Cewe Stiftung & Co KGaA
XETRA:CWC

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Cewe Stiftung & Co KGaA
XETRA:CWC
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Price: 102.4 EUR -1.16% Market Closed
Market Cap: 761.9m EUR
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Earnings Call Transcript

Earnings Call Transcript
2020-Q3

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Olaf Holzkamper
CFO & Member of the Board of Management

We love snow, but snow is not a common resource these days. So we love fog. We love dark days. We love no sun outside these days, and we are moving into that direction, which means we love Christmas. But before we talk about Christmas, we have still to talk about Q3, which is the road to Christmas. And that is what we would like to talk about today.Christian, why don't you go ahead?

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Christian Friege
Chairman of Management Board & CEO

Olaf, thank you very much. Good morning, ladies and gentlemen. It's a great pleasure to be with you again, and it's a great pleasure to report about our third quarter. Before we go into the numbers, let me pay homage to the slightly strange year that we have with corona ahead of everything and with corona governing a lot of decision these days.I'd like to share with you a slide that, to some extent, we've shared with you when we talked about the first quarter some 6 months ago. And our priorities are still the same. They have extended at the lower end of the listing, but in general, they are still the same.Our first and foremost focus is on the health and safety of our employees. And whilst you may think that the customer should be at the #1 spot, I would entirely agree with you, but in these years and these days, it's just important that there is someone to serve the customers. And that is why we put health and safety of our employees at the absolute #1 priority. And we have really, really done whatever is possible and necessary to ensure that everyone is working in a safe environment, be that at home. But most of our employees these days are actually in the labs and our production facilities where we are ready and already busy to produce photo gifts for the Christmas season.And that is exactly then the #2 priority. Our production capabilities, our labs, our printing plants all need to be in operation at all times. And as I said, we've done everything that is necessary and possible to ensure that. We are also communicating, obviously, with our customers, and we are trying to bring this little extra spin in there that acknowledges that we understand about the difficulty of these days and about the extra burden that this puts on our customers and everyone in the country and in Europe.We have continuously -- and I'll come back to that over the discussion of the numbers. We've continuously focused on cost reduction, and we've reviewed investments wherever it is possible. But let me tell you also, we have never cut back to the extent that it would endanger the future development of the company, and we're always looking beyond this year and beyond the next year to make sure that what we are doing is actually ensuring the further growth and well-being of the CEWE group.We have implemented a number of measures to improve our position in retail and in our commercial online print division, and we've reported about those in August, I believe, where we explained to you about the reduction of some of the retail stores that we operate and also the refocusing of our 2 main commercial online print brands. I'd also come to that later.And then last but certainly not least, if there is any opportunity, if there's any M&A-focused thing, any opportunity, as I said, that comes our way, we will be very open for that. And we are also financially prepared, and Olaf Holzkamper, when he goes into the numbers, will certainly prove to you that we are ready to go there if there is any opportunity.Now in a nutshell, the third quarter has resulted in the financial performance that allows us to say that we are still coming with a slight head start into the fourth quarter. Bottom line is EUR 1.4 million better than previous year. Despite the fact that what we had announced in August that we would expect a slightly setback in our photofinishing division as a result of a changed holiday behavior has turned out to be true, yet we're still profitable in that division. We have obviously had continuously, the situation that we've reported for the past 2 quarters in our commercial online print division. And again, despite the significant impact of the corona situation, our bottom line is still, in our mind, very well managed. And the same applies to hardware retail, where, in fact, we have improved the bottom line results by a few EUR 10,000. So overall, as I said, we are slightly ahead of last year as far as the 30th of September is concerned, and that is good in a year like this to be slightly ahead.Now if we go into the detail, I'd like to start out with photofinishing. We have shared with you that we acquired a new partner, a very significant partner in the United Kingdom. For the -- in the third quarter, we are very, very busy to roll out our CEWE photo station and also the presentation of our lab products to more than 900 Boots stores. And I tell you with a -- with honest pride, I have to say, that the team that's comprised of people that we have on the ground in the U.K. but also people helping from the Netherlands, from Germany and from other CEWE group companies, we've actually been able to pull this off despite the corona situation, despite lockdowns and all kinds of adverse environmental conditions I should say. And by the end of this year, we will be present with our CEWE brand in more than 1,000 Boots stores in the United Kingdom, and that is a very significant step forward for us in that region.We're also very happy that we've introduced a new mobile app over the past few