CEWE Stiftung & Co. KGaA (CWC) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to today's annual press and analyst conference on behalf of numbers as of year 2021. We are looking at the outside world, and we are looking into the snow. It looks like Christmas and not like close to Easter. But you know that we love snow, we love dark and gray with outside. And because if it's sunny and shiny, that's the time to take pictures. And if it's gray weather and snow like today, then this is the time to create a total product from CEWE and all them. So obviously, we love the weather as we have it right now. And we spent the time -- we love to spend the time with you together to look at what happened in 2021 at CEWE. I'm saying we -- I mean, first of all, our CEO, Christian Friege, who is going to lead to the overall situation of the company and who will shed more light on the development of the different segments. Then on the other side of the screen, we have Reiner Fageth who will talk about our progress in artificial intelligence. In between the 2, I'm going to talk about the financial details. My name is Olaf Holzkamper, I'm responsible for finance. And finishing off, Christian will give again a view on the outlook of 2022 before we are happy to take your questions. The questions I'm going to be put into the chat today, and we will pick it up from there. But to start, Christian.

Yes, a very good morning to you all as well from my side. It is good to see that there is such a significant interest in the development of the CEWE Group. And whilst I will focus most on the year 2021, let me start with one of those very current topics, and that is the war in the Ukraine. It is a situation that really saddened us and makes us very impacted in a way -- personally impacted. We have tried and we are trying to support where we can and how we can. And the way we support efforts in the Ukraine is probably very telling for what we represent as a group. The first thing that we do is -- or that we did is we donated EUR 100,000 to SOS Children's Villages. You all know that we've had a long -- a long partnership with SOS Children's Villages, and they had to evacuate some of their children as a students' villages, and we supported that with a EUR 100,000. The other thing that we are doing, and this is what we are currently ongoing doing is we invited our seasonal workers from the Ukraine who helped us in the past 2 or 3 Christmas seasons in our Polish lab. We invited them to come to Poland. Our Polish colleagues converted a house to house the guests from the Ukraine. People from CEWE around Europe donated, I think it's up to EUR 27,000 now, and we will match that as a company so that there are sufficient funds to help with clothing, with food, with support whatever that is. And I think it is very typical for our CEWE Group that we are extending our hands to those who even temporarily are part of the CEWE family. In business terms, luckily, we are not directly affected by the war. We have no supplies directly coming from neither Russia nor the Ukraine nor do we have any sales outlets in the Ukraine or in Russia. So that part of the situation is somewhat safe for us. However, at the same time, we are obviously impacted by price increases, supply shortages, et cetera, of the long supply chains that somewhere do involve the war-stricken countries. And so when we are planning for 2022, at this point in time, we do not take into account any effects, especially on consumer behavior, especially in consumer behavior of the war in Ukraine that extends in terms of time and or space. So that is the disclaimer around the Ukraine. Now let us look at what happened in 2021. You see here the slide that we have been showing you for longer than we all can think and shows the development since 1990. You see in blue our analog photofinishing. You see in red our digital photofinishing. You see the long-term growth curve. You see the impact of corona in the end, specifically on the commercial online trend and we will then explain my colleagues and I today to you what in fact happened in 2021. Our earnings after tax are clearly above the last 3 corona year 2019. There is a level above that, but they are somewhat below 2020 though within the range, and the same applies to the EBIT. We achieved an EBIT of EUR 72.2 million at the lower end of our expectations, but clearly very much above all 3 corona years. If we look at those EUR 72.2 million, there is an explanation for that. On the one hand, the EBIT contribution from photofinishing was EUR 17.4 million lower than in 2020. I'll come back to that in half a moment. But in our retail, IT and our commercial online print, COP and in other, we managed to offset more than half of that shortfall, specifically by turning around the situation in retail and commercial online printing. Now as far as the photofinishing is concerned, you see the little inlet slide on top of the EUR 17.4 million, and that explains that our operational margin in photofinishing -- operational EBIT margin photofinishing has actually risen somewhat above the 2019 number. And we see that 2020, obviously, was a bit of an outlier here, but the overall development is absolutely intact. Again, I'll come back to that a little later. If we look at the various quarters in the year 2020 and '21, we can see how corona actually impacted us and specifically our photofinishing, our commercial online print. You all remember that the first quarter in 2020 was a no corona quarter. We all felt that there's something going on in China, but it's not going to affect us. And it was a normal quarter, we netted EUR 2 million in EBIT in 2021 in most of the European countries, actually, in all of the European countries. This was a hard lockdown. The time of people being confined to their homes, and they had little else to do, I would like to say little else to do then to order CEWE PHOTOBOOK and other CEWE products. So the delta