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Leifheit AG

Quarterly Report Nov 14, 2013

261_10-q_2013-11-14_608271b5-523d-4c0b-adc7-36b1f5563eee.pdf

Quarterly Report

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Quarterly fi nancial report for the period ending 30 September 2013

At a glance

  • • Group turnover up 1.5% to € 162.4 million
  • • EBIT before currency effects rose from € 7.0 million to € 7.8 million
  • • Free cash flow of € 21.0 million
  • • Turnover and earnings forecast confirmed for 2013

Group data as at 30 September

2012 2012
adjusted
2013 2013
adjusted
Change
Turnover
Group 1) € million 164.0 160.0 163.9 162.4 1.5% 1)
Brand Business 1) € million 132.0 128.0 131.9 130.4 1.9% 1)
Volume Business € million 32.0 32.0
Foreign share 1) % 56.6 56.8 56.4 56.7 -0.1 pps 1)
Profitability
Gross margin % 44.0 44.5 0.5 pps
EBIT 2) € million 7.7 7.0 6.6 7.8 11.3% 2)
EBIT margin 2) % 4.7 4.4 4.0 4.8 0.4 pps 2)
Earnings before taxes (EBT) € million 6.4 5.2 -18.5%
Net result for the period € million 5.2 4.1 -21.7%
Cash flow from operating activities € million 1.0 23.1 > 100%
Free cash flow 3) -5.7 21.0 > 100%
Employees
Group persons 1,018 1,015 -0.3%
Investments in tangible assets € million 6.6 2.0 -70.0%

1) Turnover adjusted for discontinued operations with Dr Oetker Bakeware

2) EBIT adjusted for unrealised foreign currency effects from the valuation of foreign exchange hedges

3) Cash flow from operating activities + cash flow from investment activities, adjusted for incoming and outgoing payments in financial assets as well as from sales of divisions

Foreword

To our shareholders

First the good news: after a difficult first quarter Leifheit is back on track. At the end of the nine-month period, we were able to book turnover growth of 1.5% to € 162.4 million (previous year: € 160.0 million), adjusted for discontinued operations with Dr Oetker Bakeware. At the segment level in the Brand Business we achieved an increase of 1.9% and recorded a turnover of € 130.4 million (previous year: € 128.0 million). As expected, our Volume Business remained stable overall and contributed € 32.0 million to Group turnover like the previous year.

In the first nine months of the year we achieved Group earnings (EBIT) of € 6.6 million (previous year: € 7.7 million). On the one hand, the extraordinary effects of provisions for severance payments totalling € 1.1 million negatively influenced earnings. Secondly, the valuation as at the balance sheet date of currency hedges resulted in a burden on EBIT of € 1.2 million. In the same period last year this effect had a positive impact on earnings of € 0.7 million. Adjusted for effects from the valuation of currency hedges, our Group EBIT rose by 11.3% to € 7.8 million.

Our general economic conditions did not improve significantly during the year. While countries such as Spain, Portugal or Greece are showing initial signs of recovery, new challenges are arising in established markets such as the Netherlands or Belgium.

For us this means that: we need to implement our "Leifheit GO!" strategy more consistently in future. The following measures will also be the focus of our activities over the next few months:

  • • We are promoting organic growth. To this end, we are developing marketing strategies on a country level to handle our strategic focus markets even more efficiently. Main emphasies aside from the DACH region lays on our focus markets in Central and Eastern Europe.
  • • With our e-commerce activities, we are creating national and international growth. We are working with global trading partners and supporting them through professional product information systems as well as online and offline campaigns.

  • • We are strengthening our innovation through measures to improve innovation management and the optimisation of processes in the relevant sectors.

  • • With our POS-excellence initiative we are improving the Leifheit brand in retail – both in Germany as well as in the developed markets of Central Europe. The interplay of measures at the point of sale and an accompanying 360-degree brand communication through television commercials, online marketing and PR results in a holistic brand and communication strategy.
  • • Aside from the described measures to stimulate organic growth, we are not ruling out acquisitions either. To this end, we are well positioned with cash totalling € 51.9 million and a solid financing.

Dear shareholders, 2013 is a year of transition for us in many ways. Leifheit is in the process of re-establishing itself in terms of structure and personnel. We can already look back on initial success, but at the same time we have a number of challenges ahead of us. Our goal is to make Leifheit AG – your company – even more innovative and flexible and optimally position ourselves among the competition.

However, in terms of outlook and achieving our goals we stand for continuity: we are confirming our forecast for 2013, even if at the lower level of the range stated. In the medium term, we are planning a sustainable and profitable sales growth of 3 to 5% on a Group level, combined with a disproportionate increase in earnings. We have set out to increase the EBIT margin from 4.8% today to 8% by 2016. This goal is ambitious, but quite achievable with the focused execution of our strategy.

Kind regards

Dr Claus-O. Zacharias

The Leifheit share

Mood on the financial markets remains positive

During the third quarter the financial markets continued to be upbeat. The essential criteria for the investment decisions remained the generally attractive valuations of many stocks at a consistently low interest rate level for fixed-income investment alternatives. The expected increase in inflation in the Eurozone and the USA in response to the expansionary monetary policy further explained the high demand for shares. In this generally positive environment, the course of the SDAX in the first nine months of 2013 showed an increase of 21.8%, closing at 6,393 points on the reporting date of 30 September. In the third quarter, the SDAX rose by 10.3%.

Leifheit share up in the third quarter

After a successful start to the year, the Leifheit share reached its highest value in the reporting period in early April at € 35.30. Following this, an increasing consolidation of shares was observed. On 23 May, the major shareholders announced an end to talks on the sale of their shares. At the same time, it was announced that Chairman of the Board of Management Georg Thaller would be leaving the company with effect from 31 May 2013. Afterwards, the share price dropped over the course of June, falling to € 26.00 – the lowest share price in the reporting period. In the third quarter, the Leifheit share was significantly stronger. After a rally in early September, the share finished on 30 September at € 29.33. Over nine months, the value of our share has remained virtually unchanged. In the third quarter, the price increase was 8.8% thus approximately matching the performance of the SDAX.

Compared to the second quarter the trading volume of the Leifheit share fell in the third quarter on average by 2,200 units per trading day (Q2/2013: around 6,000 shares per day). The market capitalisation of Leifheit AG at the end of the third quarter stood at € 147 million, which is approximately 8% higher than at the end of the first half of 2013.

