand

2020

2019

Loss allowances on 1 January

1,714

1,659

Expected losses according to IFRS 9

153

27

Additions

1,673

1,440

Utilisation/Derecognition

-1,064

-1,006

Reversal

-557

-406

Loss allowances on 31 December

1,919

1,714

Expenses from the recognition and income from the reversal of loss allowances are reported under selling and distribution costs.

For further general information on the recognition of expected credit risks and risk management , see section 8 under "Other notes and disclosures".

Recoveries of the authorised collection agency are included in the position "Reversal of loss allowances" under selling and distribu-tion costs.

3. Financial assets at fair value through profit or loss

The Group holds investment fund units that invest in short-term, low-risk money market instruments and bonds. These are catego-rised as "financial assets at fair value through profit or loss" in accordance with IFRS 9.

The fair value of the Group's monetary investments in investment fund units as of 31 December 2020 was EUR 610 thousand (2019: EUR 582 thousand). The investments denominated in euros were neither past due nor impaired.

As in the previous year, the securities held by the Company in the amount of EUR 610 thousand, which were measured at fair value through profit or loss as of 31 December 2020 are allocated to Level 1 of the fair value hierarchy.

The financial assets measured at fair value through profit or loss changed as follows:

in EUR thousand

Other financial assets at fair value through profit or loss

As of 1 January 2019

1,698

Addition

0

Disposal

-1,210

Measurement loss recognised in profit or loss

94

As of 31 December 2019

582

Addition

0

Disposal

0

Measurement gain recognised in profit or loss

28

As of 31 December 2020

610

The effect from the measurement of securities for the 2020 finan-cial year amounts to EUR 28 thousand.

4.Other financial assets

6.3 Carrying amounts

As of 31 December 2020, current other financial assets mainly in-cluded receivables from non-recourse factoring.

Current other financial assets were neither impaired nor past due in the financial year under review.

in EUR thousand

Goodwill

As of 31 December 2020

3,717

As of 31 December 2019

416

5. Other current assets

Other current financial assets consisted of the following items:The breakdown of goodwill respectively provisional goodwill by cash-generating unit as of 31 December is as follows:

in EUR thousand

31.12.2020

Prepayments made

649

Other current assets

14

Other current assets

663

*provisional allocation as part of the purchase price allocation, which is still provisional

92556

Prepayments made related primarily to deferred maintenance expenses and rent for technical equipment. Other current as-sets mainly include receivables from a collection service provi-der and from employees.

6. Goodwill

6.1 Cost

in EUR thousand

Goodwill

As of 31 December 2020

10,092

As of 31 December 2019

6,791

6.4 Impairment test of goodwill

The carrying amount of FAIRRANK's goodwill was determined as part of the provisional purchase price allocation. For further in-formation, please see section 6 "Initial consolidation of acquired companies". As of 31 December 2020, no impairment indicator was available for the provisionally allocated CGU within the scope of the purchase price allocation, which is still provisional. Accor-dingly, the provisional goodwill was not tested for impairment.

For the purpose of impairment testing, the carrying amount of goodwill acquired as part of the business combination in the amount of EUR 416 thousand was fully attributed to the directory assistance business of 11 88 0 Internet Services AG as a cash-gene-rating unit in accordance with IAS 36.80.

6.2 Accumulated impairment

in EUR thousand

Goodwill

As of 31 December 2020

6,375

As of 31 December 2019

6,375

As in the previous year, the impairment test found no indication of impairment in financial year 2020.

The recoverable amount of EUR 1,181 thousand of the cash-gene-rating unit Directory Assistance Business at 11 88 0 Internet Ser-vices AG was determined for a period of five years based on the budget approved by the Supervisory Board. The first three years represent detailed planning, while the years 2024 and 2025 re-present the extrapolation of trends. The longer time period was chosen to better reflect the decline in the directory assistance business within 11880 Internet Services AG. The discount rate before tax used for the cash flow forecasts was based on average weighted capital costs (2020: 20.99%; 2019: 22.80%). Cash flows

after the period of five years were recognised as the terminal value. A significantly lower EBIT margin by comparison with the detailed planning period and an annual degression rate for revenues of 20% have been assumed here. Accordingly, a growth discount of -20% was applied when calculating the terminal value.

6.4.1 Basic assumptions

The basic assumptions used by management in preparing its cash flow forecasts for the impairment test of goodwill are discussed below.

