CEWE Stiftung & Co. KGaA — Call Transcript 2015

Aug 11, 2015

Results Q2 2015 CEWE Stiftung & Co. KGaA

Analyst Conference Call Oldenburg

August 11, 2015

This presentation contains forward-looking statements that are based on current assumptions and forecasts of the management of CEWE. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments.

All numbers are calculated as exactly as possible and rounded for the presentation. Due to this, rounding errors might occur.

Axel Weber Head of IR, Planning & Reporting Dr. Olaf Holzkämper CFO

Agenda

• 1. New Products and Results
• 1. Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)
• 1. Outlook
• 1. Q&A

Highlights Q2 2015

Results		Q2 2014	Q2 2015	Comment
Photofinishing
Sales Volume Turnover EBIT	in photo m. in EUR m.	463 70.4 -2.5	437 72.6 -2.5	 At 5.6% lower than 2014, sales are within the expected range  Added-value products drive the increase in turnover  In preparation of the seasonal peak, EBIT at the same level as the previous year in spite of more costs
Commercial	Online-Print
Turnover EBIT	in EUR m.	17.6 -0.7	18.4 -0.9	 Online portal sales grow at 6.5%, total turnover at 4.8%  Increase in staff and marketing costs slightly reduces EBIT
Retail
Turnover EBIT	in EUR m.	16.3 -0.4	15.1 -0.2	 Focus on profitability successful  EBIT continues to improve
CEWE Group
Turnover EBIT EBT	in EUR m.	104.2 -3.6 -4.0	106.1 -3.5 -3.6	 Photofinishing and commercial online printing increase turnover  EBIT and EBT slightly better than in the previous year
Free Cash Flow	in EUR m.	-5.9	-6.7	 Operative cash flow improved, increased investments reduce free cash flow
ROCE	%	16.5	16.7	 ROCE continues to rise
Equity ratio	%	53.8	55.1	 Equity ratio continues to rise

► Q2 confirms the annual targets for 2015

Agenda

1. New Products and Results

- Photofinishing

• Commercial Online-Print
• Retail
• Group
• 1. Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)
• 1. Outlook
• 1. Q&A

CEWE PHOTOBOOK: New TV summer campaign

• with authentic customer opinions
• integrated communication
• starts by end of holiday season (late August)

► Multi-channel summer campaign starts with authentic customer opinions

CEWE takes over majority interest in "DeinDesign"

"DeinDesign" produces and markets mainly customisable smart phone cases and films for personalising many electronic appliances on its website www.deindesign.de

• Turnover of around 6 m. euros in 2014
• Currently growing at more than 30 %
• Modern production technology
• Wide product range
• Young target group
• Takeover early in Q3 2015

► Well-matched: "DeinDesign" rounds off CEWE photofinishing portfolio

Photos Q2 2015

► Q2 volume as expected, although Easter biz 2015 completely in Q1

Photos H1 2015

► H1 volume at the top of the expected target corridor

CEWE PHOTOBOOK growth Q2 2015

► CEWE PHOTO BOOK increases volume slightly and clearly enhances photo value

Photos Total by Quarter

Saisonal distribution: CEWE 2011 to 2015

Total share of photos per quarter as a percentage

target ► Volume: Photofinishing within expected range

Value of Photos Q2 2015

► Increasing turnover per photo of Q2 driven by value added-products

*turnover since 2013 adjusted Rounding differences may occur

Value of Photos H1 2015

► Increasing turnover per photo of H1 driven by value added-products

*turnover since 2013 adjusted Rounding differences may occur

Shares in Turnover by Quarter - Photofinishing

Seasonal distribution: CEWE 2011 to 2015

Share in turnover by quarter as a percentage

* Photofinishing turnover approx. on previous year´s level (2014: 386.0 Euro mill.)

Photofinishing Segment in Q2

• turnover continuing to rise: +3.2%
• Added-value products are sales drivers
• Easter business fell in Q1 this year (Q1 photofinishing growth at 7.5%), in the previous year only in Q2
• EBIT almost exactly same as in previous year
• In spite of incr. marketing costs, slightly higher staff costs and slightly incr. depreciation (among other things for POS kiosk systems), EBIT constant in comparison to previous year
• Earlier Easter business than in the previous year enhanced profitability additionally in Q1 (Easter business in Q2 in the previous year)
• ► Added-value products increase turnover in Q2 as well
• ► EBIT at previous year's level in spite of more costs in preparation of peak season

EBIT before Restructuring by Quarter – Photofinishing

* 32.0-38.0 Euro mill. group EBIT-target less planned retail (-2.0 Euro mill.) and online printing EBIT (-1.5 Euro mill.)

