Cewe Stiftung & Co KGaA

XETRA:CWC

Earnings Call Transcript 2018-Q3

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

Thank you very much, and good morning to everybody from our side in Oldenburg. Welcome to today's conference call regarding the results of Q3, 2018. It's getting dark, it's getting colder, it's getting rainy, we are approaching the important season of Christmas for CEWE. But before we get to that, let's talk about what happened in Q3 and Q3 was very much also, for our workload, influenced by the Photokina fair we had in Cologne, and Christian, before sharing the numbers of Q3, wants to share some impressions of that with you. Christian?

[Christian Friege, Chairman of Management Board & CEO]

Yes. A very good morning to you all. We ended the third quarter with the international fair, Photokina, and at Photokina, CEWE presented very much to the acclaim of many visitors, both product innovations and also conceptual innovations that we've dubbed, smart solutions. So we showed new products that will help us in our Q3 and Q4, but we also showed a way ahead for photofinishing, including Smart Solutions, artificial intelligence, et cetera, and I'll come to that in half a moment.In addition to that, Photokina is always a get together for the company, and you can see here the team at the first day of the fair, we man our stand with entirely with our own people. So it's the product manager, it's the software developer who explains the new developments to our visitors at the booth and that very much helps us to understand what our customers want, where it is that we can actually gain insights for further development of our products. Photokina was also the day and place where we got awarded the world championship. I'm a little bit relaxed here. Indeed, we got the Best Photo Print Service Worldwide by the TIPA association, which is the world championship for photofinishing, and I'm very proud that we got this for a classic traditional product and that is for our CEWE PHOTOBOOKs with embossed covers. We also won the European Championship, which is the ISA Award, and we got that for a smartphone product, the CEWE PHOTOBOOK Pure. So you can see that also there, we are going both in the direction of maintaining and developing our legacy product as well as implementing and developing new products for new times with mobile phones.If we get to the aforementioned product innovations for 2018, we showed, in essence, 15 product innovations in 6 categories: CEWE PHOTOBOOK, CEWE CALENDAR, CEWE WALL ART and CEWE CARDS but also cases and advent calendars, among which, as I already said, the embossed covers, which we have rolled out to all hard covered books, among which is a whole set of new refined design elements that we introduced at the Photokina. We introduced 7 new styles for our award-winning CEWE PHOTOBOOK Pure, and we also introduced a new little sibling to all our CEWE PHOTOBOOKs, the CEWE PHOTOBOOK Kids, which is -- what the idea is that the real grandmother and the real uncle, aunt, mom and dad are shown to the little kids and that can only be done with the CEWE PHOTOBOOK Kids.We also introduced our hexxas, our hexagonal wall decor elements with a very nifty system to fasten that to the wall, that was very well received at the fair. And it's a product that we are very proud of. We're very proud of this product also because it comes from a [ Hekaton ]. So the original product idea comes from a [ Hekaton ], where folks from our software development department and from our marketing team department test together for 2 days and came up with this idea and it shows that innovation at CEWE comes from within. You all remember that there is no innovation department at CEWE. All of us are involved in innovation and so this product actually comes from the IT and marketing department.We are extending our range in smartphone cases, and I need not say that this is an area that we are quite happy with and also, we extended the range in advent calendar, which we use to start the [ Q3 ] to Q4 Christmas season ahead of time. So if we were to look at the whole of Q3, not just Photokina and the new products, we can see that there's 2 things that happened: number one, the seasonal shift continued. So we see that instead of ordering right after coming back from holiday as was the usual order time in the analog times in Q3, people wait and wait to order right before Christmas. So there is a seasonal shift away from Q2 and Q3 into Q1 and specifically Q4, and I'll come back to that in a short while. In addition to that, we had unusually warm weather, and you will all remember that, and not only in June and July but all the way from March, April through October. And this unusually warm weather has the advantage of being perfect photo taking weather but unfortunately, it is imperfect sitting at home in front of your desktop and order a CEWE PHOTOBOOK weather. So we see that enhancing the seasonal shift that we've seen over the past years.So with the expected negative contributions to earnings from the acquisition of Cheerz and LASERLINE, the CEWE Group EBIT for Q3 is reduced by EUR 1.6 million. So we have digested the unusually warm weather, we have digested the seasonal shift, we have digested the Cheerz acquisition cost and the LASERLINE acquisition cost as were planned, and we are "only