in EBIT for the first quarter, EUR 21 million versus EUR 26.6 million, exactly reverse has happened the following Q2 in 2020. This was the first lockdown quarter, where we actually had a relatively good result for the second quarter. Whereas in 2021, this was all -- probably it's over now. We're going into summer. We can travel again. You all remember that there was a big relief after Easter in 2021 in the second quarter. The result of that is we netted less EBIT to the tune of EUR 5.5 million. Summer was both as a year of a little bit limited to hope. There was some trouble going on, same more or less result for us. And then in the fourth quarter, in 2020, we had again the hard lock down, no Christmas markets, no -- lot of online shopping, very much online shopping, none of it on the high street, and it was a lot more relaxed than that in 2021, again, that left us with EUR [ 8.2 ] million EBIT less. So this is a lock quarter due quarter-by-quarter what actually happened in the business correlated to corona as you actually can see and how much 2020, but also 2021 was still impacted by corona. We tried very hard in all of our locations across Europe to support our staff with a safe working environment that was very much on the top of our list. We had -- we wanted to have people -- to give people the feeling that they are actually in a safe environment, and we supported a lot of vaccinations in most of the places that where we do business, we actually offered vaccinations as much as the local legal environment was possible. And to go through this year of heavy corona impact again, is an achievement in itself. And I would like to take this opportunity to thank all members of staff, everyone working at the CEWE Group for, again, an outstanding performance and outstanding contribution and an outstanding loyalty to our group in the past year. Without you folks, we wouldn't have been able to achieve anything. That we are a good environment to work, that we are a great place to work is indeed the result of our employee satisfaction survey that we conducted last year. And you can see on average that we actually move all the way to the corner of being an excellent place to work. And if you understand that this is the average of all our locations, then you probably assume with me and I happen to know this, that some of our locations are even in the excellent bracket. And this is a benchmarking with companies who care for their people, who go out of their way to do satisfaction surveys. So within a group of interested companies, we seem to score quite well. And that is something that we're all proud of, that we are working together that well. There was probably also a contribution to why we worked for the second time in a row, recognized as a best managed company by Deloitte Wirtschaftswoche Credit Suisse and the Bundesverband der Deutschen Industrie. And again, that is something that we feel a little proud of. Now looking into the various areas of business. I would like to start out with photofinishing. 2021 was also the year where we finished our CEWE Photo Award 2021, which is now the world's largest photo competition with more than 600,000 photos submitted from over 170 countries. And not only do we see that this is the largest photo competition, we also see that the quality of the submission is significantly increasing and the CEWE Photo Award is more and more recognized as one of the leading photo awards in the world. It clearly is the largest. We sell it right photography with this, but we also underline the European market leadership of the CEWE brand in photography, and that is something that we believe is important and that we invest into. The feedback that we get from press and publicity is very significant now all across Europe, a little idea of who actually reported about us is on this slide. We also celebrated the 75th million CEWE PHOTOBOOK that was ordered in 2021. It was ordered by Lizzie Ross, who is a customer at our trading partner, Boots in London, and you see photo of a little ceremony, where we actually celebrated 75 million CEWE PHOTOBOOKs sold all across Europe. As far as our new products are concerned, we entered a partnership -- a new partnership with the well-known and very traditional company of Faber-Castell, where we have 2 sets of [indiscernible] that we actually offer in metal cases that you can put a photo on. We increased the amount of advent calendars with 100% biodegradable inner hearts. We've introduced nature prints on recycled paper. We extended the package -- the page packages for our CEWE PHOTOBOOK. Now you will think that adding another 4 or 6 or 8 pages is nothing -- but I can tell you that this cost us a lot of research and development to find the best possible way to make the binding durable so that this is not only looking good when you get this from CEWE, but it's also looking good years and years thereafter. And that is a challenge and that is what we put effort into. We had great emotions in our Christmas campaigns all across Europe here is a photo from the campaign that we run among others in Germany, and we had a very strong Christmas business again. Across the group, we were awarded 3 TIPA World Awards next to the ISA Award, and we'll come back to that later. The Technical Image Press Association World Awards are the most recognized awards in our industry, and it is an achievement that we are very proud of that we got 3 awards in the last year for the A2 calendar gold edition for the CEWE PHOTO center. So for the first time for something that is connected with instant printing that you know is an interesting area, an important area of our business. And our group company, WhiteWall was rewarded a TIPA World Award for the room view function, a function where you take a photo of your living room with your smartphone and then you can actually load that up to the website, and you can see how exactly your room, the wall behind your sofa