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[Dutcho]

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Das Werk AG (Initiating Coverage)
The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its
accuracy cannot be guaranteed.

Share Price EUR5.05 20/09/01
Key Figures per share
(EUR) 1999 2 0 0 0 2001e 2002e 2003e
E P S 0.18 0.65 0.66 0.85 1.02
eps-growth n.a. 261.11% 1.54% 28.79% 20.00%

Das Werk AG Rel.Perf. to NM Source: Datastream
Skilful acquisitions towards an international integrated media company
Founded in December 1991, Das Werk AG now is based on four main
business units, which are “Digital Image and Audio Post Production”, “Film
Production and Sales of Rights”, “Animation” and “Technology & Software”.
The latter two units are quite young and therefore do not significantly
contribute to the company’s revenues.
Based on four main
business units
Digital Image & Audio
Post Production
Das Werk AG
Animation
Technology &
Software
Film Production &
Sales of Rights
Source: Das Werk AG; Merck Finck & CO
Since 1998 the Production & licensing unit gained importance in terms of
revenue contributions and therefore became the second important "pillar" of
Das Werk AG. Coming from the traditional post production business of the
movie and advertising scene, Das Werk AG generated 80% of its revenues in
this area.
Coming from the
traditional post
production business
and expanding to
movie production

Post Production F i l m P r o d u c t i o n Animation
Source: Das Werk AG; Merck Finck & CO
Das Werk AG (Initiating Coverage)
The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its
accuracy cannot be guaranteed.
The change in the revenue allocation resulted from the acquisition of Road
Movies, which is the film production company of Wim Wenders, a successful
German stage director and producer (Paris Texas, Buena Vista Social Club,
The Million Dollar Hotel). Moreover the acquisition of 73% of Promark plc., the
parent company of the US based film- and TV production company Promark
Entertainment resulted in a higher revenue share of the production and
licensing business. Through the latter acquisition Das Werk has access to an
international distribution network and to the US film market. Traumwerk and
FFP Media are two participations of Das Werk which are active in the area of
TV productions.
International movie
business
Das Werk covers all kind of digital postproduction for advertisement spots, TVand
feature films and music videos and the creation of virtual worlds. Single
work areas are the scanning and digitalisation of movies, offline and online
cutting, special effects, computer animation, mastering and archival storage.
Postproduction:
digital sound and
vision processing
Through the acquisition of Centropolis Effects (CFX), Das Werk entered the US
market for the digital post production. Both companies therefore can handle
larger film projects on the basis of 200 workstations. While CFX focussed on
movies, the company now can also profit from Das Werk’s competence in the
advert sector. Moreover the employees of the companies profit from the
international know how and training transfer. Purchase of hard- and software is
centralised.
Entering the US
market by the
acquisition of
Centropolis Effects
(CFX)
Part of the digital post production are special effects for movies. The table
below shows an excerpt of CFX projects and their budgets for special effects.
CFX produces special
effects for Hollywood
CFX projects
(excerpt)
Box office Budget Effects Budget
Independence Day US-$ 800m US-$ 70m US-$ 20m
Godzilla US-$ 375m US-$ 125m US-$ 50m
The Patriot US-$ 215m US-$ 115m US-$ 11m
Stargate US-$ 200m US-$ 60m US-$ 9m
Planned projects
Arac Attack Matrix 2 and 3
Der Pianist
Furthermore the acquisition of CFX is an expansion of Das Werk to the special
effects and international movie area, which reduces the dependency from the
national advert business. In 2000 53% of revenues came from the post
production area, whereof 82% originated from advert and video processing. In
2001 postproduction will make 64% of total revenues due to the CFX
acquisition while the production & licensing unit will come in at 34%.
Revenues from the animation unit will come in at 2% of total revenues.
Reducing the
dependency from the
local advert business
Film Production
Road Movies
48%
Promark
27%
FFP
25%
Postproduction
Processing of
commercials and
video
82%
of movies, TV
products and series
18%
Das Werk AG (Initiating Coverage)
The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its
accuracy cannot be guaranteed.
Currently the German advert market decreased by 1.6% in H1-2001 after years