Planned gross profit margins - Planned gross profit margins were determined based on the average gross profit margins realised in comparable markets and known to the cash-generating unit wit-hin 11880 Internet Services AG from past experience, and extra-polated in reflection of expected revenue and cost changes. For the detailed planning period, a gross margin which is comparable with the past few years is assumed. This has been reduced to the decreased margin level which is expected for the terminal value in the trend years 2024 and 2025. EBITDA of the cash-generating unit Directory Assistance Business of 11 88 0 Internet Services AG decreases from EUR 0.40 million in 2021 to EUR 0.20 million in 2025 due to the downturn in business.

Nominal interest rate for debt instruments - German government bonds with a term of 30 years were used for the risk-free base rate. An equity ratio of 100% has been assumed for the determination of the fair value.

Regarding free cash flow before tax of the cash generating unit Direc-tory Assistance Business the forecast assumes a decline to EUR 0.20 million by 2025.

6.4.2 Sensitivity of the assumptions made

In the opinion of the management, the following main assumpti-ons have the biggest influence on the recoverable amount of cash generating units and thus are reviewed on a regular basis:

  • Discount factor: The discount factor was determined based on the average cost of capital of the 11 88 0 Solutions Group and companies in its peer group as well as an additional lump-sum risk premium on the discount rate thus determi-ned. Market-specific and social changes respectively may result in an adjustment of the discount factor. An after-tax discount rate increased by a further 2.0 percentage point reduces the fair value of the cash-generating unit Directo-ry Assistance Business by EUR 0.08 million, ceteris paribus.

In this case too, the fair value of the cash-generating unit Directory Assistance Business would exceed its carrying amount by EUR 0.52 million. Overall, the after-tax discount rate might be increased by more than 28 percentage points without this resulting in an indication of impairment, cete-ris paribus.

  • Changes of customer demand and of the market volume may have a significant effect on the future cash flows of the cash-generating unit. A revenue decrease of a further 15 percen-tage points compared with the annual revenue degeneration rate of approx. 20% which is in any case assumed by the Com-pany's management for the trend years and for the terminal value reduces the fair value of the cash-generating unit Di-rectory Assistance Business by EUR 0.21 million. As a result, in this case too the fair value of the cash-generating unit Di-rectory Assistance Business would exceed its carrying amount by EUR 0.40 million. Accordingly, no indication of impairment would result.

  • Changes in the margin achievable on a long-term basis might li-kewise have a negative impact on the recoverable amount for the cash-generating unit Directory Assistance Business. A ten per-centage point reduction to 20% in the long-term EBITDA margin by comparison with the original value calculation reduces the fair value of the cash-generating unit Directory Assistance Business by EUR 0.10 million. In this case too, the fair value of the cash-generating-unit Directory Assistance Business would exceed its carrying amount by EUR 0.50 million, ceteris paribus, and no indication of impairment would be applicable.

Also on the basis of additional sensitivity and scenario analyses, the management is of the opinion that a realistic variation of planning and measurement assumptions is not currently liable to lead to scenarios that would result in an indication of impairment with a certain degree of probability.