Changes in the shareholder structure

In the reporting period 2013 there were changes in the Leifheit shareholder structure due to acquisitions of major shareholder Home Beteiligungen GmbH amounting to a total of 0.63%. Based on attendance at the last Annual General Meeting the voting rights of Mr Joachim Loh were adjusted.

The following shareholders currently hold more than 5% of the shares in Leifheit AG:

Home Beteiligungen GmbH, Munich 50.27%
MKV Verwaltungs GmbH, Grünwald 10.03%
Joachim Loh, Haiger 8.26%
Leifheit AG, Nassau 5.01%
Free float 26.43%

Interim management report and selected explanatory notes

These unaudited condensed consolidated interim financial statements for the quarter and nine-month period ending 30 September 2013 were prepared in accordance with the International Financial Reporting Standards (IFRS) formulated by the International Accounting Standards Board (IASB), in particular in accordance with the provisions of IAS 34. The same accounting and valuation principles were applied as in the consolidated financial statements as at 31 December 2012 in addition to the International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) and interpretations of the IFRS Interpretations Committee (IFRIC and SIC) relevant to Leifheit that are mandatory from the financial year 2013.

On 1 January 2013 the revised standard IAS 19 – Employee Benefits (2011 revision) – was applied for the first time. The actuarial gains and losses for defined benefit plans are recognised in the period in which they are incurred in full in other comprehensive income, immediately adjusted into the other reserves, and not reclassified as profit or loss in subsequent periods. As a result of the adjustment recognised in equity at 1 January 2013, employee benefits obligations rose by € 13.3 million and deferred tax assets by € 3.7 million, while equity decreased by € 9.6 million.

The application of all other standards and interpretations relevant to Leifheit and mandatory from the financial year 2013 had no material impact. Other new or revised, published but not yet effective standards and interpretations were not applied prematurely.

The condensed consolidated interim financial statements do not include all information and disclosures required for consolidated financial statements at the financial year end, and are therefore to be read in conjunction with the consolidated financial statements as at 31 December 2012. The accounting and valuation principles are described there in detail.

In the consolidated interim financial statements, the income tax is recognised on the basis of the best estimate of the income tax rate expected for the entire financial year.

Cyclical and seasonal factors are described, where essential, in the section "Economic environment" and "Results of operations".

Group structure and business activities

The Leifheit Group is a European developer and manufacturer of branded products for selected areas in the household. Leifheit is with 15 locations active in over 80 countries.

Our operating business is divided into two segments:

In Brand Business, we distribute our products under two wellknown brands: Leifheit and Soehnle. The products of our Brand Business are characterised by high-quality workmanship in combination with a high degree of consumer benefit and are offered in the mid to upper price sector.

The Volume Business of the Leifheit Group includes the French subsidiaries Birambeau and Herby as well as the Project Business. Here we offer product assortments in the medium price range plus customer-specific product developments and their manufacture, as well as contract manufacturing for third parties.

Across both divisions, we focus on our core competences in the categories of cleaning, laundry care, kitchen goods and wellbeing.

Leifheit AG has been a listed stock corporation under German law since 1984. Its headquarters and management offices continue to be based at its founding location in Nassau/Lahn. The Leifheit share is listed on the Prime Standard. At 30 September 2013, the market capitalisation was € 147 million.

The main locations of Leifheit AG in Germany are Nassau (administration and production) and Zuzenhausen (logistics). In addition, there are three foreign constituent branches with no legal status. Leifheit AG has 12 direct or indirect subsidiaries.

Scope of consolidation

On 29 May 2013 the outstanding 49% of shares in the already controlled and fully consolidated Leifheit Distribution S.R.L., Bucharest, Romania, were acquired from the minority shareholder by Leifheit AG. The impact on the interim financial statements is not material. No other changes in the scope of consolidation took place during the reporting period.

Economic environment

Global economy stabilising at a low level

Since the beginning of the year the global economy has gained some momentum but the pace of economic recovery is still restrained. The International Monetary Fund (IMF) registered growth in all economies around the world of an average of 2.5% in the first half of 2013. According to the IMF this corresponds to the level of the second half of 2012. Mainly the more mature economies were behind this growth, especially the USA. The growth impetus from the United States continues. However, the economic development in emerging economies remains subdued. This is also true for China, whose economy experienced a further slowdown in the first half-year. Although signs of an end to the recession in the Eurozone are increasing, in Europe in the first nine months of 2013 the biggest challenge continues to be tackling unemployment in the crisis-ridden countries.

The performance of the US dollar in the third quarter was significantly affected by the American budget dispute. The euro rose from \$ 1.30 at 30 June to \$ 1.35 at 30 September 2013.

Germany remains Europe's star pupil

Despite the ongoing recession in the Eurozone economies, economic growth in Germany is relatively stable compared with other European countries.

According to the German Institute for Economic Research (DIW) in Berlin, the recovery continued at a slower pace. According to the institute, growth of 0.2% was achieved in the third quarter of 2013 after growth of 0.5% in the previous quarter. However, the mood in the German economy brightened considerably following the beginning of the second quarter. From April to September the Ifo Business Climate Index rose every month continuously from 104.4 to 107.7 points. During the same period, the assessment of the current business situation improved. This part of the Ifo barometer rose by 4.1 to 111.4 points.

Domestic consumption remains an important pillar of the economy

Contrary to the persistent problems in the European Economic Area, Germans are still keen to consume eager consumers. According to the Association for Consumer Research (GfK), the indicator for consumers' willingness to buy reached 45 points in September 2013, the highest level since August 2006. The reasons for this are continued low interest rates, the stable development of the labour market and real income gains since the beginning of the year. Overall, this has led to a stable domestic economy.

Results of operations

On 31 December 2012 we ended the license agreement for the use of the naming rights to the brand Dr Oetker Bakeware. The turnover of Dr Oetker Bakeware amounted to € 4.0 million in the first nine months of 2012. During the same period this year, as part of the final completion, sales totalling € 1.5 million were made. For better comparability, in the comments below turnover for this and last year has been adjusted for the business with Dr Oetker Bakeware.

Product innovations support Group turnover

In the first three quarters the Leifheit Group achieved a turnover of € 162.4 million (previous year: € 160.0 million). This represents an increase of 1.5% compared to the previous year. Among other things, this was due to catch-up effects in the second and third quarter, after the first quarter of 2013 was characterised by an unusually long period of frost leading to unfavourable weather conditions for our business.

