Economic crisis weighs heavily on TAKKT Group key figures

Adjustment of cost structures shows signs of success

The global economic crisis has resulted in a sharp decline in turnover for the TAKKT Group in the first half of 2009. As expected, the 24.3 percent decrease in sales revenue in comparison to the same period last year also resulted in a drop in operational profitability. The EBITDA margin fell to 11.0 percent. In view of the current level of demand, the management has launched the FOCUS and GROWTH programmes, which are designed to optimise the allocation of resources within the Group and promote growth initiatives.

Major events in 2009

• Adjusted for currency and acquisition effects, a 29.5 percent decline in turnover
• Gross profit margin up; EBITDA margin of 11.0 percent
• FOCUS and GROWTH programmes launched
• Acquisition of the leading US mail order group for restaurant equipment

Management opts for cost optimisation and targeted expansion
The TAKKT management has initiated two programmes of measures in response to the current crisis in demand. Namely FOCUS, which will review the existing and potential value contribution of the Group’s activities, and GROWTH, which will pool and prioritise growth initiatives. One of the most significant FOCUS measures is the decision to close down Topdeq’s US-based activities by 31 December 2009. The business has been unable to live up to the long-term business volume and response rate expectations since it was established in 2000, also due to the development of the US dollar. As the Management Board does not expect any change in the underlying business conditions for Topdeq in the USA in the medium to long term, the Topdeq division will henceforth focus on its profitable European activities.

Meanwhile in the K + K America division, the number of warehouses for the Plant Equipment Group will be reduced from four to three, as improved shipping networks in the USA now mean that deliveries can be made to the customers almost just as quickly and reliably from three as from four locations.

In KAISER + KRAFT EUROPA, the Estonian marketing approach is to be overhauled, in view of the limited size of the market and the current economic developments in the Baltic States. The customers there will in future be serviced by a marketing partnership with a local retailer, rather than by a TAKKT sales company. A similar business model has been used successfully in Slovenia since 2007.

These measures will be responsible for one-off expenses in the second half-year 2009 of around EUR 1.5 million in 2009. The Management Board nevertheless anticipates that these measures will make a positive earnings contribution of more than EUR 2 million per annum with effect from 2010.

As part of the GROWTH programme, the KAISER + KRAFT EUROPA division will use additionally the brand name “certeo” to market office and business equipment to business customers via the internet only. It is due to be launched in Germany in October 2009 and plans for a European roll-out are already in preparation.

Furthermore, business dealings with customers in the service sector are set to be expanded as part of GROWTH. “We have put our food service activities on a firm foundation thanks to the acquisition of Central Restaurant Products (Central) in April and the further expansion of Hubert within Europe,” explained Dr Felix A. Zimmermann, who succeeded Georg Gayer as CEO on 01 June 2009. Following the successful launch of Hubert in Germany, the second most important European market, namely France, will now likewise be represented by its own sales company there from autumn 2009.

Further initiatives within the FOCUS and GROWTH programmes are currently being reviewed in detail and the results will be announced in due course. The Management Board intends to have completed all the FOCUS initiatives by the end of 2009.

TAKKT Group hit by economic crisis
The TAKKT Group achieved turnover of EUR 358.3 (2008: 473.2) million in the first half of 2009, representing a year-on-year decline of 24.3 percent. Adjusted for acquisition and currency effects, consolidated turnover fell by 29.5 percent. Zimmermann commented on the results of the first six months of the year as follows: “The significant reluctance of our customers to make investments in the first half of the year can be interpreted as a sign of the ongoing uncertainty concerning the economic outlook. At present, we see no signs of any sustainable economic recovery.”

The TAKKT Group’s gross profit margin rose to 42.3 (41.9) percent. Adjusted for acquisition effects, the margin increased to 42.5 percent thanks to improved purchase prices. As expected, EBITDA (earnings before interest, tax, depreciation and amortisation) fell as a result of the sharp decrease in business in the first six months, from EUR 76.3 to 39.5 million, which amounts to an EBITDA margin of 11.0 (16.1) percent. The drop in profits caused the cash flow to decrease from EUR 55.3 to 29.6 million, which resulted in a cash flow margin of 8.3 percent.