weeks. And I can only encourage you to load that down and try it out for yourselves. What is important here is -- and you see this on the left screen shot that we actually have suggestions at the ready for our customers now. And if you click on those suggestions, with 2 clicks more, you will get a fully designed CEWE PHOTOBOOK about your personal event.You can change everything, as you would expect from us CEWE, but you can also order this as is. And it is amazing how our IT colleagues have actually managed to sort out all those photos that you don't want to see, to limit duplicate content, et cetera, et cetera, et cetera. I can only encourage you, as I said, try it out for yourselves and see how you like that. Also experiment with the changes that you can make, the design that you can, at the click of your fingertip, that you can do. And these are actually our first customer-focused artificial intelligence steps because, obviously, there is a combination of the traditional software and artificial intelligence behind this miracle.We are ready for our Christmas business with our group company, Cheerz. As you would expect, you can see some of the Cheerz Christmas range here. Cheerz has always and traditionally a range of designs for Christmas. Cheerz is also doing very, very well with very focused customer communication during the lockdown in the spring. They were very successful with what they called La Petite Attention, a small attention, a little bit of a communication between people, bringing people together with Cheerz product. And you can find, it's still in the range. It's now called The Thought That Counts. It's available at Cheerz. And if you really want to see something about customer-focused communication, go on to the slide up for Christmas products at the Cheerz website, scroll down, and you will get the explanation why the Cheerz range is so special.We're continuing to make progress at WhiteWall. Just 2 highlights for you today. We are constantly promoting the Masterprint, the seamless Fine Art pigment print up to a size of 5 meters by 2.4 meters. That's 12 square meters if I'm not mistaken. Is that correct? Probably, somewhere around that. And it's one piece of paper. It's one piece of acrylic, and it is unique. You don't find this anywhere in the world in this size, and this is the absolute peak, the absolute cusp of photofinishing in the world.And this is also reflected in our partnership with Leica cameras. We will now start and we started 3 weeks ago with the Munich store. The next will be the Beijing store in China. We will be available or the WhiteWall products will be available to order directly at the Leica stores, and we'll continue to roll this out store by store.Our group company DeinDesign is, as you would expect, doing well. What we're doing there is we're carefully extending the product range. Now you can also get individualized backpacks for example. Go check it out on the website of DeinDesign. But we are also obviously carefully extending the sales channels, the countries that we are present in, so this is going forward step by step. And that's for the CEWE brand.For the Christmas season -- as you would expect me to talk about today, for the Christmas season, we have again pulled together what we call a 360-degree marketing effort, a campaign that is actually reflected at the point of sale in print, on TV, in social media, on the Internet, in our customer communication, our e-mail communication. Wherever you look, you see a coordinated appearance of the CEWE brand, a coordinated representation of the CEWE brand, the same product, the same focus. This year, a little bit more skewed towards the calendar because, obviously, as we will see when we look at the numbers for Q3, the CEWE PHOTOBOOK is under the weather because of the holiday situation.On this next slide, you can see some of those photos of our campaign, and we have consistently been able to use our true and real and honest own customers for these spots and photos, et cetera, et cetera. The joy of our product is represented by those people who really enjoy the products. And you can see that also we have a little TV spot prepared for you. You can see that in that TV spot.What's new in the product range? We are focusing -- we've extended the frame options for our premium posters. We have put in a new set of calendar designs. And as I said, we'll focus on calendars. We know that people have photos on their smartphones. Everyone has 13 photos for 12 months and the cover page, so 13 photos. And the CEWE CALENDAR is going to be the gift next to the CEWE PHOTOBOOK, of course, for Christmas.With our advent calendar this year for the first time, the chocolate Advent calendar has actually printable insides of the doors. So you not only have the 1 photo on the front but 24 photos on the inside. I've just designed one myself. I can tell you it's really fun to do that. It's really fun to do. It's a fantastic result. It really is fantastic.We've updated our design options at CEWE CARDS of course, and we have also done a lot for the CEWE PHOTOBOOK. And we will bring to our customers additional options beyond travel and beyond your last trip for why you can do a CEWE PHOTOBOOK. Here, for example, a year book where we have put in a range of designs and styles that make it absolutely easy to create a year book for 2020, and again, you will find this in our TV spots over the course, pre-Christmas, in fact, of the next weeks. Now what I would suggest we do is, on the left-hand side of your screen, you can see that there is a TV spot, [Foreign Language]. That is the spot that is represented on the slide here. It's 2 friends who've actually been friends forever, and they do something with a -- with the most personal gift -- with a very personal gift. And if you want to spend 20 seconds, just click on the video, and we'll all look at the video synchronized, and then we get back to the presentation.[Presentation]

