Leifheit AG Quarterly Financial Report Q1 2014

Key Figures of the Group as at 31 March

Metric	2013 (€ million)	2014 (€ million)	Change
Turnover
Group	55.6	55.9	0.6%
Brand Business	45.2	47.0	4.1%
Volume Business	10.4	8.9	-14.8%
Foreign share (%)	56.6	54.6	-2.0 pps
Profitability
Gross margin (%)	44.1	47.0	2.9 pps
Cash flow from operating activities (€ million)	2.9	2.2	-24.0%
Free cash flow (€ million)	2.5	1.3	-47.3%
EBIT (€ million)	2.8	4.0	44.2%
EBIT margin (%)	4.9	7.1	2.2 pps
EBT (€ million)	2.4	3.6	50.2%
Net result for the period (€ million)	1.8	2.5	39.1%
Employees
Group (persons)	1,029	1,039	1.0%
Investments in tangible assets (€ million)	0.5	1.0	>100%

1) 2013 turnover adjusted for residual sales in the amount of €0.8 million arising out of the Dr Oetker Bakeware business discontinued at the end of 2012.

Foreword

Leifheit started the 2014 financial year with a 0.6% increase in turnover to €55.9 million in the first quarter. The Brand Business segment saw significant growth of 4.1% to €47.0 million. Despite adverse weather conditions in Q1 2013 and the departure of a major customer, the company compensated for these challenges. Political situations in Eastern Europe also impacted business. The window vacuum cleaner, launched in Q2 2013, proved to be a growth driver. Volume Business turnover was below the previous year at €8.9 million, a decrease of 14.8%, reflecting a focus on profitability. Operating results (EBIT) improved to €4.0 million, with an EBIT margin of 7.1%. Gross margin increased to 47.0%. Strategic measures, including a focus on e-commerce, showed positive results with double-digit growth. The company launched a marketing campaign and is restructuring its US distribution. Leifheit anticipates stable turnover for 2014, with Brand Business growth between 1% and 3% and a slight decline in Volume Business. Expected EBIT for 2014 is to remain at the strong 2013 level (€14.9 million).

Signed by Thomas Radke and Dr. Claus-O. Zacharias.

The Leifheit Share

Financial markets started 2014 on an optimistic footing, though growth was more restrained than anticipated. The SDAX, a benchmark for Leifheit's share, developed laterally, closing at 7,168 points as of March 31, 2014, an increase of approximately 5% compared to the end of 2013.

The Leifheit share price increased significantly at the beginning of 2014, rising approximately 12% by January 10. It fluctuated between €35.00 and €36.00, closing at €36.10 on March 31, 2014, an increase of approximately 17% over the closing price for 2013.

Trading volume increased to an average of 1,984 shares per day in Q1 2014. Market capitalization reached approximately €180 million. There were no changes to the shareholder structure.

Major Shareholders

Shareholder	Percentage
Home Beteiligungen GmbH, Munich	50.27%
MKV Verwaltungs GmbH, Grünwald	10.03%
Joachim Loh, Haiger	8.26%
Leifheit AG, Nassau	5.01%
Free float	26.43%

Leifheit presented its 2013 business figures at an annual results press conference and held roadshows. Analysts' recommendations for the Leifheit share were "buy" or "hold", with target prices between €38.00 and €44.00.

Interim Management Report

Foundations of the Group

Leifheit Group is a leading European brand supplier of household items, known for high-quality, innovative products. It operates in over 80 countries across 15 locations. The business is divided into two segments: Brand Business (Leifheit, Soehnle) and Volume Business (French subsidiaries Birambeau, Herby, Project Business). Core competences are in cleaning, laundry care, kitchen goods, and wellbeing. Products are designed in-house and produced in Germany, Czech Republic, and France, as well as by external suppliers in Europe and Asia. Distribution is primarily in Germany and Europe, also in the USA, Middle East, and Far East, through brick-and-mortar stores and e-commerce.

Leifheit AG is listed on the Frankfurt Stock Exchange. As of March 31, 2014, market capitalization was approximately €180 million. The company's headquarters are in Nassau/Lahn, Germany.

Personnel Changes

Thomas Radke was appointed Chairman of the Board of Management on January 1, 2014.

