Speech of Georg Gayer

Chairman of the Management Board

Only the spoken word applies

Ladies and gentlemen,

On behalf of TAKKT AG, I would like to warmly welcome you to this year’s financial statements press conference.

In the usual manner, I would like to discuss the events of the year 2002 regarding TAKKT AG and the influencing factors on our business. Subsequently, Dr. Zimmermann will present in detail the figures of the TAKKT group. We will be happy to answer your questions at the end of our reports.

Increased profitability despite adverse economic environment
The last financial year can be summarised in one sentence. Despite the difficult economic environment, TAKKT AG is succeeding in maintaining and in further extending its position as international market leader in B-to-B mail order for factory, office and inventory equipment.

Higher EBITDA margin on slightly lower turnover
At this point I would like to make some key points.

First: In 2002 the general economy and the development of exchange rates impacted our business. Overall, TAKKT AG thus posted a turnover decline of 4.9% to some € 784 million. We are able to partially compensate for the turnover decline in Germany with growth abroad. We thus benefited from our international alignment. Although we are not satisfied with the development of turnover, according to industry figures available to us, we were able to gain further market share.
Second: Despite adverse external circumstances, we increased profitability. At 10.9%, the EBITDA margin is within the corridor we had set for our long-term development. What is more important is that it is slightly above the figure of 10.5% from the previous year. We considerably increased profit before tax and cash flow, achieving a growth of more than 9% for both of these key ratios.
Third: Despite the decline in turnover, in terms of finances TAKKT AG remains an extremely sound company. Last year we increased our equity ratio and further reduced liabilities.

Weak general economic situation characterises business in North America and Europe
Let us look more closely at the figures. As I said, turnover at TAKKT AG, declined by 4.9% or some € 40 million. Naturally, we had hoped to present growth figures again in 2002.

Unfortunately this is not the case. In particular, the economic developments forecast did not materialise. The upward trend in the US economy was considerably slower than expected and was also fuelled almost entirely from the private sector. This caused us problems in three respects. Firstly, we generated some 44% of turnover in the USA. When business in this region falters, it has a perceptible influence on the whole group.

Secondly, the USA was not able to play its role as the growth engine for the rest of the world in the accustomed fashion. Economic development thus suffered in Europe, and with it our business in Europe. Thirdly, the weak US dollar negatively impacted our figures. Had exchanges rates remained stable in comparison to 2001, the turnover minus would have been only 3.0%.

Earnings remain strong at TAKKT AG
On the other hand, we kept the EBITDA position (earnings before interest, taxes, depreciation and amortisation) stable – an indication of the profitability of the TAKKT business model.

Even if we did not increase the absolute level of EBITDA, we consider that in the circumstances widening the margins to 10.9% was a success. The increased gross margin and rigorous cost management made a material contribution here.

We also generated an improvement with cash flow. This figure reached with € 53 million an increase of 9.7%. Profit before tax was even stronger with a 9.9% increase to € 39.0 million. You see that even under difficult conditions, TAKKT is a profitable company.

Stabilisation after rapid expansion in previous years
In 2002, group investments were at the same level as in previous years, if one excludes acquisitions. After the strong expansion in previous years, TAKKT AG focused on organic growth and further restructuring in the past financial year.

Furthermore, in the last financial year our object was to place the companies founded in previous years in their respective markets with suitable funding and attention, and to develop their market positioning.

TAKKT AG is a profitable and soundly financed company. You can see this from the increase in the equity ratio. It moved up from 24.8% to 27.7%. Parallel to this we were able to reduce indebtedness. We thus have a stable financial basis for the further growth of our company.

Economic forecasts not fulfilled
As stated, I would like to explain the inter-relationship of the general development of the economy and on business trends at TAKKT AG. As an introduction, we have summarised the development of the forecasts, and then what actually happened. You see that all of the predictions have incorrectly estimated development in 2002. The positive expectations have moved to uncertainty. Instead of additional growth, growth rates are declining. All this impacts our business.

Generally speaking, our clients order relatively more infrequently from us in times of economic difficulty and the value per order is lower. Nonetheless, order numbers were kept almost constant at just over two million. This is due to the fact that we gained some 200,000 new clients last year, increasing the our number of clients to approximately 2.6 million.
As a result of the difficult economic situation, the average order value within the TAKKT group declined by 2.8%. In 2002, the figure was € 381.

Gross margin hardly impacted by the general economy
Our gross margin has remained stable. Indeed, in the last financial year it even improved by half a percentage point to 40%. One reason for this is that in relative terms our product range is not price-sensitive. Furthermore, with the extended warehouse in Kamp-Lintfort, KAISER + KRAFT EUROPA extended its warehouse business. This also improved the gross margin. And curiously enough the economic slump even helped us in one respect. There were few large orders on which we would have had to grant a discount.

