Speech of Dr Florian Funck

Ladies and Gentlemen,

I would also like to extend a cordial welcome. For me, this is sort of a premiere today, as this is my first financial statements press conference as TAKKT’s Chief Financial Officer. I am therefore pleased that I can present such positive figures. Now that Mr Gayer has summarised the financial year 2004, I will explain some key figures in greater detail.

Turnover TAKKT group: organic growth by 5.8 percent
Let’s begin with turnover. Following three economically difficult years, our turnover increased again in 2004 - by as much as 5.8 percent in currency-adjusted terms. This growth is attributable to the fact that the three parameters that determine our turnover pointed upwards. The average order value as well as the customer and order numbers increased. The number of orders for example increased approximately 3 percent and are now well above two million.

Given that we generate almost 40 percent of our turnover in North America, the weak US dollar had an adverse impact on our key figures in euros. I would like to give you one figure to show what this means. If exchange rates had remained unchanged, our turnover would have been EUR 28 million higher - which represents approximately four percent of our revenues. I will come back to the impact of fluctuating exchange rates when discussing some of our other key figures.

Turnover
2000   € 762.8 m
2001   € 824.1 m
2002   € 783.7 m
2003   € 713.9 m
2004   € 727.6 m

Turnover TAKKT group: diversified portfolio
But our strong international presence in over 20 countries is also a big advantage as it clearly helps to compensate for cyclical fluctuations in individual regions.

This chart shows a breakdown of turnover by divisions and regions. KAISER + KRAFT EUROPA continues to generate the highest turnover and contributed 52.2 percent to total group revenues, up approximately 2 percentage points on the previous year. Topdeq’s share declined slightly to 10.3 percent. K + K America was particularly affected by the exchange rates, with turnover in euros down by a bit less than two percentage points to 37.6 percent.

The tendencies in the divisions are also reflected in the regional breakdown of group turnover. The German market accounted for a slightly increased share of 24.8 percent. The increase was somewhat more pronounced in TAKKT’s other European markets, which contributed for 36.0 percent to total turnover - this is a plus of 1.4 percentage points on previous year. The share of the US companies declined to 39.1 percent as a result of the weak US dollar. The other regions, namely Japan and Mexico, accounted for 0.1 percent of total group turnover.

E-business TAKKT group: continuous increasing impact
E-business is of increasing importance for our business. Turnover of e-business increased last year by 30 percent over the previous year and now accounts for over 7 percent of our total turnover - that is over EUR 50 million.

E-business at TAKKT includes orders placed on the website of our sales companies. Furthermore we also have e-procurement projects: in this instance of e-business TAKKT produces electronic catalogues, which are included directly in the customer's own network. The products disclosed are those as required by the customer. This is of advantage to both sides: The customer can place orders easily, quickly and cheaply; for TAKKT it means better customer loyalty and more turnover.

The number of e-procurement projects continues to increase. The KAISER + KRAFT EUROPA division has already completed such projects for more than 200 customers.

Gross profit: increase of margin to 40.8 percent
In 2004, we were once again able to moderately expand our gross profit margin to 40.8 percent. This favourable development is attributable to several factors. First, we negotiated further improved purchasing terms. Second, the expansion of the Kamp-Lintfort mail order centre had a positive effect, given that the stock shipment business generally generates higher gross profit margins than the drop shipment business as it allows us to pool purchasing volumes. But I also have to say that we still miss some larger orders. This had a positive effect on the gross margin as larger orders generally go along with higher rebates than the normal order with an order value of about EUR 340.

EBITA: margin at upper end of target corridor of 9 to 11 percent
Earnings before interest, tax and amortisation, or EBITA for short, rose by 11.1 percent to EUR 78.2 million. Our profitability also improved, as the EBITA margin climbed from 9.8 to 10.7 percent.

There are several reasons for this increase in the EBITA margin. The foundation was laid by the higher gross profit margin. Secondly, staff productivity has increased. Thirdly, despite an increased number of catalogue copies, we managed to reduce our advertising expenses.

