Speech of Georg Gayer
Chairman of the Management Board
Financial Statements Press Conference of TAKKT AG on 14 April 2000 in Stuttgart
Only the spoken word applies
Ladies and Gentlemen,
Let me welcome you on behalf of the management board of TAKKT AG.
For us, the 1999 financial year was an exciting and eventful year. The re-structuring efforts, the spin-off, the initial public offering, the advancement of our electronic commerce activities and - for us somewhat expectedly -very successful results represented the most important events.
Let us look back:
The road towards independence
TAKKT AG was established on 1 March 1999, and, by means of a spin- off, took over the former Mail Order Division from GEHE AG on 1 July 1999. Since 15 September 1999, TAKKT AG has been listed on the Frankfurt and Stuttgart stock exchanges.
Spin-off strengthens focus on core competencies
Our way to independence was something very special. It was the first classic spin-off at a German stock exchange, which was forcefully advanced by both ourselves and GEHE AG. Now both companies can focus more strongly on their core competencies in their specific business segments. Furthermore, as you may know, the capital markets prefer companies that focus on transparent and clearly defined core areas.
Uncertainties overcome - TAKKT's share price potential recognised
Initially uncertainties did exist. During the first financial analysts' conference and subsequent roadshows we illustrated TAKKT's business activities, our position in the market, and our clearly defined growth strategy with e-commerce as the central component. We were convincing: analysts as well as investors are now convinced of our business and our strategy and have recognised the strengths of the TAKKT share:
TAKKT is the leading business- to- business mail order supplier for office, business and warehouse equipment in Europe and North America.
TAKKT offers an optimal portfolio of strong, national brands and specific know-how with little risk.
And not only that: e-commerce is the next logical step in the mail order business, and in that arena TAKKT is already positioned significantly better than its competitors.
Due to its own sound policy of expansion and as part of a quickly consolidating industry, TAKKT has an enormous growth potential.
The TAKKT share - an outperformer
Experts value the TAKKT share as an outperformer with great growth potential. This also has an impact on corporate value. Given that the TAKKT group is a pure business- to- business venture with a sound Internet strategy and global activities, its shares are a unique opportunity on the short list of German investors.
This claim was confirmed by the listing of TAKKT in the SMAX in March 2000. With a market capitalisation of currently about Euro 700 million, we are one of the five largest companies in this index segment. Of course, our next goal is an SDAX listing at the earliest possible date.
The performance of the TAKKT share
In the meantime, our share price performance shows very clearly that the market has recognised the value of our company.
The share was initially listed at Euro 6.50. As you know, every GEHE shareholder received the same number of TAKKT shares at no extra cost. After those investors which only invest in pharmaceutical and/or DAX companies sold their TAKKT shares, the share price decreased to Euro 5.10, but in the meantime we have found our own shareholders. Taking the share price from Tuesday this week, the share has achieved a performance of over 60 % within seven months.
TAKKT has found its own shareholder structure
At 31 December 1999 the shareholders were as follows:
Franz Haniel & Cie. GmbH: 67.9%
AXA Colonia Konzern AG: 10.0%
Institutions and other: 22.1%
Modern corporate structure ensures growth for the Group
Our position is excellent. We pursue a growth- oriented strategy, and we have an efficient, modern structure with full Internet capability.
This modern structure also means that our subsidiaries enjoy a maximum degree of independence. Our key philosophy is as follows: "As much centralisation as necessary and as much market proximity as possible."
This is the only way to make full use of the synergies and economies of scale in the scaleable systems approach perfected by TAKKT AG and to expand our individualised customer service. We are able not only to transfer our know- how to other products and regions at any time but also to use the Internet as a comprehensive distribution channel.
The assignment of responsibilities within the company illustrates the "healthy blend" of centralisation and market proximity.
Management holding guarantees exchange of knowledge
The management holding company TAKKT AG represents the top of our group. Its most important task is to enable the circulation of knowledge within the group without restricting the separate market identity of each subsidiary. This flow of knowledge gives the entire group the decisive advantage of speed and competitiveness which is critical to success in our dynamic business. We constantly use our experience and know- how advantage to improve the group's positioning:
European supplier programme implemented
In 1999, TAKKT AG implemented a European Supplier Programme with the aim of significantly improving the conditions under which we purchase over 30,000 products and harnessing additional synergies by selecting pan- European suppliers according to given standards.
