• EBITA increased at double-digit rate thanks to good earnings in the second quarter
• At two billion euro sales in first six months reach prior-year level
• Earnings forecast for 2008 confirmed – sales expectation subdued

Kirkel – July 23, 2008. In the second quarter 2008 – and also in the first half of the year – the Praktiker Group experienced a boost in earnings. Although the Group’s sales stagnated at the prior-year level in the wake of the impairing economic climate on the domestic market, the Group succeeded in boosting its operating profit (EBITA) by 20.5 percent to 59.2 million euros in the first six months of the current fiscal year. This was attributable to the highly satisfactory earnings trend in the second quarter based on a distinct improvement of the gross-profit margin especially in the domestic business. “We have demonstrated that earnings can be improved despite stagnant sales”, said Wolfgang Werner, Management Board Chairman of Praktiker Bau- und Heimwerkermärkte Holding AG. Werner: “Praktiker is well on its way and on the right track”.

The Interim Report H1/2008 is available here.

Against this backdrop, Werner confirmed the earnings expectation formulated for the first time at the annual press conference on April 2. Accordingly, an EBITA improvement to 135 to 140 million euros is forecast for the full 2008 fiscal year. This would be 10 to 15 million euros more than the Praktiker Group achieved in 2007 before complying with antitrust regulations referring to the acquisition of Max Bahr.

By contrast, the original sales forecast had to be slightly modified. Although the Praktiker Group continues to anticipate steady growth in sales at Group level, this growth is now expected to reach a low, not a mid single-digit rate. In Germany, sales are likely to decline, to what extent will depend very much on the consumer sentiment which is hesitant at the moment and might potentially become even more pessimistic as a result of the inflationary trend. “It is all the more important”, Werner emphasized, “that in the international markets sales continue to rise at a double-digit rate. The expansion strategy of Praktiker is the guarantor for steady, profitable growth at Group level.”

Group sales at prior-year level – Continued double-digit growth of international business

Between January and June 2008, the Praktiker Group achieved total sales of 1,997.2 million euros. This is on the level of the first half of 2007 (2,004.9 million euros). International growth continues to be dynamic. The volume of business outside Germany increased by 16.7 percent to 578.3 million euros (previous year 495.4 million euros). International business now accounts for 29 percent (previous year: 24.7 percent) of total Group sales. The countries with the highest growth rates were Romania, Bulgaria and Poland. The expansion of the store portfolio by 18 new locations implemented since mid-2008 was the essential growth driver. However, even on a like-for-like basis, sales were up once again by 2.1 percent – after a productivity leap of more than 15 percent in the previous year.

Net sales in the German business declined in the first half of 2008 by six percent to 1.418,9 million euros; like for like, the minus was 8.4 percent. This decrease was partly due to the appreciably impaired market environment, but partly also to the realignment of the marketing activities for the Praktiker brand which encompassed a clear reduction of the number of 20-percent discount campaigns, among other aspects. Werner: “We have deliberately hazarded the resulting volume losses for the benefit of a better gross-profit margin”.

In the second quarter 2008, domestic sales benefited from weather-induced stronger seasonal business. However, the market as a whole remained weak and, following satisfactory business in April and May, it was characterized by a further slump in sales in June. As a result, quarterly sales of 792.5 million euros in Germany marked a 5.5 percent decrease in year-on-year comparison (838.6 million euros). In the period from April through June, the sales volume reported by the international segment increased by 17.6 percent to 339.7 million euros (previous year 288.9 million euros). This demonstrates that the business trend in the second quarter was substantially better than in the first three months. This also holds true in like-for-like comparison. In Germany, the minus of 13.1 percent in the first quarter was followed by minus 4.4 percent in the second quarter. In the international business, like-for-like sales in the second quarter rose 2.8 percent, after 1.0 percent in the first quarter.

Operating profit: Earnings boost thanks to margin improvement

In the first six months, the gross profit on sales rose by 7.0 percent to 665.7 million euros despite the decline in sales volume, and the gross-profit margin was raised by 2.3 percent points to 33.3 percent. This positive trend is essentially attributable to the strategic change in the marketing approach for the German market which yielded a distinct improvement in the earning quality of the sales achieved. In international business, the gross-profit margin also rose slightly.

As a result, the Praktiker Group achieved an operating profit (EBITA) in the amount of 59.2 million euros in the first half of 2008. This corresponds to a plus of 10.1 million euros or 20.5 percent compared to the first six months of 2007. Domestic business contributed 34.9 million euros – almost twice as much as in the respective prior-year period. In the first quarter, it still had to report a loss, in the second quarter its contribution to earnings of 57.0 million euros exceeded the previous year’s mark of 43.5 million euros by 30.9 percent. “These satisfactory figures prove that it was correct to concentrate again on margins rather than on sales volume in Germany”, commented CEO Wolfgang Werner.

In the first half of 2008, the international business reported EBITA of 24.3 million euros, which is slightly below the prior-year result (25.7 million euros). The only reason for this decline was the need for adding four million euros to provisions in the second quarter to account for an antitrust suit pending in Poland against the local Praktiker branch and other DIY retailers. Without this extraordinary item, an increase in earnings would have been posted by the international operations both in the second quarter and for the first half year 2008. In total the consolidated operating profit in the second quarter of 80.0 million euros exceeded the respective prior-year period result by 15.8 percent.

Capital expenditure and locations

In the first half of the year, the Praktiker Group invested a total of 57.6 million euros (previous year 64.5 million euros), thereof 29.9 million euros in the second quarter (previous year 43.0 million euros). As already in the first half of 2007, capital expenditure was focused on the expansion of the store portfolio in Eastern Europe. The decrease in capital expenditure is to be explained by the fact that in the previous year five new Max Bahr stores were opened and this year no new location was added.

As per June 30, 2008, the Praktiker Group operated 429 DIY and home improvement stores, 11 more than a year ago. In Germany, the number of locations decreased to 336 (previous year: 343). Most of the divestments or closures of German Praktiker stores took place in the second half of 2007. In the second quarter of 2008 only one store was closed. The number of Max Bahr stores did not change (76). Outside Germany, the store portfolio was extended from 75 to 93.

Interim report for the half year / second quarter 2008

* incl. addition to reserves for Poland (euro 4.0 million)
** undiluted