Within Germany Leifheit achieved growth of 1.5% to € 70.2 million (previous year: € 69.2 million). The introduction of three innovations had a positive effect here in particular: the Leifheit window vacuum cleaner, the Varioline laundry drying rack and the collapsible Fresh & Slim storage boxes are enjoying great popularity among consumers.

In other European countries we generated € 83.5 million (previous year: € 81.3 million), an increase of 2.8%. This was mainly influenced by the region of Central Europe. Here we achieved an increase of 3.3% to € 71.0 million (previous year: € 68.8 million). During the reporting period a number of countries that have been strongly affected by the financial crisis showed the first signs of recovery: Spain, Portugal and Greece improved slightly, albeit at a low level. In Eastern Europe, our turnover at € 12.5 million remained at the good level of the previous year (€ 12.5 million).

In the other regions across the world, turnover declined overall and amounted to € 8.7 million (previous year: € 9.5 million).

The share of turnover by region was divided as follows in the reporting period: Germany accounted for 43.3%, 43.7% was generated in the region of Central Europe, 7.7% in Eastern Europe and 5.3% of turnover was generated in other regions across the world. At 56.7%, the foreign share was slightly below the previous year's period (56.8%).

Group turnover reached € 53.6 million in the third quarter (previous year: € 52.1 million), an increase of 2.7%.

Brand Business on track

With our well-known brands Leifheit and Soehnle we achieved in our Brand Business in the first nine months turnover of € 130.4 million (previous year: € 128.0 million). The growth of 1.9% was mainly due to our efforts in the product categories of cleaning and laundry care. The Brand Business' share of Group turnover increased slightly compared to the previous year again to 80.3% (previous year: 80.0%) This is consistent with our strategy: we are consistently focusing on expanding our business with innovative branded products for the Leifheit and Soehnle brands.

Our domestic market of Germany rose again with a turnover increase of 3.1% to € 66.4 million (previous year: € 64.4 million). We thus benefited from sustained domestic demand and the launch of new products.

We also achieved further growth in Central Europe. Here, turnover reached € 45.9 million (previous year: € 45.1 million), an increase of 1.8%. Growth in Austria, Scandinavia and Spain was particularly pleasing. However, we suffered falls in turnover in the Netherlands and Belgium. Eastern Europe, with a turnover of € 12.5 million (previous year: € 12.5 million), remained at the previous year's level. Rising turnover in the Czech Republic offset the lack of demand in Russia and Poland.

In the other regions across the world, in the first nine months of this year we recorded a fall of 7.8% to € 5.6 million (previous year: € 6.0 million).

In the third quarter, turnover in the Brand Business rose by 2.5% to € 41.7 million (previous year: € 40.6 million).

Details of the performance of our four product categories of the Brand Business segment are set out below:

In the cleaning category we strongly increased our turnover in the first nine months by 15.5%, reaching € 41.8 million (previous year: € 36.2 million). We benefited in particular from the launch of our new window vacuum cleaner. This product innovation generated high demand, which continued in the third quarter. Shortages had to be temporarily offset by air cargo shipments. Almost three-quarters of sales growth were realised in Germany: growth was particularly strong in the hypermarket, cash & carry and mail order distribution channels. Abroad, France, Austria and the Czech Republic developed particularly positively. Even the Dutch market, marked by a weaker demand, was able to stabilise.

In the laundry care category, catch-up effects in the sales of rotary dryers in the third quarter once again led to a significant increase in turnover of 3.0%. So the missing turnover from the first quarter, which was characterised by unfavourable weather conditions for us, has been largely compensated. Over nine months, turnover reached € 56.4 million (previous year: € 57.3 million). While sales of ironing and steam ironing products did not reach the previous year's level, demand rose for dryers both in domestic and international markets. Outside Germany, targeted special offers boosted sales. Accordingly, high-volume countries such as Austria or Switzerland developed very positively, but Spain showed growth as well. The situation in the Netherlands and the USA is still strained, however.

In the first nine months, our kitchen goods product category saw a fall of 8.1% to € 12.4 million (previous year: € 13.5 million). Furthermore, in 2012 the high levels of clearance sales of obsolete stock dominated the developments in this sector and led to the aforementioned decline. Domestic sales fell short of the previous year's level. Additionally, there was falling demand in France, Belgium and Switzerland, which resulted in an overall decline in foreign sales. It is gratifying that we increased turnover slightly in the third quarter in our Leifheit brand kitchen products for the first time in a long while: due to the successful introduction of innovative collapsible Fresh & Slim storage boxes in this summer, sales increased by more than 1%.

In the wellbeing category we sell products under the Soehnle brand. Turnover fell in the reporting period by 6.0% to € 19.8 million (previous year: € 21.0 million). This was due to the lack of demand for bathroom scales – especially from abroad. For example, in the Middle East region we were unable to repeat a successful promotional business and also weak consumption in the Netherlands negatively impacted sales. Similarly, demand for kitchen scales fell. In Germany, we saw declining turnover and outside our domestic market the regions of Italy, the Netherlands and Belgium showed weaker demand. Scandinavia and France developed positively, however.

During the reporting period, our Relax range benefited from the air product programme launched last year that has been very well received on the market. Accordingly, we were able to increase turnover further. In addition, with design aroma diffusers and battery-operated heating products, in 2013 we launched more innovations that will provide turnover momentum.

Volume Business at a stable level

Our second segment, Volume Business, generated turnover of € 32.0 million in the first nine months of the year as in the previous year's period. The Volume Business' share of Group turnover thus fell to 19.7% (previous year: 20.0%).

In Germany, in the first nine months the segment recorded a decline of 20.1% and generated € 3.8 million (previous year: € 4.8 million). This was due to lack of volume of special offers for non-branded laundry care products.

However, in Central Europe we increased sales by 6.0% to € 25.1 million (previous year: € 23.7 million). Abroad, turnover fell at a low level by 12.7% to € 3.1 million (previous year: € 3.5 million). This was due to sales difficulties in the Project Business with a US customer.

In the third quarter, our Volume Business increased slightly and reached sales of € 11.9 million (Q3/2012: € 11.5 million). This was led by our business with kitchen products and the laundry care sector. Here our subsidiary Herby achieved double-digit growth.