EUR 1.6 million behind." If we were to include the contributions of Cheerz and LASERLINE, the reported group EBIT is reduced by EUR 2.2 million to EUR 1.4 million. So the one that's before the extraordinary effect and the one thereafter. That is the overall setting for Q3, and we will come to more detail about that shortly. So as I already said that we have the photofinishing seasonal shift and the extremely warm weather, we have also seen in our commercial online printing division the EBITDA of commercial online print falling short of that of the previous year, which, again, is partly due to the LASERLINE acquisition, partly due to ongoing price pressure in Germany, weak U.K. business, cost increases in paper and other material cost.Overall, and again, I will come to that on the next slide, we can confirm our annual target specifically the annual EBIT target in the range of EUR 48 million to EUR 54 million and that works like this. On the left-hand side of the slide, you can see the Q1 to Q3 distribution of earnings in comparison to Q4. So the dot red is the Q4 and earnings of the past years, 2013 and onwards, and the light gray is the evident Q1 to Q3 and it is not a surprise to you who followed us for a long time, the money is made in Q4. And we have not only been able to make the money in Q4, but you can see from this graph on the left side that we've been able to increase the contribution every year, on average, by EUR 4.1 million over the last 12 years in the Q4. So if that is the case, and you can see that we only "need EUR 3.8 million improvement over last year." In order to hit the lower edge of the range, we need an improvement of about EUR 9.8 million to hit the upper end of our target area. So let's look at how that worked over the last years and that's on the right-hand side where the EBIT increased, just the EBIT increase is reported separately. So from 2013 onwards, you see that we increased our EBIT by EUR 4.7 million, EUR 3.7 million, EUR 3.4 million, et cetera; last year, by EUR 6.7 million, and of which, we recorded a non-recurring effect of PPA asset depreciation in the range of EUR 3.6 million. So you can see that over the last years, we were well within the range in increased EBIT to hit our targets, and you can imagine that I've already seen our October results and that makes me not any less confident that we will reach the target.Okay, let's look into some more details. Photofinishing goes first. We can see that the value per photo in Q3 has increased by 8%, the turnover by 4.3% and if we were to add this up for the first 3 quarters, we increase -- the value per photo increased by 5% to almost EUR 0.20 per photo, which led to a turnover in the photofinishing, plus 6.4%. We have recaptured growth in the CEWE PHOTOBOOK, albeit only at 1.4%. You remember in 2017, we were severely hit by the VAT, an increase in our important German and Austrian markets and there is no decline in the CEWE PHOTOBOOK category that we see. Basically, we are flat, but I am as confident as I've always been that the CEWE PHOTOBOOK is not a product of the past but a product of the future. Keep in mind that this increase of 1.4% is on the back of the seasonal shift that I pointed out on the back of the extraordinary warm weather and on the back of the fact that the [indiscernible] CEWE PHOTOBOOK doesn't lend itself to be ordered at 35 degrees Centigrade outside. Now, if we look at the shares in turnover by quarter, our turnover is within the range that we expected for all 3 quarters and to this, contributed also our Cheerz acquisition. Let me say a few sentences to Cheerz. If you remember that we acquired Cheerz, I think the 1st of February this year, a mobile marketer of photofinishing domiciled in France, with a home market in France and significant interest in Spain and Italy, and we had acquired this under 2 headlines. The first headline is what has strengthened the mobile sales and a channel and the second headline being to strengthen our presence in the French, Spanish and Italian market, and I'm very pleased to say that both goals seem to work out for us. We are very much on track with what we had expected from Cheerz, and it is personal pleasure for myself to be involved in the supervisory board for Cheerz on a quarterly basis. This is a great team that we have on board there.So the photofinishing growth through the Cheerz acquisition, but if we look at the Q1, Q3, we can also see that it is not only Cheerz but there is also a good chunk of organic growth, which specifically happened over Q1 and so the EBIT absorbs the scheduled negative Cheerz earnings, as I said before, given the fact that we have the negative earnings of Cheerz and LASERLINE in the e-commerce online-print division that we digest in our results, I am very, very happy with what we have achieved so far. EBIT therefore, restructuring by quarter in photofinishing began quarter-by-quarter is within our expectation, and there's 3 little green tick marks that show us that this is what we expected it to be.So in summary, our photofinishing is on track. Commercial online print. You all remember that we have now 4 brands that are targeting slightly different customer groups with LASERLINE being a predominant player in the Berlin Bradenburg area; with Viaprinto having a specific USP and a "what you see is what you