Intermediate holdings with fundamental central functions
The management holding company acts as a know-how intermediary and has three intermediate holding companies and 28 operative companies in Europe, the United States and Canada.
The following core competencies are centralised within the intermediate holding companies: procurement, logistics, mailing lists and customer databases as well as the centralised preparation of advertising media. They are divided into the following divisions:
KAISER + KRAFT EUROPA, consisting of KAISER + KRAFT, Gerdmans and Gaerner,
Topdeq and K + K America, consisting of C & H Distributors, Avenue Industrial Supply and Conney Safety Products.
Apart from the spin- off and the initial public offering, these were our 1999 highlights:
1. Expansion of Kamp- Lintfort
The European mail order centre in Kamp- Lintfort, which consists of a 24- metre high- bay warehouse, is the logistics heart of KAISER + KRAFT EUROPA. This facility currently serves approximately 800,000 customers throughout Europe.
Given the significance of the logistics centre for the expansion of the online mail order business, it was decided in 1999 to expand capacity from 12,000 to 28,000 euro pallet spaces. The expanded logistics centre, which will be operational by mid- 2001, will be able to house over 5,500 different items. TAKKT's subsidiary KAISER + KRAFT EUROPA is investing approximately Euro 17 million in the expansion of this leasing project. Construction is scheduled to begin several weeks from now. The expansion of capacity will reduce delivery times and contribute to the growing globalisation of procurement.
2. Conversion of Gerdmans' order and warehouse processing system
Another important highlight of KAISER + KRAFT EUROPA was the conversion of the order and warehouse processing system of the Gerdmans group, which is active in all four Scandinavian countries. This is an example of how we are able to expand our scaleable systems approach without any problems. The Swedish company is now better equipped to realise the synergies of the scaleable systems approach, e.g. by exploiting economies of scale.
3. French subsidiary for Topdeq
Preparations for entering the French market by establishing the French company were a high point of 1999. This step underscores the will and ability of Topdeq to consistently implement its growth strategy. Within the European Union, France's economy is second in terms of growth, and this development will have a positive influence on Topdeq's turnover. As planned, operations started on 2 January 2000. The first quarter figures already show that Topdeq's unique product range coupled with its unique service also appeals to our French neighbours.
4. Integration of Conney Safety
After the 1998 acquisition of Conney Safety, the company was successfully integrated in the K + K America Group in 1999. This is another example of the perfected scaleable systems approach TAKKT can transfer to new products, market segments and regions in a cost- effective fashion at any time.
Unique product portfolio
All TAKKT companies represent strong brands with excellent product and regional market coverage. These brands have a high degree of acceptance in their respective markets and in most cases are the market leaders. TAKKT's modern corporate structure allows the group to maintain a portfolio that is unique in terms of its product range, services and regional presence.
Business Equipment Solutions
But TAKKT does not just offer business equipment. Given the ability to network its product and systems intelligence, the Group is also capable of offering integrated problem solutions. The decisive competitive edge of the TAKKT group resides in the intelligent linking of knowledge which centres on processes, markets and customer needs. This knowledge permits TAKKT to offer more to its customers than its competitors: product quality, service, guaranteed and rapid delivery schedules, extensive warranties and strong brands. This is what we call Business Equipment Solutions.
Positive financial year 1999
This is also reflected by irrefutable quantitative, hard facts, and in this respect, TAKKT AG is also in an excellent position: The positive business development continued during the financial year 1999. Let me give you a few figures, hopefully without taking away anything from my colleague, Dr. Zimmermann:
Compared to the previous year, group turnover increased by 16.4% from Euro 539.2 million to Euro 627.6 million.
EBITDA improved by 8.3% to Euro 70.5 million, despite the extraordinary charges relating to the spin-off and the initial public offering.
Low susceptibility to economic fluctuations
Past acquisitions and internal growth account equally for the success of TAKKT. These excellent results make one thing very clear, given the weakness of several European economies. TAKKT AG is relatively independent of fluctuations in the economic environment because its diversified product portfolio is equally successful in the most divergent regions.
Predictable dividend policy
Our shareholders should share in our success. Therefore, TAKKT AG aims at long-term and predictable dividend policies. The company plans to pay appropriate dividends based on its operational earnings capacity and taking retained earnings into account, which may be necessary for the envisioned expansion strategy to succeed.