Details of the performance of the product categories of Volume Business are set out below:

In line with planning, the cleaning category did not generate any significant turnover in the first nine months of 2013.

In the first nine months, turnover in our product category laundry care remained stable and reached € 9.9 million, the same as in the previous year. The major sales driver of the product category is our French subsidiary Herby. It recorded an increase of 7.2% to € 7.8 million (previous year: € 7.3 million). Reasons for the positive development was a higher volume of special offers at well known hypermarket and a new listing in a leading Dutch trading company.

Our kitchen goods product category remained at € 19.6 million (previous year: € 19.6 million) at the previous year's level. The Volume Business' share of total turnover thus still amounts to around two-thirds. Within the kitchen goods category, our French subsidiary Birambeau increased slightly, reaching € 16.5 million (previous year: € 16.4 million). In contrast, the weak clearance sales of our Project Business in the USA continued to impact the turnover situation this product category.

The wellbeing category generated a high rate of increase at a low level and realised a turnover of € 0.9 million (previous year: € 0.7 million) beyond our brand names. The successful introduction of a customer loyalty programme in the Netherlands had a positive impact on total turnover.

Contract manufacturing from the plant in Blatná/Czech Republic fell slightly compared with the previous year, booking a turnover of € 1.5 million (previous year: € 1.7 million). The share of Volume Business was therefore reduced to just under 5%.

Group gross margin rises further

In the first nine months of 2013, we were able once more to increase the Group's gross margin slightly by half a percentage point to 44.5% (previous year: 44.0%). On the procurement side, currency trends helped us to compensate for the negative effects of clearance sales of obsolete stock of the Dr Oetker Bakeware brand for increased turnover reductions. At the segment level, our Brand Business once again increased its gross margin, reaching 47.1% (previous year: 46.2%). In contrast, the gross margin in the Volume Business declined by one percentage point to 33.9% (previous year: 34.9%).

Extraordinary effects influence Group earnings

In the first nine months of the year we achieved Group earnings (EBIT) of € 6.6 million (previous year: € 7.7 million). On the one hand, the extraordinary effects of provisions for severance payments totalling € 1.1 million negatively influenced earnings. Secondly, the valuation as at the balance sheet date of currency hedges resulted in a burden on EBIT of € 1.2 million. In the same period last year, this effect had a positive impact on earnings of € 0.7 million. Adjusted for effects from the valuation of currency hedges, our Group EBIT rose by 11.3% to € 7.8 million.

The result in the Brand Business fell to € 4.7 million (previous year: € 5.7 million). Adjusted for the aforementioned effect from the valuation of foreign exchange hedges, in the Brand Business we achieved an EBIT of € 5.8 million (previous year: € 5.0 million).

In the Volume Business, we achieved with an EBIT of € 1.9 million (previous year: € 2.0 million) earnings just under the previous year's level. In this segment as well, the currency effect described had a slightly negative impact of € 0.1 million. The earnings adjusted for this effect stayed at last year's level of € 2.0 million.

At a Group level, earnings before taxes (EBT) developed in line with EBIT at € 5.2 million in the reporting period (previous year: € 6.4 million).

The tax rate increased from 19.2% for the first nine months of 2012 to 22.4% in the reporting period 2013. The net result for the period thus reached € 4.1 million (previous year: € 5.2 million).

Financial position and net assets

Cash flow and liquidity

The cash flow from operating activities rose sharply to € 23.1 million (previous year: € 1.0 million). This was attributable to net result for the period of € 4.1 million (previous year: € 5.2 million), depreciation and amortisation of € 5.0 million (previous year: € 4.8 million), the decrease in particular in receivables and inventories in the amount of € 13.4 million (previous year: increase of € 4.9 million) and the increase in accounts payables and other liabilities of € 1.1 million (previous year: decrease of € 3.9 million).

The cash flow from investment activities fell to € 1.8 million (previous year: € 4.0 million). Investments declined due to non-recurring expansion investments in the previous year by € 4.6 million to € 2.1 million. This was offset by effects from the sale of assets related to the abandonment of the license agreement with Dr Oetker Bakeware, totalling € 1.6 million. The changes in the financial assets of € 2.3 million had a positive effect (previous year: € 6.7 million). This concerns the purchase and sale of securities, such as zero coupon bonds or debentures.

Cash flow from financing activities consisted of dividends paid and amounted to € -7.1 million (previous year: € -6.1 million).

Cash and cash equivalents increased accordingly compared to 1 January 2013 by € 18.2 million to € 51.9 million.

Free cash flow reflects how much cash remains for the repayment of borrowings or dividends for shareholders. Free cash flow is the total cash flow from operating activities and cash flow from investment activities, adjusted for incoming and outgoing payments in financial assets as well as from sales of divisions. In the first nine months of 2013, free cash flow rose to € 21.0 million (previous year: € -5.7 million). The main factors were the decrease in receivables, inventories and other assets and lower capital expenditure compared to the same period last year.

Investments

The additions to tangible assets amounted to € 2.0 million (previous year: € 6.6 million) and related to tools for new products, machinery, rationalisation investments for production plants, display stands as well as tools and equipment. In the previous year, expansions at the production plant in the Czech Republic as well as warehouse automation at the logistics centre in Zuzenhausen led to higher investments in tangible assets. During the reporting period, additions to intangible assets as in the previous year were € 0.1 million.

The investment ratio amounted to 1.2% of the historic acquisition and production costs of the assets. We invested € 1.8 million in Brand Business and € 0.3 million in Volume Business. Investments were offset by depreciation of tangible assets amounting to € 4.1 million and amortisation of intangible assets amounting to € 0.9 million.

Adjustment of the balance sheet structure as at 1 January 2013

The initial application of the revised IAS 19 – Employee Benefits (2011 revision) – led on 1 January 2013 to a significant adjustment of the balance sheet structure of the Leifheit Group compared with the consolidated financial statements as at 31 December 2012.

Through the application, actuarial losses of € 13.3 million, not recorded at 31 December 2012, were recorded on 1 January 2013 in the employee benefits obligations (pension reserves), thus increasing the Group's obligations. The adjustment was made in consideration of deferred taxes recognised directly in equity in the amount of € 3.7 million. This resulted in a decrease in equity of € 9.6 million. The equity ratio at 1 January 2013 thus amounted to 45.0%. For better comparability, a corresponding balance sheet was inserted at 1 January 2013.

