I Combined Management Report of the Einhell Group

I COMBINED MANAGEMENT REPORT OF THE EINHELL GROUP 1. PREAMBLE The combined management report published in the Annual Report 2020 comprises the Group management report and the management report of Einhell Germany AG. Unless otherwise stated, the report on performance and financial figures as well as the situation and the expected development relates to both the Group and Einhell Ger- many AG. Sections containing information on Ein- hell Germany AG only are identified as such. In the economic report, disclosures in accordance with the German Commercial Code (HGB) for Einhell Germany AG are presented in a separate section. 2. BUSINESS ACTIVITIES, STRUC- TURE, MANAGEMENT AND GOALS OF THE EINHELL GROUP also where quality assurance takes place. Einhell 2.1 General operations and employs approx. 1,700 employees worldwide. business segments Group revenue amounted to EUR 724.7 million in financial year 2020 (previous year: EUR 605.7 million). Einhell Germany AG, with its registered office in Landau an der Isar (Germany), is the parent com- The Einhell Group structures its operations ac- pany of the international Einhell Group. For more cording to the regions “D/A/CH”, “Western Eu- than 55 years, Einhell has been one of the global rope”, “Eastern Europe”, “Overseas” and “Other market leaders in the development and marketing countries”. Operational responsibility for the re- of house, garden and leisure products for DIY en- spective CPU lies with the Board of Directors of thusiasts and professionals. Einhell supplies DIY Einhell Germany AG and the Managing Directors stores and other distribution channels with a wide of the subsidiaries. range of DIY products. Einhell is known for top products for DIY enthusiasts and hobby garden- ers.1 In addition to living up to its standard of of- 2.2 Legal structure and fering reliable quality at an outstanding price-performance ratio, the Einhell brand stands for prod- management of the Group ucts that provide users with flexibility, simplicity and joy when realising their own projects.2 Cus- a) Legal structure and changes to Group struc- tomer satisfaction is our primary goal.3 Therefore, ture customer-oriented services are more than just an Einhell Germany AG, Landau an der Isar, holds di- empty phrase at Einhell but in fact our everyday rect and indirect shareholdings in a total of 41 sub- standard.4 Subsidiaries and associates across the sidiaries, which each form separate legal entities. world ensure the proximity to the Einhell Group’s 100% of the shares in subsidiaries with a central- globally operating customers. ised or special function such as services, product sourcing/product processing, procurement/pur- The subsidiaries comprise distribution companies chasing and quality control/quality assurance are mainly in Europe but also in South America and thus held by Einhell Germany AG. Moreover, Ein- Australia as well as trading companies in Asia. The hell Germany AG also generally holds 100% in the Asian subsidiaries are also responsible for prod- global distribution companies. uct sourcing, product processing and procurement. As production is carried out in Asia, this is 1 Unverified statement 3 Unverified statement 2 Unverified statement 4 Unverified statement In all consolidated subsidiaries where Einhell Ger- Group. Responsibilities within the Board of Direc- many AG does not hold all the shares, Einhell Ger- tors are based on the respective member’s func- many AG has a direct or indirect majority share- tional responsibility for the departments assigned holding. to them. With regard to the responsibilities of the Einhell The Chairman of the Board of Directors is respon- Group companies, all activities that can be central- sible for distribution, procurement, marketing and ised are carried out at just one location. Product corporate strategy. processing, the search for factories, their auditing and certification, procurement, services, control- The Chief Financial Officer is responsible for fi- ling, financing, IT and other administrative activi- nance and accounting, tax, legal, internal audit, ties, for example, are carried out centrally by the controlling, investor relations, human resources Group companies in Germany and China. This or- and maintenance. ganisational structure within the Group allows all distribution companies to focus on their core The Chief Technical Officer is responsible for tech- functions. Einhell is also in a position to press nology, product management, product pro- ahead with international expansion as each distri- cessing, quality control and supply chain manage- bution company has a similar structure and the ment. business model can be efficiently rolled out in additional countries. As organic growth offers great The Chief IT and Digitization Officer is responsible potential, the organisation and efficient develop- for the services and IT segments. ment of the Einhell Group’s business model are among the management’s most important re- The Board of Directors supervises the specialists sponsibilities. and managers in the