Economic Environment

The global economy was expected to grow moderately. The USA was anticipated to generate growth impetus, while emerging economies and China were expected to grow slightly slower. Europe showed signs of economic recovery. Germany's domestic consumption and labor market situation supported positive growth rates. Political unrest in Ukraine created uncertainty.

Consumer sentiment in Germany showed a slight decrease in optimism in March 2014, partly due to the situation in Ukraine, but companies remained content with their business positions, especially in the retail sector.

Business Performance

German consumers' propensity to consume increased due to a solid labor market and rising income expectations. However, the retail sector was expected to experience only moderate growth (1.5%).

Currency Developments

The euro remained stable against the US dollar in Q1 2014, with the euro valued at 1.38 US dollars on March 31, 2014.

Net Assets, Financial Position and Results of Operations

Group turnover increased by 0.6% to €55.9 million in Q1 2014, driven by the Brand Business segment. Germany saw a 5.3% turnover increase to €25.4 million. Central Europe increased by 0.6% to €24.3 million, with strong growth in the Netherlands, Austria, and Scandinavia. Eastern Europe turnover was €4.4 million, affected by political situations, with the Czech Republic showing strong growth. Other regions contributed €1.8 million, aligning with the strategy to focus on European countries.

Turnover breakdown: Germany 45.4%, Central Europe 43.3%, Eastern Europe 7.8%, Other regions 3.5%. Foreign share was 54.6%.

Brand Business on the Rise

Brand Business turnover increased by 4.1% to €47.0 million in Q1 2014. This growth was partly due to a lower comparative base in Q1 2013 and despite the loss of a significant customer. Growth was driven by cleaning and laundry care categories. Brand Business's proportion of Group turnover increased to 84.2%. Germany showed an 8.1% turnover increase for Brand Business.

In Central Europe, turnover increased by 6.2% to €17.3 million, with strong growth in the Netherlands, Austria, and Scandinavia. France and Italy saw a fall in turnover. Eastern Europe turnover was below the previous year, affected by political developments in Ukraine, though the Czech Republic showed growth. Other regions saw a decrease in Brand Business turnover.

Performance by product category in Brand Business:

Cleaning: Turnover increased by 19.1% to €15.8 million, boosted by the window vacuum cleaner and mild weather.
Laundry Care: Turnover increased to €20.8 million, primarily due to rotary dryers. Ironing and steam ironing products were restrained, but the Air ironing board range was enhanced.
Kitchen Goods: Turnover decreased slightly by 1.5% to €4.1 million, with domestic growth offset by a fall in turnover outside Europe.
Wellbeing: Turnover decreased by 16.8% to €6.3 million, mainly due to lower sales of bathroom and kitchen scales.

Decrease in Turnover in Volume Business

Volume Business turnover decreased by 14.8% to €8.9 million, as expected, due to the strategic focus on Brand Business. Its proportion of Group turnover fell to 15.8%. Germany saw a decrease in Volume Business turnover to €1.0 million. Central Europe Volume Business turnover was €7.0 million, and overseas markets €0.9 million.

Volume Business product categories:

Cleaning: No significant turnover.
Laundry Care: Turnover fell to €3.0 million, with the French subsidiary Herby showing growth.
Kitchen Goods: Turnover remained below the previous year at €5.3 million, with the French subsidiary Birambeau seeing a decrease.
Wellbeing: No notable turnover.
Contract manufacturing: Turnover fell to €0.6 million.

Development of Results of Operations

Strong Earnings Upturn

Earnings before interest and taxes (EBIT) increased by 44.2% to €4.0 million in Q1 2014, exceeding the previous year's result by €1.2 million. This was driven by higher gross profit and strict cost discipline. The EBIT margin rose from 4.9% to 7.1%. Earnings before taxes (EBT) increased by 50.2% to €3.6 million. The net result for the period was €2.5 million, an increase of 39.1%.

Gross Profit

Gross profit rose by €1.4 million to €26.3 million, with the gross margin increasing from 44.1% to 47.0%. This improvement was due to rationalisation measures, focus on high-margin business, favourable currency rates, and improved purchase prices.

Research and Development Costs

R&D costs remained stable at €0.9 million.

