Cewe Stiftung & Co KGaA

XETRA:CWC

Earnings Call Transcript 2020-Q2

[Olaf Holzkamper, CFO & Member of the Board of Management]

Welcome, everybody, to today's conference call with our -- about our Q2 results of this year. This year being obviously a very special year, and everybody is obviously looking at how the different companies are doing in these special times, and we are happy to present to you how we did in Q2. If I mean -- if I say we, I mean next to myself is, as always in the last years our CEO, Christian Friege, who is proving to you actively that also in these days, in corona times, it's possible to be on vacation and to take great pictures in order to deliver business to CEWE. And that's what he's doing from the south of France but he wouldn't miss the call. He would like to take part in this call, and that's why he's on the line. Now let's check out whether we got it done technically. Christian, the floor is yours.

[Christian Friege, Chairman of Management Board & CEO]

Yes, Olaf, thank you very much. Good morning, everyone. It's a great pleasure for me to join this call. And yes, indeed, I'm in the South of France. The weather is outstanding, the restaurants are full to the brim, and it seems to me that despite the corona pandemic, there are holidaymakers about. This as you know is very important for us, and we will report to you about how we've been faring for the second quarter. Unsurprisingly, the second quarter has been governed by the corona pandemic. And what you can see on this slide is the 6 priorities in order in which we have actually been working on them that we followed over the last months in order to make sure that our business is doing as best as possible. It's been always our first priority to focus on the health and safety of all of our employees. You would normally expect us to have our customers on the #1 position. And yes, they are, in fact. But without healthy employees, we can do nothing. And so we feel that health and safety of our employees is our #1 priority. And to the date, we are putting in numerous measures to make sure that there is no infection coming out of our business and that our employees are kept healthy and safe. We also secured production capabilities of our labs and printing plants throughout Europe, and this actually proved to be important for the results in the second quarter. We have at all times been able to deliver to all of the countries in which we are operating. And I have to say that I'm proud that all of our employees worked with us on this goal and that we have kept all of our labs and all of our printing plants open so that we could deliver to our customers. The third priority has been that we kept online and mobile sites up, very obvious because this has been a quarter, obviously for everyone in the industries across the world of online business. But what is also important for us is the communication with our customers. Yes, I am on holiday, and yes, we are taking photos, my family and myself. But we've also tried over the last months to inform our customers in the photofinishing businesses that taking photos is about sharing special moments. And yes, we have special moments when we are traveling, when we are on holidays, but there are so many more special moments in your own garden when you are spending times with your family, with your children, when you have quality time, maybe more than you had before during these lockdown periods. And we are communicating to our customers a lot of new ideas about what you can do with special moments, with memories in photofinishing. Needless to say and very important for us, even in the middle of March, we started a very focused cost reduction program. We reviewed investments and we made sure that our cash lasts. And Olaf will later explain the balance sheet to you, and you would see that this has actually been contributing to the numbers that we are presenting to you today. We are also -- and this is very important to us, focusing on the restart, in inverted commas, of retail and Commercial Online Printing. So we are taking the opportunities and we are taking openings that we have in order to better our understanding in these 2 areas as well as obviously in photofinishing, and we'll come to that in half a moment as well. And last but not least, and this is on the to-do list for everyone at CEWE and specifically the Board obviously, we are looking for corona upsides and that is if there is a special investment opportunity, we are prepared and we are financially able to follow that. Now if we go into more detail, we can see that the Q2 brought us ahead by EUR 2.4 million in EBIT compared to previous year. And this has been clearly carried by the photofinishing where we have seen the stay-at-home effect. We've seen a strong growth of 13.8% and an improved average to an exceptional EUR 5.1 million. Our CEWE PHOTOBOOK increased its sales by 11.1%, and also other categories of photofinishing products contributed to the increase of our revenues, plus the cost reduction program that obviously also was rolled out in the photofinishing division. So these facts, the CEWE PHOTOBOOK, the other CEWE photofinishing products and the cost reductions led to not only the improved sales, but also the very strong EBIT performance of our photofinishing in Q2. Commercial Online Printing was very hard hit by the corona crisis. It's very obvious. If there is no concerts, there's no posters to be printed for those. If there is no fairs, there's no fair brochures to be printed. If nobody is visiting anybody, you don't need business cards and so on and so forth. So the turnover of EUR 10.9 million was 56.5% below the previous year's levels. Efficient cost management and the conversion to performance-oriented depreciation kept the decline in earnings under control. And so if I'm talking about a great job that our employees did in the second quarter, it absolutely includes everyone at the Commercial Online Printing division because with that decrease in revenues to limit the decline in earnings has been a good achievement, I would have to say. Then obviously, we have our hardware retail where the turnover declined by almost 30%, very obvious a closed shop can't sell. We have been able to transfer some of that into online business, but as you can see, only some of that. The -- we have put aside, and I will come to that as well, EUR 3.2 million for a streamlining and also an acceleration project to convert more of our retail sales into online sales. As I say, I will come back to that in a moment. And last but not least, the EBIT of the group in the second quarter is EUR 2.4 million ahead of last year's EBIT. And so we are not entirely dissatisfied with the results of the second quarter. What I have to also proudly present to you is that Deloitte, WirtschaftsWoche, a leading