of stable top line growth of 3% - 5%. Concerning the advert based revenues of
German TV broadcasters AC Nielsen reports a decrease from €7.61m in H1-
2000 to €7.47m in H1-2001. Forecasts from different market research
companies differ, but the majority expects generally weaker advert markets in
Germany for the current and the next year with downturns of about 3% to 5%.
Estimating the market
potential for post
production
We are basically convinced that the advert sector and the sub-sector TV advert
spots will not significantly grow until 2003, based on the generally reduced
marketing expenses from larger companies from the telco sector or the
financial sector in Germany. Furthermore forms of advertising permanently
change and currently the broadcasters and the advert agencies develop new
forms of TV advertising. The latter does not impact on Das Werk negatively as
the digital processing of all kind of media applications can be provided by Das
Werk. Moreover Das Werk will profit in the future from its standing as an
internationally based company.
We are convinced
that the German
advert market will not
grow significantly
until 2003
Investments in advertising in € bn
Germany
1997 1998 1999 2000 2001e
Honorariums,
production of
advertising media
28.94 30.17 31.44 33.21 31.9 -
33.5
Change +3.1% +4.2% +4.2% +5.6% -4% - +1%
Whereof revenue of
advertising media
19.79 20.81 21.83 23.29 22.6 -
23.9
Change +3.7% +5.1% +4.9% +6.8% -3% - +2%
In the post production area Das Werk owns subsidiaries in Germany, USA,
Switzerland, Spain, Portugal, U.K., Belgium and France, which makes Das
Werk to the European market leader in post production. On this international
basis Das Werk is an interesting partner for international companies.
Advertisement spots which were originally produced for one country can be
transformed to spots for another country by digital postproduction. A process
which saves money for international companies as it is 30% – 60% cheaper to
revise a spot than to shoot a new one.
International basis in
the postproduction
area makes Das Werk
to an interesting
company for
international
companies
We basically appreciate the position of Das Werk in the international digital
post production business (and the advert business). But in the short term the
company already suffered from the weaker advert markets which could be
seen in the company’s H1 figures and which was also stated by the
management. As a majority of revenues (65%) in the advert business are
generated in Q4, based on the Christmas business, the downturn in H1 is not
a reason for panic. In contrast to that we do not like to rely on a favourable
business in Q4, when the advert market in general does not perform. Therefore
the general advert market development has impact on our rating.
Slowdown in the
advert business
already had impact
on Das Werk and has
influence on our
rating
Future potential for Das Werk lies in the digital remastering of film archives. TV
movies from broadcaster archives are a basis for increasing revenues. The
processing of special effects for movies is an expanding unit in the future as
CFX now can offer additional capacities in Europe on the basis of the Das
Werk network. The transformation of cinemas to digital technology will reveal
additional potential as it is easier and cheaper to produce advert spots for local
players, which are currently badly represented in the cinema advert spots.
Secondly the production time of a spot is significantly lower. Short term
marketing activities could quickly be produced and brought to the cinemas.
Future potential
Das Werk AG (Initiating Coverage)
The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its
accuracy cannot be guaranteed.
The production and licensing unit is a diversification of the company’s post
production business to the movie and TV business. After the acquisition of
Wim Wender’s production company Road Movie, Das Werk further acquired
FFP Media, a production company which produces contract productions for
ZDF, e.g. films based on novels from Rosamunde Pilcher or Barbara Wood in
which FFP holds the filming rights. FFP does not hold the rights in the
productions but receives fixed margins for the production which cover all costs
of the production and result in a profit for the company. As those movies are
marketed world wide by ZDF, FFP receives a share from the export revenue
and from the exploitation of auxiliary rights like the soundtrack from the movie.
FFP Media produces
TV contract
productions and holds
filming rights
In October 2000 Das Werk acquired a 73% stake in Promark Entertainment