Although the depreciation and interest charges stemming from the spin- off will reduce the domestic results of TAKKT AG in the coming years, dividends can be paid from domestic profits subject to a corporation tax credit.
Dividend of 5 cent per share
For 1999, we will suggest the payment of a dividend of 5 cents at the annual general meeting. Including tax credit, the dividend would be 7 cents per share. Without the tax credit, the payout rate would be approximately 20 percent. TAKKT shares participate in the company's profits since 1 July 1999.
If we take a look into the future, we will note the following:
E-commerce will determine the future of the mail order business
The market for office, business and warehouse equipment as well as for products related to workplace safety is undergoing rapid change. The development of e-commerce has given the traditional mail order business a new lease on life. The TAKKT Group - the largest business- to- business mail order company for office, business and warehouse equipment in both Europe and North America - is an active force in the evolution of these changes.
Especially e-commerce, e-procurement and e-payment will determine the future of the mail order industry. These developments are creating a new type of "mail order supplier", one who succeeds primarily through speed and flexibility. Our company is fully prepared for these challenges:
First, because we have been offering our products online for quite some time, and
Second, because we are largely capable of controlling merchandise streams online, independently of the type of order involved: At TAKKT, the Internet- capable infrastructure suitable for tomorrow's virtual world is already a reality.
Network strengthens position of system suppliers
We expect the volume of transactions carried out between companies through such networks to increase significantly, with major consequences for all involved:
The presence of a supplier in a customer's network increases process integration, strengthens mutual ties and gives the respective mail order supplier crucial competitive advantages, especially those who deliver total solutions. E-commerce systems that integrate suppliers into customers' merchandise management systems will therefore gain strategic importance in the future.
TAKKT begins development of an integrated e-procurement system
Since we consider this type of individualised customer care to be a strategic element, we base all our concepts on partnerships and alliances within internal and external systems. Actual development of such an integrated e-procurement system was launched in 1999.
Internet - TAKKT offers general and specific e-commerce solutions
We are pursuing a two- pronged strategy in the e-commerce segment which ensures optimum proximity to customers. We first make available a market place in which all products and services are accessible to all. In addition, we offer the above- mentioned individual solutions, especially to large customers.
Portal by InterWorld
The portal to the so- called second- generation e-commerce will be designed by InterWorld, a leading U.S. company for web design and web hosting in the business sector. We commissioned InterWorld in March of this year.
What does "second generation" mean?
1. The portal is open to other market participants; there are no time- consuming adjustments.
2. Networking with our customers will also be simpler.
3. We are able to offer our customers many more service functions than previously, for example:
- Information about product availability
- Mail order tracking
- Customised information for our clients
- Call- back button
- etc.
Knowledge is the power of TAKKT AG
Ladies and Gentlemen,
Knowledge concerning customers' needs as well as knowledge concerning the efficient use of advertising media, products, markets and logistics forms the basis of TAKKT's activities. This knowledge is the result of decades of experience which the company has gained through continuous market analyses. We are the market leader and have therefore consistently applied this knowledge in ways aimed at influencing the market. We will continue to play this role in the future.
Increase market penetration
We remain committed to our goal of increasing our market penetration in our regions and segments, using customer-oriented and knowledge- based business solutions. Given that the market for business equipment is highly fragmented, TAKKT has the necessary leverage for both growth and consolidation thanks to its excellent positioning.
Plans include:
Expansion of the product range in selected product segments;
Geographic expansion by establishing new companies and making further acquisitions; and
Extension of e-commerce.
Continued success in year 2000
In view of the foundation established in the past and a systematically implemented growth strategy, the financial year 2000 will represent a seamless continuation of the success in recent years. We expect turnover to increase in all business divisions and another positive earnings development.
Very good first quarter in 2000
The first quarter has already met our expectations. Adjusted with regard to work days and currency exchange rates, turnover increased by more than 10 percent as compared to the same quarter in 1999. During the same period, EBITDA improved almost as much. One has to keep in mind, though, that start-up losses of our new Topdeq subsidiary in France and our increased investment in e-commerce have prevented an even better performance.
Contact:
Georg Gayer
Tel.: (49) 711 / 5001-239
Dr. Felix A. Zimmermann
Tel.:(49) 711 / 5001-861