get" software where you can actually see exactly what it is that is being printed. The Saxoprint focusing on all kinds of B2B printing across Europe and CEWE-PRINT being the player that takes advantage of our CEWE brand in the German markets, specifically the small and home office markets.Now, our turnover grew by 18.2% this quarter and this is mainly through the LASERLINE acquisition. The organic growth is there but it is not very significant. And again, the EBITDA, the cost due to the LASERLINE integration also, I have to say, we are slightly behind schedule here and on this being slightly behind schedule means that there is some additional cost that we have not anticipated incurred just for the integration of LASERLINE.Overall, if we look at the first 3 quarters in our commercial online print division, we see that it is, again, more than anything else, LASERLINE acquisition, which we had on the books since January 1, that sees the turnover in the first 3 quarters rise. The organic growth is significantly smaller. We have price pressure in Germany and that continues to happen. We have cost pressures that I mentioned before in terms of personnel, in terms of paper, logistics, et cetera, and we have also the U.K. business that remains weakened by Brexit and now we tell this to our analyst community every quarter, and we keep saying that, to remind us all of the ongoing idiocy of this Brexit movement, if I may say that as a not politically correct statement. So we are slightly behind in our commercial online print division due to the slightly delayed integration of LASERLINE and the aforementioned price pressures, but we should not see this and danger the overall results for the year.Quickly over to retail. Retail has an interesting quarter 3 because we had, as I pointed out, at the end of Q3, the Photokina and our 146 retail stores with a revenue in photo-hardware of EUR 53 million in 2017 and sales of the photofinishing products on top of that, which we report within photofinishing is doing what it's meant to do. So we see some wait and see effects prior to the Photokina. So some of our customers were actually waiting for what Photokina has to offer to them. So there is a bit of a decline in sales, specifically in August, September. Photokina was very good for photo retailing, there were a number of very significant new product releases, and we are quite happy that the positioning of our retail actually works, while we are focusing on hardware that is the upper part, the premium segment of the photo cameras, tripods, et cetera, et cetera, which give also a satisfactory margin. We are not part of the sell at the price slightly below the price that you bought the product, for that's not our business and with this focus on higher margin product, with a focus on -- [indiscernible] with a focus on the brands that you can see here, we have integrated the CEWE brand into Japan Photo, FOTOJOKER, FOTOLAB, with a focus on the CEWE brand. The retail business that we continue to pursue actually serves both these focus on the photofinishing, the focus on the expertise and the positioning in the photo camera market but also it significantly supports our brand in Norway, in Poland, in the Czech Republic, Slovakia and so on. So with that, if we go to the results page, we can see for Q1, Q3, that overall, we have slightly below EUR 1 million in EBIT negative, with a decline in sales of 7.8%, you see that the decline is overall slightly below the decline in Q3 for this Photokina effects -- event that I pointed out. I'm quite relaxed about the Q4 for our retail segment because it seems to me that we are, again, also in this segment, well-positioned. Other is a business segment that as far as the turnover is concerned, specifically, has the sales of futalis in it. Futalis grew by 28.4% and for the first 3 quarters, by almost 30%, but it remains a relatively small business. The EBIT is specifically improved for our last year's investment in the Saxopark property. You may remember that we bought the real estate that houses our Dresden print factory. And since we are not only using this ourselves but letting some of the surplus space to others, there is some positive effect here. If we're now looking at what this all means for the group, you can see that in Q3, we grew our turnover by EUR 5.3 million (sic) [ 5.3% ]. In Q1 to Q3, by 7.3% or about EUR 27 million. If you remember the bracket of our goals that started at EUR 330 million, we are EUR 4 million short of the lower end of that bracket in terms of the increase in revenue. If we were to look at the EBIT business, not a very surprising slide to you given what I explained to our -- about our retail business, the commercial online-print and the photofinishing business. Overall, we are at the negative of EUR 1.9 million in our EBIT, but wait and see, Q3 -- Q4 will come. And we are well set up for our fourth quarter. We have our labs, as we call our production plants, we have our labs buzzing. We have a good chunk of orders in there that are being produced every day and this buzz that actually makes the whole company become a very special company in the last week just running up to Christmas is already perceivable. This works well for us.And having said that, I hand over to Olaf Holzkamper, who has lots more in numbers and details for you.