Group, London / L.A.. Promark was founded in 1988 and produces six to eight
movies yoy with a volume of $3m - $5m each, family formats and one Soap
Opera. Customers of Promark are broadcasters world wide, like HBO in the
US, Tele Cinco in Spain with which Promark has signed an output deal. Two
co-productions were already released with the German CLT-UFA. Promark
develops the screen plays by itself and acquires well-known actors, like Roger
Moore, Jürgen Prochnow or Kiefer Sutherland, for its productions. This results
in a high likeliness for a good viewer ratio of the broadcasters. “Exposé 2001”,
a reportage format of Promark was already sold to China, U.K. Ireland, the
Netherlands, South Africa and Thailand.
Promark produces
international TV
content
Magnitude of production budgets In € mln
International movie production 1 – 10
International prime time movies 3 – 5
TV contract productions 1 – 2
As the production of a movie is followed by the post production process, the
expansion of Das Werk results in a safeguarding strategy for a filled post
production pipeline. Moreover the European post production network of Das
Werk offers capacities for additional orders in the special effects area, where
the US market has a size of $1.6bn.
Combining production
and technology
We are generally convinced from the quality of the management and the
standing of the company in the European post production market. The skilful
acquisition strategy of Das Werk has resulted in a group consisting of more
than 50 companies, for which we still see an integration risk as it is still too
early to finally judge the integration. Furthermore we have to take the weaker
advert markets into account which already had impact on the company’s H1
figures. The impression from our company visit was absolutely positive. We
saw a well organised post production company and had the possibility to see
some production examples of commercial spots, produced for the German TV.
Valuation & forecast
The company’s H1 report refers to the weakness in the German advert market
and further states that the company still has some work to do in the area of
cost organisation. As it is not planned to risk losing the creative potential of
the staff, this can only result in an optimisation of work flows or industrial
engineering. Additionally the company needs to optimise its controlling in
order to monitor the impressing growth of the last two years. As this is a
running process, we still want to see further progresses.
Risks
Das Werk AG (Initiating Coverage)
The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its
accuracy cannot be guaranteed.
At the end of H1 Das Werk owned €8.25m of cash and 0.72m of marketable
securities. Accounts payable of €12.6m are covered by accounts receivable of
€44.2m. Moreover current liabilities are increased by short term bank debt of
€13.3m at the end of H1, up from €7.1m at the end of 2000. Other short term
liabilities increased during the same time from €17.7m to €29.2m. The
expansion of short term debt is mainly due to the pre-financing of movies,
which will be finished and delivered in H2-2001. In sum, current liabilities of
€66.9m were covered at the end of H1-2001 by €79.8m of current assets.
Balance sheet
Long term debt comes in at €83.03m at the end of H1, up from €39.04m at the
end of 2000, based on a long term film financing line for Promark and the
purchase of CFX. The debt / equity ratio is at 1.47 at the end of H1, which in
our opinion is not really favourable but is typical for the way the movie
business operates. (Adjusted by that part of liabilities which is financed by film
funds, the ratio would be at 1.36) The ratio is currently larger than one as the
pre-financing of movies drives short term debt up until cash reflow from the
delivery of the movies, which will take 18 – 24 months, will decrease short
term debt again. At the end of the year, we expect the ratio to be at a slightly
more favourable level of around 1.4.
Debt / equity ratio at
1.47 due to the prefinancing
of movies
Fixed assets come in at €169.1m, up from €110.3m at the end of 2000. The
largest increase of €29.2m, from €29.7m at the end of 2000 to €58.9m at
30.06.01 can be seen in intangible assets, which is also based on the
production of new movies. Tangibles increased by €13.3m, from €22.5m to
€35.8m at the end of H1. This reflects the consolidation of CFX as well as the
opening of new subsidiaries in Zürich and Ludwigsburg. Due to the acquisition
of CFX, goodwill of €52.1m at the end of 2000 increased by €13.4m to €65.5m.
However, the balance sheet structure of Das Werk is healthy. The view on the