German business weekly. Crédit Suisse and the Bundesverband der Deutschen Industrie, our industrial association, were kind enough to present this with the Axia Award of Germany's best managed companies. It was a bit bizarre when we had the handover ceremony in May. I was, in fact, the first external visitor. We received an [Foreign Language] since March with 1 meter 50 distance, our arms were just about long enough to hand over the trophy. Yes, we're a little bit proud of that. Next slide, please. So coming to photofinishing, we have, in the second quarter, rolled out our -- started to roll out our Boots engagement, we've reported to you about this before. The first shops are now up and running. We have installed to date more than 150 stores. The CEWE PHOTOSTATIONS will cover about 1,000 stores by the end of the year. We have introduced our Boots Photo powered by CEWE new website. We have introduced the mobile app, and we are starting to play what you can see on the right-hand side of this slide, our omnichannel approach to photofinishing. And as I would say, we are not -- we are quite happy about this, I have to say. It works well, and it works as well as we would have hoped it would be. So we see a strong new partner on board in the United Kingdom. We are also constantly and consistently improving our ordering software, our home photo software. Here, you can see on the slide on the left corner, our quarterly customer magazine OnTour, where Auf in den Foto-Sommer is actually the headline for a lot of ideas around taking photos and ordering photofinishing products outside of the fact that you are traveling and on holiday. And on the opened page that you can see in the center of the slide, you see some of the new layout functions of our software which are already live. We are constantly, constantly, constantly improving our ordering channels, our home photo software here for the laptop, our mobile photo software for the mobile -- for your mobile phones, which will actually come out new in the next 2 or 3 weeks, I would guess. And so this is a constant to-do for us, to stay ahead of the market with new features, with making it more easy to order ACV photo products and so on and so forth. Now if we sum all of this up for Q2, you can see that the total number of prints rose by 2.7%, the total value per photo rose by 10.8% and the turnover in photofinishing obviously resulted then in the already reported increase of 13.8%. The value per photo was positively impacted by WhiteWall, our last year's acquisition, which is actually doing as we would have hoped it would be. For the first half of 2020, that then adds up to a turnover increase in photofinishing of 12.2% with same -- more or less distribution between the number of total prints which rose and the value per photo. If we look at our most important product, the CEWE PHOTOBOOK, you can see that the Q2 increase was slightly above that of the whole first half of the year underlining the stay at home effect, the amount of time that people had, the fact that they also looked back into some of their older photos. So you can see the 11.1% increase in Q2 versus the 6.5% increase in the first half of the year. Overall, there is nothing wrong with this performance. And if we then look at the photofinishing turnover by quarter, you can see that we have actually increased our sales in both the first as well as the second quarter. We are comparing here to what we call the pre-corona perspective. And can see that in both quarters, we are actually fulfilling what we had hoped for and what we had planned for before corona hit us. I would caution you the fact that 2 quarters worked according to this pre-corona perspective does not automatically mean that the third and the fourth quarter work the same way. In fact, despite the full restaurants that I reported to you from South France, when I talk to people here, the tourism season is actually very much shorter than it was before. And the expectation overall is not that strong as you would read in all of the papers. And we cannot, at this point in time say in which way this affects us because obviously, holidays and these special moments outside of your own home are key moments that are put into CEWE PHOTOBOOKS and other CEWE products, and how that will impact us we will only see in the second half of the year. And if we look at this, we have business segment PHOTOFINISHING, we didn't have this before. If we look at the turnover in the second quarter, it's EUR 110 million plus 13.8% and on the next page you can see the first half of the year, which then gives you the same 12.2% that I believe we had and the overall EBIT of EUR 8.4 million that we are reporting for the first half of the year. And if you compare that to 2019, you will find the increase of EUR 6.6 million that we had reported before. And you also can see that there is special effects included in this on the right-hand side of this slide, but overall, there is no doubt there's a market improvement in photofinishing earnings in the first half year. Same for EBIT, as you would expect, with these numbers that are presented to you were in line with the pre-corona perspective. It doesn't say anything about how the whole year will actually come out. And I'll come back to this question of perspective for the whole year later on. Okay, let's go to retail. You all remember that we are operating about 145 photo stores and there is hardware stores in the Czech Republic and Slovakia, in Poland, in Norway, in Sweden, and 2 stores in Oldenburg going back to the foundation of our company in 1912 as a company called Wöltje. And you can see the logo of Wöltje Foto on the bottom of the left-hand side of the slide. The retail segment contains hardware revenue only. This is, again, one of the things that I'd say every quarter. The photofinishing business is shown in the photofinishing segment. On the next slide page, you can see what happened in retail. Obviously, the 28.8% decrease in turnover, I mentioned that before, and it's 3.2 million loss in EBIT. Now the EUR 3.2 million loss in EBIT is entirely because we set aside EUR 1.7 million in restructuring provisions for shop closures. We will close down 30 of -- above 30 of the stores that we currently operate because we do not see a positive perspective post corona for these 30 locations. And we've also set aside another EUR 1.5 million in devaluation of our stock because, obviously, people in the past months have had either a focus than buying new expensive photo cameras. We believe, however, and we call this program accelerate, and we call this program accelerate because we invest at the same time as part of this provision into converting retail sales into online sales. We are investing into converting hardware sales into photofinishing sales, and we believe that at the