Following severe financial problems, Leica shareholders met yesterday to discuss the future of the company. The company aims to reorient its corporate structure to achieve a sales volume of around €100 million in the near future. It aims to simplify capital reduction, increase the share capital against contributions in cash and a creation of authorized capital. Dr. Josef Spichtig, chairman of the board of management of Leica Camera AG, described these measures as being “indispensable for the existence of the Company”. Leica Camera Group recorded a 21% sales decline from €119.1 million to €93.7 million, year ending March 31. The measures take into account operating losses of around €13 million for the next financial year (2005/2006). For the subsequent fiscal year, 2006/2007, the company aims to break even. Dr Spichtig, said he intended to continue the photo and sports optic units as well as Leica M and Leica R camera systems and compact cameras as 'co-operation products'.
General Meeting approves capital measures
Go-ahead for turnaround strategy
The Extraordinary General Meeting of Leica Camera AG on May 31, 2005 has approved the capital measures proposed by the Board of Management and the Supervisory Board, in each case with a vast majority of more than 90%. As announced in essential outline in the electronic Federal Gazette (elektronischer Bundesanzeiger) of April 20, 2005, the measures consist of a simplified capital reduction, an increase of the share capital against contributions in cash and a creation of authorised capital. At the General Meeting, Dr. Josef Spichtig, Chairman of the Board of Management of Leica Camera AG since April 18, 2005, described these measures as being “indispensable for the existence of the Company”. He rated the consent given by the shareholders as “a declaration for the preservation of the Company and a positive attitude to its perspectives in the future”. The Company now plans to issue 13.5 million new shares at a price of € 1.70 per share. The new shares will initially be offered to the existing shareholders of the Company.
According to Mr. Spichtig, the goal to be attained by the Company will be to reorientate its corporate structure in order to achieve a sales volume of approximately € 100 million in the near future. Mr. Spichtig said, he intended to continue all of the Company’s business, i.e., both the Photo and Sports Optics business units. In addition to the two camera systems, Leica M and Leica R, the Company will continue to offer compact cameras as cooperation products. In all product lines, digital solutions, development of which will be continued in cooperation with partners, will be strengthened. “As we all know, digital technologies have already been developed and are available on the market. We intend to combine these technologies with our Leica know-how, in keeping with the idea of engineering.
"To master this task, we plan to increase our human resources", said the Chairman. The maturity achieved in digital photo solutions, which had led to a neck-and-neck race with analogue processes at the high end, now increasingly offered room for Leica solutions, said Mr. Spichtig. State-of-the-art optics, a concentration on the essentials and solidity again were important factors, since sensors were no longer the main distinguishing quality characteristic of a digital system.
As concerns production and logistics, Mr. Spichtig said that he planned a streamlining, entailing, among other things, a halving of the Company’s inventory, which currently amounted to € 42 million. The measures were directed at the Solms and the Portuguese locations and would be implemented in a way that would not endanger “Made in Germany” manufacturing.
As to marketing and distribution, Mr. Spichtig sees his responsibility in reshaping the Company’s sales structure according to quality criteria. “For those Leica products that require explanation we need well-trained dealers who offer good service. We must gear our international distribution policy to the development of attractive business for our chosen partners”, said Mr. Spichtig.
In his speech to the Company’s shareholders Mr. Spichtig said that the Leica Camera Group in fiscal 2004/2005 (FY end March 31) had recorded a 21% sales decline from € 119.1 million to € 93.7 million in a difficult market environment. As to the reasons for this devolopment, Mr. Spichtig pointed out that there had been false estimations of the Company’s management concerning the speed at which the photo market would change over to digitalisation, combined with weak points in the Company’s structure, as well as external factors such as unfavourable exchange rates.
In addition to the expected loss of € 15.5 million already announced there could be a burden resulting from the valuation of inventories, as currently discussed with the Company’s auditors. Mr. Spichtig said the new valuation was not the result of a prior mistake in valuation but a possible effect of the currently prepared turnaround strategy on the valuation of inventory range.
The Company started into the new fiscal year with sales of € 6.2 million in the month of April. This resulted in a loss of € 1.7 million. The Company expects sales and losses on a similar scale for the month of May.
The losses have led to an excess of debts over assets in the Company’s financial reporting. However, subordination agreements ensure that the Company will not reach overindebtedness status at any time.
The capital measures are based on a results planning that takes into account operating losses in the € 13 million range in fiscal year 2005/2006. Mr. Spichtig said that the examination process with respect to possible improvements was not yet completed. Possible extraordinary expenditure for restructuring measures also had to be taken into account. For the subsequent fiscal year, 2006/2007, the Company had set the goal of a break-even result.
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