looks when you order a certain white wall art with a certain frame, et cetera, et cetera. So the outer world is recognizing us for our product innovation. Looking to some numbers. We see that the number of -- the total number of prints has actually gone back by 6.7%. That is mainly driven by a shortfall in the CEWE PHOTOBOOK orders. However, the trend of an increasing value per photo plus 2% is very much intact, and that then leads to also a limited depression of the overall turnover in photofinishing. The CEWE PHOTOBOOK, as I mentioned before, was ordered 5.6 million times. What we see here is that during corona, weddings have actually been celebrated less often, big celebrations were less often. The archives are trending to become more empty than they were before. So what actually drove some of our business in 2020, which is the archived photos from 2006, '05, '04, '03, or whatever, that we had then in our CEWE PHOTOBOOK orders. They have actually become empty. And most importantly, and this is the real big reason, traveling is not back to where it was to 2019. And one of the most important reasons to order a CEWE PHOTOBOOK book is a trip that you make -- and the further away, the fatter the CEWE PHOTOBOOK. So it's not only the fact that trips were less frequent last year, but also that people less frequently travel to Africa, to Canada, to Asia or wherever the trip of their lifetime that typically results in a very significant CEWE PHOTOBOOK. As far as photofinishing overall is concerned, the turnover is, as I said before, 4.8% below 2020, but still 3.9% above 2019. So it's still about the last 3 corona year, and the same obviously applies to the EBIT minus 20% versus plus 6.4% versus 2019. And that is, again, related to the stay-at-home effect that had a greater impact on demand for photo products in 2020 than in 2021. Looking as they're all used to at the quarterly development, you can see that the Q1 quarter with a lockdown in 2021 was a stronger-than-expected quarter, whereas the other quarters were short of expectations. However, still the Christmas or the season quarter, the last one is above 2019 significantly. Same applies, by the way, to the EBIT. Now let us look at this slide again. This is a small slide that was in the first slide that I used to explain the EBIT of 2021. You can see this long line of operational photofinishing EBIT margin that's actually continuing step by step to increase if we take out this one outlier year of 2020. And the trend of steadily improving operating earnings margin in the core business segment of photofinishing, ongoing for many years, continued positively if we compare to 2019 to reach 12.7% in 2021. So our photofinishing business is intact. As far as the commercial online print is concerned, we're very much impacted by corona. There was no fares, no brochures ordered, no meets, business meetings, no business cards orders, no big concerts and other events, no posters for that ordered, restaurants were closed, menus, or et cetera, et cetera, et cetera. So there was a lot of impact on our commercial online print. And with our Viaprinto service focused the small and medium enterprise company for commercial online print and the cost leader Industrial online printing SAXOPRINT, where we are actually in our turnaround managed to become the absolute cost leader in the industry, fueling our best price strategy with the adjacent LASERLINE, which is covering the metropolitan area of Berlin. Those 3 brands are in the making in the business for our commercial online print. And why is the turnover was slightly below 2020. Remember, first quarter in 2020 was still before corona, and it was a strong quarter for our commercial online trend. We've managed to actually with different measures to turn around the business to a profit of EUR 1.2 million. In retail, you remember that we reported last year about our program to accelerate the shift between our stationary stores and our online activities. This retail report solely come as the hardware revenue. So whatever we actually originate in our store chains in Norway and Poland and the Czech Republic and Slovakia as far as the photofinishing business is concerned. Whatever comes from there is actually reported in the photofinishing segment. Here in the retail segment, we solely report about hardware, about cameras, tripods, about lenses, frames, et cetera, et cetera. We consistently co-branded and here's the story in Norway, co-branded our hardware stores with CEWE, using the stores not only to sell the hardware, but also to increase the brand awareness and to obviously sell photofinishing products. If we look at the business segment retail, the hardware turnover, it's 8.7% below the previous year. Remember, we closed about 30% of our stores and we achieved, again, a turnaround to what we would call a black 0. The hardware retail and foods earnings with optimized branch structure and the way that actually goes is if you look at the detail in the third quarter, we were 15.8% below in terms of our turnover. And in the fourth quarter, only 3.0% compared to the previous year. And now the 3.0% also still has the nonsales that we have because some of the camera manufacturers were actually not able to supply us because of semiconductor problems, et cetera. So had they been able supply us, we may even have hit the sales level of the previous year with 30% less stores. I think we did the right thing here. In the business segment, others, we report about miscellaneous in the turnover section is only futalis our personalized dog food subsidiary. So that grew nicely by almost 16% and it also contributed to a positive -- it contributed -- it realized a positive result. Now adding all those up, group turnover to EUR 692.8 million. You can see the different segments that I introduced you to. The ongoing corona situation with a larger stay-at-home effect in the previous year influenced the development of group sales