Speech of Georg Gayer

Exceeded expectations
But our expectations were exceeded not only in Eastern Europe. We exceeded our turnover and profit targets in nearly all other regions as well.

I would like to take this opportunity to thank all our employees for their commitment. Together with our partners they made an important contribution to our improved figures and to our successful performance in 2004.

The TAKKT group’s turnover rose by 1.9 percent to roughly EUR 728 million. As I said earlier, the increase would have been almost six percent in currency-adjusted terms.

Our profitability continued to improve, so that all earnings figures increased over-proportionally. Earnings per share, for instance, were up by more than 33 percent.

Thanks to improved catalogues and offerings and thanks to continued intensive customer canvassing, we won over 100,000 new customers in 2004. Compared to the previous years, however, the increase was slightly lower as a result of the poor economic outlook and the high number of business closures and relocations.

A major problem, especially in Germany, is that many of our customers have lost their confidence in the future. This is also reflected in the fact that there continues to be a lack of large-scale orders, i.e. investments in new plant capacity. Our growth is based on customers’ orders for investments in replacements and rationalisation as well as on new market share.
 
Especially in Germany, there have been no signs of sustainable economic growth so far. What is more, the situation in Germany will deteriorate even further, given that the countries in Eastern Europe can offer companies better conditions for doing business. In my opinion, the main reasons are new EU subsidies, low corporate taxes and less bureaucracy.

There are two reasons why this is less dramatic for TAKKT. First, the mail order business continues to grow at the expense of the retail business. Second, the TAKKT group already has an international presence.

The B2B mail order business generates extremely high cash flow and requires relatively little capital expenditure. As a result, the equity ratio inevitably rises significantly. At the end of 2004, TAKKT had an equity ratio of almost 40 percent.

I would like to say a few words about the mail order business in general.

You may be aware that our share price would probably have performed better had it not been for the negative buzz caused by the - partially homemade - problems experienced by a certain B2C mail order company. However, there are fundamental differences between the B2B mail order business and the B2C mail order business.

In the B2B sector, business is determined by demand. Price discounts cannot generate demand. The situation is different in the B2C sector, where additional advertising and price discounts can indeed generate additional demand. But this also means price battles, high returns ratios and high losses on receivables as customers order more than they can pay.

But these are just a few major differences between the B2B and the B2C mail order business. A full description of all the differences would simply take too long, so let’s get back to the year 2004.

Increased turnover in all divisions
Let’s take a look at the individual figures. As you can see from the chart, the TAKKT group generated EUR 727.6 million in turnover, up 1.9 percent on the previous year. It should be noted here that the fluctuations in exchange rates had an effect on euro-denominated turnover. Above all, the weak US dollar had an adverse impact. In currency-adjusted terms, turnover was up by as much as 5.8 percent. All three divisions - KAISER + KRAFT EUROPA, Topdeq and K + K America - contributed to this growth.

The operating result, i.e. earnings before interest, tax and amortisation - or EBITA for short - also developed favourably, rising by 11.1 percent to EUR 78.2 million. The EBITA margin climbed to 10.7 percent, which is at the upper end of our long-term target corridor of nine to eleven percent.

Increased profit before tax and high cash flow
Profit before tax increased at a high rate of 26.8 percent to EUR 51.5 million. Accordingly, the profit margin reached 7.1 percent. TAKKT additionally benefited from the fact that interest expenses declined again due to the lower debt level.

Thanks to the good turnover and earnings figures, our cash flow also increased at an already high level, reaching an excellent EUR 57.7 million; this represents a margin of 7.9 percent.

Capital expenditure at normal level
Let’s now take a look at capital expenditure. TAKKT invested EUR 8.6 million in the rationalisation, extension and maintenance of its operations, which means that capital expenditure was in line with the long-term average of one to two percent of turnover. We mainly invested in systems that help us improve our services and processes, such as new IT platforms.

Assured debt repayment and financing of future growth
Our business model requires relatively little capital expenditure. Given that expenses remained at a “normal” level in 2004, free cash flow increased by an impressive 20.6 percent to a new record level of EUR 49.1 million. The high free cash flow allowed us to reduce our borrowings as planned and to further increase our equity ratio.