Rounding errors may occur EBIT 2011 – 2013: EBIT adjusted to other tax

Photofinishing Segment in H1

• Both Q1 and Q2 increase in turnover in comparison to the previous year: Total H1 2015 + 5.4%
• Added value products drive increase: CEWE PHOTO BOOK, CEWE CALENDAR, CEWE CARDS, CEWE WALL PICTURES
• EBIT improved by 1.2 million euros
• Operative EBIT before restructuring (in the first quarter of 2015 closure costs for a call centre in Dresden were incurred in an amount of 0.4 m. euros), even as much as 1.7 m. euros better than in the previous year: -3.1 m. euros (H1 2014: -4.8 m. euros)

Rounding errors may result

► Photofinishing better than in the same period of the previous year

Agenda

1. New Products and Results

• Photofinishing
• - Commercial Online-Print
• Retail
• Group
• 1. Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)
• 1. Outlook
• 1. Q&A

Commercial Online-Print: New Products

Commercial Online-Print Segment in Q2

• Core online business in the Internet portals grew by 6.5% for commercial online printing in Q2. The externally reported increase in turnover of 4.8% includes the orders acquired outside the Internet portals (outsourced reel-fed offset printing orders)
• EBIT only slightly below previous year in spite of incr. staff costs and more marketing expenses: -0.9 m. euros after -0.7 m. euros in the second quarter of the previous year
• EBIT absorbs 0.5 m. euros in non-operative depreciation acc. to IFRS resulting from the purchase price allocation of the Saxoprint acquisition (also for the customer base and brand; elimination largely at the end of 2016)

► Commercial Online-Print continues to increase turnover ► CEWE PRINT start-up 2015 still causes initial losses

Rouding differences might occur

Commercial Online-Print Segment in H1

-5,7%vU -6,0%vU

• Core online business in the Internet portals grew by 9.4% for commercial online printing in H1. The externally reported increase in turnover of 7.1% including the orders acquired outside the Internet portals (outsourced reel-fed offset printing orders)
• EBIT only slightly below previous year in spite of incr. staff costs and more marketing expenses: -2.2 m. euros after -1.9 m. euros in H1 2014
• EBIT absorbs 1.2 m. euros in non-operative depreciation acc. to IFRS resulting from the purchase price allocation of the Saxoprint acquisition (also for the customer base and brand; elimination largely at the end of 2016)

► Commercial Online-Print continues to increase turnover ► CEWE PRINT start-up 2015 still causes initial losses

Rouding differences might occur

Growth outlook CEWE Commercial Online-Print

Revenue (in Euro millions)

► Commercial Online-Print is a major growth driver

Agenda

1. New Products and Results

• Photofinishing
• Commercial Online-Print

- Retail

• Group
• 1. Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)
• 1. Outlook
• 1. Q&A

New shop concept at Fotojoker

► Focus on photofinishing products in CEWE-retail shops

Retail* Segment in Q2

in Euro millions

26.0 25.4 27.6 16.3 15.1 2011 2012 2013 2014 2015 -7.6% 0.4 0.3 -0.3 -0.4 -0.2 2011 2012 2013 2014 2015 +59.0% -2.4% -1.1% of turnover Turnover* EBIT*

• Photo hardware sales decrease slightly in all the markets, one of the reasons being a stronger focus on earnings in Q2 2015
• In Q2 it was one year ago since the discontinuation of wholesale business in Poland, hence no longer an impact (hardware sales decline at Fotojoker only only still just over 0.1 m. euros)

• EBIT improved by 0.2 m. euros against the previous year, and also better than in 2013 (the year before the discontinuation of wholesale business and requirements for restructuring)

► Retail earnings improved over those of the previous year

Rounding errors may result * Only hardware, no photofinishing

Retail* Segment in H1

in Euro millions

• Photo hardware sales decrease slightly in all the markets, one of the reasons being a stronger focus on earnings in Q2 2015

• Discontinuation of wholesale business in Poland still felt in H1 2015, since wholesaling was only given up completely at the end of Q1 2014.

