Cewe Stiftung & Co KGaA

XETRA:CWC

Earnings Call Transcript 2022-Q3

[Olaf Holzkamper, executive]

Good morning to all of you. A warm welcome to today's call for the results of Q3 2022 from CEWE. Welcome to you. We have the same setting as in the last many calls, I have to say. It's Christian Friege, our CEO, next to me; and myself, Olaf Holzkämper, the CFO. Next to Christian, you don't see them, there is the 2 people -- 2 persons who have prepared a lot of this, that is Axel, who is running the show, Axel Weber, and making sure that it actually works, in addition to presenting all those numbers. And then Marcus Opitz, our Head of Accounting, who is preparing those numbers.

The 4 of us are sitting here in a very exciting way. That's how you see us. Excited for 2 reasons. One reason is because of the numbers we'd like to show to you. We are quite proud of that. And the second reason is we are just before Christmas. And you know that we love Christmas. You know that Christmas is important for us. So this is a very exciting time for us in the year. And before passing on to Christian, let me highlight again that we are recording the part of the presentation of the call. And as soon as we are moving on into Q&A, we're going to stop that.

And with that, Christian, please.

[Christian Friege, executive]

Thank you very much, Olaf, a very good morning to you all. Indeed, I was for days very much looking forward to this presentation because I feel we have every reason to be proud of what 4,000 people in this company have worked on over the past months. And so we are proud to present the results. But we are also, as Olaf said, truly excited about what is ahead of us in the next 8 weeks.

A highlight. On the next, a highlight of Q3 is that the group turnover grew by 14.3% to slightly above EUR 150 million. And we've also managed to turn this into a positive development in our EBIT. EBIT grew compared to Q3 2021 by EUR 3.1 million to a positive EUR 1.1 million. That is the headlines. However, to this positive development, all our business units contributed. So it's not one subsidizing another, but all 3 business units contributed to this growth in the third quarter. And we are feeling perfectly prepared and positioned for our Christmas business. And as a result of that, I can already unveil that we will strongly confirm our targets for 2022.

Now if we're looking at why it is that we feel properly and perfectly prepared and positioned for our Christmas business, there are 6 reasons that I would like to quickly go over with you.

The first one is that our customers in Photofinishing have a large stock of images. We've had -- we've seen this year a strong travel season. We have seen weddings, family reunions, et cetera, all of that picking up. And for Q2 and Q3, this has actually fueled our business. So there are photos in the hands of our customers.

We also have probably one of the strongest if not the strongest lineup of new products in Photofinishing, and that's obviously something that will positively contribute to the Christmas campaign this year. It's always been a backbone of our company to introduce new features, new products into the market. But as I said before, rarely have I seen over the last 7 years that I've been with the company, 7-plus years now, a strong line up as strong as this one.

Thirdly, we have converted our cash at hand into customer satisfaction on plan. How did we do that? We actually stocked up on material, necessary material for the Christmas season in a way that we've never seen before in this business. We've rented outside storage just to make sure that in these unsure times, we have what we need in order to produce the products that we wanted to sell over the Christmas period.

And the same, by the way, also applies to energy. We are in our production not dependent on natural gas so we can run all of the processes without gas. We have for heating, dual-fuel situations in all of our locations. So there is no challenge there. And we also feel with the emergency electricity sufficiently prepared for any problems that may occur in electricity. So we have put a lot of dedication into the preparation of our Christmas season more so than probably ever before.

Four, we have been able to compensate cost increases. Yes, we've seen cost increases when we've stocked up. Yes, we are seeing cost increases in our energy cost. Yes, we are seeing cost increases also in our personnel costs. But yes, we have also been able to hand these on into the market over the last months. And you may not see that in your numbers in the way that I'm presenting this to you, which has a very simple background and reason. And that is most of those price increases that we were introducing this year were introduced in Q3, towards the end of Q2, Q3 and even in October this year, so that they are really sort of in place for the Christmas season.