EBITA
2000   € 81.3 m   10.7%
2001   € 76.4 m     9.3%
2002   € 75.1 m     9.6%
2003   € 70.3 m     9.8%
2004   € 78.2 m   10.7%

Profit before tax: noticeable increase
Profit before tax rose by 26.8 percent to EUR 51.5 million. If exchange rates had remained unchanged, profit would even have been approximately EUR 2 million higher - here again, the currency effects are making themselves felt. The profit margin stood at 7.1 percent. It was positive that the good free cash flow and the reduced debts allowed us to further reduce our interest expenses. At the same time, we also benefited from the weakness of the US dollar, which reduced interest expenses in the translation to euros. The increase in US interest rates in the course of the year had a moderately adverse impact on the interest result, though.

Profit before tax
2000   € 55.5 m    7.3%
2001   € 35.5 m    4.3%
2002   € 39.0 m    5.0%
2003   € 40.6 m    5.7%
2004   € 51.5 m    7.1%

Net income before minority interest: increase due to lower tax rate
The TAKKT group increased its net income before minority interest to EUR 33 million. The margin rose to 4.5 percent. This increase is also due to a decreased tax quota which benefited from a tax refund in 2004.

Net income before minority interest
2000   € 33.5 m    4.4%
2001   € 19.4 m    2.4%
2002   € 24.5 m    3.1%
2003   € 24.4 m    3.4%
2004   € 33.0 m    4.5%

Cash flow: high level proves profitability
At EUR 57.7 million, cash flow reached a new record level. Given that depreciation and amortisation were more or less on a par with the previous year, this increase is mainly due to the improved operational result - which testifies to the TAKKT group’s high profitability. The cash flow margin climbed to 7.9 percent.

Cash flow
2000   € 55.1 m    7.2%
2001   € 48.3 m    5.9%
2002   € 53.0 m    6.8%
2003   € 50.6 m    7.1%
2004   € 57.7 m    7.9%

Motivated employees allow for gain in profitability
These positive figures are the result of the excellent work of our many employees all over the world. We have clearly improved our profitability in recent years. This allows us to handle a larger order volume with the same headcount. Within the individual divisions, the number of full-time employed people has also remained largely unchanged in 2004. As of 31 December 2004, the TAKKT group employed 1,840 full-time employees. 846 of them worked at KAISER + KRAFT EUROPA, 214 at Topdeq and 754 at K + K America. TAKKT AG, the holding company, employed 26 people. On average, TAKKT had 1,851 full-time employees in 2004.

Employees (full time basis, average)
2000   1,674
2001   1,973
2002   1,914
2003   1,860
2004   1,851

Consolidated balance sheet: write-offs and currency effects reduce total assets
Let’s now take a look at the consolidated balance sheet, which continues to be characterised by a solid financial structure. Let’s look at the assets side first.

At EUR 24.7 million, scheduled amortisation of goodwill and depreciation of intangible and fixed assets was more or less on a par with the previous year. The capital expenditure of EUR 8.6 million is on normal level within the range of 1 to 2 percent of turnover. The company’s fixed assets totalled EUR 285.9 million.

Within the current receivables and assets we increased our inventories with a view to improving our delivery service by exploiting the extended capacities of the Kamp-Lintfort mail order centre. Trade receivables increased over the previous year due to the higher turnover, especially in the fourth quarter. As a result, current receivables and assets rose to EUR 166.6 million.

As of 31 December 2004, TAKKT AG’s total assets amounted to EUR 457.8 million, down 4.8 percent on the previous year. The decline is attributable to exchange rate effects in an amount of approx. EUR 14 million as well as to scheduled goodwill amortisation.