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

Thank you very much for that kind of overview, Christian. Now let's dive into the details of the whole thing and let's look at what the P&L is saying. The P&L is saying on the revenue line -- the P&L is saying on the revenue line, we are EUR 6.9 million ahead of last year in Q3, if we look into Q3 only, and that is derived from turnover growth we are seeing in our core segment of photofinishing and commercial online-print with the acquisitions we've seen there. Now if we look further down, there are big changes in the P&L that's a little bit more other operating income. What we see there is we have -- had a disposal of assets there and if the sale of the property in Nuremberg, which is mentioned in the extraordinary items if we discuss the different segment reports there. And the other half is [ rest of the prudent ones ]. So that's the normal changes we have in this item here. More interestingly, operatively, is the next one, cost of materials. What you see there is basically stable, flat, 40.6 to 40.7 material cost but nevertheless, if you look at this in percent of revenue, you see decrease from 31.2% to 29.7%, and this decrease is driven by the reduction in our retail business where we tend to have a high material cost and the increased share in the other types of business where we have a lower material cost in percent of revenue. So this structure takes shift we have seen over many years now is something that you see in this quarter again.If we continue to our gross profit -- below our gross profit line. In the next 2 items, personnel expenses and other operating expenses. You see a movement that is the contrast of what we just have seen in the cost of materials. In here, not only the absolute number in expenses is rising, you see personnel, plus EUR 4 million, and other operating expenses, plus EUR 7.6 million. So these 2 are rising due to the acquisitions, obviously, and offered you to the fact that we are running up for Christmas both in personnel as well as in other operating expenses, marketing and so on. And the contracts to the point of material was that in here, you'll see a rise as well -- in absolute numbers, as well as in relative numbers in percent of revenue. So personnel expenses rises up from EUR 28.8 million to EUR 30.3 million and other operating from 33.4% up to 37.3%. So that is an increase here, which is again, absolutely in line with the kind of change in our P&L structure that we have seen now for many years, reduced cost of materials and increased value added, i.e. increased personnel expenses and increased other operating expense.Now moving on to the amortization and depreciation. It's pretty much stable. You see a slight increase of EUR 0.6 million that is due to the acquisitions. If you look at that in terms of percent of revenue, we're looking at 6.9% and 7.0% of revenue, respectively. So that is not a big change, this structure that's been here. Looking down into the differences in financial income, not much of a change. Last year, we had some distribution of earnings from our high tech [indiscernible], which was a minority number. And for this year, you see a bit more financial expenses there, which is due to the tax that we have had to pass these acquisitions last year, which meant we had more financial debt on our balance sheet as you will see in effect. So this is a P&L that confirms the structural change we've seen for many years now. What does it means on the balance sheet? If we move 1 page further on, you see a increase in terms of length of balance sheet by EUR 54.2 million. Now if you look on the asset side, on the core part of that is obviously, the noncurrent asset, which means we have the acquisition of LASERLINE and Cheerz. We have the purchase of little property in Oldenburg and these 2 -- sorry, these 3 factors were driving up the balance sheet length in total and what is financing that on the other side is due to financing is done, one, through equity. You see the increase, we had an equity there. Two, the financing is done by our financial liabilities that we just split into current and noncurrent, on the next sheet you will see it more clearly but it was EUR 25.5 million more international liabilities, and three, third source of financing is also the trade payables, for instance, that we acquired with LASERLINE and Cheerz, which are increasing our liabilities there as well and that we do not have to pay an interest for, which is nice.On the current asset side, the bottom on the left-hand side asset, you see a slight increase, which is mainly driven by the acquisitions we've had there. The rest of the group is counter balancing that. Now the trade payables effect we just looked at, you can see on the next page, where we actually do deduct the trade payables from our net working -- from our working capital, so we get to the net working capital on the left-hand side and capital employed. So there, you see a deduction of EUR 1.7 million to get to this 7.3% compared to last year's number. So that is a reduction in net working capital but helpful there, in terms of percentage terms and absolute terms, cash is no big change but the noncurrent assets, obviously, are increasing by the EUR 50.5 million that we were looking at already on the page before. So we had a total increase in terms of capital employed by EUR 48.1 million. And on the right-hand side, you can nicely now grouped up in gross financial liabilities the increase in the financing contribution from interest-bearing debt there of EUR 25.5 million. So that was the development in our management balance sheet compared to last year. If we look at what happened throughout the quarter, it's no big change. So what we see here on the next page, the first part of capital employed: within Q3, noncurrent assets, you see, yes, we had a little bit more of investment adding EUR 0.8 million and for instance, you see digital printing here as an investment part, although it was little and as you will see on the cash flow statement, when we come to that, it was actually less than last year. So no big change in terms of assets there. We had the reduction of the intangible assets, what you see there is this little -- sorry, in