end of this program we will actually be better positioned in our retail segment than we are today. And we are also foreseeing the impact on the stationary retail businesses that will come out of corona with a strengthening of online businesses. So EUR 3.2 million in provisions. If you take those out, we're actually flat. And with that, basically where we were in the last year, and again, I have to say that the people in the retail segment have done a stellar job coping with corona in the last quarter and in the first half of this year. And we will utilize this position to build up our retail segment with less stationary stores and more online sales. If you again take out the EUR 3.2 million that I just reported about, we are basically where we were in EBIT before, despite the fact that we have this decline also in the first half of the year of 28.2%. Those of you who are wondering how can it be that in the first quarter, obviously, we had the same 28% decline in sales roughly speaking than in the second quarter. We were obviously very, very hard hit in March where everything was closed down. Nobody moved out of their houses. Everybody was concerned about buying toilet paper and disinfectant, and nobody focused on photo, whereas in the second quarter, in May and June, we saw some improvement of our retail sales and we are clearly seeing results that are better towards the end of the Q2 than the 28.8% that we reported for the -- for the Q2 overall. So that is the explanation for that. Overall, we are using this situation in the corona crisis to strengthen our retail segment. Now for commercial online print, you see the 3 brands that we are continuing, SAXOPRINT, Viaprinto for small additions. SAXOPRINT is our big industrial printer and LASERLINE for the metropolitan area Berlin. You will miss CEWE-PRINT. We've decided to split CEWE-PRINT between Viaprinto and all the upload and print businesses being integrated into Viaprinto -- is being integrated into Viaprinto as we speak and the editor business that we built at CEWE-PRINT is being integrated into the CEWE website. This will also help us to focus our CEWE brand exclusively on photofinishing. And we are again taking the situation of the corona pandemic, where we have to rebuild some of the online print business anyways. I explained to you about the posters and the fairs and so on and so forth. And so we are rebuilding that under the Viaprinto and the SAXOPRINT brand primarily and not under the CEWE-PRINT brand. This will, we hope, give us advantages in being streamlined setup, and it will give us advantages in cost, where we overall have actually been streamlining our businesses and commercial online print for the full 6 months that we're reporting about here. You may remember that we had taken a provision to restructure LASERLINE. That's been fully accomplished in the meantime. And we have also taken opportunities to streamline at other of our commercial online printing businesses so that we feel that as far as the cost structure is concerned, we are well set up for a restart of our business. In numbers for Q2, you can see that the 56.5% decline in turnover that have already reported about is visible here as well as the comparatively moderate setback in EBIT. And this is the result of efficient cost management, and that kept the decline in earnings under control. Same for the first half of the year where obviously, the decline in turnover is a little bit less significant because the first 2 months of the year as we reported, when we reported to you about Q1, were quite successful. But overall, you can see the decline in business here and again the effect of the cost management. We feel that with the measures that are described, we are doing whatever we can in order to set up our commercial online printing division in a way that it could actually get out of the corona crisis in a -- as good shape as possible and being set up quite competitively. Okay. We are coming to the business segment Other, which is not very exciting. In fact, the turnover is solely the futalis turnover. Increased in Q2 by 13.3%. More importantly for you, we've basically reached breakeven. Because of the corona pandemic, we have actually had to stop our efforts to sell this business for the time being. And so this will actually go back into the overall reporting. It has always been included in the business segment Other, but it will now also go back. And you can see that in our overall group reporting. We feel that we hopefully are in a better position to sell this asset off at some point in time in the future whenever we decide to do so, which by then will actually be a breakeven performing business that may actually be even in a different environment, also easier to sell. Group turnover in Q2 is only been down by 2.7%, and that is the addition of all the reports that I have given to you. Group turnover for the first half of the year will actually -- is actually up by 0.9%. So basically, despite all of the corona situation, despite the fact that we have had a significant decline in our turnover on Commercial Online Printing and also in retail, we've managed to hold the sales level of the previous year. And if we then look into the EBIT figures for the group, we will see that in Q2, we have actually an operating profit before special items of EUR 3 million, which is EUR 5.5 million versus previous years for the Q2 and for the full of the first half of the year. We're actually even EUR 6 million operating profit before special items with EUR 5.8 million better than previous years and a positive performance. And you can see we haven't had a positive performance in the first half of the year for the last 4 or 5 years. Now this is the status that we are in, and Olaf will actually present to you the details of balance sheet and et cetera, et cetera. I just want to put another word of caution so that we're all on the same page here. This is the performance of the first half of the year. This is 4,000 people who have done an outstanding job in managing the corona crisis. We do not know at this point in time how this will go on and whether we have sufficient new ideas for people to make up for the missing holiday pictures, missing holiday photos, the big fan CEWE PHOTOBOOKS from a safari in Africa; from a big, big cruise; from a recreational vehicle tour through Canada or whatever it is; which is now a holiday on the Baltic Sea, 2 weeks in [ Haapsalu ] is great but may not actually yield as many exciting photos as the safari. We do not know how this will impact our business, we do not know how this will impact our Christmas business, and that is why we still -- and I'll come back to that at the end of the presentation, would not know exactly where we will come out. But first of all, I'll hand over to Olaf for the financial details.