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Christian Friege
Chairman of Management Board & CEO

Celebrating friendship with the CEWE PHOTOBOOK.Now if we go to Q3, you can see that we have actually decreased in the number of prints that we have processed this quarter. And this is a clear sign of what happened in the holiday season. You will all have experienced this with your friends, your neighbors, your family, maybe yourself even. We have actually traveled this summer, but we traveled to the Rennsteig or the Weserbergland or to Haffkrug at the Baltic Sea. And you can imagine that the stories that you can tell from these 2-week trips are slightly different from the ones that you would have in other years, where you did the cruise in the Mediterranean or went to see temples in Thailand or safari in Africa or an RV tour in Canada, whatever. Those are the stories that actually result in great CEWE PHOTOBOOKS. The Weserbergland will actually probably not reach much further than 26 pages in the small format.Now -- and that's what you can see here, total prints go down by 13.6%. We've increased the value per photo. And this is a constant development that all of you have actually tracked us for a longer time, have seen over and over and over again. And it's part of our strategy obviously but still with a 13.6% decline, the turnover in photofinishing went down by 5%. That's the way it is.Overall, if we look at the year-to-date, year to the end of Q3 figures, we are still up by 6%. And that leads to also a decline in the number of CEWE PHOTOBOOKS.Here, we have a decline of 15.5%. Again, we see that people have photos, but they don't have, obviously, as many photos that you can use to tell a story. And it's the story that makes the CEWE PHOTOBOOK, the story of your friendship, the story of 2020 or, as I said, for Q3 specifically, the story of a holiday. And that is what is missing, and that actually leads to a year-to-date decline in the CEWE PHOTOBOOK of 1.3%. It is as it is. What can I say?And that then obviously leads to a photofinishing turnover of EUR 110 million. I mentioned that before. What we've done here for you since we do not have a guidance for this year, we compare to the previous year. And you can see that both in Q1 and Q2, we were ahead of the previous year; whilst in Q3, we are now down by the 5% that I mentioned. And we'll see what Q4 brings to us. That will then obviously be part of our discussions at the end of the presentation.If we look at the bottom line on the next slide, you can see that the bottom line holds up. The 5% decrease or EUR 6 million decrease roughly led to a decrease in our bottom line by only EUR 600,000. That is within what one would expect despite of strict cost reductions, and we have a moderate decline in earnings. Again, the reason is the holiday behavior. And I could go on and on and on and tell you from our customer research where people have actually traveled and where not. In fact, it was interesting, is the travel books that we get from Germany in the German market or from France in the French market are basically on par with the previous year. But what's missing is the travel within Europe and extend -- and outside of Europe that actually leads, as I said, to those new and big CEWE PHOTOBOOKS.That is then the addition for the first 3 quarters. And you can see in photofinishing, we are still in EBIT, EUR 6 million, ahead of last year and 6% in overall sales.You remember that we started out in Q1 quite nicely. We had -- we were off to a strong year again. We had, in Q2, the stay-home effect. But we also had in Q2, the decline in on-site finishing. As you would have to expect that the stores were closed and we have about 20,000 on-site finishing stations out there, and they obviously were dampening our performance a little bit. Whilst the online photofinishing business obviously had stay-at-home effect. And then Q3, what's actually the headline here is the lack of the holiday photos. So total photofinishing quarter-by-quarter, we've seen that just now, and I think that should be for the photofinishing.We move on swiftly to retail. I always remember you at this point that the retail segment contains the hardware revenue only. I always remind you at this point in time that people tend to take photos more and more with smartphones and less and less with cameras. What we see is that the hardware is actually pushing up ever more to a high-ticket sale of photo cameras. It's the more expensive cameras that we sell, and that's actually what we're also focusing on because those are the ones that then also pull lens sales and other additional equipment sales with them. And so in Q3, we are back at the decline that we've seen before of about 10% year-on-year, and with minus 12.5%, we are entirely comfortable. And if you put enough digit behind the 0 there, and then you can see that, the few EUR 10,000, that we're actually being more profitable than in 2019. So overall, we returned to our free coronavirus trend.If you look at the year-to-date figures, I would like to remind you that in the second quarter, we took a EUR 3.2 million hit. We took that hit because we wanted to accelerate our move from land retail to online sales, and we have decided to shut down about 30 retail stores. We have decided to invest more even into the online channel in the countries that we have a strong retail presence. And if you take that out, those EUR 3.2 million, you can see that we're actually even ahead of last year by about EUR 300,000 as far as our EBIT is concerned.Now what's been a little sort of sorrow this year is our commercial online print. Again, I remind you that a quarter ago, we explained to you how we are focusing on SAXOPRINT with LASERLINE as our cost leader in industrial online printing, and the cost leader is then also in a good position to lead the market as far as the prices are concerned. And with Viaprinto with a service focus on small and medium-sized businesses, that's been explained and last quarter.So now this quarter, we actually saw about the same -- slightly lower decline. It's still nothing good to talk about. It's a minus 38.1% in sales. Again, the team did an outstanding job in limiting the damage to the bottom line. We are with minus EUR 1.6 million, about EUR 800,000 worse off than last year. And we can see that there is a direct relation, I can say that much, between openness of stores and freedom within the corona pandemic and the performance of the sales line and our commercial online print. If there's less happenings, there's less posters to be printed. If there is less restaurants open, there's less menu cards to be printed. And there is a clear relation between freedom and in verge of commerce, please and the necessary limitations, I should better say, necessary limitations and the decline of our commercial online print turnover.So far, the significant decline, if you do the math in your head, were about EUR 26 million down -- EUR 26 million down in turnover by the end of the Q3. And those EUR 26 million led only to a EUR 2.7 million decline in bottom line. And this is a combination of the most focused and efficient cost management that you can imagine in conjunction with a change that we did, and we explained that at the end of Q2 in the depreciation of our equipment -- plant and equipment in the commercial online printing division from a fine depreciation to allowances based on the performance and the use of the utilization of the machinery. And so we feel okay as it is, and we feel that the damage is under good control. And we also feel that we do the right things to be as best prepared for 2021 as we could possibly be.In our other segment, there is only Viaprint -- there's only futalis, sorry. There's only futalis. It continues to grow, and it continues to grow actually quite positively with earnings moving very close towards breakeven now. And so whilst we would have liked to find a new home for this asset some time ago, we are now feeling quite comfortable to leave it in our care for a few more months, years or whatever so to, at the right point in time, then possibly restart the efforts to sell off the asset.And then if we go to the group turnover, I think as far as Q3 is concerned, it's a total of 10.7% less -- loss in turnover and overall, 3.3% for the group at the end of Q3. And for me, the main message is, if you look at the right-hand part of the slide, at the end of Q3, we are actually EUR 1.4 million better off as far as our EBIT line is concerned, and you know that we are managing our EBIT line very focusedly. We are better off by EUR 1.4 million, and that gives us, as I said, the slight head start into our Christmas business.Now this is the overview, has a lot more detail that Olaf has prepared for you.

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Olaf Holzkamper
CFO & Member of the Board of Management