financial assets, we had the reduction of EUR 1.2 million, which is the little startup company that we had on our balance sheet. You will remember the IFRS 9 case we had in Q1. So what happened now in Q3 is simply an asset swap, the reduction of financial assets here and cash that's coming in, no effect on profit in this quarter. And the other effect in Q1, actually, what's not on profit, it was in [ OCI ], as you'll recall. So that was the change in noncurrent assets, basically stable within the quarter, minus EUR 0.7 million. If we look at the net working capital. So inventory first, yes, although, we are decreasing retail merchandise, we are stocking up for Christmas within this third quarter, obviously. So slight increase there, all fine, speaks to the seasonality. Current trade receivables, yes, we are increasing our sales and that's why a slight increase here as well makes sense. And if we look at trade payables, what we can see there, we have a little bit more than last year, which makes sense also due to the acquisitions and due to stocking up for Christmas. So all in all, no big change in operating net working capital but nevertheless, the little bit of reduction from EUR 30.5 million to EUR 29.8 million. If you put that in relation to the revenue, it means we're are coming down from 22 days to 20 days of operating net working capital. So that is a movement absolutely into the right direction, shows that it's well-managed by our colleagues.Moving on to the nonoperating, so the other net working capital. No big changes here that are to be explained. Yes, you know we show our tax prepayment on the balance sheet here. So that has a slight increase by EUR 3.7 million. We see on the right-hand top, further down, you see yet a little reduction in terms of other current receivables and assets. I mean, we're looking at the active [indiscernible] so it’s really prepaid expenses, no big deal, that's just normal business. And what we see down there in EUR 2.2 million more in other -- in current other liabilities, that is basically -- mainly the increase for Christmas bonuses to wind up here for all of our employees. So no big deal, no big change. Other net working capital increased by EUR 1.6 million. So that means in total, net working capital, other and operating, show a pretty much stable development from EUR 22.5 million to EUR 22.3 million. That means adding it all up and adding the cash in there. It means that capital employed is pretty much stable EUR 304.2 million developing to EUR 304.6 million, no change in that number. In terms of how it's financed, looking at the capital invested. What you can see there, it's also a direction -- a movement into the right direction. Equity is up EUR 2.7 million and interest-bearing financial liabilities are down EUR 2.5 million. So all in all, after our nitty gritty changes, no change in capital invested really, and if a change into the right direction, equity up and financial debt is getting down. So what happened cash flow wise in Q3? The development to explain there actually is to be explained more by what happened last year, because you've seen operating -- in cash flow from operating activities, you see a nice increase from EUR 5.4 million to EUR 12.0 million and what we reckon is the EUR 12.0 million is actually, if you look further to the left into the last year's, it's actually a good year but it's more or less on the level as the last year's were to what happened last year. Last year, we had increased prepayments for all the years before, and we had increased tax payment in 2017 for that very year and this brought down the operating -- the cash flow from operating activities in Q3 2017. Now in 2018, we feel we are back on a normal level, and we feel well above that. Moving on to the cash flow from investing activities, the same is true actually. You recall that looking at last year, that we had the acquisition of Saxopark, which Christian mentioned already, the real estate where we have our production in Dresden in commercial online-print in there that took up quite some money, and we acquired -- or we had some payments for the new building in Oldenburg, all that bringing cash flow from investment down to minus 42.2%, now back to normal, even a little bit less as I've just mentioned in commercial -- in digital printing and investing cash flow is just minus 7.9%. So it makes sense that it's more or less in line with what we have seen in all the years back, which means that we got an [ accretive ] cash flow. Adding those 2 numbers up, we're seeing a nice increase by more than EUR 40 million from minus EUR 36.8 million up to EUR 4 million positive free cash flow in Q3, which is a nice development, if you look at this chart here that shows what happened in the 4 years before.So the details, bring to those numbers, and I think we can be quick on this one. We talked about decreases in working capital already. And there's a little bit of difference in these 2 numbers because here, we deduct anything that's not really working capital and move it to reduce the investments and fixed assets and so on if it is a payable due to investment. But all in all, no big change. Taxes paid, that's a big change, that's the one you see here, EUR 6 million more cash flow because last year, you see the minus EUR 9.6 million and this year, only EUR 3.6 million in tax payment we had to deliver. So that is bringing up the operating EBITDA cash flow and in terms of investing, you see the difference, you see the main drivers there, Saxopark, new building in Oldenburg that's not mentioned here, that's the other one. But Saxopark is clearly the main number that drove us up in the investment last year. This year, a nice increase, EUR 40.8 million more in terms of free cash flow.ROCE, all in all, you see it on the 12-month rolling number. You see 12 months EBIT slightly down. Average capital due to the acquisitions we had undertaken, up, and that is the reason why ROCE is down to 15.1% here. But as we look into our numbers, we reckoned, due to seasonality, this is probably below this year and we saw this number increase within the next quarter to come. So that's the overall situation for the financial details on Q3. And then I'll pass on -- yes.

