Annual Report 2015 ANNUAL REPORT 2015 “Together with all of the company’s employees, we have ensured that the established market leader for industrial photofinishing of analogue photos and films is now also the market leader in the market for digital photo products. As the no. 1 product on the market, CEWE PHOTOBOOK is the outstanding symbol of this successful transformation.With CEWE CALENDARS, CEWE CARDS and CEWE WALL ART, we have now brought further brand products onto the market. We intend to build on this position. We have also exploited our newly acquired expertise in the field of digital print- ing and have established the growth business area of Commercial Online Printing.” Dr Rolf Hollander, Chairman of the Board of Management of Neumüller CEWE COLOR Stiftung 2 Highlights HIGHLIGHTS 2015 Targets for 2015 achieved Digital prints in billion units Prints from film in billion units CEWE PHOTOBOOKS in million units 2.16 0.07 6.0 2.15 0.070 6.1 2.10 0.065 6.0 Target Actual Target Actual Target Actual Turnover in million euros EBIT in million euros EBT in million euros 554.2 36.8 36.3 38.0 36.0 535.0 32.0 30.0 515.0 Target Actual Target Actual Target Actual Investments in million euros Earnings after taxes in million euros Earnings per share in euros / share 46.0 39.3 22.7 3.24 24.0 3.45 20.0 2.87 Target Actual Target Actual Target Actual Highlights 3 Photofinishing sales Retail results Total volume of photos slightly exceeds expectations, Retail turnover falls to 60.8 million euros with 2.23 billion photos (2014: 67.3 million euros) due to repositioning in Poland 6.0 million CEWE PHOTOBOOKS, whose quality level EBIT before restructuring costs in the Retail segment once again continues to rise: + 2.0 % on the previous year marginally positive: 0.1 million euros (2014: – 2.9 million euros) CEWE CALENDARS, CEWE CARDS and CEWE WALL ART reinforce the trend of higher-quality products Consolidated profit and loss account Group turnover increases to 554.2 million euros 96.8 % of photos are digital All of the company’s goals for 2015 achieved: More than 63 % of all photos are collected from retail stores Group EBIT of 36.8 million euros Photofinishing turnover Fourth quarter once again provides more than 100 % Stronger share of CEWE brand products reinforces of the annual EBIT figure: 41.0 million euros Photofinishing turnover EBIT margin improves within the Group from 6.2 % Turnover per photo continues to increase: (2014) to 6.6 % (2015) + 10.3 % to 18.6 euro cents per photo Normalised Group tax rate of 33.0 % Photofinishing turnover of 414.9 million euros exceeds Earnings per share at 3.24 euros (2014: 3.08 euros / share) turnover target for 2015: + 7.5 % on previous year Fourth-quarter turnover realises strong growth Balance sheet and financing of 12.4 % to 175.3 million euros Solid balance sheet: Equity ratio increases to a stable 52.7 % Operating net working capital rises to 50.2 million euros Photofinishing earnings Solid financing structure, net cash position of 15.0 million euros For 2015 as a whole, further outstanding Christmas business leads to an EBIT figure of 40.4 million euros in the Photofinishing Cash flow segment (2014: 39.4 million euros) Turnover-related decline in working capital in Operating EBIT before extraordinary expenses even 4.0 million euros the previous year results in decrease in operating higher than in the previous year: 43.4 million euros cash flow by comparison with previous year Operating EBIT in Photofinishing segment exceeds expectations CEWE invests in growth Fourth quarter delivers 97 % of Photofinishing’s EBIT for the Outstanding Christmas business results in growth year as a whole in free cash flow for the 4th quarter Photofinishing’s operating margin once again increases in 2015 Return on capital employed as a whole and now amounts to 10.5 % (2014: 10.2 %). Average capital employed increases to 211.1 million euros, Results in the Commercial Online Printing business unit due to acquisitions Turnover target fulfilled for 2015: 77.8 million euros, The earnings trend for the Photofinishing business unit + 10.4 % (previous year: 70.5 million euros) has caused the ROCE to increase from 16.8 % to 17.4 % Commercial Online Printing reaches operating profit threshold earlier than planned EBIT improves by 1.9 million euros 4 CEWE – Europe’s online printing and photo service CEWE supplies consumers with photos and digital print products via over-the-counter trade as well as Internet sales. CEWE is a service partner for the leading brands on the European photography market. In 2015 the company developed and produced 2.2 billion photos, also in 6.0 million CEWE PHOTOBOOKS and photo gifts. “CEWE PHOTOBOOK” (Europe’s leading photobook brand) and the company’s other product brands CEWE CALENDARS, CEWE CARDS and CEWE WALL ART, easy-to-use ordering applications (PC, Mac and the mobile iOS, Android and Windows), our high level of expertise in digital