- An even stronger Christmas quarter generates more than 100 % of EBIT
- Growth with strong brands: 30 millionth CEWE PHOTO BOOK produced in 2014
- Online printing grows well, photofinishing positive, retailing pro-actively reduced
- EBIT rises to 32.6 million euros (2013: 28.9 million euros)
- CEWE debt-free with a strong capital ratio (51.1%)
CEWE Stiftung & Co. KGaA (SDAX, ISIN: DE 0005403901) reached all its targeted results for the business year of 2014. Preliminary calculations show turnover at 523.8 million euros (exchange-rate adjusted at 527.5 million euros; previous year 2013: 536.2 million euros), and operative earnings (EBIT) improved significantly from 28.9 million to 32.6 million euros. "Our core business of photofinishing was again positive, the business segment of online printing grew well and we pro-actively reduced our retail business in 2014. What was also important was that we developed the company strategically in 2014, thus improving the basis for increasing income in future. We grew in photofinishing with highly attractive brand products, while at the same time reaffirming the rapid pace of expansion in online printing and achieving a jump in income. This made CEWE a debt-free company with a strong capital base in 2014, and positioned the company optimally for more growth in future," said Dr. Rolf Hollander, CEO of CEWE Stiftung & Co. KGaA. Earnings before tax (EBT) increased from 27.1 million euros in 2013 to 31.5 million in 2014. In the previous year, after-tax earnings benefited considerably from positive non-recurring tax effects resulting from the change in the legal form of the company (+ 3.3 million euros). For this reason after-tax earnings in 2014, at 21.4 million euros, were 0.9 million euros lower than in the previous year (2013: 22.3 million euros). Against the background of a return to a normal tax rate of 32.1 % for the Group (2013: 17.7 %), earnings per share reached 3.07 euros in the year of the report (2013: 3.39 euros).
Excellent Christmas season once again boosts the fourth quarter
Constant innovation was also the basis for sustained business success in 2014: the Christmas season was successful thanks to the wide range of high-quality products and the excellent delivery service provided by all the CEWE operations. The high level of brand awareness and the first-class image of the CEWE PHOTO BOOK and the other CEWE brand products - also advertised on TV - meant that they were once again greatly in demand as Christmas gifts, with a rising proportion of orders being placed through one of the many CEWE apps for mobile devices such as smartphones and tablets. The CEWE approach, delivering finished photo products from the stores operated by CEWE retail partners in addition to mail deliveries once again proved to be extremely successful during the Christmas season.
Fourth quarter contributes EBIT of 37.3 million euros
While operative earnings (EBIT) for the first three quarters still amounted to - 4.7 million euros due to the continued seasonal shift to the fourth quarter, the final quarter of the year peaked with its Christmas business and accounted for around 2 % more turnover than in the previous year, to amount to 194.8 million euros, and an 11.0 % increase in EBIT, at 37.3 million euros, over that of the previous year. CEWE thus generated around 37.2 % of its full annual turnover and - with good contribution margins thanks to the extremely high utilisation of production capacities - more than 114 % of its income in the vital fourth quarter.
Online printing and photofinishing increase strongly
The biggest CEWE business division grew even more than expected in the 2014 business year: with turnover at 386.0 million euros (+2.8 %) and EBIT at 38.4 million euros (+7.2 %), photofinishing accounts for 73.7 % of the Group turnover and for 117.8 % of the Group EBIT. The photofinishing margin for the full year reached 10.0 % (2013: 9.5 %). The Group EBIT margin was raised from 5.4 % to 6.2 %, in particular on the basis of the positive development in photofinishing and online printing, while CEWE downsized its low-margin wholesale business in retailing, decreasing turnover by 33.4 % to 67.3 million euros. CEWE reported a negative EBIT of - 2.9 million euros due to retailing problems and essential adjustment measures, particularly in Poland. Online printing met the high expectations for growth, increasing turnover by 17.8 %, to 70.5 million euros. EBIT generated with online printing improved by 4.1 million euros, to - 2.9 million euros, in spite of considerable initial funding for marketing measures. "As previously announced, we used the photofinishing earning power to further expand our new business segment of online printing," says Dr. Hollander.
In the previous year of 2013, restructuring costs of 3.3 million euros and a 2.7 million euro depreciation of goodwill had still had a negative effect on consolidated earnings, while costs of 1.3 million euros for the presentation at the Photokina, the largest photographic trade show in the world, and expenses as part of an option plan of 0.9 million euros were reported as non-recurring effects.
Sales targets all reached - digital rate of 96.1 %
In 2014, CEWE produced a total of 2.29 billion prints, thus reaching the top end of the target corridor of 2.23 to 2.29 billion prints. The figure for digital prints, 2.20 billion (target: 2.15 to 2.20 billion), is matched by only 0.09 billion prints from films (target: 0.075-0.085 billion). At a considerable 96.1 % in 2014, the digital rate is gradually approaching 100 %. The high volume of digital photos is mainly the result of CEWE PHOTO BOOK sales, which grew again, by a good 160,000 to 5.9 million books (target: 5.8 to 5.9 million). It was not only sales, but also the turnover per book that increased again. The majority of other brand products such as CEWE CALENDARS, CEWE CARDS and CEWE WALL PICTURES also generated double-digit growth rates. The larger share of high-quality photo products offered as CEWE brand-name products and the growth in demand for these photo products resulted in an increase in turnover per print, by 6.2 % to 16.84 eurocents per print. The fourth quarter impressively confirmed this positive trend: in the important Christmas quarter, turnover per photo increased by 7.5 %, from 19.02 eurocents in the same quarter of the previous year to 20.44 eurocents.
Capital ratio: 51.1 % - debt-free company and a high dividend
The CEWE capital ratio continued to improve significantly, by 8.4 percentage points to 51.1 %. Equity increased from 142.8 million euros to 173.7 million euros. Thanks to the positive trend in the previous business year, CEWE is now a debt-free company paying out high dividends every year. After reporting a net financial debt of 16.3 million euros at the end of 2013, CEWE had net assets of 23.5 million euros at the end of 2014. Dr. Hollander: "Our strong business model in terms of earnings and cash flows and our capital ratio put us in a position to rapidly expand new growth sectors such as online printing, and to be well positioned for more growth irrespective of the financing environment - and at the same time offer a high dividend which has increased steadily in the past six years.
Comments on reported figures: In accordance with IFRS specifications, since the third quarter of 2014 CEWE has no longer reported items of sales expenses in reduction of turnover; instead these items have been reported under "other operating expenses". This applies for an amount of 7.3 million euros for 2014, and 7.7 million euros were subsequently re-allocated for 2013.
Furthermore, in conformity with IFRS provisions, CEWE with immediate effect reports EBIT including other taxes, which had hitherto only been deducted with income tax from EBT, as part of "other operating expenses". This means that for 2014, other taxes in the amount of 0.9 million have already been taken into account in EBIT, and 0.7 million euros in other taxes were subsequently re-allocated for 2013. The EBIT target of 30 to 36 million euros for 2014 was still shown before other taxes in March 2014, according to the logic applied so far.
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