Speech of Georg Gayer

CEO of TAKKT AG

Only the spoken word applies.

Ladies and gentlemen
A warm welcome to this year’s financial statements press conference of TAKKT AG. Today, together with my colleagues, I would like to inform you about the development of TAKKT Group’s business in the year 2007.

Firstly I would like to report the key developments and highlights of the past year. After that, Dr Funck will present the figures of TAKKT Group. Then I will inform you about our strategic agenda and our forecasts for 2008. And finally we will be available to answer your questions.

I would like to start with three important personnel changes – one on the TAKKT Supervisory Board and the others on the TAKKT Management Board.

Since 1 January 2008, Alexander von Witzleben has been the new Chairman of the Supervisory Board of TAKKT AG. He replaces Prof. Dr Klaus Trützschler, who now acts as his deputy. This change reflects the changed responsibilities for TAKKT on the Management Board of Franz Haniel & Cie. GmbH, TAKKT’s majority shareholder.

With Thomas A. Loos we lost a member of the TAKKT Management Board in July 2007 for health reasons. He was responsible for our North American division, K + K America. I have assumed his duties on a temporary basis until the end of April. With effect from 1 May 2008, Dr Felix A. Zimmermann will take over the division as Deputy Chairman of the Management Board.

With Dr Zimmermann we have gained a colleague who is totally committed to B2B mail order. He was our CFO from 1999 until May 2004 and played a major role in the company’s spin-off and the IPO.

TAKKT 2007 – continues on growth track
Ladies and gentlemen
The year 2007 was marked by our successful strategy of international diversification. TAKKT Group again significantly increased its turnover and profit figures – and grew more strongly than expected. We were able to achieve this success despite uneven economic conditions worldwide. Economic growth declined in the USA, while remaining relatively stable in Europe. In this challenging environment, TAKKT gained both market share and new customers. The Group finished the financial year with a new record turnover of EUR 986.2 million. This corresponds to an increase of 2.9 percent over 2006. Adjusted for currency fluctuations and the turnover of the North American company Conney Safety Products LLC (Conney), which was sold with effect from 30 September 2007, organic turnover increased by 9.2 percent. This figure is again significantly above our long-term average of around six percent per year.

The profitability of our Group also developed encouragingly in 2007. With an EBITDA margin of 14.4 percent we are above our long-term target corridor of 11 to 13 percent.

Profit for the period under review grew even more strongly than turnover, by some 27 percent. Contributors to this, alongside further improvements in efficiency, were lower interest expense and a slightly reduced tax ratio.

We could also record a new record for cash flow. At EUR 101.2 million, this is a three-digit figure for the first time.

TAKKT’s balance sheet structure remains very strong. Due to the sale of our US subsidiary Conney, total assets are somewhat lower than in the previous year. Due to the high operating cash flow and the proceeds from the sale of Conney, the Group was able to significantly reduce its borrowings despite substantially higher investments in 2007. Capital was spent above all on far-reaching expansion in the capacity of our warehouse infrastructure. We are now in a position to handle the increased volume of business even more quickly and with better service, and to further strengthen our market position.

Our shareholders should also benefit from our success in 2007. Therefore we plan to propose to the Annual General Meeting a substantial increase in dividends. The total dividend, consisting of an ordinary and a special dividend, will increase to 80 cent per share, which represents a tripling in comparison to the previous year. More details about this later.

TAKKT highlights in 2007
Now the TAKKT highlights in 2007:
I will begin with our largest division, KAISER + KRAFT EUROPA. This division continued its success story in 2007 in a positive economic environment, with double-digit organic growth rates for all brands. New customers, higher order numbers and higher average order values are features of a record year for this division. The international expansion was pursued in 2007. Following its multi-brand strategy, the division entered the Slovakian market with the KAISER + KRAFT brand. The first catalogues were mailed in June. Here the company could benefit from the experience of its sister company KWESTO, which has been active locally since 2002.

But not only the 2007 start-up in Slovakia was successful. The development of our young companies Gaerner in France and KAISER + KRAFT in China also exceeded our expectations. 

Turning to our second division, Topdeq, its repositioning as a premium brand continued to bear fruit in 2007. The operating result was especially positive. A premium brand should also offer its customers a premium service, so Topdeq USA has brought two new warehouse locations into operation. Topdeq can now supply its customers throughout the country in a maximum of 48 hours – a service that is unique in the USA.

Together with KAISER + KRAFT EUROPA GmbH, Topdeq is expanding its existing warehouse in Pfungstadt into a joint logistics centre for office equipment.

