Saarbrücken - 27 June 2006. Praktiker is optimally positioned to continue profitable growth in Germany and abroad and hence to enhance its market value continuously. This was the gist of the statements made by Wolfgang Werner, chairman of the Management Board, at the first Annual General Meeting held by Praktiker Bau- und Heimwerkermärkte Holding AG in Saarbrücken on Tuesday. "Our growth targets are ambitious", he said.

They are based on a very good 2005 financial year and a positive trend in the first half of 2006 which “smoothly carried on the previous year’s success”. For the current year, Werner confirmed expectations of a plus in sales in a “low one-digit percent range” and an EBITA above the prior-year mark.

International business: Expansion focused on Eastern Europe

Praktiker wants to step up its growth dynamics mainly on an international scale. Werner emphasised that Praktiker has the management capacities, know how and the resources needed to expand further in Eastern Europe. “We will strengthen our presence in those areas where we are already represented. And we will tap new markets where this is reasonable.” In the second half of this year alone eleven store openings were planned in Eastern Europe. The market entry to the Ukraine was also being advanced. The medium-term goal was to increase the international share in the Group’s sales to 35 to 40 percent – “with the corresponding positive impact on our profitability”.

Germany: Price leadership, cost leadership, optimisation of store network

On the other hand, Werner identified growth potential on the German market which remained “the most important pillar of our business despite enhanced internationalisation”. Here Praktiker was able to act successfully because the company was pursuing a clear strategy based on three pillars: price leadership, cost leadership and optimisation of the store portfolio. According to Werner it was inevitable to implement location management consistently, geared to commercial success. “No business without optimisation of store network, no price leadership without cost leadership, no success without price leadership in a market which is so extremely driven by price competition as the German market.”

Easy-to-Shop concept complements Praktiker strategy

In order to remain on the success track and win further market share, Praktiker was complementing its strategy with the new Easy-to-Shop concept. Elements of this concept were a clearly structured store layout, a plausible colour-based navigation system, largely self-explanatory presentation of the merchandise and a further reduction of the assortment depth. Werner: “Easy-to-Shop is a promise towards our customers. Shopping at Praktiker should not only be value for money but also easy and comfortable.” But Easy-to-Shop was also devised to accelerate the merchandise turnover on the shelf. Thus Praktiker was boosting the efficiency of the capital employed and improving the earnings situation. “We are sure of what we do”, Werner pointed out. As a result, at the end of July six pilot stores will be convented to the new selling concept, three more than originally planned. From 2007 onwards, the Easy-to-Shop concept was to be introduced country-wide in Germany.

Werner underlined that the domestic market continued to be characterised by overcapacities, pressure on prices and lower margins. “Some competitors are making losses, others are looking for partners because they are getting short of money.” That is why market observers were considering consolidation necessary and probable. Werner’s comment: “We are observing the market trends carefully. We have the necessary financial power should an opportunity arise. But we are not under pressure to act. We will only participate actively in the consolidation of the market if this proves to be economically advantageous for us.” In this respect, he was seeing Praktiker in a “comfortable situation”.

2005 financial year: Sales and earnings distinctly increased

Werner was able to present to the Annual General Meeting a totally positive result of the 2005 financial year. Praktiker lifted Group sales by 3.4 percent, surpassing the three-billion-euro mark for the first time. In Germany, net sales increased slightly by 0.7 percent – against the trend of the market. On an international scale Praktiker again registered a two-digit percent growth: by more than 12 percent to around EUR 770 million. Thus Praktiker had for the first time achieved somewhat more than one fourth of Group sales outside Germany.

According to Werner, EBITA increased faster than sales, by almost 32 percent, to about EUR 106 million. Outside Germany, an improvement by almost 14 percent to EUR 51.5 million was accomplished, in Germany EBITA rose by 54 percent to more than EUR 54 million. “As demonstrated by these figures, business in Germany and in the other countries was contributing almost in equal measure to earnings before interest, taxes, depreciation and amortisation”, Werner explained. In Germany in particular progress in cost cutting initiatives, optimisation of the store network and sharpening the profile of the strongly discount-orientated market position of Praktiker were clearly taking effect.

The financial position of the Praktiker Group was described by Werner as “very sound”. Cash and cash equivalents were raised from around EUR 33 million at the end of 2004 to EUR 349 million at the end of 2005. Net of interest-bearing liabilities, short-term liquidity of EUR 205 million was remaining. The free cash flow of around EUR 88 million exceeded the previous year’s level by about EUR 21 million.

General trends confirm growth expectations

Werner summarised that “the 2005 financial year has been successful throughout”. In his opinion, expectations for further growth were fuelled by some general trends that promised “a consistently positive market demand for our products.” In detail, this was the high percentage of home owners and the growing purchasing power in the East European markets, the increasing need for rehabilitation, renovation and modernisation of German homes and flats as well as the trend towards the acquisition of real estate as part of private old-age provision. Werner: “All this will benefit Praktiker and fosters our confidence in continuing strong growth”.