• EBIT includes 0.6 m. restructuring costs (incurred in Q1) lower by only 0.2 m. euros in comparison to the previous year

• Operative EBIT before restructuring improves by 0.4 m. euros: -0.7 m. euros after - 1.1 m. euros in H1 2014

► Operative retail earnings before restructuring improved

Rounding errors may result * Only hardware, no photofinishing

Agenda

1. New Products and Results

• Photofinishing
• Commercial Online-Print
• Retail

- Group

• 1. Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)
• 1. Outlook
• 1. Q&A

Turnover

► Increase in turnover in photofinishing and commercial online printing exceed targeted reduction in turnover in retailing

Operational Result (EBIT before restructuring)

EBIT Q2 before restructuring

in Euro millions

EBIT H1 before restructuring

in Euro millions

Commercial Online-Print

Retail

Rounding errors may result

► Before restructuring: positive improvement in earnings

EBIT Q2 after restructuring

in Euro millions

Rounding errors may result

• ► After restructuring: H1 also improved after restructuring
• ► At 33.4 m. euros, 12-month EBIT already in the target corridor of 32 to 38 m. euros for 2015

EBIT H1 after restructuring

in Euro millions

Agenda

• 1. New Products and Results
• 2. Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)
• 1. Outlook
• 1. Q&A

Group P&L – Q2

In Millionen Euro	Q2	% v.	Q2	% v.	Delta*	Delta*
	2015	Umsatz	2014	Umsatz	m€	%
Umsatzerlöse	106,1	100,0%	104,2	100,0%	+1,9	+1,8
Bestandsveränderung	0,0	0,0%	-0,1	-0,1%	+0,1	+143,6
Andere aktivierte Eigenleistung	0,2	0,2%	0,3	0,3%	-0,0	-12,5
Sonstige betriebliche Erträge	3,2	3,0%	3,6	3,4%	-0,4	-11,1
Materialaufwand	-34,9	-32,9%	-35,7	-34,2%	+0,8	+2,2
Rohergebnis	74,7	70,4%	72,3	69,4%	+2,4	+3,3
Personalaufwand	-33,3	-31,4%	-32,4	-31,1%	-0,9	-2,7
Sonstige betriebliche Aufwendungen	-36,5	-34,3%	-35,4	-34,0%	-1,1	-3,0
EBITDA	5,0	4,7%	4,5	4,3%	+0,5	+10,5
Abschreibungen	-8,5	-8,0%	-8,1	-7,8%	-0,4	-5,1
EBIT	-3,5	-3,3%	-3,6	-3,4%	+0,1	+1,6
Finanzerträge	0,0		0,2		-0,2	+96,0
Finanzaufwendungen	-0,1	-0,1%	-0,6	-0,6%	+0,5	+78,9
EBT	-3,6	-3,4%	-4,0	-3,8%	+0,3	+8,6
Steuern vom Einkommen und Ertrag	1,2	1,2%	1,1	1,0%	+0,2	+16,1
Ergebnis nach Steuern	-2,4	-2,3%	-2,9	-2,8%	+0,5	+17,7

Es können sich Rundungsdifferenzen ergeben Rounding errors may result

Only the substantial, significant differences to the previous year are illustrated. Due to P&L in German language figures are shown with "," instead of "." as delimiter symbol.

Distribution of sales returns:

€ 72.6 m. photofinishing (PY: € 70.4 m.) € 15.1 m. retail (PY: € 16.3 m.) € 18.4 m. photofinishing (PY: € 17.6 m.)

(-) Returns from re-charged advertising services (-) Exchange-rate gains (+) Retailing merchandise

(-) Raw materials, consumables and supplies for lab photofinishing + online print (+) On-site finishing (kiosks)

(-) Saxoprint (-) Central services (marketing, R&D) (+) Retailing

(-) Marketing costs

(-) Logistics costs

(+) Exchange-rate losses

(-) Fixed-asset depreciation, incl. for new kiosk systems (photofinishing)