[Olaf Holzkamper, CFO & Member of the Board of Management]

Thank you very much, Christian. And for the national details, let's add a little bit of color to the P&L first that we walked through along with the different segments so far as Christian did. If we look at the total P&L, you already have heard that we have a decrease in revenues of only EUR 3.6 million which is photofinishing not quite balancing the decline in commercial online print and retail. The lines below don't show any important thing other than other operating income is down by EUR 0.7 million. We don't have to talk about that a lot but it shows that numbers are quite okay because this EUR 0.7 million is not nothing. But still we cope with it without further delay. Moving on to the cost of materials, you see a big reduction in cost of materials by EUR 7.2 million which is due to the fact that those segments that in general have a very strong material cost ratio, i.e., retail and Commercial Online Printing have the biggest decline in revenue, whereas photofinishing with a light cost of material compared to the other 2 segments has quite an increase in revenue. And that's the reason why we have this decline of EUR 7.2 million which in percent of revenue expressed in that way, the decline from 30.3% to 25.7% of revenue from last year's Q2 to this year's Q2. Now that is a substantial change in our structure of the P&L there which leads to the fact that, although we have a decline in revenue at the top of EUR 3.6 million, we end up with an increase in gross profit by EUR 3.3 million there. Now this increase in gross profit, we managed to defend pretty much and bring it down to an increase in EBIT by 2.4 million. That we actually talked about before already in our first part of the presentation by Christian. The lines in-between personnel, other operating and amortization don't have a big decline here. Personal has a slight relief in personnel cost, which is mainly due to the overall cost containment we are doing there. We are benefiting from the integration of LASERLINE on the commercial online side which we have been -- which we have seen costs for in the restructuring costs of last year. Now we are benefiting from that. That is counterbalanced a little bit by the restructuring in retail. We have booked for in Q2 as well as by a little bit by the acquisition of WhiteWall which was adding a month of -- 2 months of costs which we didn't have before in Q2. So all in all, that adds up to a relief of costs, of personnel cost of EUR 1.4 million and doesn't change the structure. It's 33.4% and 33.3% in the 2 quarters, respectively. So there's basically no change in structure. Moving to other operating expenses here, we have an increase in other operating expenses, which is mainly due to the last item mentioned in this list here of the 3 items: its mail order costs, having people stay home and ordering a lot more online and having the products sent back to them mail order-wise did add quite a bit mail order cost to our structure here. And that's the reason -- the main reason why we are seeing an increase of EUR 1.9 million in terms of other operating expenses which is a slight change in structure, 32.5%, 32.5% in percent of revenue of last year's Q2 are increasing now to 34.8%. Amortization, depreciation is pretty stable, not a big change. Also no absolute terms neither in percent of revenue. So in the end of the day, EBIT still increased by EUR 2.4 million, which is a nice increase in terms of EBIT and that was clearly driven by the success we've had in photofinishing. If we move over to the balance sheet there, let's start with the year-on-year comparison. What we're seeing there is a EUR 17.3 million decrease in assets. So we have a shortening of the balance sheet here, which is mainly driven, as you can see there by the yellow part in this chart. The noncurrent assets are decreasing by EUR 14.9 million to EUR 366.9 million. That is mostly driven -- very mostly driven by fully regular depreciations in terms of purchase price allocation assets that are depreciated and the IFRS 16 leasing assets we are seeing there that are depreciated there. So that's all fine and fully regular. Then below there in the current assets, there's actually no big change overall, as you can see. It's minus EUR 2.4 million. So that's basically stable. If you look 1 level deeper, you have quite some changes. You have a little bit more inventories, EUR 2.3 million. You have a little bit less in terms of receivables from tax refunds due to less prepayments and deferment of prepayments there for taxes. And the most important thing in there is the trade receivables are down by EUR 11.7 million, and that is pretty much translating into the cash positioning mentioned there. So the trade receivable decrease of EUR 11.7 million is a first -- on first-hand side a nice development, but nevertheless it's obviously driven by seeing less business, especially in Commercial Online Printing, and that's the reason why the money came in here. But the money came in nicely. We saw it in cash. We didn't see it in any depreciation there which is helpful as well. So we had a change there from trade receivables into cash. And that's all hidden in this minus EUR 2.4 million current asset, which, all in all, look basically stable. If we move over to the liability side, what you see there is a strong increase by EUR 27.9 million in equity. Nice, we appreciate that, it's the development of the last 4 quarters. A successful development of the company overall and it underlines the stability we are seeing there. It ends up starting from 46.4% equity ratio last year at this point in time. We have now increased to 53.7% equity ratio. And if you take out all these IFRS 16 effects which are extending the balance sheet, then we would see a 61.3% equity ratio, which underlines that we are in a very stable situation here. CEWE is stable, and that's important, and that's even more important in these corona times here. We always care about -- care for the equity ratio. But this year, it's even of more importance to us, and we appreciate having such a stable balance sheet. If we move on to the noncurrent liabilities, we decreased that by EUR 7 million, which is again very regular depreciation, IFRS 16. And the current liabilities were decreased by EUR 38.2 million down to EUR 137.5 million. And by far, the largest part of that was driven by short-term financial liabilities. And here, we are looking at the WhiteWall acquisition, which we had last year, which in short term, was financed by the debt we took. And you can see now that 1 year later, the debt is basically gone which we appreciate a lot. It underlines the -- not only the stable -- how stable balance sheet of CEWE is, but it underlines the cash generation potential of the company. We enjoy this development. Now the trade payables are increasing, and we're financing the inventory increase that we see on the management balance sheet. If we move to that one, you see that here we have an even stronger reduction in the management balance sheet, i.e., and the capital employed, for instance. It's not only the EUR 17.3 million on the normal balance sheet, but capital employed reduced by EUR 24.8 million. A lot of that, again, is driven by the noncurrent assets, minus EUR 14.9 million. We just saw that in the balance sheet as well. But then you see a strong development in terms of cash counterbalancing that. A big increase from EUR 12.5 to EUR 24.2 million in cash. And here, please bear in mind, the dividend of roughly EUR 14 million hasn't been paid yet, different to last year where within Q2 the dividend was paid out. Coming down to the net working capital at the bottom, we see a strong decline here of 21.5%. And this is, to a large degree, again, the effects we saw already on the other balance sheet. The current trade receivables are making, by far, the biggest effect here with a reduction of EUR 11.7 million, but also the receivables from income tax refunds were reduced by EUR 5.2 million. Moving over to the capital invested side. On the equity position there, you've seen the development already, plus EUR 27.9 million, same as Page 34 (sic) [ Page 35 ]. And in the gross financial liabilities you see the strong reduction here and that is the big movement we already talked about. WhiteWall debt was paid or the debt we took up short-term for WhiteWall to finance the acquisition last year at this point in time, at this very point in time was completely paid back. And that is, to a large degree, pushing the gross financial liabilities down by 47%. So they all in all reduced by EUR 54.5 million. The