balance sheet of a movie company at a single point of time – here at the end
of H1 – can mislead. Short term financial debt will be reduced on the basis of
the operating movie business within the next two years.
The view on the
balance sheet of a
movie company at a
single point of time
can mislead
We forecast revenues of €152m and an EBIT of €17.5m for the current FY. Our
estimate is cautious based on the weaker German advert market. Moreover
EBIT margin should decrease from 15% in 2000 to a level of 11.5% based on
the higher influence of TV and movie postproduction. Net income will come in
at €7.4m which results in an EPS of 0.66, up one cent compared to the
previous year. As we are convinced that the advert markets can return to a
moderate growth of 1% - 2% in 2002, remaining at stable growth of 2% - 3% in
the following years, we further assume a revenue increase of 24% in 2002,
based on higher income from the movie business and the planned post
production projects in the movie area. Our EPS estimate for 2002 is at €0.85
and in 2003 we expect an EPS of €1.02.
Forecasts
Despite the weaker H1 result of Das Werk AG, we are convinced that the
company will remain profitable showing a stable result which is only slightly
above the previous year. Our estimates also include start up costs for two new
subsidiaries. The calculation of our DCF and earnings discount model works
with a discount rate of 11% and results in a fair value of €8.1 p.s.. Basis for our
calculation are our own earnings and cash flow estimates until 2003. Following
2003 we assume a yearly bottom line growth of 10% until 2010. As we
anticipate possible earnings disappointments our estimates are lower than
consensus. We therefore initiate coverage with a hold rating.
We initiate coverage
with a hold rating
Das Werk AG (Initiating Coverage)
The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its
accuracy cannot be guaranteed.
SWOT-Analysis
Strength
· European market leader in digital post production
· Access to the US post production market
· World wide post production network
· Positive track record of 10 years
· Attractive customer portfolio: ZDF, Nestlé, Siemens, VW
· Long-term experience and contacts in the international movie business
· Combination of production & Sales of Rights with technology / post
production business
· International know how and staff transfer in house
Weakness
· Controlling leaves room for improvement, monthly reporting is targeted
· Still high exposure to the advertising market
· Expansion has led to currency risks in the group, which are currently
managed by a treasury team
Opportunities
· Increasing market for digital movie processing, especially in the advert
market
· Production and sale of own software can result in additional income
· Setup of the animation unit will lead to additional income in the future
· International structure increases attractiveness of Das Werk for global
companies
· Expansion towards the production of international special effects
· Digitalisation of cinemas should increase the demand for local advert
spots in the future
· Additional service in the area of digital archive for TV broadcasters
Threats
· Integration risk: The holding currently includes more than 50 companies
· Fragmented post production market: Mergers can form new competitors
· Fast change of technology is typical for the sector – price decline in
technology can simplify entrance of competitors
· The resignation of key persons could result in revenue decreases
· Bottle-neck in the supply of creative employees would limit the growth in
digital processing
· Change of the market situation in the production and licensing business.

Alexander Kachler

[Robin7]

Von wem ist die Studie? Gibts das auch in Deutsch?

[Kaufmonster]

Wenn Nogger T doch immer diese prima Tipps an alle weitergibt, dann sollt er sich mal die WKN 541200
DAS WERK anschauen !!
Das wäre nämlich mein Favourit in Sachen Rebound und technischer Erholung !!!!!!

[Friseuse]

Wenn die zentralen Aussagen bitte fett unterlegt werden könnten oder die Botschaft durch Überschriften kenntlich wäre, ja dann würde ich den Text auch eventuellst lesen wollen.

Das tu ich mir nicht an.

[Tandil]

Hier steht noch eine Gewinnwarnung aus. Vorsicht.

[Dutcho]

wer die Infos genauer / in deutsch / fett usw haben
will, sollte auf die Page gehen

www.dasWerk.de


Gewinnwarnung war schon / Garantie gibt es keine das
nicht noch eine kommt, sieht aber momentan nicht danach
aus / werden die Gewinne bestätigt geht was ab !!!!

und wenn sich die konj. Lage wieder verbessert wirds
auch wieder 2-stellig

[Dutcho]

dat passst doch