And we've also been putting a lot of effort into doing market research around price increases. We've been doing a lot of assessments. We've been growing individual into the pricing product by product, so as not to go with a straight x percent across all the products so that we feel very nicely balanced and positioned in the market. And at the same time, we can actually compensate for cost increases.

Number five, we are traditionally and provenly a stable business in a weak economy. What we are selling is not off-the-shelf products. What we are selling is memories captured and emotions given away. And those items make us just jump from the current consumer sentiment and you see this in the numbers. You may also want to think always about textile, apparel, shoes, whatever, these type of businesses. You have 5 T-shirts at home, you don't really need a sixth T-shirt. That is where you see the downfall in certain segments of the consumer businesses. But if you've had a great trip this year this summer to the Mediterranean, you wanted to keep that memory and the incremental price is less than that of another branded T-shirt.

And last but not least, number 6, what we also see from a number of market studies, the one that we're quoting here is the pilot Radar is that there is more of a cocooning happening in societies these days. People are gathering at home. They are meeting with friends. They are not that much going out for all kinds of reasons that I do not want to speculate about. However, cocooning at home gives people an opportunity to also come together but also spend time behind their laptop and order a CEWE PHOTOBOOK and other CEWE products.

So what I'm trying to convey to you here is we are -- we feel exceptionally well positioned this year for our Christmas business despite the environmental factors. But what I'm also trying to bring across here is that we are not just another e-commerce business. We are not just another e-commerce business. If you're going and looking at the performance of e-commerce business and just put that performance onto your expectations for CEWE, you are probably off, I have to say.

And while we are doing all that, we are still continuing to care about those values that have driven this company for years, for the last years. So one of the things that happened a few weeks ago, in fact, mid of October, at the Photopia photo fair in Hamburg was that we were awarding yet another 2 of our suppliers with our Supplier Sustainability Award. And just in preparation of this presentation, if you've been at the homepage of the Schiettinger Group. Schiettinger is a packaging and displays supplier to us. And the first thing that you see on their home page, and this is the pride that they have feel about this award is this Supplier Sustainability Award that they got from us a few weeks ago.

We are extending our strive towards sustainability, our strive towards doing the right thing for the environment and our climate protection, not only within our business, but we are taking our suppliers along and this is really important to us.

Very well. So let's look in more detail into Photofinishing. And I did mention to you that innovations have been carrying the positive development of CEWE for years. And 4 of those foundations of these most recent years are the 4 that we've put up here for you.

One, foundation of our innovation. And you will see in half a moment why that is so important is a comprehensive strengthening of the CEWE brand. Some 5 years ago, we were looking at the CEWE PHOTOBOOK and other CEWE products. Today, we are looking at a branded offering that we have and that we consistently also display at our trade partners of the CEWE products, among which the CEWE PHOTOBOOK is obviously a very, if not the most important one.

And initiatives such as the CEWE PHOTO AWARD, which is now the world's largest photo competition, are actually supporting this approach of a branded product. And within that branded product, we have the opportunity to bring innovations to the marketplace that then also pay back and into the strength of the brand, and that also then allow us to have a pricing in the market that gives us a sufficient return on sales.

Number two, over the past years, we have actually extended our brand strategy to a multi-brand strategy, not only with Pixum, but with DeinDesign, WhiteWall and Cheerz, all of which we acquired over the last 5, 6, 7 years and which cover additional incremental market segments. And we're talking about innovations here. In innovations such as the WhiteWall Master Print, we've never been the right innovation for the CEWE brand. But for our gallery quality brand, for our worldwide acting WhiteWall that has actually an outstanding quality, the master print is a format and is a product that is not only exclusive to the WhiteWall brand but is also attracting the most eminent photographers in the photographic arts world worldwide.

Number three, we consistently have been for the past years, consistently focusing on mobile phones, not only as substitute cameras, but even more so as order channels. And the acknowledgment that the photo camera is now also the ordering device has actually been driving a lot of the developments that we've seen in this company over the last years.