Consolidated balance sheet: strengthened equity ratio of 39.6 percent
The liabilities side looks very favourable. As a result of the good net income, shareholders' equity climbed to EUR 181.1 million and would have been even EUR 3.5 million higher if exchange rates had remained unchanged. The equity ratio - excluding minority interest - reached a record level of 39.6 percent.

Borrowings were down 52.3 million on the previous year. TAKKT used EUR 43.6 million of the cash flow to repay debt. Exchange rate effects reduced the company’s borrowings by EUR 8.7 million. As of 31 December 2004, net borrowings stood at EUR 182.3 million.

KAISER + KRAFT EUROPA: main contributor to turnover with high profitability
Let’s now take a look at the development of the three divisions of the TAKKT group.

2004 was a very positive financial year for KAISER + KRAFT EUROPA. At EUR 379.5 million, turnover was up 6.1 percent on the previous year. Based on stable exchange rates, turnover would have been up by 6.2 percent. The increase is mainly attributable to higher order numbers but also to a higher average order value.

Nearly all KAISER + KRAFT EUROPA companies contributed to this positive trend. Strong growth was achieved by the subsidiaries in Japan, Eastern Europe, Norway, Switzerland and France. Domestic turnover also picked up noticeably following a disappointing first quarter. Business was weak only in the Netherlands.

KAISER + KRAFT EUROPA’s profitability increased at a high level. The division's EBITA reached EUR 61.2 million, while the EBITA margin climbed from 15.7 to an excellent 16.1 percent, mainly thanks to the increased gross profit margin.

KAISER + KRAFT EUROPA
           Turnover       EBITA
2000   € 366.4 m     € 48.3 m
2001   € 383.3 m     € 53.2 m
2002   € 367.2 m     € 55.1 m
2003   € 357.9 m     € 56.0 m
2004   € 379.5 m     € 61.2 m

Topdeq: costs for repositioning
Let’s now take a look at Topdeq. Our second division performed relatively well in a persistently difficult environment. While the weakness of the European office furniture market again weighed on the company’s turnover in 2004, the effects were not as strong as in 2003. As in the previous year, Topdeq generated EUR 74.6 million in turnover. Based on stable exchange rates, however, turnover would have been up by 1.7 percent.

Demand for office furniture in Germany, Switzerland and, above all, the Netherlands was weak. By contrast, Topdeq France continued to develop favourably. Turnover of the US subsidiary stagnated in the first six months of the year, and rose noticeably in the second half of the year. The US market has eventually accepted the price adjustments implemented by Topdeq USA in response to the weak US dollar in the first quarter.

The weak US dollar had an adverse impact on the Topdeq group’s gross profit margin, however. Moreover, personnel measures at the management level had a non-recurrent effect on earnings. As a result, EBITA declined to a negative EUR 2.2 million and the EBITA margin stood at a negative 2.9 percent.

Topdeq
           Turnover      EBITA
2000   € 87.1 m      €   7.7 m
2001   € 83.0 m      €  -0.4 m
2002   € 79.3 m      €  -1.5 m
2003   € 74.6 m      €  -1.2 m
2004   € 74.6 m      €  -2.2 m

K + K America in USD: increased turnover and profitability
This chart shows K + K America in US dollar. The company generated USD 339.8 million in turnover, up 7.0 percent on the previous year.

Nearly all subsidiaries of K + K America developed very favourably. Both total order numbers and the average order value increased. C&H Distributors and Hubert Company clearly felt the improved economic situation. Incoming orders exceeded our expectations also at C&H Mexico, K + K America’s latest subsidiary. Good figures were also presented by Avenue Industrial Supply, our Canadian subsidiary. The situation was different at Conney Safety Products, whose business was affected by the decline in employment in the manufacturing sector. Since mid-year, the situation has improved, however, so that we are cautiously optimistic about the company’s future development.

K + K America clearly increased its profitability. EBITA reached USD 33.4 million and the EBITA margin stood at 9.8 percent. The good result is mainly attributable to two factors; the division has made more efficient use of its capacities and cut its advertising expenses without reducing the number of catalogue copies.