Thank you very much. But hopefully, the detail won't last that much more longer than we have taken for the -- just for the overview so far. No, just kidding. Let's look at the details of Q3, and that means starting at the P&L as typically. You've seen how we declined in revenue here. You see a minus EUR 16.4 million on the right-hand top of this chart. And it means that, as we just discussed, there is a reduction in sort of all business areas, and it actually is in retail. It means we are, in hardware retail, back to normal where we were before the accelerated pandemic we have seen there, the accelerated decline. But in the other areas, mainly, especially in photofinishing and the commercial online print, we are seeing an effect of less travel and less business activity. And that's driving the decline in revenue.This decline in revenue clearly means we have a cost reduction in absolute terms. That is why, along the most important cost lines here, if you move further down, you see only positive numbers, positive numbers and the last column on the right-hand side, meaning less cost. But that is only driven by the reduction in revenues. That is why it's important also to look at the percent of revenue of the different cost lines to see what kind of structure we have in our P&L system there.But before we move to the cost of materials, let me just stop at the other operating income for the second year, which is other as it always is, and we are digesting a EUR 0.8 million, so nearly a EUR 1 million reduction here, i.e. a hit without even talking much about it. And that is good to know that we can afford this.Then let's look at the most important operational lines, cost of materials. You see that we have spent EUR 6.5 million less of cost -- less on cost of materials. And in percent of revenue, it means a decline from 28.9% to 27.6% of revenue, which is clearly underlining our general trend. We are strong in photofinishing. We are spending more on value-added products there, i.e. the increase there at the bottom of gross profit and not moving towards gross profit here. So the share of materials is reduced, which is driven by a change in photofinishing and obviously, the decline also there in terms of commercial online print and retail -- hardware retail.That is cost of materials. Personnel expenses, we have seen the slight increase here, i.e., value-added activities in our company, especially in photofinishing. That's the reason why we are increasing personnel expenses from 30.3% of revenue to 31.8% of revenue. Although in absolute terms, as mentioned here on the right-hand side, we are declining there in personnel costs. 5% revenue is increasing. It underlines the importance of value-added products, especially in photofinishing.And in other operating expenses, we are on the same level in terms of percent of revenue, 58.53 -- sorry, 35.8% from last year moving towards 35.5% of revenue this year so basically, on the same level, although we could have spent more there in terms of marketing, administration, but it is a cost-wise difficult times. So we have been looking at that. We have been managing costs in all our businesses and Christian was laying out very carefully. And that's also something you can see here by a EUR 6.3 million cost reduction in other operating expenses. We have collected contributions from all our different P&Ls. That is a good movement there, which, at the end of the day, leads to a movement that we are -- EBITDA-wise, we are just a little bit below last year.In terms of balance sheets, let's leave the P&L. We are looking at the balance sheet here end of September this year compared to the end of September of the 4 years before. What we see is we have a decline in assets, which is helpful in some years. And the reason why we have a decline, a reduction in assets by EUR 20 million is twofold, and you see basically half of that in noncurrent assets and the other half in current assets.Let's talk about the noncurrent assets first, reduction by EUR 11.1 million. If we skip the rounding error, EUR 11 million reduction we have here, which is basically due to the fact that the IFRS 16 leased assets are now starting to see their depreciation, i.e., the level of assets is being reduced here. And that is the main driver of the decrease by more than EUR 10 million, which we are seeing compared to the same point in time last year. The other half of the EUR 20 million reduction in assets is driven by the current assets. You see a reduction by EUR 9 million there at the bottom. And the main driver in there is what you can see in the box next to it. It's in receivables. It's current receivables from income tax payments because we reduced our prepayments there. That's one driver. And the other driver is a decline in receivables compared to last year, especially in the commercial online print. And that no wonder Christian has explained the harsh decline our businesses there are facing in terms of revenue, and that is something you see obviously in the receivables there as well.Now the receivables decline are the big driver of the reduction of current assets. The other topic here, like the inventories, are even counterbalancing that. And the inventory buildup is mainly driven -- we'll see that later on a few times again -- mainly driven by the instant printing business, our on-site finishing business in the different stores where we are making sure that we can deliver the photos Christmas time and beyond. So we are ramping up our inventory there in terms of photographic paper for instant point-of-sale business.And we are installing our photographic paper equipment at the stores of Boots, as Christian mentioned. This rollout obviously is also driving the increase in inventory we have seen here.Now that is on the asset side. And the story is totally different on the liability side. Obviously, we do see the decline of EUR 20 million there as well. No wonder but nevertheless -- so yes, assets and liabilities do match. But nevertheless, the story underneath is totally different. It's not half and half. It's an increase we are seeing there on the equity side and the big decrease by more than EUR 50 million -- EUR 40 million, it's at the bottom in current liabilities. And what you see there is in the box on the right-hand side, you see a minus EUR 40 million in terms of interest-bearing financial liabilities. The reason for that is the WhiteWall acquisition we had seen last year. We had financed that by short-term debt obviously, and that has been paid back by now.And that's the reason why we see minus -- more than minus EUR 40 million in terms of current liabilities, which is partly counterbalanced by an increase, a nice increase of EUR 25.5 million to the equity. So equity -- share of equity is up. The equity ratio -- given that the liabilities in total are decreasing, the equity ratio has been increasing from 46.1% to a 53.2%, which is very nice.Without the IFRS 16 assets, we have taken that a few times. But just to do it again, we would be at an equity ratio of 60.3%. That is mentioned on the very left-hand bottom. Now that is a very stable situation. And we have to say that, as we did our AGM within -- at the beginning of Q4 only, the dividend payment hadn't happened by this time, so -- but even if we reduce the close to EUR 15 million in terms of dividend payments, we would still be -- as you can see on the right-hand bottom, we would still be at an equity ratio of 50.2% or without IFRS 16 asset, 57%. So fair enough, we have to probably reduce that by dividend, the equity share just to be comparable to last year, but still, it shows a nice increase. So the balance sheet is damn stable.If we move to the management balance sheet, it's compared year-on-year actually. The message here in this quarter is very similar. You do see a reduction, not EUR 20 million this time, but only EUR 17.8 million to capital employed on the left-hand side. And this reduction can be split again roughly 2 halves. One is the noncurrent asset reduction by more than EUR 11 million, and we just look at that on the page before. And the other half of the reduction can be found at the net working capital at the bottom there, where we see a reduction of net working capital from EUR 7.1 million (sic) [ EUR 7.7 million ] to minus EUR 2.9 million in terms of net working capital, so EUR 10.6 million reduction in net working capital, which is driven by the topics we had seen already, which was the trade receivables, which was the inventory buildup for the on-site finishing we have seen and the other items in terms of less tax refunds there and so on and so on. So these are the big drivers, which have been driving the reduction in terms of capital employed.If we move over to the other side of capital invested, also there, the story is obviously the same. We have the EUR 17.8 million reduction, but at the bottom, you can see the strong decrease by EUR 40 million in terms of gross financial liabilities. That is