[Christian Friege, Chairman of Management Board & CEO]

And that leaves us to the outlook for the whole year. You have here the range of targets that we've communicated all of this year. Let me just focus on the revenue, I mentioned that within Q1 through Q3, we are EUR 27 million ahead of 2017 in terms of revenue, at [indiscernible] EUR 599 million plus EUR 27 million, we're already nudging at the lower end of our targets in that. And if we look at the EBIT, I pointed out to you why it is that we are still and no other than before convinced that we have every chance and opportunity to hit that target. As I said before, the first 10 months of the year support this view as much as the walk through our meetings and our labs and our advertising activities, I can say we are perfectly equipped for the expected peaks in demand in the fourth quarter and with that, we will do the best possible for our shareholders in Q4, but most of all, for our customers to give them joy in their Christmas and give them the most personal gift you can imagine.And with that, I would like to open the Q&A session.

[Operator]

[Operator Instructions] The first question is from the line of Christian, calling from Baader Bank.

[Christian Weiz, Analyst]

With regards to the other line, I mean, futalis has become quite quiet around this investment and yes, it's growing but not really profitable to stay that way. I mean, what's the plan going forward with that small entity? And with regards to the Commercial Online-Print, when do you believe that things will change? When do you believe that things will improve at that entity?

[Christian Friege, Chairman of Management Board & CEO]

Okay. Starting out with the commercial online-print. We will have a year in commercial online-print probably, slightly and below with the factors that I've pointed out to you than what we had internally hoped for, but we've also identified the levels, and we will definitely work on improving the situation for 2019. There's the number of measures that we, as I said, have identified in that and with that, we should actually see improved results. Just to give you one little idea of what we're doing. Because of Brexit, we are enabling our lab -- photofinishing lab in Warwick to also take on commercial online print business, first, in digital printing, possibly even in offset printing, and we can see that, that actually helped us to shorten the delivery times and with that, also gain the focus of this being a local business and so some of the problems that we've recorded on Brexit, hopefully, will look less severe next year than they looked this year. As far as futalis is concerned, you have properly identified that the strategic importance of futalis is probably less than what it might have been at the time when we acquired it, and we shared that with you on the strategic [ pointers ] with you.