The start was in March 2007 and from the middle of 2008 our customers will be supplied from a warehouse that will have nearly doubled in size. Total investment in our Pfungstadt site will come to some EUR 40 million and it will offer new jobs to more than 30 employees.

Regarding our third division, I would like to begin by commenting on the sale of Conney:
The sale took place for a number of reasons. Firstly for strategic reasons. Conney mainly sells consumables in the fields of first aid and occupational safety. These products are increasingly traded as mass-market articles, leading to ever greater pressure on prices and weaker margins.

Furthermore, by selling Conney we are consistently pursuing our strategy of concentrating on B2B mail order with durable equipment.

But there were also internal reasons. We were too small to achieve better purchasing prices. Changing this would only have been possible through a substantial acquisition. Not least, the low level of synergy between TAKKT’s core business and that of Conney was another reason for us to decide to sell the company.

National Business Furniture (NBF) Group acquired in 2006, continues to complement the division optimally. The Group has discontinued its business with private customers who were being served via the pure internet brand FurnitureOnline.com. The reason for this step was that private customers are less loyal and have a show higher return rates and payment defaults; and in addition the sales potential per customer is incomparably higher in the business customer segment than with private customers. The resulting fall in turnover was more than compensated for significant increases with existing B2B customers. With an EBITDA margin of 8.6 (6.7) percent in 2007, NBF is already close to its goal of a double-digit EBITDA margin, which has been set as a target for 2010.

I must not omit to mention our jewel, Hubert. Hubert was again able to increase its sales figures and profit in the year under review.

In order to be able to handle the constantly growing volume of business and offer our customers an even wider range of products, warehouse capacity in Harrison/Ohio was nearly doubled in 2007.

TAKKT AG wishes its shareholders to benefit from this pleasing overall development. The Management Board together with the Supervisory Board will therefore propose a substantial increase in the dividend at the next Annual General Meeting. The ordinary dividend will increase by 28 percent to 32 cent per share. In addition, the flow of liquidity from the sale of Conney enables us to pay a special dividend of 48 cent. The total dividend will come to 80 cent per share. In comparison to the previous year, the dividend has thus more than tripled. In future, TAKKT will enable its shareholders to benefit directly to a large extent from the Group's profit and cash flow, as long as no further large-scale investments or acquisitions are undertaken.

At TAKKT, the shareholders profit to an above-average degree from the company’s success. But the size of the dividend is by no means the only information that is of interest. TAKKT is therefore always concerned to ensure that all interested parties are informed as quickly and completely as possible about its current business development and about all changes and special effects in the period under review. This commitment was again recognised by the business magazine Capital in its annual investor relations competition. After two third places in 2005 and 2006, TAKKT took first place in the SDAX segment in 2007.

TAKKT excels not only in its good products, successful corporate strategy and transparent financial communication. The Group can only achieve such a pleasing business development as we saw in 2007 when it can rely on a further key success factor – its staff. At this point, in the name of the Management Board, I would therefore like to thank all our staff for their great commitment.

The performance of our management and staff in the past few years is something to be proud of, and can be characterised as an exemplary development.

TAKKT 2003 – 2007: an impressive development
Turnover increased in the past five years by 38.1 percent despite the ever-weaker US dollar. Earnings before interest, tax, depreciation and amortisation, EBITDA for short, rose by 77.8 percent. This good figure was exceeded by the increase in profit before tax, which rose by 185.7 percent.

The most important figure – the profit for the period under review or profit after tax – rose by as much as 225.3 percent.

As a result, as already reported, we are in a position to increase our dividend once again. The profit distribution will have increased sevenfold in comparison to 2003.

We have achieved this through continuously improving our offers, with better service and more efficient processes – and we have achieved this without transferring jobs to “ostensible” low-wage countries. Thus we have been able to increase the number of jobs within the Group by more than 8 percent.

Now that I have presented to you the major facts and highlights of the 2007 financial year, I will hand over to our CFO Dr Funck. He will inform you in detail about all the Group’s relevant key figures for the year under review.

Outlook for 2008
Ladies and gentlemen
After such a record year, what can we expect in 2008? We believe: another successful year! TAKKT is cautiously optimistic that the Group will continue to grow. However we can base our forecast only on our own successful business model and the measures we have taken. We cannot base it on the assumption of any positive economic stimuli in 2008. I will come back shortly to the economic background. First of all let me sketch out our medium and long-term growth targets – and what TAKKT Group is doing in order to reach these targets.

Outlook: strategic agenda
Growth targets
In the last two decades, TAKKT has been able to increase its turnover by an average of twelve percent per year – through acquisitions and organic growth in roughly equal measures. For the future, management has set the goal of continuing along this growth path.