where you can find the interest-bearing financial liabilities for the WhiteWall acquisition we had seen in 2019 and we don't see any more this year.So the good news on this chart this year is compared to end of Q3 last year, capital employed has been reduced. The cash is still strong. On the left-hand side, you see an increase by more than EUR 3 million -- EUR 3.7 million from 13.2% to 16.9%. Cash is still strong, although we have paid back a lot of financial debt due to the WhiteWall acquisition, which has been paid off by now. So very strong balance sheet also visible here on that end.Now that was comparing to 12 months ago. Now we are moving to the comparison of beginning of Q3 to the end of Q3. And there, the story here on this chart is already slightly different, and we have seen the strong reduction in noncurrent assets compared to 12 months ago. Now within Q3, we see a slight increase here of -- by EUR 1.6 million in noncurrent assets. And the reason for that is -- I mean it's a slight increase, and the reason for that is in the first line already, where you can see that we had some investments in on-site finishing. And that is exactly the rollout to our new retail partner, Boots, which has been happening there, and that's why that's the main increase there. And we have not seen a very substantial reduction due to the IFRS 16 right-of-use assets here in this quarter, but we have seen an only minimal restructuring, as it's mentioned here, due to the extension of one production site we have done, which added one right-of-use assets to our total collection of right-of-use assets there. And in the end of the day, that meant that we only have seen a slight decrease in Q3 to this item here.And this is the main driver of why we see the EUR 1.6 million in noncurrent assets increase there at the bottom. So basically, noncurrent assets are basically stable. There's no big change there.If we move to the net operating working capital, you see that we have the last line there an increase by EUR 7.3 million. And the increase we see there is, to some degree, very limited due to the inventory increase, and we talked about that, the buildup of the stock in quarter due to the kiosk business, mainly to prepare for the season and to prepare for the business with our new partner, Boots. That's one driver. And that is actually bigger than the EUR 0.6 million because what's not visible here, we have seen quite some hardware stock reductions in retail business, which is completely in line with strategy.But we don't want to see too much hardware revenue, too much hardware business in our company. We want to use our retail outlet to sell our photofinishing product to a very large degree there. And retail, as you can see here, is nicely moving into that direction and is reducing the hardware stock business actively. And that is visible here -- or it's not quite visible, but it's hidden behind the inventory number, which is where the hardware retail inventory is actually being reduced.So that's one slight increase of net operating working capital. But the more important increase is the increase in receivables, EUR 7 million there. And that's mainly from photofinishing where we can see that it's cut-off date topic to a large degree. But it also shows that the end of the quarter, obviously, wasn't too bad to us, so there were quite some receivables still out there, which has been collected to a large degree by now obviously. So especially the receivables were driving the increase of net operating working capital within Q3.Moving to the other net working capital here. You see there is not a EUR 7 million change, but there's a EUR 3.4 million change. You can see in the very last line of the first section, our net working capital here, EUR 3.4 million increase, which is driven, to a large degree, by the decrease in other current liabilities. And you see all the details there in the large box on the right-hand side, less VAT liabilities. It's basically a cut-off date topic. We have paid our deferred social security contributions in France, which were from government delay due to corona. So we had to pay them in a delayed mode. We did do that, and we did pay obviously. So that's where all these payables -- these are the main reductions of the payables there. And that's the reason why the other net working capital increased because we had less payables, less liabilities reduced by EUR 2.6 million.Now taking those 2 contributions into the net working capital, the operating, we have seen at the page before, and the other net working capital here, the EUR 7 million and the EUR 3.4 million, they add up to EUR 10.7 million increase, as you can see there in the middle segment of this chart here. And if we now ask ourselves, so if we have an increase here by EUR 10.7 million, how did we finance that, and you can see at the bottom section here that half of this increase -- not quite but more than that, half of that increase has been financed by the liquid funds, where we saw a -- within Q3 a reduction by EUR 7.2 million. And the other half of that increase, as you can see on the next page, has been financed by the current financial liabilities, where you see exactly the EUR 5 million increase in the fourth row counting from the bottom. And that is basically the biggest change we have seen here on this chart, so the story is quickly told on that chart. All the other changes are just minimal.That was the changes in what happened to our invested capital and capital employed and how did we finance that. And what did it do to our cash flow? That is something you can see on the next page here. And it won't surprise you, having looked at the changes in working capital and that they were kind of important, that is changes in working capital are the topic to talk about on this page here as well because the only big change that's really interesting to look at is, on the left-hand side, the reduction from EUR 15 million free cash flow last year to EUR 1.7 million free cash flow last -- this year in Q3. What did happen there? And also there, the story is very quickly told, looking at the middle 1 of the 5 dashes we are seeing in this nice box there, where it says the EUR 13.8 million reduction we are seeing in the cash flow from operation business, 14% of that, so basically all -- EUR 14 million of that, so basically all, can be explained by changes in net working capital, where we have seen the higher operating net working capital this year due to the buildup in receivables within this quarter. And we have seen less of a increase in liabilities, where we have basically no change this year but a lot of change last year.And as you know, in cash flow, you're always comparing this second deviation if you want. And looking at these 2 changes, it means we had a negative change in terms of receivables this year, and we didn't have the positive change in terms of liabilities last year. So that was driving a EUR 14 million hit in the calculation of the free cash flow. That's the reason why we are seeing this big decline. All the other lines we are seeing on this page, they basically balance out each other and don't make a big difference.And that's the big point. That is -- that carries through because, in investment activities in the middle part, there not much of a change. We're seeing the small increase here by EUR 0.9 million. We talked about the on-site finishing rollout we have done at our retail partner, Boots. The investment basically for that, that is what you're seeing here. And if you add the 2 columns, we end up at the very end here on the right-hand side in free cash flow change that is mainly driven by the working capital effect we have seen this year and last year.So other than that, there's no big change. And so without the working capital effects, we would have a completely normal free cash flow within Q3.Last chart, looking at the return on capital employed, the ROCE. We have seen taking the 12-month average, i.e. the average of the 4 quarters we are looking here, we are seeing a slight increase in working capital there, which is driven by the WhiteWall acquisition, for instance. And we are seeing a slight increase in our 12-month EBIT we are looking at. So that is a nice development that this brings to us, which means we are -- even if we take all the hits in terms of new assets from IFRS 16 and so on, we are beyond -- we are higher than 15% ROCE right now. That is a very strong number. But the number becomes even more obvious if we take out the one-off costs we had for restructuring, especially in retail here and if we take out the assets due to IFRS 16, which has added some EUR 60 million to our asset base here. So if we correct by these 2 development, we are looking at the ROCE of exactly 20% right now, which is a very nice development. So CEWE is creating what value we see in a good position here right now.And with that kind of finish to the financial details, I'd like to hand over to Christian back again.