Strengthened equity ratio and higher dividend
The result can be seen on this chart. The equity ratio - excluding minority interest - climbed from 32.8 to 39.6 percent in the course of one year. This gives us the resources to fund our future growth and to raise the dividend by 50 percent; the Management and Supervisory Boards will propose to the Annual General Meeting to pay out a dividend of 15 cents per share.

This way, we will give our shareholders an appropriate share in the company’s performance.

Corporate Governance
Before I come to our expectations for the financial year 2005, I would like to briefly address the topic of corporate governance. The TAKKT management has always attached great importance to managing the company in a transparent and responsible manner. We therefore expressly endorse the German Corporate Governance Code and fully comply with its recommendations save for the following two exceptions.

Given that the Supervisory Board of TAKKT AG is relatively small, we still do not consider it necessary to set up an audit committee.

Nor will we provide individualised information about the compensation of the members of the Management and Supervisory Boards. We are convinced that individualised figures would hardly be more meaningful than the cumulative compensation. It would, however, invade the Board members’ privacy.

A few more words about the ongoing discussion about an individualised disclosure of the full compensation and fringe benefits of Management Board members.

• If disclosure becomes mandatory, there should be no exceptions whatsoever - neither for members of parliament nor for Board members or managers of public-law companies.
• A disclosure will definitely not lead to lower compensation but rather to a further increase in compensation - as the example of the USA has shown.
• Another example of the consequences of a disclosure: How do you explain to a manager in a job interview that he will earn less than his predecessor?
• And finally: German society has much more important things to do than to discuss this issue for months.

Our full declaration of conformity can be found on our website and in our Annual Report.

Outlook 2005
This takes us to the final topic, the outlook on the year 2005. How will TAKKT perform this year?

We expect to see hardly any positive economic impulse in Europe and North America. The reasons are the budget deficits on both sides of the Atlantic; high raw material prices; the euro / US dollar exchange rate and governments’ passiveness with regard to economic policy.

We are nevertheless cautiously optimistic. Our solid earnings and financial position forms a good basis for further growth - with our existing operations, start-ups and acquisitions.

In the coming months, we will establish five new companies on three continents for an even broader-based international presence.

Provided that the authorities will grant the required approvals, KAISER + KRAFT China will mail its first catalogue in autumn 2005. However, the People’s Republic is not only an interesting output market but also an attractive procurement market. Going forward, KAISER + KRAFT EUROPA and K + K America will increasingly source products from this Asian country - provided, of course, that they meet our high quality standards.

Moreover, KAISER + KRAFT will soon have a presence in Turkey. The new subsidiary in greater Istanbul will sell the most successful products in the KAISER + KRAFT range. Starting May 2005, the company will mail catalogues in the country’s economically most important region between Istanbul, Izmir and Ankara.

KWESTO, our specialist brand for Eastern Europe, will expand to Romania, where KWESTO will be the first renowned B2B mail order company. This pioneering role will allow the company to clearly make its mark on this up-and-coming market. KWESTO plans to mail the first catalogue in autumn 2005.

Topdeq will establish a company in greater Brussels to make inroads into the Belgian market. Thanks to the new inventory management system, the company can offer its customers a 24-hour delivery service, with products supplied directly from the Pfungstadt mail order centre. The first French and Flemish catalogues will probably be mailed from mid-2005. Besides the start-up in Brussels, Topdeq will focus on improving its efficiency, services and turnover in 2005.

Expansion is also an item on K + K America’s agenda again. Three years ago, Hubert, the US subsidiary, mailed its first catalogue to Canada. Business has meanwhile developed so positively that Hubert will establish a subsidiary in greater Toronto in 2005.

We have set ourselves ambitious objectives for 2005, not only in terms of market presence. We also aim to further improve our quality. After all, TAKKT’s exemplary service is a major argument for our customers to buy our products. We will therefore continue our “Perfect Service” project in 2005 to improve our performance in all divisions. This applies to processes and services as well as to catalogues, mailings and product ranges.

Five start-ups and a group-wide quality initiative - as you can see we have great plans. I am convinced that the above projects will help us make good progress. They will lay the foundation for continued dynamic growth in the coming years and help us expand our market position. We expect to grow by at least three percent in currency-adjusted terms in 2005.

I would like to close my presentation with this positive outlook. Dr Funck will now explain to you the details of our financial statements.

Thank you very much for your attention!