And last but not least, and this is actually a very important part that we have occasionally brought to your attention is our MAIC, our Mobile and Artificial Intelligence Center, which actually allows us to look at developments in artificial intelligence and bring those into the mobile world. So what I did report to you a few quarters ago is that we got the EISA award last year for our mobile application that was developed at the Mobile Artificial Intelligence Center.

These strategic moves support the growth through innovations and are the foundation for product innovations, of which we have this great lineup for 2022.

And this is the overview slide where you can see that we have actually 5 significant innovations around the CEWE PHOTOBOOK, 2 around the calendar, 3 around the advent calendar, 7 around photo gifts, 2 around greeting cards and so on and so forth, you see this here. And I just want to impress you by numbers. I do also want to impress you by some singled out innovations such as our XXL Advent Calendar with Tony's Chocolonely. What is this? This is the Advent Calendar that we have with fair trade chocolate that's been very nicely accepted and taken up by our customership.

We're also looking at an interesting innovation in the advent calendar range where we have actually a reusable Advent calendar. We've observed that our customers from time to time are actually closing the little doors again and being very careful about not destroying the photo on front. So we said, you know what, if you're so interested in the photo, we will actually give you the 24 little photos behind, which you can see on the wall there behind, so that you can take them out. Once the 24th of December is achieved, we have those wooden frame parts that you can buy with and you just put this on to your wall for another, how long you ever want to have this and have all those 24 photos at hand. This was originally invented by Cheerz. We are talking about multi-brand strategy again and significantly further developed this year for CEWE and Pixum.

Also very important, there's a whole lineup of new products that are based on recycled paper such as this desk calendar nature from -- made from 100% recycled paper, including a wooden stand, and I'll point out a few more. We have replaced our photo booklet, the CEWE PHOTOBOOK MINI and the CEWE PHOTOBOOK Pure, with a real CEWE PHOTOBOOK Small Square here that's been introduced this year.

We have actually taken up in the line of the leather and linen cover and gloss -- with gloss photographic paper on the big -- scale photographic paper CEWE PHOTOBOOK.

We have a lot of investment into book templates and design elements for the CEWE PHOTOBOOK and also other products. Why? It does make it even easier to design an individual CEWE PHOTOBOOK and we want to make it easy and at the same time, people should be and shall be and will be and are proud of what they are designing with us.

For our CEWE PHOTOBOOK Kids, we have finally introduced specially designed book templates that; actually help a gift givers to design this for your small children. I have, but for the sake of completeness, I want to sort of point this out again, we're showing you before the personalized slipcase XL for the CEWE PHOTOBOOK for which we got the TIPA award, by the way. We got this TIPA award at least one for the past 5 years for our product innovations.

And almost to the end of the examples that I want to point out to you, the whole range of Hardcover CEWE PHOTOBOOKS is now also available 100% recycled paper. We're not only talking about sustainability, we are really contributing to this very important cause and to this also very important trend among our customership.

For the photo gifts, some ideas, if you are still looking for, and I hope you are, a good Christmas present, we have our own range of premium photo puzzles and established that we're also producing ourselves in our [indiscernible] lab. We have a new range of photo magnets with the retro design. We have introduced a new photo keychain and there is hardly an end to what we are doing this year for Christmas.

But I want to really underline, it is not selling products that is on our agenda. We are not a product selling company. We are not just another Amazon or whatnot. We are, unlike other e-commerce business, selling emotions. And how we are selling emotions is the core of our TV campaign, which is one of the strongest TV campaigns that we've had in the past years. And you can TV spot for a CEWE Advent calendar. And I think there is 2 more coming. Axel, you read the pointer.

[Presentation]

[Christian Friege, executive]

We have perfect -- and we've put a lot of effort into making this range of TV spots ever more perfect, and I can assure you they are working. We are testing them, obviously, and I can assure you they are working very nicely. Now if we convert this and this is what interests you at least as much as the marketing report that I'm giving you is numbers.

And if we look at the number of prints and turnover at Photofinishing in Q3 and only in Q3, we see that the number of total prints went up by 12.6%. The value per photo went up by 0.3%, and total turnover photofinishing obviously, if you put these together, is 13%.