7. Intangible assets

7.1 Cost

in EUR thousand

As of 1.1.2020

Additions

Addition in the context of business acquisitions

Disposals

Reclassifica-tions

As of 31.12.2020

Software

14,726

24

115

-21

0

14,844

Licenses

13,337

21

16

0

0

13,374

Internally generated database

2,073

0

0

0

0

2,073

Acquired customer bases

30,301

0

0

0

0

30,301

Acquired klickTel brand

997

0

0

0

0

997

Acquired customer contracts, FAIRRANK

0

0

359

0

0

359

Internally generated intangible assets

9,273

306

0

0

0

9,579

Customer contracts

19,977

3,845

0

0

0

23,822

Other intangible assets

8

0

0

0

0

8

Intangible assets being developed/ with prepayments

46

77

0

0

0

123

Total

90,739

4,273

490

-21

0

95,481

in EUR thousand

As of 1.1.2019

Additions

Addition in the context of business acquisitions

Disposals

Reclassifica-tions

As of 31.12.2019

Software

15,380

9

0

-665

3

14,726

Licenses

13,361

8

0

-39

7

13,337

Internally generated database

2,073

0

0

0

0

2,073

Acquired customer bases

30,301

0

0

0

0

30,301

Acquired klickTel brand

997

0

0

0

0

997

Acquired customer contracts, FAIRRANK

0

0

0

0

0

0

Internally generated intangible assets

8,403

838

0

0

32

9,273

Customer contracts

16,617

3,360

0

0

0

19,977

Other intangible assets

8

0

0

0

0

8

Intangible assets being developed/ with prepayments

74

7

0

0

-35

46

Total

87,214

4,222

0

-704

7

90,739

7.2 Accumulated amortisation and impairment

in EUR thousand

As of 1.1.2020

Amortisation

Disposals

As of 31.12.2020

Software

14,566

123

-21

14,668

Licenses

13,199

61

0

13,260

Internally generated database

2,073

0

0

2,073

Acquired customer bases

30,301

0

0

30,301

Acquired klickTel brand

997

0

0

997

Acquired customer contracts, FAIRRANK

0

50

0

50

Internally generated intangible assets

8,168

849

0

9,017

Customer contracts

15,384

3,064

0

18,448

Other intangible assets

0

0

0

0

Intangible assets being developed/with prepayments

0

0

0

0

Total

84,688

4,147

-21

88,814

in EUR thousand

As of 1.1.2019

Amortisation

Disposals

As of 31.12.2019

Software

14,958

273

-665

14,566

Licenses

13,155

83

-39

13,199

Internally generated database

2,073

0

0

2,073

Acquired customer bases

30,301

0

0

30,301

Acquired klickTel brand

997

0

0

997

Acquired customer contracts, FAIRRANK

0

0

0

0

Internally generated intangible assets

7,119

1,049

0

8,168

Customer contracts

13,329

2,055

0

15,384

Other intangible assets

0

0

0

0

Intangible assets being developed/with prepayments

0

0

0

0

Total

81,932

3,460

-704

84,688

7.3 Carrying amounts

in EUR thousand

Carrying amounts as of

31 December 2020

Carrying amounts as of

31 December 2019

Software

176

161

Licenses

114

137

Internally generated database

0

0

Acquired customer bases

0

0

Acquired klickTel brand

0

0

Acquired customer contracts, FAIRRANK

309

0

Internally generated intangible assets

562

1,105

Customer contracts

5,374

4,594

Other intangible assets

8

8

Intangible assets being developed/with prepayments

123

46

Total

6,666

6,051

The useful life of intangible assets was determined in as follows in the 2020 financial year:

Useful life of intangible assets

Software

3 to 7 years

Licenses

3 to 15 years

Internally generated database

3 years

Acquired customer bases

7 and 10 years resp.

Acquired klickTel brand

10 years

Acquired customer contracts, FAIRRANK

2 to 4 years

Internally generated intangible assets

2 to 5 years

Customer contracts

3 years

Other intangible assets

3 years

Amortisation was calculated based on the straight-line method over the established useful lives.

Amortisation was included in the costs of sales, selling and distri-bution costs and general administrative expenses proportionately based on use.

Internally generated intangible assets were capitalised develop-ment costs for creating or enhancing software. In the year underreview, development costs of EUR 1.9 million (2019: EUR 2.0 mil-lion) not qualifying for capitalisation were expensed within cost of revenues.

Sales commission was capitalised as the cost to obtain a contract (shown as "customer contracts" in the statement of changes in fixed assets) and amortised over the average customer retention period of 3 years on a straight-line basis.