Turnover and income in the first and second quarters can only be compared to a limited extent. “A comparison of the first two quarters 2009 is limited, mainly due to the lower number of working days in the second quarter as well as a change in the way in which catalogues are recorded in the balance sheet, which has caused an unequal distribution of advertising expenses,” explained CFO Dr Florian Funck. Irrespective of this, the measures to adapt capacity utilisation and costs to the economic situation were further intensified in the second quarter, which is for example shown by clear reduction in personnel expenses excluding the acquisition.

KAISER + KRAFT EUROPA records sharp drop in turnover
The turnover of the biggest and most profitable division, KAISER + KRAFT EUROPA, fell by 33.1 percent to EUR 189.6 (283.2) million in the first half of the year. EBITDA was down from EUR 63.8 to 32.0 million and the EBITDA margin fell to 16.9 (22.5) percent, primarily as a result of reduced capacity utilisation and a drop in advertising efficiency. Turnover developed negatively across the board. The hardest hit regions were those that had been developing exceptionally well in previous years, such as Eastern Europe.

Topdeq business remains weak
Topdeq, the specialist for design-oriented office equipment, suffered a further significant fall in turnover of 30.7 percent down to EUR 29.4 (42.4) million in the first half-year. This downward trend was most pronounced in the US market. Adjusted for the positive currency effects of the Swiss franc and the US dollar, the organic drop in turnover was 32.1 percent. EBITDA fell to EUR -0.9 (2.9) million, resulting in an EBITDA margin of -3.1 (6.8) percent. Profitability was stifled both by the decline in advertising efficiency due to the economic climate and by reduced capacity utilisation of the mail order infrastructure.

K + K America strengthens its position with Central takeover
Of the three business divisions, K + K America fared the best in the first half of 2009, with a decline in turnover of 17.9 percent to USD 185.8 (226.2) million. The initial consolidation of Central had a positive effect on turnover. But even when adjusted for the effects of this acquisition, the division still developed slightly better than the rest of the Group with a minus of just 24.3 percent, thanks to its more diverse customer structure and broader product portfolio. When translated into the reporting currency of the euro, turnover fell by a mere 5.6 percent to EUR 139.6 (147.9) million. EBITDA fell from EUR 14.8 to 12.1 million and the EBITDA margin was 8.7 (10.0) percent. Central’s higher operational profitability had a slightly positive effect on the division’s margin. Disregarding Central, K + K America had an EBITDA margin of 8.4 percent.

2009 turnover forecast revised – profitability scenarios confirmed
As a result of the business development in the first half-year, the Management Board has revised the range of its turnover forecast, from the original 15 to 25 percent drop in organic turnover to a fall of 20 to 25 percent. It has also confirmed the profitability scenario which foresees that, even with a decline in organic turnover of about 25 percent, operational profitability before extraordinary effects would only be just under ten percent.

Conference call
We invite you to directly address the Management Board with your questions. We will be hosting a conference call for this purpose at 15:00 (CEST) on 30 July 2009, during which we will be open to questions. To take part, please dial the following number: +49 711 9659-9628 (access code: 779134#).

IFRS figures for the TAKKT Group at the end of Q2 2009
in EUR million



In order to make a valid comparison with the prior year, the prior year's figures were restated under the revised IFRS regulations for advertising expenditure.

Short profile of TAKKT AG
TAKKT is the leading B2B mail order specialist for business equipment in Europe and North America. The Group is represented with its brands in more than 25 countries. The product range of the TAKKT subsidiaries comprises over 160,000 items from the areas business and warehouse equipment, classical and design-oriented office furniture and accessories, as well as equipment for retailers, the food service industry and the hotel market.

The TAKKT Group employs some 2,000 staff, has 3 million customers worldwide and distributes more than 60 million catalogues and mailings per year.

TAKKT AG is listed on the SDAX and was admitted to Deutsche Boerse’s Prime Standard on 01 January 2003.

Stuttgart, 30 July 2009

Contact:
Dr Felix A. Zimmermann, CEO
Tel. +49 711 3465-8201

Dr Florian Funck, CFO
Tel. +49 711 3465-8207

Email: investor@takkt.de