Now let me point out to you that if you look at the total number of prints plus 12.6%, the target that we had set ourselves was between minus 7% and plus 4%. And so whilst we do not have a target on the value per photo and turnover photofinishing, this total prints target that is also published is significantly exceeded. Same, by the way, applies to the number of prints and turnover photofinishing Q1 through Q3. You see left out total prints plus 3.3%, the range minus 7% plus 4%. So we are at the upper end of the range here. Value per photo minus 0.5%, I'll come to that in half a moment, turnover photofinishing plus 2.8%.

Now please remember first quarter 2022 versus first quarter 2021. In the first quarter 2021, everybody was confined to their house as we had a COVID lockdown. So that actually put us back in photofinishing almost EUR 8 million in EBIT. It put us back in turnover. It put us back on a lot of items. We have actually crept up. And overall, we are here with a plus 2.8%. So we've overcompensated that lockdown effect already at the end of Q3.

And if you look at the total prints plus 3.3% overall Q1 through Q3 and the plus 12.6% for the third quarter, you will also easily find that actually the trend goes up rather than the other way. Same, by the way, very significantly applies to the CEWE PHOTOBOOK. In Q3, CEWE PHOTOBOOK plus 12.9% against a maximum target of plus 4%, total CEWE PHOTOBOOKS almost at the upper range of the target plus 2.4% versus another range of the target of plus 4%.

So what we are seeing is that we are getting through the COVID impacted times and coming back to where we were before. In fact, if you look at the third quarter, the 1.229 million CEWE PHOTOBOOKs example -- books that we sold is actually more or less getting close to where we were before COVID.

In total, we see that the corona normally -- the COVID normalization is going ahead. We see the increased and significant activity in the travel sector. Mind you, we are looking at the travel activity this year that's predominantly European. Pre-COVID, we used to have also significant contribution of CEWE PHOTOBOOKS from ships to far away destinations such as the Kilimanjaro as you just saw, such as the Americas, such as Asia, Australia, et cetera, which typically contributed in addition to the CEWE PHOTOBOOK sales.

We don't have those at this point in time anywhere near as significantly as we had before COVID. However, we are still in, and if you look at the numbers, ahead of where we were before, plus 30% over 2021 in turnover, plus EUR 3 million -- EUR 3.2 million in EBIT versus 2021. Those are numbers that are interesting. But also interesting is that we are ahead in terms of the EBIT of 2019 by EUR 300,000.

Overall, plus 2.8% versus 2019 in sales, plus EUR 10 million, roughly speaking, EUR 9.1 million versus 2021 with for the first 3 quarters taken together. The slight drop back in EBIT is visible here, and we are obviously reporting about that. Please remember what I said before about the price increases, those were applied mostly in Q3, a little bit in -- towards the end of Q2 and then really sort of are taken during Q3 means that some of them were taken in September, some actually even in October, and they're all in time for the Christmas business, so that we feel that there will be some impact from those as well.

Now if we look at the Photofinishing turnover by quarter in our long-range view, you can see that we actually are coming out of the previous years ahead in most quarters, not in the first quarter lockdown. But compared to 2019, this is pre-COVID, that is significantly ahead even in Q1. We are on target for all 3 quarters and we are seeing an increasing turnback.

If you look at the right-hand side of the slide, you can see this a little extra column estimation 2022. And what we've done there is we've actually looked at what is it that we would have to do in order to meet our target range in sales. This is EUR 240 million -- EUR 254 million to 281 million in sales.

And if we look at the next slide, we have the similar analysis for our EBIT by quarter. You see that in each of the quarters, we actually were within the target range. You see that we are actually going towards the outer -- the upper end of the target range in Q3. And if we look at what is it that we have to deliver in order to be within our overall 2022 target range, that is the EUR 63.7 million to EUR 78.7 million EBIT. And if you compare that with previous years, you can see that there is some significant confidence that we can deliver that.