bottom nonoperating liabilities are basically stable year-on-year. Now if you look into what happened within Q2 in greater detail, let's look at the capital employed first. There if we look at the noncurrent assets, we can glance through and say there is basically in the end of the day no change at the bottom line. We had a bit more investments, bigger than depreciation and the property, plant and equipment side. We had a reduction in intangible assets due to the scheduled depreciation of the purchase price allocation assets and software we have in there. So that's fully regular, all in line. And all in all, noncurrent assets don't really change, minus EUR 0.3 million. Then we are starting to look at the operating net working capital. What we see there is inventories are up, and that is for instance, the paper stock for on-site finishing, we had the ordering done already, and we are quite happy to have the stock. So whatever happens to our supply chain there, we can rely on the paper. We have already when stores reopen and see more activity in the future that's the reason why there's more inventory. And quite frankly, in the meantime, we saw also more inventory within Q2 in other positions of our balance sheet. That was part of what Christian at the very beginning highlighted, as making sure our production keeps up and running. That was visible, more visible in the balance sheet within Q2 when we had some concerns here. But now we are down to an increase compared to last year of EUR 3.9 million, which is mainly due to paper for on-site finishing. That was financed or that is financed by the increase in current trade payables by EUR 4.3 million at the bottom. So those 2 positions belong to each other content-wise and they balance each other. So what you see there is a change at the operating net working capital, which is reduced by EUR 5.8 million. It's basically purely driven by the current trade receivables that within Q2 were reduced by EUR 5.4 million, which is linked to the reduction of EUR 11.7 million we just saw on a year-on-year basis on the page before. So this is all less revenue, especially in Commercial Online Printing. And that's why less receivable. If we move to the other net working capital, we could take a very easy shortcut and look at the bottom line of that part, other net working capital, and say there's only an increase of EUR 0.8 million, which means a change of EUR 2.4 million, which means no change, basically. But nevertheless, if we look at all the comments the colleagues have added there in the rows on top of that, there were quite some changes underneath the surface. So what you see there is the current receivables from income tax refunds. They increased a little bit. And also here, you can see that there is a corona effect in that sense because this is only a small increase compared to a normal Q2, where we would see more increase in this position. And we're looking at next point, current financial assets, an increase of EUR 1.1 million which was due to the social security insurance which still will pay some of the money to us there, which is not incoming money as cash. Next one is other current liability -- other current receivables and assets where we have less, EUR 1.3 million less VAT claims. Also that is unchanged due to corona because we have purchased less due to the cost containment that Christian mentioned already, due to less material that we have purchased to produce less of a revenue in some areas. So that is the VAT claims there. In terms of current tax liabilities, we have -- we paid the income tax of the previous years. So that's a very regular item. That is no corona influence that happens, it's just a question of timing here. And also within the current other accruals, yes, we do see an increase here, but that's only the provisions for the restructuring in retail, balanced by the usage of provisions for the restructuring of LASERLINE, which we had booked in there end of last year. Current financial liabilities down because we have purchased another few percent of Cheerz as planned. So we are fully in line there, nothing in particular. And the last one, 1.6 million, a large part of that is corona driven, if you want. It's a deferral of social security contributions in France, which was granted by the government to all the companies and we also enjoyed that here. So all in all, many changes, many ups and downs. But they all balance to an EUR 0.8 minor decrease here in other net working capital. So if we look at the net working capital in total, there is basically only the change in operating net working capital that remains in there. We saw that was driven by the current trade receivables where we had the big decrease. And this EUR 5 million decrease we saw there, they now translate into net working capital. And quite frankly, they pretty much translate also into the change of the cash position at the bottom of EUR 4.5 million more cash we have on hand. So if we boil it down to the 1 change that really makes the difference, what we see there in terms of change in cash position is really the reduction in current trade receivable that we have seen within Q2. Moving to the capital invest side, there is obviously the EUR 0.8 million reduction we have been seeing on the page before for capital employed. So that fits and there's no big change. And also here, yes, a bit of changes, ups and downs, but quite frankly, there's nothing in there that really makes a difference. It's the typical changes in IFRS 16 lease liabilities and so on, but nothing that's worth mentioning, nothing that is big time corona driven or whatsoever. So if we move on therefore, to the cash flow of Q2, i.e., what do these changes we just looked at mean compared to last year's changes? And how do they affect our cash flow? We can see that within Q2 in cash flow from operating business, we saw a great increase here of EUR 10.8 million in our cash flow from operating business. But if we look at what drove this change, then quite frankly, there is the EUR 2.8 million increase in EBITDA which is nice, which is something that we can rely on. And then there's the higher cash flows from operating network capital we looked at, which is mainly driven by the trade receivables we just learned. And then the less cash out for income taxes, which is also a timing issue. So quite frankly, yes, it's great to see such a big operating -- big cash flow from operating business, but it is also a timing question and the way we play. So one day, we see more revenue. Again, we will see higher trade receivables again. We will see a decrease here in this operating cash flow also again, which is completely normal. But all in all, yes, slight increase remains in there. That is worth mentioning and worth -- to be proud about. Looking at the outflow of funds from investment. Last year, we had the big acquisition of WhiteWall. This year, we had just normal acquisition and we actually were quite, quite careful with the acquisitions we have done there. So we were back on normal level there. And that is why adding these 2 things up, we actually look at a positive free cash flow in Q2. Now I can't recall when I've seen a positive free cash flow in Q2. But anyway, we see it this year nevertheless, again, there's a few one-off effects in here that are not there to stay forever. Once we see more revenue, we will see more trade receivables again. But nevertheless, it's a good development so far. And within the corona period, this looks the way it should look like. The next page gives you some more detail, and I think I've talked through most of that already. So in the interest to save some time here, it's for your reading at your own leisure. And with that, I would like to move on to the ROCE page here. We're also we are seeing a nice development within our company. You have seen that we moved up 12 months EBIT in the numbers that we presented to you. If you add it up on a rolling 12-month basis, it means the EBIT increased from EUR 56.1 to EUR 59.3 million. Nevertheless, the rolling 12-month capital employed also increased to EUR 383.1 million. And all that ends up in a weak, slight decrease in terms of ROCE from 16.5% to 15.5%, which is still a nice number to look at. But if we take out the restructuring items and if we take out this IFRS 16 additional assets we are looking at here, then we would see an increase in ROCE from 18.1% to 20.3% ROCE. And both 15.5%, but even more 20.3% gives us a good feeling that we are creating value. CEWE is on track this year. And with these words around the balance sheet and some more details, I'd like to hand back to Christian.