C
Christian Friege
Chairman of Management Board & CEO

Yes. And the -- we're coming around the circle in looking at what would actually potentially, possibly maybe happen in 2020. I have to say everything is possible. We can look at shop closures in some of the European countries where we -- where customers do not have access to on-site finishing anymore, to our hardware retail anymore. And some of the countries, our stores are currently closed.We can look at holiday photos. I have no understanding of whether a CEWE PHOTOBOOK that is ordered today is one that is now ordered because of the lockdown and would normally be ordered in 2 weeks or is that one that would have been ordered in October, and we didn't print it yet because people knew that they would be confined to their homes again in November, and they are ordering it now. No idea. We have impact on the commercial online print. There used to be some concerts and some things going on during summer. Those are all canceled. There is no Christmas market, so there's no posters for Christmas markets. There's a lot of things that I can see that potentially go the wrong way adversely to our business. But at the same time, I can see a lot of things that actually are potentially in our favor.I am personally absolutely convinced that also across the different countries of the CEWE group within Europe, we have never had a stronger marketing campaign as we have this year. People are at home and not at concerts again. And they're watching TV, so they're watching our TV spots. We've seen in March and April a lockdown effect, a stay-at-home effect. Is that going to recur in a light version? No clue. I can tell you that an asset that I see is that the team is very, very focused here at the CEWE group for -- towards Christmas, maybe even 5% more focused because we all know that this is a very difficult environment for us, and we need to do our very, very best to make this all happen. So these are upsides.I can only give some maths to you this year. We are ahead EUR 1.4 million compared to last year at the end. So if we have less EUR 1.4 million in EBIT in our fourth quarter, we will still end up at the same profitability level as we ended up last year. And I have to leave it to you to weigh the pluses and minuses that I have slightly alluded to just now, whether the pluses are stronger or the minuses are stronger. I honestly have no clue what we are doing as we are very focused on managing from day to day within the environment of our corona measures that I outlined to you at the very beginning of this presentation, and I can only assure you we will do our very, very best. And then we will come back to you in -- early on next year, and we will report how it went. And given the overall situation with the corona pandemic, I think we are doing reasonably well.And with that, I hand it over to you. We have questions and answers, and whatever we can answer, Olaf Holzkamper and I will try to answer for you.

Operator

[Operator Instructions] The first question comes from the line of Volker Bosse from Baader Bank.

V
Volker Bosse
Co

Yes. Volker Bosse. I would like to start with the Boots cooperation. You said rollout with more than 1,000 stores at the end of the year, does it mean that the rollout will be finalized at the end of the year and so that we see the full effect of the Boots cooperation then in your P&L of '21 already?And the second question would be on the trading update for the fourth quarter. I mean we see the COVID-19 infection rates rising, tightened hygienic restrictions. Does it mean that you already see a negative effect so far on the performance in the retail and online print business? And on the other hand side, regarding Q4 photofinishing, have you been able to return already to sales growth in Q4 in photofinishing? Yet I saw, you mentioned also the TV advertising, which you already started, looks to be a bit earlier than the year before. So does it already play out?And finally, a last one on your on-site photofinishing printers. I saw that they are locked by the stores. So dm, Rossman, they blocked the photofinisher for hygienic reasons of course. How will that affect your Q4 sales contribution? So how much of sales is coming from these on-site printers, to get a feeling, just a rough idea?

C
Christian Friege
Chairman of Management Board & CEO

Volker, let's see what we can answer for you here. Number one, very easy. Yes, we, at this point in time, will finish the rollout at Boots by the 31st of December. Unfortunately, the rollout in the Republic of Ireland has been postponed by a few weeks, but current planning is that those stores will also be equipped with the CEWE photo station before the end of December. And then matter of logic, all of 2021, will have all the CEWE photo stations at Boots in working order.And we've had online sales from Boots in already, and we also had on-site sales in because, obviously, the machines that we have put up during the second half this year, they're already working, and people are using them. And it seems to me that our customers and also our partner at Boots are quite pleased with them. So yes, we will have the full year of Boots in 2021, but no, we've already had some Boots in 2020.As far as any questions regarding trade -- trading in the fourth quarter are concerned, my colleague Olaf Holzkamper has really, really, really made it clear to me that we need to report Q3 and not Q4. And so I unfortunately can't tell you much about Q4. What I can tell you is the little bits and pieces that I have actually told you in terms of pluses and minuses, and I'll have to leave it to you to take your conclusions from yet -- from that.As far as the on-site finishing is concerned, our CEWE photo stations are mostly working wherever stores are open and areas of stores are accessible. In some countries, there is a clear differentiation between what is a -- in France, for example, a [Foreign Language] and those areas of the stores are open and other areas of stores, in some of which the CEWE photo station is located, are actually cordoned off and people can't use them.We have developed 2 things, in fact, this year to make it easier for our partners in retail to operate the CEWE photo station. Number one, we have, in all CEWE photo stations now contactless printing. So with a QR code or a numeric code, you can actually do all the things that you would typically do on the screen on your smartphone. And you can step back from the station, and you can print -- start the printing from your smartphone. And the only thing that you have to touch is your very personal prints that come out of the printer. So this is what we implemented in the first half of this year, very few weeks after the whole corona lockdown situation started.And the second thing is that we have our PS XXL, our protection shield XXL that we are offering our partners, whereby on one side of the CEWE photo station, a very big acrylic screen is actually mounted that prevents, when the CEWE photo stations are close to each other, from any viral movement between one CEWE photo station and the other CEWE photo station. And what I can say is that our trade partners are picking these up quite eagerly, and so far, there is odds and bits and ones and twosies these of CEWE photo stations that are off, if the store is open and if the area is not cordoned off and other CEWE photo stations are working. But then the last hint that I can give you on this without getting under pressure from Olaf Holzkamper is that this customer frequency and this whole shopping behavior has actually changed during the corona pandemic.So impulse shopping has actually decreased significantly, and targeted shopping where people go directly and buy their things and then go home again has increased. And I will also leave it to your imagination whether that is positive or potentially somewhat negative for the CEWE photo station. And that's all I can actually offer you at this point in time.