(+) Interest expenditure

(+) Earnings-induced increase in deferred income tax item

Balance Sheet as of June 30

in Euro millions in Euro millions

Assets Liabilities

► Strong result in the past twelve months increases equity ratio

Management-Balance Sheet as of June 30

Capital Invested

Capital Employed

► Increasing investment intensity increases capital employed

Capital Employed I

							(-) Investments > depreciation
In Millionen Euro	30.06.	% v. C E	31.03.	% v. C E	Delta	Delta	(-) Investments < depreciation
	2015		2015		m€	%	(+) Side investments HTGF and Capnamic
Sachanlagen	105,4	51,9 %	105,1	52,2 %	+0,3	+0,2 %
Als Finanzinvestitionen gehaltene Immobilien	5,1	2,5 %	5,0	2,5 %	+0,1	+3,0 %	(-) Loan to landlord (retail)
Geschäfts- und Firmenwert	25,4	12,5 %	25,4	12,6 %	+0,0	+0,0 %	(+) Long-term share of accrued items
Immaterielle Vermögenswerte	17,7	8,7 %	18,1	9,0 %	-0,4	-2,4 %
Finanzanlagen	5,2	2,6 %	3,7	1,8 %	+1,6	+42,2 %
Langfristige Forderungen aus Ertragsteuer-Erstattungen	1,1	0,5 %	1,1	0,5 %	+0,0	+0,0 %	(+) Earnings-induced capitalisation of deferred taxes on in-year losses
Langfristige finanzielle Vermögenswerte	3,2	1,6 %	3,3	1,7 %	-0,2	-4,8 %	(+) Photofinishing raw mat. and supplies
Langfristig übrige Forderungen und Vermögenswerte	0,5	0,2 %	0,2	0,1 %	+0,2	+90,9 %	(+) COP raw mat. and supplies (-) Merchandise
Aktive latente Steuern	9,5	4,7 %	8,6	4,3 %	+0,9	+10,4 %
Langfristige Vermögenswerte	173,0	85,1 %	170,5	84,7 %	+2,5	+1,5 %	(+) Increase corresponds to increase in
							stocks
Vorräte	47,7	23,5 %	46,3	23,0 %	+1,4	+3,1 %
+ kurzfristige Forderungen aus LuL	37,5	18,4 %	37,6	18,7 %	-0,2	-0,4 %
Operatives Brutto-Working Capital	85,2	41,9 %	83,9	41,7 %	+1,3	+1,5 %
- kurzfristige Verbindlichkeiten aus LuL	54,9	27,0 %	52,6	26,1 %	2,3	+4,4 %
Operatives Netto-Working Capital	30,3	14,9 %	31,3	15,6 %	-1,1	-3,4 %

Only the substantial, significant differences to the previous year are illustrated. Due to capital employed structure in German language figures are shown with "," instead of "." as delimiter symbol.

Capital Employed II

In Millionen Euro	30.06.	% v.	31.03.	% v.	Delta	Delta
	2015	C E	2015	C E	m€	%
Zur Veräußerung gehaltene Vermögenswerte	1,4	0,7 %	1,4	0,7 %	-0,0	-1,4 %
+ Kurzfristige Forderungen aus Ertragsteuererstattungen	4,5	2,2 %	2,9	1,4 %	+1,6	+57,3 %
+ Kurzfristige finanzielle Vermögenswerte	2,4	1,2 %	2,7	1,4 %	-0,3	-11,1 %	(+) Capitalisation of tax pre-payments
+ Kurzfr. Übrige Forderungen und Vermögenswerte	8,0	4,0 %	6,8	3,4 %	+1,2	+18,0 %	(+) Value added tax receivables at Saxoprint
Sonstiges Brutto-Working Capital	16,3	8,0 %	13,8	6,8 %	+2,5	+18,5 %	(-) Value added tax and income tax
- Kurzfristige Steuerrückstellungen	4,5	2,2 %	4,5	2,2 %	-0,0	-1,0 %	(-) Wages and salaries, social security
- Kurzfristige übrige Rückstellungen	3,7	1,8 %	3,9	1,9 %	-0,2	-5,1 %
- Kurzfristige finanzielle Verbindlichkeiten	0,3	0,2 %	0,3	0,2 %	+0,0	+0,0 %
- Kurzfristige übrige Verbindlichkeiten	20,2	10,0 %	20,5	10,2 %	-0,3	-1,4 %
Kurzfristige übrige Schulden	28,7	14,1 %	29,2	14,5 %	-0,5	-1,8 %
Sonstiges Netto-Working Capital	-12,4	-6,1 %	-15,4	-7,7 %	+3,1	-19,9 %
Operatives Netto-Working Capital	30,3	14,9 %	31,3	15,6 %	-1,1	-3,4 %
Sonstiges Netto-Working Capital	-12,4	-6,1 %	-15,4	-7,7 %	+3,1	-19,9 %
Netto-Working Capital	17,9	8,8 %	15,9	7,9 %	+2,0	+12,7 %
Langfristige Vermögenswerte	173,0	85,1 %	170,5	84,7 %	+2,5	+1,5 %
+ Netto Working Capital	17,9	8,8 %	15,9	7,9 %	+2,0	+12,7 %
+ Liquide Mittel	12,3	6,1 %	14,9	7,4 %	-2,6	-17,2 %
Capital Employed	203,2	100,0 %	201,2	100,0 %	+1,9	+1,0 %