Balance sheet structure as at 30 September 2013

As at 30 September 2013, total assets reached € 203.8 million after € 205.9 million as at 1 January 2013. This represents a decrease of € 2.1 million.

Cash and cash equivalence increased by € 18.2 million to € 51.9 million. Trade receivables and other liabilities fell accordingly compared to 1 January 2013 by € 5.0 million to € 46.5 million. Inventories decreased due to further improvements in stock management by € 5.9 million to € 33.5 million. Other current assets decreased by € 3.2 million to € 1.4 million. This decline was mainly due to a residual purchase price from the sale of assets related to the abandonment of the license with Dr Oetker Bakeware, the decline in VAT receivables and supplier bonuses. Due to low investment activity, tangible assets decreased by € 2.5 million to € 36.3 million and intangible assets by € 0.8 million to € 18.7 million.

Trade payables and other liabilities increased accordingly compared to 1 January 2013 by € 1.8 million to € 46.8 million. Derivative financial instruments as liabilities increased by € 1.2 million to € 1.6 million and relate to the valuation of the concluded currency hedges.

Equity decreased by € 3.1 million from € 92.8 million as at 1 January 2013 to € 89.7 million as at 30 September 2013. The major reason for this is the dividend distribution of € 7.1 million. A positive impact had the net result for the period amounted to € 4.1 million. The equity ratio stood at 44.0%.

Compared with the end of 2012, there were no material changes in non-balance-sheet assets (mainly leased and rented goods). In addition, no new off-balance sheet financing instruments were used. There were no company purchases or sales except the acquisition of the minority interest in Leifheit Distribution S.R.L., Romania.

Treasury shares

Leifheit did not use its own shares in the reporting period. In the same period of previous year 3,646 treasury shares, corresponding to 0.07% of the share capital, were issued in the form of employee shares. The corresponding interest in the share capital was k€ 11.

Neither in the current reporting period nor in the previous year treasury shares were purchased. Including the treasury shares purchased and issued in previous years Leifheit held on 30 September 2013, an amount of k€ 7,598, corresponding to 250,525 treasury shares (5.01% of the share capital). The corresponding interest in the share capital was k€ 752.

There are no subscription rights for members of Group organs and employees in accordance with section 160 para. 1 no. 5 of the German stock corporation act (AktG).

Commitments

The Group companies have not entered into any commitments.

Contingencies and other financial liabilities

There are rental and leasing agreements for business premises, IT and telephone equipment, vehicles and similar assets and licensing agreements with an annual expense of € 3.0 million (previous year: € 3.2 million). The future minimum payments on basis of lease and rental agreements without cancellation option amount to € 0.7 million up to one year (previous year: € 0.7 million), € 2.3 million between one and five years (previous year: € 2.1 million) and € 0.0 million for more than five years (previous year: € 0.4 million). The leases constitute operating leases within the meaning of IAS 17.

As at 30 September 2013, purchase commitments totalled € 1.4 million (previous year: € 1.2 million). There are contractual obligations to acquire items of tangible assets in the amount of € 1.7 million relating to tools in particular. A contingent liability in the amount of € 1.4 million of Leifheit-Birambeau S.A.S. in France exists from a tax audit that is still pending.

Other financial assets and financial liabilities

Financial assets and liabilities measured at the fair value as affecting net income

Financial assets and liabilities measured at fair value as affecting net income are those currency options, forward exchange contracts and currency swaps that do not qualify as hedges. These financial instruments are used to reduce the foreign currency risk for sales and purchases based on an assessment of the management with regard to the business development.

As at 30 September 2013, the following forward exchange contracts and currency swaps are not accounted as cash flow hedge instruments:

Value of
liability
Foreign
currency
Nominal
value
Buy USD/€ € 58.9 million USD 78.4 million € 58.0 million
Buy HKD/€ € 3.0 million HKD 31.6 million € 2.9 million
Buy CZK/€ € 0.7 million CZK 18.0 million € 0.7 million
Sell USD/€ € 1.8 million USD 2.3 million € 1.8 million

Furthermore, there was a currency options transaction. The fair value amounted to € -0.2 million.

Hedges – cash flow hedges

As at 30 September 2013, there were forward exchange contracts for future payment obligations in US dollars, which can be attributed to a transaction that is highly probable to materialise in the future. It involved the expected and highly probable future purchases of goods in the months of October 2013 to December 2014 from suppliers in the Far East amounting to USD 18.6 million, classified as highly effective. An unrealised expense of k€ 5 on hedging instruments (of which k€ -2 is the effect from income tax) was recognised in equity with no impact on net result for the period as at 30 September 2013.

Hierarchy of fair values

All financial instruments recorded at fair value are classified into three categories defined as follows:

  • level 1: quoted market prices
  • level 2: assessment procedure (input parameters observed on the market)
  • level 3: assessment procedures (input parameters not observed on the market)

All financial assets and liabilities to be measured at fair value are assigned to level 2. In the period from 1 January 2013 to 30 September 2013 there were no transfers between levels.

The following table shows the book values and fair values of the main financial instruments reported in the interim financial statements:

Book value Fair value
k€ Valuation
category in
accordance
with IAS 39
30 Sep 2013 31 Dec 2012 30 Sep 2013 31 Dec 2012
Financial assets
Cash and cash equivalents a) 51,917 21,738 51,917 21,738
Structured money market instruments d) 11,979 11,979
Trade receivables a) 46,504 51,535 46,504 51,535
Derivative financial assets c) 38 12 38 12
Other financial assets a) 502 6,593 502 6,593
Financial liabilities
Trade payables b) 18,001 19,073 18,001 19,073
Derivative financial liabilities c) 1,610 389 1,610 389
Other financial liabilities b) 17,352 15,664 17,352 15,664

a) loans and receivables not quoted on an active market

b) financial liabilities carried at amortised cost

c) financial assets and liabilities measured at fair value without effects on net result for the period d) financial assets and liabilities measured at fair value with effects on net result for the period

Overall statement

Business development in the first quarter in particular was dominated by the difficult weather conditions with long periods of frost until spring. This had a negative impact on consumer spending. In the second and third quarter the sustained domestic demand, positive signals from other European countries as well as occasional catch-up effects from the spring season helped us. At the same time our product innovations have been well received on the market. In contrast, decreases in demand in important regions such as the Netherlands, Belgium, Italy and Russia pose new challenges for us.