Operator

The next question is coming from the line of Winfried Becker from FMR Research AG.

W
Winfried Becker
Senior Equity Analyst

Yes. I have 2 questions, please. The first is on the sales per photo, the tremendous increase of 10% to 23% something since. I guess it's a mix of, let's name, the transitional business and the acquisition of WhiteWall, which is, to my understanding, at the upper price segment active. So it would be helpful for me if you could make some more comments if also the traditional business is increasing or not. That's the first one.And the second question is, yes, let's say, about the upcoming Christmas season having in mind the corona situation. I'm sure you have already hired all the additional people you need in your production facilities. But I can imagine this year, it's a big challenge to handle all these things, keeping distance and many other rules you have to fulfill with respect to corona and maybe you could give us some comments on this front, how sure you are that everything will work properly and that will be also very helpful.

O
Olaf Holzkamper
CFO & Member of the Board of Management

Yes. Thanks, Winfried. Let me pick up your first question regarding the sales per photo, and I will leave Christian the COVID-19 question that you asked. Regarding sales of photo, yes, we have seen a nice increase here in terms of value per photo. And actually, it's pretty similar, whether you look at Q3, where you see a plus 10%, and if you look at Q1 through 3, where you see plus 10% plus 4% (sic) [ 10.4% ]. So 10% plus 4% has -- is a bit higher because there -- that is where we see some first-time consolidation effect of WhiteWall, which is exactly right, what you are mentioning, that we are moving into the higher end also due to WhiteWall. But as you can see, if you compare 10.0% compared to 10.4%, you see that WhiteWall has a good effect but doesn't have the biggest effect in the world to our numbers.So that is also driven very organically by our business there. And it's actually driven and -- as you mentioned, is driven by the transition, is driven by not only the CEWE PHOTOBOOKS. CEWE PHOTOBOOKS, which we always look at, is an important product for us and has also been driving this development for a very long time, and we have always been alluding to that. But this year and Christian was mentioning, the reason why the CEWE PHOTOBOOK is in difficult times in this very specific corona year, you can see that other products are picking up the role. And that is what we are enjoying here.It is obviously the high-end wall decoration. It is WhiteWall. And WhiteWall is also organically growing even compared to what we have seen last year, so it was in the numbers end of last year, to a large degree already, especially for Q3, and it added again more this year. But also our own CEWE-branded wall decoration products are in the same line. Our calendars are getting higher and higher caliber calendars all the time. So we keep adding more value-added products to our product range, and consumers are asking for those products that are a little bit more expensive but that are a little nicer. And they prefer a nicer product and are willing to spend a little bit more there. So that's the development we are enjoying there, and that's the main driver of this.

C
Christian Friege
Chairman of Management Board & CEO

As far as the corona rules are concerned, everyone at the company in all countries and in all group companies understands why this is important. And rest assured, as far as we, from the Board, are concerned, we've made it abundantly clear to everyone why it is absolutely important to stick to the rules and to stick to what we call in German, the [ AHA plus L plus SS de lifton ]. And we -- I'm very convinced that everyone is actually do their utmost to do what is necessary.And we have put in measures that started on from -- as far as the seasonal workers are concerned. We have had containers put up to interview seasonal workers so that they wouldn't even get into the office space or the lab space. We have identified certain work groups. Wherever people are working closely together, they have to wear masks all day. We have put up here in Oldenburg heated tents for people to change and to take their breaks so that they actually are distanced enough and so on and so forth. I honestly believe we have -- with measuring temperature, we have corona tests available on site, et cetera, et cetera, we are doing whatever we can.Can we be sure? No, we cannot because that is the nature of this pandemic that it creeps in somewhere in the corner and then you have it. And what we have tried to ensure is that if it should come into our premises that the area that is infected is as small as possible and that people have every reason to then also stay at home. And we'd rather close down part of a lab than a whole lab.But can we be sure? No, we cannot. We can be sure that we've done everything that we could imagine we should be doing? Yes, that we can be sure about. Can we be sure that there is no infection in the company? No, we cannot. It's the best I can tell you. I'm sorry.

W
Winfried Becker
Senior Equity Analyst

Yes. No, it's fine. I get the impression that you have done a lot. And we would see if normal times will come back in December or if the lockdown will be continued. Nobody knows.

Operator

The next question is coming from the line of Frans Jurgens from Juno.