[Christian Friege, Chairman of Management Board & CEO]

Yes, thank you very much, Olaf. On the outlook on the next page, you see something that is history, which is the right-hand column, pre-corona perspective 2020, which we had prepared for presenting to you at our annual press conference towards the end of March but which obviously then didn't materialize due to corona. We are in a stable position, as you can see from the balance sheet. As you can see from the cash flow, as you can see from the cash at hand, as you can see from the overall results by the end of the first half of the year. And that is a good position to be in amongst a world with so much insecurity about what's going to happen. Is there going to be a second wave? Is there going to be this, that and the other? And we are in a very, very good starting position to go over the next 2 quarters, month by month. We will continue to save cost. We will continue to focus our attention on getting the Commercial Online Printing back to a breakeven situation. We'll continue to focus our management attention to getting the retail division accelerated into a more online performing division. We will continue to make our customers aware of all kinds of new ways to look at memorable events at special moments outside and in addition to traveling and holidays. However, how the corona pandemic will continue to impact the company's business in the next few months cannot be predicted reliably within the usual confidence interval. Whereas we, in the past years, were quite confident at the beginning of the year to give you a good guidance with this new company in the fold and this, and that other strategic development that we could foresee where we would end out in the year -- in the current year. We unfortunately feel unable to do this year. In Q3, in which the turnover as a percentage of annual sales has already been declining for years, we could see an additional negative impact in 2020 resulting from changed holiday travel behavior due to the coronavirus. So whilst we are having a good starting position, we cannot reliably foresee how the year will end. What we can do is we will -- we can say yes, we will most likely have a profitable year. Yes, we will most likely have a reasonable year compared to other in the industry. But we will have to drive the company quarter-by-quarter, month by month, week-by-week according to what is happening around us. For that, we have a great starting position but this is not a guarantee for what's going to happen over the next 6 months. And with that, I hand back to our host, and I believe we can now enter into the Q&A session.

[Operator]

And our first question comes from the line of Volker Bosse from Baader Bank.

[Volker Bosse, Co]

Volker Bosse, Baader Bank. Congratulations for the figures, and thanks for all the details provided so far. I have 3 questions here, one for each of the segments, starting with photofinishing. Strong improvement in adjusted EBIT, congratulations on that. But I would be curious to see what are the drivers here behind that strong profitability improvement. Is it just economy of scale effects, entire value per photo? Or are there any structural changes in the cost structure which should be sustainable going forward? Second question would be regarding the retail segment. You have been able to achieve an adjusted EBIT of 0, which is a great achievement given the sales decline by 27% as seen in the second quarter. So I would be curious to see how that was possible to be achieved. Does that include any support from rental cost reductions or any fiscal support for short working hours? This means in German, [Foreign Language]? So how sustainable is that support going forward that you have been able to reach the flat line, so to say? And finally, a third question would be on the online print. Here, I would be curious to see how the sales development progressed throughout the second quarter. You reported minus 56% in the second quarter in total, but how was the development in April, May and June? And perhaps also a sneak preview how the trend is progressing in July and August so far, so that we can see a potential upward trend and to have some visibility, that would be helpful.