Against this background, we can be satisfied with the results of the third quarter: group and segment growth are developing positively and above the levels of last year and in line with our expectations. Our earnings development was affected during the reporting period to a high degree by extraordinary effects. Adjusted for these effects, the result is as forecast at the high level of the previous year. Even at the end of the third quarter, we remain solidly positioned with cash totalling € 51.9 million and an equity ratio of 44.0%.

Employees

In the first nine months, the Leifheit Group employed an average of 1,015 people (previous year: 1,018), of which 734 employees were in Brand Business and 281 in Volume Business.

Employees by region

1 Jan to
30 Sep 2013
1 Jan to
30 Sep 2012
406 403
373 376
173 174
63 65
1,015 1,018

At 40.0%, the largest portion of our employees work in Germany, followed by 36.8% in the Czech Republic and 17.0% in France. The remaining 6.2% of employees are located in different countries within Europe and the USA.

Personnel changes in Group organs

On 31 May 2013, former Chairman of the Board of Management Georg Thaller resigned from the company. Dr Claus-O. Zacharias is leading the company as sole Managing Director in the interim period.

On 26 September 2013, the Supervisory Board of Leifheit AG announced that Thomas Radke will take over the chairmanship of Leifheit AG at the latest on 1 April 2014. He will be responsible for the marketing, development and sales in addition to being chairman. Thomas Radke's precise start date will be fixed and disclosed after completing his departure negotiations with his current employer.

There were no additional personnel changes in the organs of Leifheit AG in the reporting period.

Opportunities and risks

For information on the opportunities and risks at Leifheit, please see the detailed description in the consolidated management report as at 31 December 2012. There were no material changes in the reporting period. Furthermore, we do not expect any individual or aggregate risks that threaten the company as a going concern.

Related party transactions

There were no transactions with related parties outside the Group in the reporting period.

The parent company in whose consolidated financial statements Leifheit AG is included is Home Beteiligungen GmbH, Munich.

Events after the end of the reporting period

Since 30 September 2013 there have been no events of special significance that would have a material impact on the net assets, financial position and results of operations of the Leifheit Group.

Dividend paid

On 7 June 2013, a dividend of € 1.50 per no-par-value bearer share eligible to receive dividends was distributed to the shareholders from the balance sheet profit of the company for the financial year 2012 – this is a total of € 7,124,212.50 due to 4,749,475 no-par-value bearer shares.

Forecast

Global economy cools

The International Monetary Fund (IMF) is expecting, according to its forecast at the beginning of October, global economic growth of 2.9% for the year as a whole. Compared with the previous estimate of July 2013, this is a decrease of 0.3 percentage points. Looking at emerging economies, the IMF has also lowered its forecast from the summer and lowered it by 0.5%. The institute now expects an economic growth rate of 4.5%. China is expected to continue to meet its pioneering role with a growth of 7.8%. For the United States, the IMF is still forecasting an increase in economic output of 1.7%. For the Eurozone as a whole, the experts expect a decline in economic output of 0.4% due to the continuing difficult economic situation and political uncertainty. Germany is forecast by the IMF to have the highest growth of 0.5%.

Latest currency forecasts for the US dollar are dominated by downside risks, however for many experts these are outweighed by the upside opportunities. The consensus of analysts' estimates thus forecasts a dollar exchange rate at the end of the year well below the level of the end of September 2013.

Consumers and retailers remain optimistic

German companies expect higher growth in the coming quarters than in 2013 so far. Besides the positive economic outlook in the industrialised countries, the expected recovery in the economies of the Eurozone will play a crucial role. Both factors are likely to boost exports and stimulate investment.

For the fifth time in a row, the Ifo business climate index improved and reached 107.7 points in September 2013, the highest level since April 2012. At 0.1 points, growth was more moderate than expected by economist, however. They attribute the upturn in sentiment, which is expected to continue over the next six months, not least to the end of the recession. The same is true for consumers in this country. Consumer sentiment is the highest since August 2006 according to a recent study by the association for Consumer Research GfK. A major factor is the continued stable situation on the labour market.

Intensification of strategic measures

As part of our business strategy "Leifheit GO!", we are developing a series of measures with which we want to better exploit the growth potential in future that we are striving for. Our mediumterm growth objectives set the direction. We will consistently pursue the following measures in the fourth quarter:

We are promoting our organic growth. With the reworking of our sales strategy on country level, we plan to handle the strategic focus markets even more efficiently in future. The main emphasis is on the DACH region as well as our focus markets in Central and Eastern Europe. The further development and expansion of distribution in other European countries will be an important factor. Outside Europe, we will focus primarily on the use of our distribution network to exploit more revenue opportunities.

In our e-commerce activities, we have national and international growth in mind. Here we are working together with global trading partners and offering direct and professional support for trading in online, multi- and cross-channel business through product information systems as well as online and offline campaigns. After a further increase in turnover of around 25% in the first three quarters of 2013, we are confident that we will continue to achieve significant growth rates in the future.

Besides the above initiatives, we have initiated organisational measures to increase our capacity for innovation. Leifheit specifically focuses on innovation management and optimisation of innovation processes. For us as a brand manufacturer, this is a top priority.

With our POS-excellence initiative we are strengthening the Leifheit brand appearance in retail – both in Germany as well as in the developed markets of Central Europe. In 2013 alone we have installed nearly 40 new shop-in-shop systems – in the next few weeks we will add another ten shops. Including the facilities of the past year, by the end of the year we will have approximately 65 attractive brand shops in trade. Leifheit offers POS solutions for each distribution channel. To this end, we have optimised our packaging, improved the search logic and developed tools and test stations that bring our products to life. The interaction with an accompanying 360-degree brand communication through TV spots, press and online marketing results in a holistic brand and communication strategy.

Aside from the described measures to stimulate organic growth, we are not ruling out acquisitions, either. To this end, we are well positioned with cash totalling € 51.9 million and a solid financing.

Leifheit confirms forecast for 2013

We are confirming our forecast of a turnover growth at Group level of 2 to 4% on the turnover for 2012 adjusted for business with the Dr Oetker Bakeware brand. We are currently assuming that the increase in sales will be at the lower end of the range. We maintain that a turnover increase of 3 to 5% in Brand Business is realistic. In Volume Business, we still expect turnover to increase on the previous year's level.