If you look at the left-hand side of the slide, we've actually done some math for you, which you probably did in previous years yourselves, and that is you looked at the EBIT target for 2022, added all the targets for the quarters and then sort of figured out what would then be the target for the whole year and this is EUR 63 million to EUR 78 million. Those of you who remember that the overall target is EUR 65 million to EUR 80 million, you can see that there is only "EUR 2 million" to be contributed from the other business units.

Now as we've reported for Q2 and Q3, those are actually both developing in a positive way. And I feel that the balance of the business is obviously very conservatively estimated. I feel that there is some buffer in there, and I've discussed it with my friend, Olaf Holzkämper.

[Olaf Holzkamper, executive]

We love buffer.

[Christian Friege, executive]

You know us as a conservative company. Commercial Online Print. You're all aware of the 3 brands that we are running here: Viaprinto, with the service focus for small and medium-sized companies; LASERLINE with a focus on the metropolitan area of Berlin; and SAXOPRINT as the cost leader in industrial online printing with a best price promise as a marketing strategy.

Looking at Q3, our Commercial Online Print grew in sales by 28.4%. So that's why if you look at the overall company, you will see the whole company in sales growing a little bit more than our Photofinishing even though Photofinishing obviously very, very bulk of the business, it is because they are so big at growth rates in Commercial Online Print.

We are benefiting, and we still are benefiting, and this is also very interesting for you. There is a very difficult climate out there as far as the consumption and as far as B2B businesses are concerned and still we are benefiting from the COVID recovery. And still, we are driving in increases in sales of 28.4%. That clearly has to be -- it clearly has to be above average of that industry.

We're also benefiting from a lower breakeven level. We have not reached the turnover. And as you can see in the upper part of the slide, we have not quite reached the turnover of pre-COVID 2019. However, we are better by EUR 1 million in terms of the EBIT. And why is that? Because the work on our cost lines, the work on automization, the work on really fitting out this great production capacity that we have in Dresden towards a low-cost production capacity has actually -- is showing fruits and you can see this in the numbers.

If we look at the overall recovery, it is plus 39.1%. Mind you, Q3 was a very strong quarter. We're very happy about Q3. We've got to take into consideration that there is some comparison here such as, for example, with a lockdown Q1 in 2021. And obviously, that had the absolute adverse effect to the Photofinishing in terms of sales for our Commercial Online Printing.

Compared to 2019, at the end of the ninth month of this year, we have actually improved the bottom line by EUR 2.3 million despite the fact that we are at EUR 15 million or 20% in sales below where we were at 2019. So if you take that comparison into consideration, and if I'm telling you that over the last few days, we've actually seen a very nice intake of sales, you can understand why I feel those EUR 2 million buffer that I've just pointed out to be rather conservative.

In retail, we are still running our 100 retail stores. No, I'm not mistaken. We are still running our 100 retail stores in Norway, Poland, Czech Republic and Slovakia, plus the 1 Belgium in Oldenburg, which you know is the root of the company. And we are still focusing on Photofinishing. We're still focusing on online business. You all remember that we've actually closed down 30% of our outlets during the COVID crisis. And we are focusing our hardware business on margin and on supporting the Photofinishing business. That is the strategy.

Other than in all the past years where because of the melting of our hardware sales, and that's not our hardware sales, that's the market, all of those cameras that were substituted by smartphones were not sold anymore in the photo retailer stores. So we have for years, and those of you who are covering us and have been covering us for years, we've seen a decline in turnover quarter by quarter by quarter by quarter, year by year by year by year, not this year. So in fact, we focus on more online business then we focus on the margin of the business has actually turned around this development, certainly for the Q3 in 2022.

And whilst we are not at this point in time, seeing a significant impact, in fact, of our bottom line, we are starting to see that -- we're starting to see that in the run-up of the 3 quarters. Again, look at the sales line. It is declining from 2018 to 2019 to 2020 to 2021, and it is now slightly picking up, and we are not in the fourth quarter yet. And with that, we have actually compared to a 40% higher sales line in 2019, still made a slightly better bottom line than before.