Only the substantial, significant differences to the previous year are illustrated.

Due to capital employed structure in German language figures are shown with "," instead of "." as delimiter symbol.

Capital Invested

In Millionen Euro	30.06. 2015	% v. C I	31.03. 2015	% v. C I	Delta m€	Delta %
Eigenkapital	158,1	77,8 %	171,8	85,4 %	-13,7	-8,0 %	(-) 2014 dividend
							(-) Earnings after tax
Lfr. Pensionsrückstellungen	22,5	11,1 %	22,4	11,1 %	+0,1	+0,4 %
Lfr. passive latente Steuern	2,8	1,4 %	2,8	1,4 %	+0,0	+0,0 %
Lfr. übrige Rückstellungen	0,2	0,1 %	0,2	0,1 %	-0,0	-5,3 %	(-) Repayment on bank loan
Lfr. finanzielle Verbindlichkeiten	0,0	0,0 %	0,0	0,0 %	+0,0	*
Lfr. übrige Verbindlichkeiten	0,2	0,1 %	0,2	0,1 %	+0,0	+0,0 %	(-) Season-related borrowing
Nicht operative Schulden	25,7	12,6 %	25,6	12,7 %	+0,1	+0,3 %
Lfr. Finanzverbindlichkeiten	2,0	1,0 %	2,2	1,1 %	-0,3	-11,4 %
+ kurzfristige
Finanzverbindlichkeiten	17,4	8,6 %	1,6	0,8 %	+15,8	+970,7 %
Brutto-Finanzschulden	19,4	9,5 %	3,9	1,9 %	+15,5	+402,7 %
Capital Invested	203,2	100,0 %	201,2	100,0 %	+1,9	+1,0 %

Only the substantial, significant differences to the previous year are illustrated. Due to capital invested structure in German language figures are shown with "," instead of "." as delimiter symbol.

Free Cash Flow Q2 2015

► Operative cash flow increases considerably

► Higher investment budget and bringing forward of investments increases outflow of funds from investment activities

Free Cash Flow H1 2015

• ► Operative cash flow and increased investments reduce free cash flow
• ► Investment budget higher, investments made earlier than in 2014
• ► Purchase price payments according to schedule

ROCE as of June 30

► 12-month EBIT increases ROCE in spite of increase in capital employed

* ROCE = EBIT / Capital Employed

Agenda

• 1. New Products and Results
• 1. Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)

3. Outlook

1. Q&A

Outlook 2015

		Target		Change 2014
Photos	digital analogue total	2.10-2.15 billion 0.065-0.070 billion 2.17-2.22	photos photos billion photos	-5% to -2% -27% to -21% -6% to -3%
CEWE PHOTO BOOKS		6.0-6.1	million books	+1% to +3%
Investments*		46	EUR millions
Revenue		515-535	EUR millions	-2% to +2%
EBIT		32-38	EUR millions	-2% to +16%
EBT		30-36	EUR millions	-5% to +14%
Earnings after tax		20-24	EUR millions	-6% to +12%
Earnings per share		2.87-3.45	EUR	-6% to +12%

* without acquisitions (companies or customer bases)

► Outlook for 2015 unchanged and confirmed

EBIT Development

in Euro millions

• ► Clear continuation of the positive development of core business
• ► Actual profitability currently hidden by online printing start-up costs

Agenda

• 1. New Products and Results
• 1. Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)
• 1. Outlook
• 4. Q&A

Q&A -Session

Analyst Conference Call Oldenburg

August 11, 2015