8.Property and equipment 8.1 Cost

in EUR thousand

As of 1.1.2020

Additions

Addition in the context of business acquisitions

Disposals

Reclassifi-cations

Currency translation

As of 31.12.2020

Technical equipment

8,240

112

0

-155

0

0

8,197

Other equipment, fixtures, furniture and office equip-ment, and low-value assets

3,123

81

217

-876

0

0

2,545

Equipment being purcha-sed/with prepayments

0

0

0

0

0

0

0

Total

11,363

193

217

-1,031

0

0

10,742

in EUR thousand

As of 1.1.2019

Additions

Addition in the context of business acquisitions

Disposals

Reclassifi-cations

Currency translation

As of 31.12.2019

Technical equipment

11,671

133

0

-3,751

187

0

8,240

Other equipment, fixtures, furniture and office equip-ment, and low-value assets

3,753

53

0

-682

0

-1

3,123

Equipment being purcha-sed/with prepayments

195

0

0

0

-195

0

0

Total

15,619

186

0

-4,433

-8

-1

11,363

8.2 Accumulated depreciation and impairments

in EUR thousand

As of 1.1.2020

Depreciation

Disposals

As of 31.12.2020

Technical equipment

7,685

183

-151

7,717

Other equipment, fixtures, furniture and office equipment, and low-value assets

2,758

108

-875

1,991

Total

10,443

291

-1,026

9,708

in EUR thousand

As of 1.1.2019

Depreciation

Disposals

As of 31.12.2019

Technical equipment

11,268

168

-3,751

7,685

Other equipment, fixtures, furniture and office equipment, and low-value assets

3,308

115

-665

2,758

Total

14,576

283

-4,416

10,443

8.3 Carrying amounts

in EUR thousand

Carrying amounts as of 31.12.2020

Carrying amounts as of 31.12.2019

Technical equipment

480

555

Other equipment, fixtures, furniture and office equipment, and low-value assets

554

366

Total

1,034

921

The useful life of property and equipment was determined in as follows in the 2020 financial year: There were no adjustments of the useful life compared with the previous year.

Useful life of property and equipment

Technical equipment

3 to 19 years

Other equipment, fixtures, furniture and office equipment

3 to 15 years

Depreciation was calculated based on the straight-line method over the established useful lives of the items and included in the cost of revenues, selling and distribution costs and general ad-ministrative expenses proportionately based on use.

The disposals in the 2020 financial year mainly resulted from the scrapping of technical equipment, other equipment, and opera-ting and office equipment as well as leasehold improvements.

In accordance with IAS 38.4, system software was assigned to the item property and equipment, because it constitutes an in-tegral part of hardware.

9. Capitalised right-of-use assets (IFRS 16)

9.1 Acquisition costs

in EUR thousand

As of 1.1.2020

Additions

Disposals

As of 31.12.2020

Buildings

6,350

801

-18

7,133

Motor vehicles

358

187

-30

515

Total

6,708

988

-48

7,648

The share of capitalised right-of-use assets attributable to FAIR-RANK GmbH, the company acquired in September 2020, was EUR 616 thousand. This resulted in additions of EUR 565 thousand for buildings and EUR 51 thousand for motor vehicles.

in EUR thousand

As of 1.1.2019

(after first-time adop-tion of IFRS 16)

Additions

Disposals

As of 31.12.2019

Buildings

6,087

263

0

6,350

Motor vehicles

258

100

0

358

Total

6,345

363

0

6,708

9.2 Accumulated depreciation and impairment

in EUR thousand

As of 1.1.2020

Depreciation

Disposals

As of 31.12.2020

Buildings

994

1,030

0

2,024

Motor vehicles

130

164

-30

264

Total

1,124

1,194

-30

2,288

in EUR thousand

As of 1.1.2019

Depreciation

Disposals

As of 31.12.2019

Buildings

0

994

0

994

Motor vehicles

0

130

0

130

Total

0

1,124

0

1,124

The depreciation of capitalised right-of-use assets is included in cost of revenues in the amount of EUR 282 thousand (previous year: EUR 270 thousand), in selling and distribution costs in the amount of EUR 490 thousand (previous year: EUR 441 thousand) and in general administrative expenses in the amount of EUR 423 thousand (previous year: EUR 413 thousand).

9.3 Carrying amounts

in EUR thousand

Carrying amounts as of 31.12.2020

Carrying amounts as of 31.12.2019

Buildings

5,109

5,356

Motor vehicles

251

227

Total

5,360

5,583

The useful life of capitalised right-of-use assets is as follows in the 2020 financial year:

Useful life of capitalised right-of-use assets

Buildings

1 to 8 years

Motor vehicles

3 years

Depreciation is calculated based on the straight-line method over the established useful lives of the items and included in the cost of revenues, selling and distribution costs and general ad-ministrative expenses proportionately based on use.

10. Other non-current assets

Other non-current assets in the amount of EUR 483 thousand as of 31 December 2020 (2019: EUR 218 thousand) mainly include capi-talised costs to fulfil a contract (capitalised customer websites) in the amount of EUR 479 thousand (2019: EUR 213 thousand). The customer websites are reported under other non-current assets and are depreciated on a straight-line basis over 3 years.