On the basis of current analyst estimates, we are assuming an end-of-year US dollar exchange rate well below the level of the end of September 2013, so we do not expect any effects from the valuation as at the balance sheet date of currency hedges at year end. Overall, we expect a stable earnings development with EBIT at the level of adjusted earnings for 2012.

In the medium term, we will continue to pursue our goal of achieving sustainable and profitable turnover growth of 3 to 5% at Group level. At the same time, we are aiming for an above average earnings upturn. By 2016, the EBIT margin should rise to 8% – a bold but realistic goal. The strict focus on our "Leifheit GO!" strategy with the further expansion of our positioning within our focus markets enables us to secure our long-term growth and earnings targets.

Condensed interim consolidated financial statements (unaudited) Statement of comprehensive income

k€ 1 July to
30 Sep 2013
1 July to
30 Sep 2012
1 Jan to
30 Sep 2013
1 Jan to
30 Sep 2012
Turnover 53,559 53,485 163,851 163,950
Cost of turnover -29,377 -30,556 -90,920 -91,811
Gross profit 24,182 22,929 72,931 72,139
Research and development costs -1,130 -872 -2,984 -2,496
Distribution costs -15,816 -16,153 -51,595 -51,692
Administrative costs -3,654 -3,757 -11,224 -10,145
Other operating income 276 424 968 939
Other operating expenses -264 -36 -519 -841
Foreign currency result -2,007 44 -1,003 -188
Earnings before interest and taxes (EBIT) 1,587 2,579 6,574 7,716
Interest income 78 142 215 479
Interest expense -501 -575 -1,505 -1,778
Net other financial result -144 -55
Earnings before taxes (EBT) 1,020 2,146 5,229 6,417
Income taxes -219 -439 -1,172 -1,234
Net result for the period 801 1,707 4,057 5,183
Components of comprehensive income after taxes taken directly to equity
Amounts that are not reclassified in future periods
in the statement of comprehensive income:
Actuarial gains/losses on defined benefit pension plans
of which effect on income taxes: k€ -187 (previous year: k€ 0)
481
Amounts that may be reclassified in future periods
in the statement of comprehensive income:
Currency translation of foreign operations 3 48 -140 118
Currency translation of net investments in foreign operations,
of which effect on effect on income taxes: k€ 96 (previous year: k€ -77)
86 112 -248 197
Net result of cash flow hedges,
of which effect on income taxes: k€ -2 (previous year: k€ 22)
-369 -80 5 -80
Comprehensive income after taxes 521 1,787 4,155 5,418
Net result for the period attributable to
Minority interests 1 -15
Shareholders of the parent company 801 1,706 4,057 5,198
Net result for the period 801 1,707 4,057 5,183
Comprehensive income after taxes attributable to
Minority interests -18
Shareholders of the parent company 521 1,787 4,155 5,436
Comprehensive income after taxes 521 1,787 4,155 5,418
Earnings per share based on net result for the period
(diluted and undiluted)
€ 0.17 € 0.36 € 0.85 € 1.09
Earnings per share based on comprehensive income after taxes
(diluted and undiluted)
€ 0.11 € 0.38 € 0.87 € 1.14

Balance sheet

k€ 30 Sep 2013 1 Jan 2013* 31 Dec 2012
Current assets
Cash and cash equivalents 51,917 33,717 33,717
Financial assets 1,001 3,334 3,334
Trade receivables 46,504 51,535 51,535
Inventories 33,450 39,386 39,386
Income tax receivables 1,795 1,255 1,255
Derivative financial instruments 38 12 12
Other current assets 1,403 4,638 4,638
Total current assets 136,108 133,877 133,877
Non-current assets
Financial assets 5 5 5
Tangible assets 36,342 38,844 38,844
Intangible assets 18,686 19,489 19,489
Deferred tax assets 10,356 10,690 6,954
Income tax receivables 2,115 2,852 2,852
Other non-current assets 176 186 186
Total non-current assets 67,680 72,066 68,330
Total assets 203,788 205,943 202,207
Current liabilities
Trade payables and other liabilities 46,787 44,949 44,949
Derivative financial instruments 1,610 389 389
Income tax liabilities 283 1,338 1,338
Provisions 4,988 5,639 5,639
Total current liabilities 53,668 52,315 52,315
Non-current liabilities
Provisions 2,384 2,527 2,527
Employee benefit obligations 55,928 56,271 42,928
Deferred tax liabilities 1,997 1,976 1,976
Other non-current liabilities 92 88 88
Total non-current liabilities 60,401 60,862 47,519
Equity
Subscribed capital 15,000 15,000 15,000
Capital surplus 16,934 16,934 16,934
Treasury shares -7,598 -7,598 -7,598
Retained earnings 72,289 75,367 75,367
Other reserves -6,906 -7,004 2,603
Minority interests 67 67
Total equity 89,719 92,766 102,373
Total equity and liabilities 203,788 205,943 202,207

* initial application of IAS 19 (revised 2011)

Statement of cash flow

k€ 1 Jan to
30 Sep 2013
1 Jan to
30 Sep 2012
Net result for the period 4,057 5,183
Adjustments for depreciation and amortisation 4,989 4,831
Change in provisions -465 -179
Result from disposal of fixed assets and other non-current assets 3 -9
Change in inventories, trade receivables and other assets not classified as investment or financing activities 13,384 -4,892
Change in trade payables and other liabilities not classified as investment or financing activities 1,123 -3,921
Cash flow from operating activities 23,091 1,013
Proceeds from the sale of a division 4,000
Acquisition of minority interests -78
Acquisition of tangible and intangible assets -2,100 -6,719
Change in financial assets 2,334 6,735
Proceeds from the sale of tangible assets and other non-current assets 1,676 29
Cash flow from investment activities 1,832 4,045
Change in treasury shares 63
Dividends paid to the shareholders of the parent company -7,124 -6,170
Cash flow from financing activities -7,124 -6,107
Effects of exchange rate differences 401 -182
Net change in cash and cash equivalents 18,200 -1,231
Cash and cash equivalents at the start of the reporting period 33,717 29,511
Cash and cash equivalents at the end of the reporting period 51,917 28,280