Distribution Costs

Distribution costs decreased by €0.4 million to €17.9 million, mainly due to lower expenditure on advertising, services, commissions, and travel.

Administrative Costs

Administrative costs decreased by €0.2 million to €3.7 million, primarily due to lower expenditure for services.

Other Operating Income and Expenses

Other operating income increased by €0.1 million to €0.3 million. Other operating expenses decreased by €0.1 million to €0.1 million.

Foreign Currency Result

The foreign currency result fell by €0.9 million to €0.1 million.

Interest Result

The interest result remained stable at €-0.4 million.

Taxes

Income taxes amounted to €1.1 million, with the tax rate increasing from 24.0% to 29.6%.

Segment Results

Brand Business: EBIT was €3.4 million, a significant increase. Gross margin rose to 49.3%. Gross profit increased to €23.3 million.

Volume Business: EBIT was €0.6 million. Gross margin rose to 34.4%. Gross profit fell to €3.0 million.

Development of Cash Flow and Liquidity Position

Group liquidity increased by €1.3 million to €53.3 million as at March 31, 2014. The debt ratio was 54.5%.

Analysis of Group Liquidity

Liabilities mainly consisted of employee benefit obligations (€58.5 million) and trade payables (€43.2 million). There were no liabilities to credit institutions.

Development of Net Assets

Total assets increased by €6.6 million to €210.4 million. Current assets increased by €7.2 million, mainly due to trade receivables and inventories. Non-current assets remained stable. Current liabilities increased by €3.5 million, mainly due to trade payables. Employee benefit obligations increased by €2.1 million. Equity increased by €1.0 million to €95.7 million. The equity ratio fell to 45.5%.

Investments

Investments in Q1 2014 amounted to €1.0 million, mainly for new products and machinery.

Location	31 March 2014	31 March 2013
Germany	396	409
Czech Republic	406	380
France	171	176
Other countries	63	67
Group	1,039	1,029

Forecast

Strategic Focus of the Group

The "Leifheit GO!" strategy focuses on expanding brands, targeting strategic markets in Europe, strengthening e-commerce, and investing in R&D. Inorganic growth through acquisitions is also considered.

Slight Growth in Europe and Germany

IMF forecasts global economic growth of 3.6% for 2014. Germany's growth forecast was raised to 1.7%. Private consumption is expected to drive domestic demand, with a 1.5% increase anticipated in real terms for Germany.

Group Forecast: Stable Turnover and Earnings Development in 2014

Leifheit AG forecasts stable development for 2014, anticipating turnover at the adjusted 2013 level. Brand Business is expected to grow by 1% to 3%, while Volume Business is expected to see a slight decline. EBIT is expected to remain at the strong 2013 level (€14.9 million).

Overall Statement of Prospective Development

Leifheit anticipates stable development in 2014, aiming for sustainable and profitable turnover growth of 3% to 5% and an EBIT margin of 8% by 2016.

Condensed Interim Consolidated Financial Statements

Statement of Profit or Loss and Statement of Comprehensive Income

Item	1 January to 31 March 2014 (k€)	1 January to 31 March 2013 (k€)
Turnover	55,861	56,429
Cost of turnover	-29,602	-31,531
Gross profit	26,259	24,898
Research and development costs	-860	-876
Distribution costs	-17,914	-18,297
Administrative costs	-3,743	-3,917
Other operating income	274	170
Other operating expenses	-105	-231
Foreign currency result	66	1,011
Earnings before interest and taxes (EBIT)	3,977	2,758
Interest income	78	79
Interest expense	-501	-501
Net other financial result	14	40
Earnings before taxes (EBT)	3,568	2,376
Income taxes	-1,056	-570
Net result for the period	2,512	1,806
Comprehensive income after taxes	978	2,182
Net result for the period attributable to
Shareholders of the parent company	2,512	1,806
Comprehensive income after taxes attributable to
Shareholders of the parent company	978	2,189
Earnings per share (diluted and undiluted)	€0.53	€0.38