So those are the reasons why we feel that we are actually very nicely set up for our Christmas business. We are looking at a strong Photofinishing. We're looking at Photofinishing that over Q2 and specifically over Q3 is actually picking up in business in a way that we like to see that. We are not in the position as we were some time in the previous years that we will have to subsidize the Commercial Online Printing and/or the Retail, but we're actually sort of supporting -- those 2 segments are actually supporting the overall result of our business.

Now then we have the segment Other. You remember that the turnover line is solely our futalis activity. And you see that the EBIT is a rounding error, and that is a rounding error for the quarters 3 or quarter 1 through 3.

So we are coming to group results. Turnover in Q3, plus 14.3%. Target, plus 7%. That is a good result. And actually, if you look at the lineup over the last 5 years, and there is no year before that, that would be higher, we are almost at the all-time high of 2019.

Group turnover for the first 3 months -- 3 quarters, plus 6.9%. Target range, upper end plus 7%. Again, we are almost at the all-time high from 2019. And the EBIT Q3, EUR 1.1 million, better than 2021, better than 2020, better than 2019, better than 2018. Q1 through Q3 with this first quarter that I pointed out to you, within reach of where we were before. And that is where we are. And that is why Olaf said at the beginning of this conference, that we are actually happy and proud to present to you what we've done over the last 9 months. But we are equally excited about what is ahead of us and what we can and are set up to achieve over the last 8 weeks of this calendar year. Olaf?

[Olaf Holzkamper, executive]

Thank you, Christian, and having seen the EBIT numbers on the last chart that Christian presented to you, let's look at the EBIT line and the rest of the P&L on the next chart, just to focus on the Q3 and the EBIT development we have seen there.

You've seen the increase of revenues by EUR 19 million in Q3. The comment on the right-hand side here is important for what we're going to talk about in the next slides. You can see that, as Christian mentioned, the Commercial Online Print has risen and more than doubled compared to the Photofinishing. So the growth rate is more than double in that case. And that influences obviously the kind of percent of revenue lines in the different lines of the P&L we're going to look at now.

So the 90% more in revenues is what you see there. I'm looking further below, we see not a lot of change in the next lines. The other operating income just shows EUR 0.3 million increase here. In fact, there's an EUR 0.7 million behind there in foreign exchange effects. So you can already guess that there is also a number to come in other operating expenses, just to spoiler on that already.

If you look at the next important line, really it's cost of materials. You can see on the very right-hand side, we had a quite substantial increase there of EUR 6.2 million, material cost, which was driven by both price as well as volume. Now if you look at the percent of revenue structure lines before, you can see that percent of revenue increased a little bit because EUR 6.2 million is quite a big number, obviously. The reason why it increased is two reasons.

One is we have increased our prices not fully at the beginning of Q3. But as Christian highlighted twice, I think, it was our sales prices were increased throughout the Q2 and Q3 as it passed on and important increases were just lately made. So that's the reason why our revenue didn't grow so strongly as our outer cost we had to pay in terms of material. And the second reason there is in the structure, as mentioned, Commercial Online Print increased the revenue share. And because it increased the revenue more strongly even than the Photofinishing part of the revenue. And that's the second reason Commercial Online Print, as you know, has traditionally higher share in terms of material cost in percent of revenue.

And that's why in percent of revenue, both the reasons here we see a slight increase in cost of materials. But as Christian highlighted, there is some increases from our side in our prices on our sales side still to come and to be really visible within Q4, and we will see what that makes -- what gives that in terms of development input here. That was cost of materials.

Moving on to personnel expenses. On the very right-hand side, you can see the increase by only EUR 2.4 million, which is not a lot compared to material costs, both in terms of salary and number of colleagues we have seen there, which is not a big increase, and that's the reason why it's even lower than our revenue increase, as you can see by the decrease in percent of revenue of personnel costs, down to 31.2% here.

Moving on to next slide. Other operating expenses. That's a big number again, EUR 7.6 million of increase you see there. And there is zillions of things there, just a few examples are named here and each of them has some importance and there's more that could be named which have importance. That's the way it is, we have increased our business there. And again, here, we do see an effect. And for the same reasons I just mentioned that the other operating expenses increased in percent of revenue here. But again, we're going to see more increases in our revenue and more price effects there in Q4 to come, and we will see what that gives us here.