11. Deferred tax assets and liabilities

The tax rate applicable for the calculation of deferred taxes com-prises, for Germany, corporate income tax, the solidarity surcharge applicable on corporate income tax as well as trade tax. In view of the applicable tax trade multipliers, the overall tax rate is 31.6% (previous year: 31.6%). There is a slight discrepancy in the tax rate for 11880 Internet Services AG, which is due to different rates of assessment.

The deferred taxes consisted of the following:

in EUR thousand

31.12.2020

31.12.2019

Gross value of deferred tax assets:

Tax loss carryforwards

10,210

9,084

Intangible assets

412

612

Other assets

31

24

Provisions

356

327

Additional paid in capital

67

22

Lease liabilities

1,959

2,007

Less impairment loss

-7,963

-7,817

Deferred tax assets before netting of which in other comprehensive income EUR 214 thousand (2019: EUR 152 thousand)

5,072

4,259

Netting

-5,072

-4,259

Deferred tax assets after netting

0

0

Less deferred tax liabilities:

Intangible assets

-2,013

-1,847

Right-of-use assets

-1,696

-1,766

Other assets

-2,012

-1,892

Deferred tax liabilities before netting of which in other comprehensive income EUR 31 thousand (2019: EUR 24 thousand)

-5,721

-5,504

Netting

5,072

4,259

Deferred tax liabilities after netting

-648

-1,245

As of 31 December 2020, the Group companies' accumulated cor-porate income tax loss carryforwards amounted to EUR 32,318 thousand (2019: EUR 28,353 thousand). As of 31 December 2020, the Group companies' accumulated trade tax loss carryforwards amounted to EUR 31,463 thousand (2019: EUR 27,689 thousand).

Corporate income tax loss carryforwards that were not applied as a result of insufficient usability amounted to EUR 25,790 thousand (2019: EUR 24,977 thousand) as of the reporting date. Trade tax loss carryforwards that were not applied as a result of insufficient usability amounted to EUR 24,022 thousand (2019: EUR 23,246 thousand) as of 31 December 2020.

Tax loss carryforwards determined in Germany can be carried for-ward without limit and used to offset future profits under current German tax laws, whereby various tax provisions (e.g. minimum taxation) apply.

100

Deferred taxes were classified as current and non-current as follows:

Financial year ended on 31 December, in EUR thousand

2020

2019

Deferred tax assets

Current

2,841

1,645

Non-current

2,233

2,614

Deferred tax liabilities

Current

-1,147

-992

Non-current

-4,574

-4,512

12. Trade accounts payable

The trade accounts payable shown as of the reporting date amounted to EUR 713 thousand (2019: EUR 1,262 thousand).

The trade accounts payable included current liabilities from transactions concerning deliveries and services. The average pe-riod of payment was between 14 and 60 days. The management presumed as of the reporting date that the carrying amounts of trade accounts payable more or less corresponded to their fair value.

Trade accounts payable were recognised at their redemption amount.

13. Accrued current liabilities

The Group showed the following accrued current liabilities under this item on the reporting dates below:

Financial year ended on 31 December, in EUR thousand

2020

2019

Obligations to employees

2,597

2,101

Invoices outstanding

2,861

2,723

Total

5,458

4,824

Obligations to employees included in particular wage and salary payments incl. bonuses that are not due until the 2021 financial year.

Disclaimer

11 88 0 Solutions AG published this content on 30 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 March 2021 08:28:06 UTC.


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Sales 2021 57,6 M 69,9 M 69,9 M
Net income 2021 -1,87 M -2,27 M -2,27 M
Net Debt 2021 - - -
P/E ratio 2021 -22,6x
Yield 2021 -
Capitalization 39,4 M 47,7 M 47,8 M
Capi. / Sales 2021 0,68x
Capi. / Sales 2022 0,62x
Nbr of Employees 586
Free-Float 21,0%
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Mean consensus BUY
Number of Analysts 1
Average target price 1,90 €
Last Close Price 1,58 €
Spread / Highest target 20,3%
Spread / Average Target 20,3%
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Managers and Directors
NameTitle
Christian Maar Chairman-Management Board
Michael R. Wiesbrock Chairman-Supervisory Board
Leonard Kiedrowski Member-Supervisory Board
Helmar Hipp Deputy Chairman-Supervisory Board
Ralf Ruhrmann Member-Supervisory Board
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