Balance Sheet

Item	31 March 2014 (k€)	31 December 2013 (k€)
Current assets
Cash and cash equivalents	53,271	50,953
Financial assets	-	1,001
Trade receivables	52,417	46,685
Inventories	36,074	33,630
Income tax receivables	1,140	894
Derivative financial instruments	290	403
Other current assets	1,245	3,668
Total current assets	144,437	137,234
Non-current assets
Tangible assets	35,023	35,421
Intangible assets	18,285	18,458
Deferred tax assets	10,332	10,310
Income tax receivables	2,191	2,159
Other non-current assets	152	169
Total non-current assets	65,983	66,517
Total assets	210,420	203,751
Current liabilities
Trade payables and other liabilities	43,221	39,290
Derivative financial instruments	1,470	1,920
Income tax liabilities	968	818
Provisions	6,242	6,452
Total current liabilities	51,901	48,480
Non-current liabilities
Provisions	1,898	1,896
Employee benefit obligations	58,548	56,385
Deferred tax liabilities	1,621	1,630
Derivative financial instruments	659	547
Other non-current liabilities	95	93
Total non-current liabilities	62,821	60,551
Equity
Subscribed capital	15,000	15,000
Capital surplus	16,934	16,934
Treasury shares	-7,598	-7,598
Retained earnings	80,991	78,479
Other reserves	-9,629	-8,095
Total equity	95,698	94,720
Total equity and liabilities	210,420	203,751

Statement of Cash Flow

Item	1 January to 31 March 2014 (k€)	1 January to 31 March 2013 (k€)
Net result for the period	2,512	1,806
Adjustments for depreciation and amortisation	1,464	1,622
Change in provisions	-129	42
Result from disposal of fixed assets and other non-current assets	6	1
Change in inventories, trade receivables and other assets not classified as investment or financing activities	-6,013	-651
Change in trade payables and other liabilities not classified as investment or financing activities	4,044	1,528
Other non-cash expenses/income	328	-1,439
Cash flow from operating activities	2,212	2,909
Acquisition of tangible and intangible assets	-986	-476
Change in financial assets	1,001	-
Proceeds from the sale of tangible assets and other non-current assets	74	1,875
Cash flow from investment activities	89	1,399
Cash flow from financing activities	-	-
Effects of exchange rate differences	17	76
Net change in cash and cash equivalents	2,318	4,384
Cash and cash equivalents at the start of the reporting period	50,953	33,717
Cash and cash equivalents at the end of the reporting period	53,271	38,101

Statement of Changes in Equity

Item	Subscribed capital (k€)	Capital surplus (k€)	Treasury shares (k€)	Retained earnings (k€)	Other reserves (k€)	Total (k€)
As at 1 January 2013	15,000	16,934	-7,598	75,367	-7,004	92,699
Comprehensive income after taxes	-	-	-	1,813	376	2,189
of which net result for the period	-	-	-	1,813	-	1,813
of which actuarial gains/losses on defined benefit pension plans	-	-	-	-	481	481
of which currency translation of foreign operations	-	-	-	-	-92	-92
of which currency translation of net investments in foreign operations	-	-	-	-	-259	-259
of which net result of cash flow hedges	-	-	-	-	246	246
As at 31 March 2013	15,000	16,934	-7,598	77,180	-6,628	94,888
As at 1 January 2014	15,000	16,934	-7,598	78,479	-8,095	94,720
Comprehensive income after taxes	-	-	-	2,512	-1,534	978
of which net result for the period	-	-	-	2,512	-	2,512
of which actuarial gains/losses on defined benefit pension plans	-	-	-	-	-1,500	-1,500
of which currency translation of foreign operations	-	-	-	-	-6	-6
of which currency translation of net investments in foreign operations	-	-	-	-	-31	-31
of which net result of cash flow hedges	-	-	-	-	3	3
As at 31 March 2014	15,000	16,934	-7,598	80,991	-9,629	95,698

Selected Explanatory Notes

Information on the Company

Leifheit AG is a publicly listed stock corporation headquartered in Nassau/Lahn, Germany. These condensed consolidated interim financial statements relate to the period from January 1, 2014, to March 31, 2014.

Reporting Principles

The interim financial statements were prepared in accordance with section 37x para. 3 of the German securities trading act (WpHG) and International Financial Reporting Standards (IFRS). They do not contain all information required for full annual financial statements.