[Christian Friege, Chairman of Management Board & CEO]

Okay. This is Christian Friege speaking. Thank you very much for those questions. Let me start answering them. For the Commercial Online Printing, as you would expect the sales performance in April was much worse than that of June. So we can see some improvement here. But since I said something about bringing the Commercial Online Printing back to breakeven, there is some room that we still have to cover. And the slow reopening of businesses also yields the demand for stationary, for business cards, for brochures, et cetera, again, and I would hope that, that development continues over the next 2 quarters. As far as the retail is concerned, yes, of course, the result in operational 0 includes some support of our landlords in the different countries, which is being organized in different ways in different countries. And yes, it also includes, in some ways, short time working yields. Those were less than EUR 1 million by heart. Olaf can give you the exact number, which we disclosed in our report. Is that sustainable? We do not know. It depends on the legislation in Poland, in the Czech Republic and Slovakia and Norway, et cetera. But we will, as I said before, through the closure of those 30-plus stores obviously limit the exposure that we have as far as rent is concerned and as far as the cost of personnel are concerned. Photofinishing, it's been all of the things that you think they would be. Clearly, there is a little bit of economies of scale. Clearly, there is an advantage that we had because we were able to deliver to such countries as Italy and Spain, et cetera, et cetera, where some of other market participants were finding it hard to deliver into. And yes, we also had -- don't forget that the acquisition of WhiteWall in the second quarter 2019 only in June, and in 2020, we had WhiteWall in obviously for April, May and June and also that contributed. So wherever you look at photofinishing, the team has done a stellar job in the second quarter. Any additions, Olaf?

[Olaf Holzkamper, CFO & Member of the Board of Management]

Yes. I think the -- what you laid out is perfect, you are right. I think it's -- what's important thinking about these special items, as you mentioned them, Volker, how special they are because special items, these items we just talked through, only appear when revenue is down. And that's what is important to bear in mind. So if you want to calculate back into a normal situation what is sustainable is, then these things are not sustainable once revenue is up again. And that's why it's hard to think about these things of being sustainable or not.

[Volker Bosse, Co]

One follow-up then on online print, you said that the trend is improving from April to June, okay. How was July progressing? Is July better than June? Also -- and would you say that -- to assume and still, let's say, double-digit percentage range down year-on-year in July is a fair assumption? Meaning minus 10%, minus 20% sales in July in online print down year-on-year.

[Olaf Holzkamper, CFO & Member of the Board of Management]

Volker, thanks for the question. We fully understand your interest in the well-being of CEWE, even within the month of July. But you are certainly aware of the fact that July is not quite part of Q2 anymore. And that's why we will delay that communication when we are out there with Q3. There's many things happening right now. And I think it boils down to what Christian said, we have seen an improvement within Q2, but we are not quite there again yet, and that continues now.

[Operator]

The next question comes from the line of Charles Bordes from Kepler Cheuvreux.

[Charles Bordes, Equity Research Analyst]

Congratulations for this strong set of results. So first one, is it possible to have a bit more color on how shares in WhiteWall performed during these special times, please? Second one would be, now that most of the lockdown measures are over. Are you still observing a stay at home effect? Or is it beginning to fade? And more especially regarding PHOTOBOOKS, did you observe changing -- changes, sorry, in consumers' habits during lockdown? For example, less photos but more finishing option.

[Christian Friege, Chairman of Management Board & CEO]

Okay. Let me -- I didn't quite get the second question, but let me first try to answer the first question. We acquired shares. And last year, we acquired WhiteWall. And as I tried to indicate with my answer to Volker Bosse before, we are truly happy with those 2 acquisitions and they have contributed to the results in the second quarter. I didn't quite honestly get your second question about photobooks. There was something about do we see differences in the...

[Charles Bordes, Equity Research Analyst]

In consumer's habits -- in consumer habits during the lockdown.

[Christian Friege, Chairman of Management Board & CEO]

Well, obviously, I mean, there's 2 obvious differences. The one is that consumers had more time to sit down, so we have an increase in the number of photobooks that we have sold by 11.1%. And we can also see that people are using some of the more older photos which is again, very obvious because they have time to do the CEWE PHOTOBOOK that they had wanted to do last year and the year before last year, but they didn't get around to. And the other thing that we see, to some extent, is that people are following ideas of also using other memorable moments to prepare a CEWE PHOTOBOOK, but that is a very, very thin trend.

[Charles Bordes, Equity Research Analyst]

And concerning the stay at home effect, is it...

[Christian Friege, Chairman of Management Board & CEO]

What effect?

[Charles Bordes, Equity Research Analyst]

The stay at home effect, yes. Do you still observe it? Or is it beginning to fade away now that the lockdown measures aren't there?

[Christian Friege, Chairman of Management Board & CEO]

Most of the people who should stay or who could stay at home are not at home, but in the restaurants here in France.

[Operator]

The next question comes from the line of Christoph Bast from Bankhaus Lampe.

[Christoph Bast, Analyst]

Three questions from my side, please. Firstly, Mr. Friege, you mentioned potential corona upsides during this presentation. So could you give a bit more color how such upside could look like? That was the first one? And secondly, on futalis. I mean, how should we think about this business going forward? Are you planning to sell it at a later stage? Have you decided that you won't sell it at all? What was the reason behind not selling at this point in time? Is it a lack of demand, different price perception? Or let's say only the organizational difficulties around the current virus? And third one is could you give us a quick update regarding your SAP HANA rollout? Is this running according to plans and which financial impact should we expect this year? And last but not least, coming back to the question of Volker Bosse, with regards to the photofinishing margin. So would you say that a 6% adjusted EBIT margin in photofinishing is a new and fair run rate for the first 3 quarters? That's it.

[Olaf Holzkamper, CFO & Member of the Board of Management]

Yes, now picking up the questions regarding SAP and the photofinishing margin. Regarding photofinishing margin, we will see how we continue there and whether that is something sustainable. I think it's going to be a special year in any way, and I think it's tough to take this year, to take any quarter of this year to extend it fully and as it is into the future. So I'd rather wait and see what the future will improve there.