So all in all, those changes nicely still increased our EBITDA by EUR 3.1 million and that even increased in the percent of revenue, as you can see, 8.5% up to 9.5%. That is some details on the P&L.

Let's look at the balance sheet. And the nicest number that we're always looking at is equity ratio. You know we love a solid balance sheet and what you can see here is solid balance sheet. Equity ratio up to 85.6% (sic) [ 58.6% ] , nice development. And even if you add up this old rule that the noncurrent assets should be financed by equity and by noncurrent liabilities, you can even see that is also nearly achieved -- or it is more than achieved, I'm sorry, because EUR 309.4 million and EUR 73.1 million on the right-hand side in terms of liabilities, equity and noncurrent liabilities is more than the noncurrent assets. So it's a rock-solid balance sheet, and that's what we like.

If we look at the balance sheet in a bit more detail on the management balance sheet, bringing the capital invested on the right-hand side and the capital employed on the left-hand side, you can see overall slight increase. Starting with the capital employed, you see the increase of EUR 20.4 million we are seeing there on top. That is derived to, let's say, a quarter from noncurrent assets where we're adding EUR 5 million. If you look at the different drivers there, it's basically the building we have acquired at beginning of the year here right next to us in the headquarter in order to enlarge a little bit and be able to work more properly there. So that's the increase up there, plus EUR 5 million.

And then we have another roughly around 3/4 of the increase at the bottom, the 13.5%. And if you look at what's driving that, you can see that is the net working capital. And a lot of that is by other net working capital, you see the additional EUR 10 million there, which is, again, the corona effects are finally gone in most items there. And you can see that we had very -- due to the success we had in 2020 in terms of EBIT, we had very high tax prepayments throughout '21 and they were really high -- extremely high because we had this tremendous success in '20, and they were too high and they still need to be paid back by the tax authorities to us. So there is some claims we have out there, which are more obviously than they were last year.

And there's other effects in operating net working capital as well. Christian mentioned that we have stocked up to be sure we can fulfill the customer demand around Christmas. That obviously drives our -- drives up our storage there and drives up the money we need to put in there. And we have it across the whole range pretty much in all segments. But at the end of the day, due to the revenue increase, if you account for that in terms of days of stock, we're even down by 1 day. So it's all fine. It's not exaggerated at all.

Moving over to capital invested on the right-hand side. You see there's like most balance sheets, you are looking at right now the pension provisions have been decreased by EUR 10 million due to the increase in the tax rates, obviously. Now you know the technique behind, there is the minus EUR 10 million here. And for the actuarial gains we need to book for that, we also could book an actuarial gain in our equity, and that's why there is a roughly EUR 10 million also up there in the yellow part as an increase.

But nevertheless, that's an increase of roughly EUR 10 million. And we have bought back shares for EUR 19 million, as you can see up there. So that was more -- this increase in actuarial gains was more than counterbalanced by the acquisition of treasury shares we have done over the last 12 months here.

But nevertheless, still bottom line even after dividend payment and all that, we have still an increase of equity by 2.1 -- by EUR 21.2 million, which is a nice increase. And due to all the cash movements behind, we have even been able to finance the treasury share buyback of nearly EUR 20 million mostly to 50% by the equity generated as a cash flow -- free cash flow and only 10% needed to be taken up in terms of gross financial liabilities, which have increased by these EUR 10 million you can see there.

So that leads us to the free cash flow considerations. And moving from the last 12 months, thinking over to the Q3, thinking only, so the numbers obviously do not exactly match. But nevertheless, what you see here is a pretty much back to normal after the special corona years of 2020 and '21. Now we are back to normal, which you can see already by just looking at the first cash flow from operating business. You can see we are back on the level, the cruising altitude where we had been in 2018, 2019 here.