printing, the benefits of scale offered by our efficient industrial production and logistics system, broad distribution via the Internet, 25,000 retailers and over 20,000 CEWE INSTANT PHOTO stations are the key competitive advantages of CEWE’s Photofinishing business. As well as these photo products, CEWE’s Retail business also distributes photographic hardware (e. g. cameras) in several countries. Through its brands CEWE-PRINT.de, Saxoprint and Viaprinto, CEWE is increasingly serving customers as an online printing service provider through printed advertising media which can be ordered online, such as flyers, posters, brochures, business cards etc. 5 CEWE at a glance Oldenburg 12 plants 24 European countries more than 50 years of success in Europe 3,400 employees 25,000 retailers supplied 6.0 million CEWE PHOTOBOOKS 2.2 billion photos produced over 20,000 CEWE INSTANT PHOTO stations over 35,000 tonnes of printed paper Production plants Delivery area Distribution branches 6 CEWE Annual Report 2015 Contents 01 TO THE SHAREHOLDERS 8 ACQUISITION-RELATED DISCLOSURES 131 Letter to the shareholders 8 Disclosures in accordance with § 315 (4) of the Report of the Supervisory Board 14 German Commercial Code (Handelsgesetzbuch, HGB) 131 Interview with Dr Rolf Hollander 19 CEWE share 27 REPORT ON REMUNERATION 134 02 CONSOLIDATED MANAGEMENT REPORT 30 MANAGEMENT DECLARATION 151 BASIC INFORMATION ON THE GROUP 32 Management report 151 Business model 32 Transactions with related parties 155 Organisation and management system 34 Goals and strategies 38 BOARD OF MANAGEMENT AND MANAGEMENT 156 Corporate functions 41 Glossary 158 ECONOMIC REPORT 60 Markets 60 CONSOLIDATED FINANCIAL STATEMENTS 160 03 Results 67 Consolidated profit and loss account 162 Sustainability 100 Consolidated statement of comprehensive income 163 Consolidated balance sheet 164 EVENTS AFTER THE BALANCE SHEET DATE 110 Consolidated statement of changes in equity 166 Events of particular significance after the Consolidated cash flow statement 168 balance sheet date 110 Segment reporting by business unit 170 Notes with audit opinion 171 FORECAST, OPPORTUNITIES AND RISK REPORT 110 Responsibility statement 230 Risk report 110 Audit opinion 231 Report on opportunities 115 The CEWE Group – structure and executive bodies 232 Report on expected developments 116 FURTHER INFORMATION 234 04 INTERNAL CONTROL AND Financial statements of CEWE Stiftung & Co. KGaA 236 RISK MANAGEMENT SYSTEM 122 Multiple-year overview 240 Corporate governance report 122 Production plants and distribution branches 246 Compliance 127 Financial diary 247 Risk management system 128 Imprint 247 Page reference Reference to table or graphic Internet reference Supplementary information To the shareholders To 01 Consolidated management report 02 “ The positive long-term performance of the inancial CEWE share provides me with security. F As an employee, because I know that my employer is in good shape – and as a Consolidated Statements shareholder, because I have a direct stake 03 in the company’s success.” Marion Grunenberg, Assistant to the Management & Human Resources Management, CEWE shareholder urther Information urther F 04 8 To the shareholders Letter to the shareholders “ CEWE PHOTOBOOKS, CEWE CALENDARS, CEWE CARDS and CEWE WALL ART – In 2015 our brand products once again met with an outstanding response among consumers and create added value: for CEWE, for its business partners and for all of its shareholders.” Dr Rolf Hollander, Chairman of the Board of Management of Neumüller CEWE COLOR Stiftung Letter to the shareholders To the shareholders 9 Dear Shareholders, the Shareholders To 01 “Christmas business: CEWE has once again delivered results” … That was the gist of analysts’ reactions to the publication of our provisional figures in February. The work of CEWE’s entire Photofinishing team, which had spent the whole year preparing for this seasonal peak, has once again paid off. All three of our business units contributed to our profit growth. Even allowing for all of our extraordinary expenses, each business units increased its profit: Photofinishing by 1.0 million euros, Commercial Online Printing by 1.9 million euros and Retail by 2.5 million euros. Overall, we have thus realised earnings growth of 4.2 million euros or 13 %. Your company has thus achieved a positive and solid performance. With an equity ratio of 52.7 %, its balance sheet also remains stable. Photofinishing: Consumers deliberately opt for the CEWE brand In Photofinishing, we have continued to develop our activities in the field of marketing, which was previously a new area for us. We are allocating even more resources here. We are increasingly associated with photography as a form of cultural expression: for nature, family, children’s, wedding and portrait photography. As well as photos from high-quality cameras, we are also producing an increasing number of photos from smartphones.