Organic growth initiatives
As I have already mentioned, TAKKT cannot place its reliance on positive economic influences, but must take its own initiatives to drive forward the company’s growth. We are continuously optimising and expanding our product range, our catalogues and our services.

Another factor in the Group’s success is the roll-out of our system business in lucrative new markets, as well as the transfer of know-how within TAKKT Group. We are profiting from this in the launch of Hubert in Europe. For the first time in TAKKT’s history, a brand is coming from the USA to Europe. Hubert is the US market leader in mail order for equipment in retailing and the food service industry, and it developed extremely positively there again last year. It is planned to mail out the first catalogue in May 2008.

Another important subject is the expansion of our warehouse infrastructure which began in 2007. In order to be able to continue to expand, create new possibilities for international procurement and further increase the number of products available for delivery to our customers directly from warehouse, we will continue with the extension of our warehouse capacities in Scandinavia and Eastern Europe in 2008.

And not least, we are continuing to push on with our multi-brand strategy. Planned for this year is the market entry of the KAISER + KRAFT EUROPA company Gaerner into Spain, where the KAISER + KRAFT brand has already been successfully represented since 1989.

Potential for further margin improvement
As Dr Funck has already shown you, TAKKT has great potential to increase its profit margins. For the KAISER + KRAFT EUROPA division, the Group has the goal of continuing to maintain the EBITDA margin at its current high level.

Topdeq improved its EBITDA margin in 2007 from 5.0 to 7.6 percent. Its repositioning as a premium brand has been a decisive factor in this good result. Management expects this strategic decision to have an ongoing positive impact. The goal for this division is therefore to raise the EBITDA margin to a double-digit value by 2010 at the latest.

At K + K America we anticipate a positive development in margins in the Plant Equipment Group through concentration on the core business and optimisation of operating processes.

For the specialties supplier Hubert, TAKKT has the objective of maintaining this company’s high level of margins despite the launch in Europe and the associated start-up costs.

The NBF companies, with their focus on office equipment, have planned like Topdeq, to reach a double-digit EBITDA margin by 2010. This will be achieved, among other things, through the staged introduction of stock shipment business in this area.

In addition, due to the disposal of the low-margin Conney business, the Group also expects a structural improvement in the EBITDA margin of the K + K America division.

The levels already reached, and the potential that we have described for the TAKKT divisions to increase their margins, have caused us to raise the target corridor for the EBITDA margin again as from 2008 – to a new figure of 12 to 15 percent.

Outlook: economic conditions – no positive impulse
As I have already emphasised, we cannot expect the economy to give us any positive impulse to boost our business. For the years 2008 and 2009, economists forecast economic growth in Europe of only 1.6 and 1.7 percent. The reason for this, among other things, is reduced dynamism in exports as a result of the strong euro and the weaker US economy. High raw material prices and uncertainty on the capital markets are further risk factors.

For Germany the experts forecast economic growth of 1.6 percent in 2008 and 1.5 percent in 2009.

In North America, increased risk is to be expected in the property and financial markets. Therefore TAKKT does not see any improvement in the North American economy; economic growth of only 1.5 percent is anticipated in the USA in 2008.

Dynamic growth in the Asian countries will probably continue. But since the Group still has limited business activities in these markets, it will not give any significant stimulus to TAKKT.

Outlook 2008: cautiously optimistic
We describe our forecasts as cautiously optimistic because we cannot assume any positive economic stimuli in the regions relevant to us. We are nevertheless optimistic, with regard to the further development of our company, that B2B mail order still possesses great potential for us to tap.

We forecast that our turnover in 2008 will grow organically (i.e. adjusted for currency effects, acquisitions and the Conney divestment) by at least four percent.

Thanks to the stability of our business model, the gross profit margin – regardless of economic developments in Europe and North America – will again be above the 40 percent mark in 2008.

We are also convinced of our ability to further increase our profit figures this year, especially on account of the anticipated growth in profitability in the Topdeq and K + K America divisions. We will therefore aim for an EBITDA margin in the upper half of our raised target corridor of 12 to 15 percent.

Investment volume will go down in 2008 compared to the year under review. Nevertheless it will be above the long-term average of one to two percent of turnover, because not all of the investment projects started in 2007 were completed during last year. For 2009 it is to be expected that investment volume will again approach the long-term average.

As you can see, TAKKT is a very healthy company, nevertheless we have much work before us. Therefore we will lose no time in driving forward the success of TAKKT Group.

I thank you for your attention.
The Management Board will now be available to answer your questions.