And the different details are mentioned there, we have a bit more EBITDA. We just looked at that already. We have a bit more cash flow from operating net working capital because we have some increase in liabilities there, both from the stock effects which we mentioned already and obviously, from the liabilities we have due to payments to retail partners over time. So that's an increase in liabilities.

We have spent some money on other networking capital, which is related obviously to the stockpiling. There is the sales tax receivables, which we had to book there. And the end, EUR 2.1 million is again due to tax payments, which were better than last year in terms of cash flow. I mentioned the very high prepayments we had to deliver last year, they don't happen again this year. So adding all that up, we are back on the level of between EUR 11 million and EUR 15 million, where we had been in the years before already making -- EUR 12.5 million this year Q3.

In terms of investments, you can see there is pretty much the level as the year before. And the little changes we had there were due to the payments, the acquisition of Hertz that we had which was still a little bit paid for -- in Q3. But all in all, we are back on normal level. And you can see the free cash flow, we also -- we used to be around the 0. We used to be a little bit positive and we are clearly closer to the 0 line. Now back again. Although there is much more to come and you know that big cash flow, obviously, is still out there to come in Q4.

In terms of ROCE, you can also here see the highlight corona boom did increase the 12-month EBIT in 2021 because that is the combination of 2020 and 2021 put in that year there. Otherwise, we have a nice and steady development. And that's why if you consider -- if you continue that on the right-hand side of the ROCE, you can see a nice and steady development there as well. We are on a level of 17% -- 16.7% ROCE, which is a nice development, which is continuing the trend that we had before the corona times and we feel we are on a reliable level. CEWE is generating value-added looking at this.

And with that, Christian, do you want to continue on the outlook?

[Christian Friege, executive]

I will be delighted to do so. And this should also not now surprise you in any whichever shape or form. We've mentioned and I have mentioned, and Olaf has mentioned to you the delta that we've been carrying from Q1. And you can see that out of those EUR 6.5 million, we have compensated EUR 5.2 million over Q2 and Q3. You can also see that there is an increase in delta on the positive side between Q2 and Q3. And we can all now do our math as to what is needed to reach the final year EBIT goal. And you can see this on this slide.

Here, we have the past years since 2015. And you can see that there is a strong buildup of EBIT for the first 3 quarters on the left-hand side -- and for the year -- on year on the left-hand side. And you can see that there is an estimation for 2022 and you can see that there is a range between EUR 65 million and EUR 80 million, that is the range that we put out at the beginning of the year.

On the right-hand side of this slide, you can see that there is a minus EUR 6 million development in terms of EBIT necessary to reach the under -- the lower end of the bracket. And there's a plus EUR 9 million increase over the last year necessary in order to reach the upper end of the bracket.

I do want to remind you that we are, as I said before, not just another e-commerce business that you need to put a different measuring stick against us and the development of our business. And we have tried to display how we have prepared for the Christmas season that is so important for this business. And it is now up to your judgment, whether you feel that we will fall behind last year or whether we will make headway against next year. I have my personal opinion, and I am rather positive about the development here. I do not see us at the lower end of the bracket at all. But again, as I said, this is my personal feeling. Olaf advised against making any statements on this.

And that leads to this long-term development. You've seen this slide a hundred times probably by now. It's over 20 -- 32 years x 4 presentation, that makes more than 100x. You can see how the analog photofinishing was replaced by our digital photofinishing. You can see how the digital photofinishing that we talk so much about today is actually driving this business more than anything else. You can see in the light gray boxes, how we have marginalized the impact of our hardware retail business with the lowest contribution to our overall results. And you've seen how we have focused our Commercial Online Print into profitability, as I have pointed out to you earlier on.

And thus, we are actually confirming our targets for 2022. And it's your judgment whether you see us more towards the upper end than the lower end of that bracket. Again, I have my very clear personal opinion about this. And with that, I think we have done what we needed to do.

[Olaf Holzkamper, executive]

Absolutely.

[Christian Friege, executive]

And we will stop the recording and...

[Olaf Holzkamper, executive]

We open up to your questions, please.

[Christian Friege, executive]

We are open for your questions.