Net Gains Won’t Settle Eventim Debate

The CTS Eventim half-year results are the best possible way the company could find to answer its detractors, although they still don’t manage to settle the debate on whether the German ticketing giant is substantially overvalued on the market.

A 14.4 percent revenue increase from euro 186.6 million (US$254.9 million) to euro 213.6 million (US$291.8), and particularly a 40 percent hike in Internet ticketing revenues, although the figures exclude the one-off effect of last year’s World Cup soccer tournament, suggest Klaus-Peter Schulenberg’s outfit is well on course.

But CTS critics say it’s about to hit some sort of glass ceiling where the Internet and acquisition expansion stalls and the profits start to drop, which is a speculative theory and therefore all the more difficult to disprove.

A 51-page report put together by leading German financial analyst SES and published July 10 under a heading of "The Completely Wrong Price," advised that CTS shares were a "sell" because they were trading at about double what it believed them to be worth.

It appears to have prompted investors to dump their stock and take their profit, as the price dropped 25 percent (euro 36.28 to 26.55) over the course of a month.

CTS legal and communications chief Rainer Appel told Pollstar the report is "misleading in various respects and arrives at conclusions that are, to say the very least, objectionable."

He said it’s not clear what the motivation behind the report could be.

"SES has never covered our company or shares before, and it is most unusual for a research firm to start coverage of a new company with a report that just bashes the company down in an unseen way and targets their shares at half the price they are actually traded for at the time the report is published," he explained.

"We can therefore not exclude the possibility that the SES report was driven by personal objections or disappointments or probably even by somebody’s personal economic interests."

Even DEAG chief Peter Schwenkow, who heads CTS Eventim’s main promoting rival in Germany, might have some sympathy.

In 2004, a similar piece in Der Spiegel forced Schwenkow to deny his company had massive cashflow problems. But on that occasion, it didn’t have an adverse effect on the DEAG share price.

Appel was reluctant to discuss whether a document like the SES report could only have been compiled with the help of some insider information, nor would he confirm stories saying CTS issued a company-wide memo suggesting it was just part of a conspiracy to undermine its stock value.

"We must point out that we are not willing to engage in public speculations about a conspiracy against CTS Eventim on the side of SES or anybody involved in the recent SES report," he said.

The report aside, there are other factors that it didn’t focus on that give some indication that – as far as new ticketing businesses are concerned – the other side of the analysts’ proverbial glass ceiling may involve some risky expansion.

Appel concedes that some of the new ticketing acquisitions haven’t begun well, but played down suggestion that the new CTS operations in Russia (Zritel o.o.o) and Italy (Ticketone) and the new secondary market Web site have had a very rocky start.

"Our project in Russia is doing fine, the platforms have been switched to Eventim software, and the synergies are now coming in as expected," Appel said. "Ticketone in Italy was only consolidated [within Eventim] one month before the end of the first-half, when one big festival [Live Nation’s Heineken Jammin] was canceled, which had a negative effect on that first month.

"This one-time effect doesn’t affect the profitability of Ticketone as such," he said.

It’s too early to find any reliable figures that would compare Eventim’s German "fansale" business with the U.S.-based Viagogo.

Appel said the live entertainment segment, which is basically the Medusa Group and its co-ownership of Marek Lieberberg, Semmel Concerts, Peter Rieger, FKP Scorpio, Dirk Becker Entertainment, ARGO Concerts, PGM, LS Concerts and Act Entertainment, had a successful first-half with festivals and tours, shifting 4 million tickets. He pointed out that the figure ranks third in Pollstar’s H1-2007 Top 100 worldwide promoter ranking, which the company mentioned in its half-year report.

He said Eventim is also very pleased with the results from its German festivals, which are Lieberberg’s twinned Rock Am Ring and Rock Im Park and FKP’s twinned Hurricane and Southside.

The Medusa Group and its associate interests in Austria, Switzerland and The Balkans produced euro 18.4 million pre-tax and interest profit (up 40.3 percent) from revenues of euro 180.3 million, 36.7 percent up on the 2006 figure.