The financial statements were neither audited nor reviewed by an auditor. The Board of Management believes they provide an accurate depiction of the results of operations.

The preparation involves estimates and assumptions that could affect reported figures. Actual amounts may differ.

Accounting and valuation principles are consistent with the most recent consolidated financial statements, except for new standards applied for the first time.

Leifheit applied IFRS 10, IFRS 12, IAS 28 (revised 2011), and amendments to IAS 32, IFRS 7, and IAS 36 for the first time. These changes do not affect the scope of consolidation or accounting methods but require additional disclosures.

Income taxes are recognized based on the best estimate of the income tax rate expected for the entire financial year.

Scope of Consolidation

There were no changes in the scope of consolidation or major changes in organizational structure or business model during the reporting period.

Segment Reporting

Key Figures by Divisions as at 31 March 2014

Metric	Brand Business (€ million)	Volume Business (€ million)	Total (€ million)
Turnover	47.0	8.9	55.9
Gross margin (%)	49.4	34.4	47.0
Contribution margin	19.1	2.7	21.8
Segment result (EBIT)	3.4	0.6	4.0
Depreciation and amortisation	1.3	0.2	1.5
Employees on annual average	762	277	1,039

Key Figures by Divisions as at 31 March 2013

Metric	Brand Business (€ million)	Volume Business (€ million)	Total (€ million)
Turnover	45.2	10.4	55.6
Turnover adjusted¹⁾	45.2	10.4	55.6
Gross margin (%)	46.9	31.6	44.1
Contribution margin	17.6	2.9	20.5
Segment result (EBIT)	2.5	0.3	2.8
Depreciation and amortisation	1.3	0.3	1.6
Employees on annual average	743	286	1,029

¹⁾ adjusted for discontinued operations with Dr Oetker Bakeware

Further information on the segments and management is available on page 71 of the 2013 annual financial report.

Treasury Shares

Leifheit held 250,525 treasury shares as of March 31, 2014, representing 5.01% of share capital.

Financial Instruments

Derivative financial instruments include forward foreign exchange contracts for buying and selling US dollars and Hong Kong dollars. The following liabilities from forward foreign exchange transactions were recorded on the balance sheet as at March 31, 2014:

Instrument	Value of liability (k€)	Foreign currency	Nominal value
Buy USD/€	59,878	kUSD 79,880	57,939
of which hedge accounting	15,841	KUSD 21,300	15,453
Sell USD/€	10,449	KUSD 14,000	10,159
Buy HKD/€	6,813	kHKD 71,025	6,631
Buy CZK/€	1,979	kCZK 54,000	1,971

The book value of derivative financial assets and liabilities corresponds to their fair values. All financial instruments recorded at fair value are classified into three categories based on market observability.

Item	31 Mar 2014 (k€)	31 Dec 2013 (k€)	31 Mar 2014 (k€)	31 Dec 2013 (k€)
Financial assets	Book value	Book value	Fair value	Fair value
Cash and cash equivalents	43,276	43,609	43,276	43,609
Structured money market instruments	9,995	7,344	9,995	7,344
Trade receivables	52,417	46,685	52,417	46,685
Derivative financial assets (not designated as hedging transactions)	290	403	290	403
Other financial assets	350	1,846	350	1,846
Financial liabilities	Book value	Book value	Fair value	Fair value
Trade payables	14,350	13,476	14,350	13,476
Derivative financial liabilities (not designated as hedging transactions)	1,741	2,071	1,741	2,071
Derivative financial liabilities (designated as hedging transactions)	388	396	388	396
Other financial liabilities	16,639	14,829	16,639	14,829

a) loans and receivables not quoted on an active market; b) financial liabilities carried at amortised cost; c) financial assets and liabilities measured at fair value without effects on net result for the period; d) financial assets and liabilities measured at fair value with effects on net result for the period.

For current assets and liabilities, book value approximates fair value.

Date	Event
22 May 2014	Annual General Meeting, Nassau/Lahn, Germany
13 August 2014	Financial report for the half-year ending 30 June 2014
10 November 2014	Quarterly financial report for the period ending 30 September 2014
24-26 November 2014	Presentation at the German Equity Forum, Frankfurt/Main, Germany

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Key Information

At a Glance