[Christian Weiz, Analyst]

Okay, great. And one last question in the order revenues or the earnings from disposal of assets. Is there something we should expect in coming quarters too? Or is it just the one-off that you sold, this property in Nuremberg? Is there more to come?

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

For now, I mean, all these things happen once in a while. We had Denmark last year. If I recall correctly, we had Nuremberg this year. At some point in times, these things happened always in the past of our company's life but it's just 1 year or the other, it's not a minor flow of income that we should incorporate them with.

[Christian Friege, Chairman of Management Board & CEO]

I mean, the view that we take at this is, generally speaking, real estate is an asset. In some cases, because the specifics of the old photofinishing labs just may actually prove to be difficult to rent out properly and if we then have a window of opportunity, for example, a tenant walks away, or we would need to invest heavily, we take a case-by-case view whether there is a merit in disposing of these noncritical asset but don't plan for this to happen on a regular basis.

[Christian Weiz, Analyst]

Okay. But did I get this right that these were real estate properties related to former photofinishing? So all the laboratories that are not in use anymore and that is to be disposed if I understood?

[Christian Friege, Chairman of Management Board & CEO]

Yes.

[Operator]

[Operator Instructions] Next question is from the line of Charles calling from Kepler Cheuvreux.

[Unknown Analyst]

Two if I may. First one, as Cheerz has suffered from the weather compared to the traditional PHOTOBOOK line or its more mobile profile has led to, let's say, smooth the revenues break down. And second one to come back on commercial online-printing, how long can we expect the price pressure to last in Germany? Are you seeing maybe a bit of an evolution with the [ system ] there?

[Christian Friege, Chairman of Management Board & CEO]

My apologies, I didn't quite get your first question. I just remember that there was something about weather, could you point that out again, please?

[Unknown Analyst]

Sorry, I was asking about Cheerz. I understand that the traditional PHOTOBOOKs line has suffered from the good weather conditions during the summer. Is it also the case for Cheerz? Or due to its more mobile profile, are the revenues more even during the year?

[Christian Friege, Chairman of Management Board & CEO]

I'm very pleased to say that the revenues are not even throughout the year but that they're actually growing throughout the year. And your assumption that there may actually be a difference in photofinishing product that you order from your smartphones, which you basically have on you all the time is also visible in the sales line. But we don't see anywhere near as much of a -- this being such a great weather from March through October effect on the Cheerz line. But again, we couldn't probably detect that so well because it's being quite happily rising all the time, dare I say that. As far as the price pressure in commercial online-print is concerned, we can see on and off with the increase specifically in paper prices, that prices are moving up more than they're moving down, but I wouldn't be too sure to bank on that. It may actually happen for next year that there's an increase in prices in the market. It may actually happen that maybe someone leaves the market but at the end of the day, I wouldn't want to build a strategy on a increase of prices. What we need to do is we've got fine-tune our strategy towards doing for our customers what they perceive, and I pointed out to you the 4 different brands that we are employing in our commercial online printing division, and we are focusing those on different user groups, more so probably than in the past.

[Operator]

There are no further questions in the queue. [Operator Instructions]

[Christian Friege, Chairman of Management Board & CEO]

I think we can close off.

[Operator]

There are no further questions. So I hand back to Dr. Christian Friege for any concluding remarks.

[Christian Friege, Chairman of Management Board & CEO]

Well, ladies and gentlemen, it's been a great pleasure to present to you not only Q3 results, not only the results from Q1 through Q3 but also the outlook for the year, and I hope that I could and all of us, we could bring across the buzz that we feel in our business at this point in time, right and ahead of Christmas, where so many orders come in and need to be fulfilled, and we are focusing on delivering those more than anything else. So thank you very much for your continued interest. I am very much looking forward to seeing as many as possible of you in March, and that is March 28 for our annual press and analyst conference, as you're all used to in Frankfurt. So it's easy for most of you to get there, and as I said, Olaf and I are looking forward to seeing you there. Have a great Christmas, have a happy new year, and we will see you next year.

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

Cheers, bye-bye.