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CEWE with clear increase in turnover in the first half of 2018

CEWE Stiftung & Co. KGaA (SDAX, ISIN: DE 0005403901) sees itself well on track to reaching its scheduled annual targets for 2018 after the first half of the year. Group turnover, at 254.5 million euros, is 8.5 % higher than that of the same period of the previous year (HY1 2017: 234.6 million euros). Due to the expected negative effects from the most recent acquisitions of Cheerz and LASERLINE, EBIT amounted to -3.4 million euros (HY1 2017: -0.4 million euros). If these effects are not taken into consideration, the EBIT for the first half of 2018 is almost exactly at the same level as in the previous year. The totalled mid-year figures confirm the forecast made by the Board of Management for the current financial year: Group turnover is to increase to an amount in the range of 630 to 665 million euros in 2018 (2017: 599.4 million euros), Group EBIT is to be in a corridor of 48 to 54 million euros, EBT in the range of 47.5 to 53.5 million euros, and after tax earnings in the range of 33 to 37 million euros. The important performance indicators thus all increased over those of the previous year.

CEWE clearly on track to confirm forecast"
Even with our most recent acquisitions, the first half of the year is clearly in line with our forecasts," says Dr. Christian Friege, Chairman of the CEWE Stiftung & Co. KGaA Board of Management. CEWE has significantly increased its photofinishing turnover, in spite of the extremely hot weather seeing customers currently more inclined to take photographs rather than order photo products, even more so than in previous years. "The renewed increase in turnover per photo is proof that customers appreciate our added-value products," Dr. Friege points out. The acquisitions have developed positively, for example with the LASERLINE acquisition increasing sales in commercial online printing by more than 21 %. "And most importantly, synergies will in future be having a positive effect at an earnings level," says Dr. Friege.

Photofinishing: increases in sales of the CEWE PHOTOBOOK and added-value products
The business segment of photofinishing developed most strongly in the first half of the year, generating an increase in turnover of 7.5 %, to 180.3 million euros (2017: 167.7 million euros). This business segment has thus achieved clear growth in spite of the record temperatures that have prevailed since April and an ever-clearer shift in sales into the fourth quarter. Cheerz also contributed to this development. Due to the negative contributions to earnings that have still been planned for as a result of the Cheerz acquisition, the EBIT decreased to 0.4 million euros (2017: 1.6 million euros). From an enterprise point of view, it is most pleasing that with the CEWE PHOTOBOOK, one of our key products achieved a 3.9 % increase in sales in the first half of 2018. Besides, added-value products such as CEWE WALL PICTURES, CEWE CALENDARS, CEWE CARDS, mobile phone covers and other photo gifts provided extra growth in the first half of the year – in some cases even in the second quarter, which traditionally tends to show declines. These added-value products are also the main reason for the 3.2 % increase in turnover per photo, to 20.07 eurocents. "Besides investing in our acquisitions, we have also continued to invest in our brand awareness over the past few months. This strategy has paid off, given the increase in sales of our CEWE brand products," Christian Friege emphasises. The positive development in turnover was also a sound basis for the fourth quarter, in which almost all the annual profits are normally generated.

Commercial Online-Print: strong growth in turnover, mainly thanks to LASERLINE
It is mainly through the acquisition of LASERLINE that CEWE was able to raise turnover in online commercial printing, by 21.3 % to 49.1 million euros (2017: 40.5 million euros). In spite of the ongoing strong price pressure in Germany and weakened UK business as a result of Brexit, the business segment also grew organically. As expected, EBIT was at -2.1 million euros, and is currently still absorbing the scheduled negative contribution to earnings made by LASERLINE (EBIT for commercial online printing in the first half of 2017: -0.2 million euros). Over and above this, higher paper prices and increased logistics costs intensified this development. Dr. Friege: "The clear increases in turnover are making us optimistic. The purchase of LASERLINE may clearly reinforce the business segment and provide a positive contribution to corporate earnings as of 2019. Besides, with the exception of the UK, the forecast for the European online printing market remains positive. Moving from offline to online printing takes time. We believe that we are very well positioned, especially with the acquisition of LASERLINE, and we expect sales to rise again in the second half of the year."

CEWE RETAIL: continued focus on photofinishing products
The progressive focus of CEWE retail business on photofinishing products naturally reduces hardware turnover in this segment. CEWE also continues to consciously abstain from generating low-margin sales. For this reason sales in the business segment of retailing fell, the same as in previous years: In the first half of 2018, 23.3 million euros were generated, a reduction of 7.0 % against the previous year (2017: 25.0 million euros). The EBIT in this case, at -0.69 million euros, fell slightly short of that of the previous year (2017: -0.38 million euros). "Past years have shown that it is mainly the fourth quarter that is decisive for income in retail business with photo hardware. Cameras and other photo hardware products are also typical Christmas gifts. We thus clearly presume that we will reach all our annual targets in this business segment," says Christian Friege. Besides, when considering this business segment, the importance of retailing as a sales channel for photofinishing products, which are in turn reported in the business segment of photofinishing, must always be taken into account.

CEWE remains soundly financed – substantial increase in the value of the company
With its capital ratio at 54.9 % as at 30 June 2018 (30 June 2017: 62.4 %), CEWE remains extremely soundly financed. The slight decrease is due to extending the balance sheet through the acquisitions of LASERLINE and Cheerz and to the purchase of the "Saxopark" property, the Saxoprint online printing operation. The return on capital employed (ROCE) dropped from 20.5 % in the previous year to what is still a very respectable 16.5 % as at 30 June 2018. In this case too, acquisitions resulted in an increase in the average amount of capital employed. Dr. Friege: "Given the strategically high value and the earnings potential of the acquisitions, and the relatively favourably-priced securing of the location in the Saxopark, interest may fall in the short term, but the value of the company will rise substantially in the long term.

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