Mail order business to increase to the detriment of wholesale and retail
The development of the economy only has limited influence on the growth of our client portfolio and the market share. In general, it can be assumed that the mail order business will gain further market share, at the expense of the retail and wholesale business. TAKKT AG also benefits from this trend.

This is an initial overview which I would like to go into in more detail at the end of my comments today. Before that, I would like to tell you about the highlights of recent months and to say a few words about the performance of the TAKKT share.

KAISER + KRAFT EUROPA, the company in our group which posts the strongest turnover, pushed forward the expansion into Eastern Europe with the new foundation of KWESTO in Slovakia. The success of KWESTO shows that it was correct to establish a second pillar in Eastern Europe alongside KAISER + KRAFT. The result is a strong presence on a promising market, which should become even more interesting with the imminent expansion of the EU to the east.

TAKKT AG ventures into Asia
With a new establishment in Japan, KAISER + KRAFT EUROPA have demonstrated that we can think about and invest for the future, even in difficult times. I will deal with the move into Asia in more detail later. Without a doubt, the highlight last year at Topdeq, our brand for design-oriented office furniture and accessories, was the commissioning of the extended warehouse in Pfungstadt. With an investment volume of € 6.5 million, Topdeq realised the largest capital investment in its history in the form of a leasing project.

Since 1 January 2003 Topdeq also has a new, more efficient company structure, comparable with the structure at KAISER + KRAFT EUROPA. As a result, the decision-making paths are even more rapid, the administration costs will decline and the financial structure has been made more transparent.

Our American division K + K America has pushed forward the expansion to Mexico. In January 2003, the company founded in Mexico by K + K America distributed its first catalogue in Spanish.

Successful system business to be introduced on Japanese market
I would now like to return to our new company in Japan, the second largest economy in the world. Japan is the first location we have in Asia. We wish to continue our successful strategy there, to transfer our successful system business to new regions. When we enter a new market, we deploy our tested business model, a professional product range and mature processes and systems.

In the medium term, we want to continue the development of Asia for our group. Thus the step onto the Japanese market is part of the learning process for us. We selected the country for its excellent infrastructure and its great market potential.

We are anticipating establishing ourselves on the Japanese market in three stages. Until next year we are restricting ourselves to the Kanto region, where the capital Tokyo is located. This is the most important region of the country economically.

Subsequently we will expand into the adjacent area of Chubu, where 14% of the Japanese gross domestic product is generated. In the third step, we intend to operate in the Kansai region. These three regions generate two thirds of the economic performance in Japan and thus are particularly interesting for us. Alongside regional expansion, we are developing our product range on an ongoing basis.

Expansion in Asia aligned to development of the economy
The move to Asia is the logical consequence of the company’s development. After all, we are already represented all across Europe and North America.

In January 2003, KAISER + KRAFT Japan distributed a catalogue for the first time. The range is initially restricted to basic products. After a test phase, we will extend the product range and increase the number of catalogues printed. In this way we can align our activities in Japan to the economic situation and client response. In Japan next year, we are keeping our motto of “Quality not quantity”.

Share performance does not reflect earnings strength at TAKKT AG
Allow me to make a few remarks on the performance of the TAKKT share last year. In the first few months month, our share decoupled itself from the negative trend on the stock markets, in line with the development of turnover and earnings at TAKKT AG. However, there is no explanation in terms of fundamental data for the performance of the share in the second half of the year. It does not reflect the high profitability and the strong cash flow at our company.

We will continue with value-oriented management at TAKKT AG in the interests of the shareholders, and will continue to face the demands of the capital markets. We see the inclusion in the Prime Standard as recognition for our previous work. The TAKKT share will remain part of the SDAX.

At the end of my report, I would like to outline briefly the activities being planned for 2003. We anticipate another difficult year, one however that we will cope with. We will continue to improve our product range and the service and will communicate this to the target groups by means of optimised advertising media. Here we are expecting to benefit from the new foundations made last year. In view of the uncertainty of the global political and economic situation, I ask for your understanding that I can only provide you with a target corridor for the 2003 financial year. Taking account of the expected economic development, we anticipate organic, currency-adjusted growth of 3% to 5% in 2003. If the dollar’s weakness continues, this will impact the turnover figures reported in euro in the current year, but has no impact on group margins. We thus retain the target of an EBITDA margin of between 10% and 12%.

I would like to thank you for your attention, and hand over now to Dr. Zimmermann, our board member for finance and controlling. He will discuss the annual financial statements.