K + K America in USD
           Turnover       EBITA
2000   $ 285.6 m     $ 30.1 m
2001   $ 320.5 m     $ 26.1 m
2002   $ 318.0 m     $ 27.3 m
2003   $ 317.7 m     $ 25.5 m
2004   $ 339.8 m     $ 33.4 m

K + K America: decline in turnover due to currency effect
Let’s now look at K + K America’s figures in the reporting currency, the euro. This comparison shows just how strong the exchange rate effect is. Due to the weak US dollar, turnover declined by 2.8 percent to EUR 273.5 million, while EBITA nevertheless increased noticeably to EUR 26.9 million.

K + K America in EUR
           Turnover       EBITA
2000   € 309.3 m     € 32.6 m
2001   € 357.9 m     € 29.1 m
2002   € 337.4 m     € 28.9 m
2003   € 281.4 m     € 22.6 m
2004   € 273.5 m     € 26.9 m

Key figures per share: stable dividend and pay out ratio
Let’s now look at the key figures per share. At 78 cents, the cash flow per share has reached a record level. Earnings per share also increased and reached 44 cents. Based on these good results, we will propose to the Annual General Meeting to pay out a dividend of 15 cents, which represents an increase of 50 percent and a payout ratio of 34 percent of net income.

TAKKT share: price advance reflects potential
We not only reported an increase in turnover, earnings and the dividend. Also the share price performance is positive. As you know, the share was admitted to Deutsche Boerse’s Prime Standard on 1 January 2003. Our admission to this premium segment is an expression of our active, open and timely communication with investors.

In the year under review, the total number of shares remained unchanged at 72.9 million. As of 31 December 2004, this represented a market capitalisation of approximately EUR 565 million.

The shareholder structure of TAKKT AG also remained largely unchanged. Our main shareholder, Duisburg-based Franz Haniel & Cie. GmbH, holds 72.7 percent of the shares, while the remaining 27.3 percent are held by a wide range of international investors.

Let’s now take a look at the performance of the TAKKT share. The increase in the share price from EUR 5.90 at the end of 2003 to EUR 7.75 on the reporting date reflects the good business development. In the second half of the year, we outperformed the SDAX. In the course of the year, the share gained more than 31 percent - we hope that our shareholders are satisfied with this increase in value.

TAKKT: outlook 2005
Finally, let’s take a look at the future. What are TAKKT management’s expectations for 2005?

As Mr Gayer already said, there will hardly be any positive impulse from the economic side. This becomes obvious when looking at the forecasted GDP-growth rate for 2005. For TAKKT the trend in the GDP-growth rate is more important than their level. And for 2005 we see a negative trend in our core market.

Against the background of the planned start-ups and the “Perfect Service“ quality initiative, we are nevertheless cautiously optimistic for 2005. We expect TAKKT to achieve currency-adjusted organic growth of at least three percent. Our investments in the five start-ups will have an impact on profitability. The reasons for that are the higher catalogue costs for our new markets, which generate relatively low turnover in the beginning as a customer base has to be established step by step. The EBITA margin will nevertheless reach between nine and eleven percent again. We expect it to be in the upper half of this target corridor – meaning 10 plus x.

The capital expenditure 2005 will be above the 2004 level. This is due to the implementation of a new common IT platform for financial accounting and inventory management for companies within the K + K America division. The aim of the project is to increase the efficiency of the business processes, to analyse customer information more comprehensively and to further expend the range of services. Capital expenditure will therefore be at the upper end of our long term average of 1 to 2 percent of turnover.

At this point I would like to finish my explanations. Overall, I think, the situation outlined by Mr Gayer and myself today is quite favourable. The figures for the year 2004 I just presented give proof of the sustained profitability of our business model. I am convinced that we are well positioned to continue the success story of TAKKT AG in the coming years.

I would like to thank you very much for your attention. My colleagues and I will now be happy to answer your questions.