relevant departments and re- lies upon the corresponding hierarchy of divi- The Group structure changed as follows during fi- sional and departmental management at Einhell nancial year 2020: Germany AG, and on Managing Directors and their specialists and managers in the subsidiaries. The In the 2020 financial year, the Einhell Group Board of Directors seeks to ensure flat hierarchies merged Einhell Export-Import GmbH into Einhell and makes sure to maintain direct contact with Holding Gesellschaft m.b.H. In addition, Einhell employees and specialist staff in all divisions. Reg- Germany AG acquired 51% of the shares in the ular meetings of the Board of Directors and of in- companies Lawn Star (Pty) Ltd, South Africa and dividual departments, as well as divisional and Mould Star (Pty) Ltd, South Africa. Moreover, Ein- cross-departmental meetings where required, se- hell Germany AG took over the remaining 1.925% cure efficient communication and informational of the shares from the former Managing Director flows to all responsible parties. of Einhell Hellas A.E. and now holds 100% of the shares. Finally, Einhell Electro Machinery Techno- The Supervisory Board of Einhell Germany AG, logy Co, Ltd, China was founded. comprising three members, monitors and provides advice to the Board of Directors in accord- b) Management and control ance with legal requirements and the provisions Responsibility for the business activities of the Ein- of the German Corporate Governance Code. hell Group lies with the Board of Directors of Ein- hell Germany AG. This comprised four members At regular meetings of the Supervisory Board, the at the time of preparation of the annual financial Board of Directors provides information to the Su- statements, consolidated financial statements pervisory Board about the Group’s current situa- and management report. The Board of Directors tion, business transactions and corporate strat- manages, organises and monitors strategies and egy. operational business processes for the whole The Supervisory Board also maintains ongoing pay a pension to the members of the Board of Di- lines of communication with the Board of Direc- rectors in the form of annuity payments that can tors outside of regular meetings and ensures an be paid out as soon as the respective Board mem- adequate level of communication and informa- ber turns 60 or 62, respectively and the amount of tional flows between the Board of Directors and which is based on the Board member’s years of the Supervisory Board. service. More information about the members of the Board of Directors’ remuneration can be The composition of the Supervisory Board did not found in the notes. change in financial year 2020: d) Personnel changes to the Board of Direc- Supervisory Board 2020 tors Univ.-Prof. Dr.-Ing. Dr.-Ing. Chairman There were no personnel changes to the Board of E.h. Dr. h.c. Dieter Spath Directors in financial year 2020. Responsibilities of Philipp Thannhuber Deputy Chair- the Board of Directors largely remained constant. man Maximilian Fritz Employee repre- sentative 2.3 Corporate strategy and management c) Principles of the remuneration system for The Board of Directors embarked on a structured the Board of Directors strategy development process together with the Members of the Board of Directors receive fixed heads of divisions and departments to define and and performance-based variable remuneration communicate the objectives and values of the Ein- with short-term components. The individual per- hell Group. formance-based components depend on factors such as consolidated net profit, segment earnings The Einhell Group’s primary objective is to gener- in the previous financial year, the development of ate sustainable and profitable revenue and profit the Group’s asset structure and personal targets. growth. Profitability takes priority over pure The evaluation system for variable remuneration growth targets. components has essentially remained unchanged for several years and ensures transparent and a) Strategy sustainable accounting practices based on the In the coming years, Einhell will continue to focus Group’s strategic aims. A pre-defined cap limits on the further development of the EINHELL the impact of extraordinary one-off effects on the brand. In 2021, we will expand our TV advertising variable remuneration component. Members of campaign to Switzerland, Hungary, Italy and the Board of Directors privately hold shares in Ein- Spain. In 2022, we will expand the TV campaign to hell Germany AG. There are no share option pro- two to three additional countries. In addition, Ein- grammes or similar schemes. An agreement is in hell will invest in sensory marketing, as good mar- place with one of the members of the Board of Di- keting addresses all senses. For this purpose, we rectors stipulating that a proportion of the varia- will create an Einhell fragrance in 2021, which will ble remuneration component must be used to be included in our Power X-Change products in purchase Einhell shares. If the employment con- the future.

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