F
Frans Jurgens

Compliments on excellent cost control this quarter. Two brief questions if I may. The first question relates capital expenditure plans for the remainder of the year given that the commercial online print is being looked at and every dime is being turned over twice before it's spent. I'm interested to know how this will influence your capital expenditure plans for the full year for the group as a whole. And secondly, given that the postal services are obviously very busy delivering packages to all the clients, this also applies to those people who order a photobook. To what extent is it necessary to bring forward the date by which people need to order their photobooks to have them in their homes by Christmas? And to what extent is that related to the fact that you've actually started your commercials and et cetera, maybe a little early?And then the final question, if I may, Olaf alluded to a pickup in orders towards the end of the third quarter. My question is to what extent that is a -- the reason that can be pinpointed why those orders picked up towards the end of the quarter. And I will not ask you if it has continued into the fourth quarter, but I'm mostly curious whether there's any particular reason you can think of why that would have happened.

O
Olaf Holzkamper
CFO & Member of the Board of Management

Yes. Let me pick up probably question #1 and 3, and I leave #2 to Christian for that. Regarding capital expenditure, I mean looking carefully at the CapEx is very close to looking carefully at the cost spending. And especially on the other cost line, we have been seeing that this is typical other costs in terms of things we could save. You have seen that we've been looking there very carefully, and we've been trying to reduce our costs where we can. With the same mode, we have been looking at our investments throughout the whole year, and we are still on the road that we are saying last year was with our -- not even EUR 40 million we have spent there last year in terms of investment. It was a really reduced investment year due to some things that have been postponed and so on and so on, so not operationally forced.But this year, again, we are on the road to achieving the same kind of reduced investment as we have seen last year. So that is absolutely in line with what we have been communicating over the last month already, and there's no danger to see any increased investment there, whether it's from commercial online print or from photofinishing or anything else. And if you look at the investments we have been mentioning, we are talking about photofinishing basically only, which is driven by the on-site finishing we have mentioned a few times for instance. So there is mainly photofinishing in the investments, and it's going to be reduced this year anyway again.Point 2 regarding the pickup in orders, you have been listening very closely and to what we are saying. But the first item I mentioned before saying that it happened to be high at the end of the year, but also there's the point that it is a cut-off date topic. So whenever things are paid and whenever they happen to be paid and the money happens to arrive here and happens to be booked correctly, then you actually see the big decline there. So that is something to bear in mind.But it shows, on the other hand, as you're asking that we have seen within Q3 and a good September in there, we were quite happy with the September numbers, but that's also something -- whatever the allocation of the different topics towards the year might be, it is something -- throughout the quarter might be -- it is something that can drop here, drop there. Within the quarter -- within the months in the quarter, you do see deviations that don't necessarily hint to a longer-term trend.But there, I can only allude back to what Christian said. There's reasons to see ups. There's reasons to see downs. And in the end of the day, we will see where we end up there.

C
Christian Friege
Chairman of Management Board & CEO

Yes. As far as postal services are concerned, I can reassure you all that we are working with our carriers very, very closely, and this is also a continuous topic in our Board meetings. Only this week, we spent almost 2 hours on what we call logistics, and that is specifically those postal services to review what's in the different countries we've actually put in as measures, et cetera, et cetera, et cetera.It is -- I don't think that we are earlier with our commercial this year than we were last year. It may feel like that, but it is not like that. In fact, we're probably even a week later, certainly in the German market, and it may differ in some of the international markets.As far as the last order date is concerned, there is not a last order date. There is many, many last order dates in the different countries, in the different group companies. And managing these last order dates is one of the most important things in managing the Christmas season. So this is a fluctuating situation that may change one way or another during the season. And at this point in time, we will actually make sure that we service our customers as best as possible.

Operator

[Operator Instructions] The next question is coming from the line of Olivier Calvet from Kepler.

O
Olivier Calvet
Equity Research Analyst

I had actually a technical difficulty, so I'm not sure if my question has been asked already. I have one left. It would be on price/mix effect in photofinishing in Q3. Is this something that has to do with WhiteWall? Or do you have -- is there -- could you give us any color in terms of why you saw the turnover, the photo increase in Q3?

O
Olaf Holzkamper
CFO & Member of the Board of Management

Yes. Olivier, we had indeed the questions from Winfried Becker already. It's regarding the nice increase in value per photo we have seen was the same in 10% in Q3. It was 10.0%, whereas Q1 through Q3 was 10.4%. So you can see as WhiteWall still was crawling to the first quarter here, WhiteWall did make a little bit of a change there and contributed what we wanted to see at the contribution there from WhiteWall. So that's perfect. But also the other businesses in photofinishing have nicely increased this, and I've been talking through the different topics there like wall decoration, higher caliber calendar product and so on.And I don't repeat it here right now, but if we should talk about that in a second conversation, just give us a ring, and either Axel or myself will pick it up.

O
Olivier Calvet
Equity Research Analyst

Perhaps one follow-up would be -- I think one of the earlier questions was touching on the point-of-sale stations that were close, but again, this might have been asked towards the latter part of the hour. I had problems there. But just wanted to make sure this is only happening at some, the ends. I mean I was in line yesterday...

C
Christian Friege
Chairman of Management Board & CEO

Yes. The majority -- the vast majority of our CEWE photo stations is in operation, the vast majority. And it is only, in some cases, for example, in the French markets where stores are closed, certain of our partners, where the whole store is closed, obviously, then the CEWE photo station is not in operation. But as far as the technology is concerned and as far as the equipment that we have, including contactless printing, et cetera, et cetera, we are all out there.

Operator

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

C
Christian Friege
Chairman of Management Board & CEO

Yes. Ladies and gentlemen, we hope we've been able to shed a lot of light onto the results for Q3. For you, what I also believe we've done is that we've communicated a good, a preparation for our very important Q4. We can see upsides. We can see challenges, but we stay very focused on servicing our customers. And the more customers come, the more customers we will happily service. And in January or February -- I mean February, I believe it is, we will then share with you the results of Q4. And I'm looking forward to talking to you then and keep ordering a lot of CEWE photo products that will actually help our numbers. Thank you very much. Have a great day.

O
Olaf Holzkamper
CFO & Member of the Board of Management

Thank you. Buh-bye.