[Christoph Bast, Analyst]

But assuming, let's say, mid-single-digit revenue growth in the next quarters, let's set aside Q4, but is there any reason why the margin should not remain at the same level as in Q2?

[Olaf Holzkamper, CFO & Member of the Board of Management]

I mean, the margin we have in photofinishing as a year overall is to a very large degree, determined by what happens in Q4. I mean you are fully aware of that, that we are doing around 90% to 100% of our EBIT within Q4. That's why this is really driving what's happening there for the whole year overall. I think the Q2 margin is just -- it's slightly moving the big number that is generated in Q4. It's hard to really drive anything from Q3 numbers there -- oh, sorry, from Q2 numbers. Regarding the SAP question, yes, you are right. We are working on the SAP HANA, S/4HANA rollout there. That project is ongoing, and that will be ongoing for quite some time. There is another 2.5, 3 years or whatever to go, but we have learned a lot in the last month regarding this project. We are on track. You won't see anything there, and you won't see much in costs this month as it's all preparation projects we are doing. But all we can say is so far, we feel very much on track. We have understood what we have to deliver and we have understood what the rough steps could be like and should be like and that's why it's on track. But it's not visible that much on the cost side yet. Regarding the question around futalis, you had pointed out that we put it back into our normal business. Yes, that's true. And yes, we put it back because after -- in the special corona times, there is nobody out there who is willing to participate into any big due diligence work out there. And that's the reason why we are seeing it's not a change into what we want to do with futalis. We have just not the ability right now to run a major process here, so I'd rather take it back. We have futalis develop well within the next year or so, and then we will restart the progress there. But there's no change in terms of how we think about this point strategically. On the other hand, we're happy with the developing that futalis is taking. And that shouldn't be of any harm to our process later on. And then you were asking about -- last point, I think you were asking for the potential upsides that Christian was alluding to at the very beginning. This can be many things. I think the most important thing that -- most of you mentioned in terms of questions is whether we want to look at any M&A opportunities or anything out there. And I think Christian alluded already there that we are willing to talk about things. And perhaps even more important, we do have the ability to be active if it makes sense and if we want to develop that way. Christian, anything to add from your end?

[Christian Friege, Chairman of Management Board & CEO]

No, this would be the exact way that I would have answered that question.

[Operator]

[Operator Instructions] And our next question comes from the line of Thilo Kleibauer from Warburg Research.

[Thilo Kleibauer, Research Analyst]

Thilo Kleibauer here. I have 2 questions. The first one is on photofinishing. In Germany. We have -- in the second half of this year, the temporary VAT reduction. So normally, your business is less price sensitive. So what is your reaction in terms of pricing? And then do you expect any impact from this in demand? And my second question is on Commercial Online Printing. I mean this is kind of a difficult industry, a highly competitive market with several players which are obviously in a much weaker financial position than CV. So what is your -- yes, outlook, your scenario for this industry in the coming quarters? So do you expect an even increased price pressure? Do you expect the kind of accelerated consolidation in this industry? So this could be helpful if you have any idea here.

[Christian Friege, Chairman of Management Board & CEO]

Yes, Thilo. Thank you very much, and I hope we have 1 or 2 ideas. Let me answer the first question first, photofinishing. I shall refrain from making any comment about the usefulness of this EUR 20 billion to EUR 30 billion package of the VAT reduction. Most people in the retail industry, and you know that we have close contacts there, are tearing their hair out because the administrative effort to account for this temporary reduction of VAT is tremendous. We do not expect any change in demand from that. We have offered for our direct customers a 3% reduction, which is a little bit more than the 2.52% that the VAT reduction would actually make out. So our customers will actually benefit from that. But if you order a EUR 40 CEWE PHOTOBOOK, 3% in the best of my -- EUR 50 CEWE PHOTOBOOK, it's EUR 1.50. It doesn't really make a decision different whether you buy this or not. So no, we do not see any impact on demand from that. It's just cost for administration. Commercial Online Printing. What you are saying is exactly what we expect. You know that in Germany, by the end of September, the bankruptcy stalemate is being lifted. And then there is a certain period of time where other printers will have to survive on [Foreign Language]. And so we would expect, indeed, a consolidation over the next 1, 2 or 3 years. You've seen our financial position. I have reported to you that we have streamlined our Commercial Online Printing division in various ways. That we have taken out cost and complexity there. And so we feel that we are as best as possible prepared for what's going to happen over the next 1 or 2 years. Do I expect that this will be years where business will be very easy? No, absolutely not. Do I think that we have a structure and is set up where we have every opportunity to prevail? Yes, we do.

[Operator]

There are no further questions coming through. So I will now hand over to Dr. Christian Friege for closing words. Please go ahead.

[Christian Friege, Chairman of Management Board & CEO]

Yes, thank you very much for the time that you've spent with us on the first half and the second of 2020, on the second quarter of 2020. I hope we've been able to answer all questions that you had adequately. You've seen a company that is set up very, very stably, that has gone through the first month of the corona pandemic in a reasonably good way. We will continue to do our very best to manage the fallout of this situation with no guarantees what's going to happen over the next 6 months. We'll strive for good results, but we cannot promise any of those. And that's why we are going out with no direct forecast of our financial performance in 2020, but we will take this month-by-month and quarter-by-quarter. Thank you very much for your continued support, and we'll talk to you again, if not at our Annual General Shareholders meeting on the 6th of October, then surely when we report on Q3. Thank you very much, and you have a great day.

[Olaf Holzkamper, CFO & Member of the Board of Management]

Thank you, cheers. Bye-bye.