Statement of changes in equity

The changes in equity attributable to the shareholders of the parent company were as follows:

k€ Subscribed
capital
Capital
surplus
Treasury
shares
Retained
earnings
Other
reserves
Total
As at 1 January 2012 15,000 16,934 -7,813 72,212 2,521 98,854
Issue of treasury shares 63 63
Dividends -6,170 -6,170
Comprehensive income after taxes 5,198 238 5,436
of which net result for the period 5,198 5,198
of which currency translation of
foreign operations
121 121
of which currency translation of
net investments in foreign operations
197 197
of which net result of cash flow hedges -80 -80
As at 30 September 2012 15,000 16,934 -7,750 71,240 2,759 98,183
As at 31 December 2012 15,000 16,934 -7,598 75,367 2,603 102,306
Change in accounting principles in
accordance with IAS 19
-9,607 -9,607
As at 1 January 2013 (adjusted) 15,000 16,934 -7,598 75,367 -7,004 92,699
Dividends -7,124 -7,124
Acquisition of minority interests -11 -11
Comprehensive income after taxes 4,057 98 4,155
of which net result for the period 4,057 4,057
of which actuarial gains/losses on
defined benefit pension plans
481 481
of which currency translation of
foreign operations
-140 -140
of which currency translation of net
investments in foreign operations
-248 -248
of which net result of cash flow hedges 5 5
As at 30 September 2013 15,000 16,934 -7,598 72,289 -6,906 89,719

The changes in Consolidated equity were as follows:

Shareholders
of the parent
Minority Total
k€ company interest equity
As at 1 January 2012 98,854 87 98,941
Issue of treasury shares 63 63
Dividends -6,170 -6,170
Comprehensive income after taxes 5,436 -18 5,418
of which net result for the period 5,198 -15 5,183
of which currency translation of
foreign operations
121 -3 118
of which currency translation of
net investments in foreign operations
197 197
of which net result of cash flow hedges -80 -80
As at 30 September 2012 98,183 69 98,252
As at 31 December 2012 102,306 67 102,373
Change in accounting principles in
accordance with IAS 19
-9,607 -9,607
As at 1 January 2013 (adjusted) 92,699 67 92,766
Dividends -7,124 -7,124
Acquisition of minority interests -11 -67 -78
Comprehensive income after taxes 4,155 4,155
of which net result for the period 4,057 4,057
of which actuarial gains/losses on
defined benefit pension plans
481 481
of which currency translation of
foreign operations
-140 -140
of which currency translation of net
investments in foreign operations
-248 -248
of which net result of cash flow hedges 5 5
As at 30 September 2013 89,719 89,719

Segment reporting

Key figures by divisions as at 30 September 2013 Brand
Business
Volume
Business
Total
Turnover € million 131.9 32.0 163.9
Turnover adjusted 1) € million 130.4 32.0 162.4
Gross profit € million 62.1 10.8 72.9
Contribution margin € million 50.3 9.8 60.1
Segment result (EBIT) € million 4.7 1.9 6.6
Segment result (EBIT) adjusted 2) € million 5.8 2.0 7.8
Depreciation and amortisation € million 4.2 0.8 5.0
Employees on annual average persons 734 281 1,015

1) adjusted for discontinued operations with Dr Oetker Bakeware

2) adjusted for unrealised foreign currency effects from the valuation of foreign exchange hedges

Key figures by divisions as at 30 September 2012 Brand
Business
Volume
Business
Total
Turnover € million 132.0 32.0 164.0
Turnover adjusted 1) € million 128.0 32.0 160.0
Gross profit € million 61.0 11.1 72.1
Contribution margin € million 49.5 9.9 59.4
Segment result (EBIT) € million 5.7 2.0 7.7
Segment result (EBIT) adjusted 2) € million 5.0 2.0 7.0
Depreciation and amortisation € million 3.8 1.0 4.8
Employees on annual average persons 722 296 1,018

1) adjusted for discontinued operations with Dr Oetker Bakeware

2) adjusted for unrealised foreign currency effects from the valuation of foreign exchange hedges

Report of the Board of Management

The Board of Management declares that, to the best of its knowledge and according to the applicable reporting principles for interim reporting, the Group interim financial statements, in accordance with the generally accepted accounting principles, give a true and fair view of the net assets, financial position and results of operations of the Group, and the interim management report presents a true and fair view of the business and situation

of the Group, together with the principal opportunities and risks associated with the expected development of the Group for the remaining months of the financial year.

Nassau/Lahn, November 2013

Leifheit Aktiengesellschaft The Board of Management

Dr Claus-O. Zacharias

Disclaimer

Forward-looking statements

This quarterly financial report contains forward-looking statements which are based on the management's current estimates with regard to future developments. Such statements are subject to risks and uncertainties that are beyond Leifheit's ability to control or estimate precisely, such as statements on the future market environment and economic conditions, the behaviour of other market participants and government measures. If one of these uncertain or unforeseeable factors occurs or the assumptions on which these statements are based prove inaccurate, actual results could differ materially from the results cited explicitly or contained implicitly in these statements. Leifheit neither intends to, nor does it accept any specific obligation to, update forward-looking statements to reflect events or developments after the date of this report.

Discrepancies due to technical factors

Technical factors (e.g. conversion of electronic formats) may lead to discrepancies between the financial statements in this quarterly financial report and those submitted to the Federal Gazette (Bundesanzeiger). In this case, the version submitted to the Federal Gazette is binding.

In the event of any discrepancies between this English translation of the quarterly financial report and the German version, the German version shall take precedence.

Key dates

13 November 2013

Presentation at the German Equity Forum, Frankfurt/Main, Germany

6 February 2014

Press Conference at Ambiente International Frankfurt trade fair Frankfurt/Main, Germany

27 March 2014 Annual financial reports 2013

27 March 2014

Analysts' conference, Frankfurt/Main

14 May 2014 Quarterly financial report for the period ending 31 March 2014

22 May 2014

Annual General Meeting, 10:30 a.m., Leifheit AG Customer and Administrative Centre, Nassau/Lahn, Germany

13 August 2014

Financial report for the half-year ending 30 June 2014

10 November 2014

Quarterly financial report for the period ending 30 September 2014

24–26 November 2014

Presentation at the German Equity Forum, Frankfurt/Main, Germany

PO Box 11 65 56371 Nassau/Lahn Germany Telephone: +49 2604 977-0 Telefax: +49 2604 977-300 www.leifheit.com [email protected]

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