in 2021. However, our group EBIT, whilst it is below 2020 is significantly above the previous years, the EBIT margin was 10.4%, while it is below 2020 is significantly above the previous years. The earnings after tax of EUR 48.9 million, while it is below 2020, significantly above the previous year. And guess what? That also applies to the earnings per share with EUR 6.72 per share. That actually led us to proposing the 13th increased dividend for the year 2020. We proposed together with the Supervisory Board to the general assembly of shareholders a dividend of EUR 2.35. And it is indeed an achievement for a group like ours, a long-term stability is sustainable development of a company where you see such a development, I believe, in the German Stock Exchange, the listed companies and the indices, there's 5 who have such a track record or a longer track record than that. In line and today as much as we publish our annual report, we also published our annual sustainability report. And I would like to make you aware of this. It is, again, the 13th consecutive edition that we are publishing here and we are one of the few German companies who have been publishing such a sustainability report that today is a mandatory for such a long time. And for that long time and probably even longer, we have established another CEWE Group sustainability as a combination of 5 dimensions under the model sustainable together. It includes what we call in German, [Foreign Language], the honest merchant, the honest businessman which is an emblem for honest and fair behavior. So CEWE sticks to awards, and we actually do ethical business all across our businesses. And it's, by the way, one of the things that actually helps us in supply today because some of our suppliers are supplying us for more than 10, 20 or 25, 30 years. And we have such a long sustainable records together that whilst we may have to accept higher prices, at least we do get supplies. Also, the economic viability is something that you've seen, the very first slide from 1990 to 2021, where this long-term development, this long-term economic viability has actually been shown to you. We are focusing on environmental protection and resource conservation. Remember, some of those products that are shown in innovative products like the natural print that very much is focused on environmental protection, resource conservation. You remember me talking about the responsibility for employees as we did during the corona times, the corona vaccinations, et cetera, et cetera, and our social commitment, the very first slide, how we take care, as an example, we take care for our seasonal workers in Poland, how we actually care for children in the SOS Children's Villages. We've been rated by the institutional shareholder services with the highest rank for environmental and ESG. And with that, I hand over to my colleague, Olaf Holzkamper for more financial details. And believe you me, he has that.

Thank you very much, Christian. And with that, we move to that section of the financial details. The first one, as always, is the P&L we are looking at. But quite frankly, there's not much of interest to really look at in detail here. It's the typical development you would imagine when you have seen all the charts before on revenue, on EBIT, on EBT, on profit after taxes and so on. So quite frankly, I would like to jump across this chart and spend more time on the balance sheet because that's where the interesting stuff this time is really happening. Where we're having a movement that is unusual, at least for our company. What you can see here on this balance sheet on the right-hand side top number in red, 56% in terms of equity ratio. So we are proud on that. That shows stability. CEWE is a rock-solid company. That is an increase again from 48.1% to 56% in terms of equity ratio, great. We love that. If we look at the developments on the asset side, let's move left again, you see overall, there's a decrease on the balance sheet side here by EUR 25.9 million. And if you are looking below where does that come from? Yes, it comes from noncurrent assets, minus EUR 10 million. And if you look at the box above there, you can see that it's mainly operating assets, and there is no big movement. It's just the normal depreciation, less investment, more depreciation or find just operational things, the way they developed, not much to talk about. And the other items in there, they move a little bit up and down, but no big movements. The real movement is happening down in the current assets, where we have a minus 15.8%. And actually, that if we look further in there, it's very much driven by the cash that is EUR 18.2 million, that was reduced by EUR 18.2 million as you can see below. The reason for this is that there's many movements in the details of current assets that you see underneath in the box. And there's many movements in the liabilities that you see on the right-hand box in the current liabilities that are actually also part of the net working capital. So in order to discuss that, we would move to the next chart and look at how our commercial -- how our capital employed developed where this these liabilities, these current liabilities are exactly moved over to the asset side, and that way create the capital employed. Because when you look at this chart, you do see there's a lot of movement now added up in the big box underneath. We get a little bar on the left-hand side. And what you see there is there is a big movement here and the strange movement that the balance sheet -- of the normal balance sheet we just looked at, was reduced by more than EUR 25 million in this EUR 26 million. And here, you can see that actually the capital employed is increased pretty much the same number just by accident, by EUR 25.6 million. And the reason for this big change is the fact that net working capital has a great financing effect in the year 2020. If you look at the bottom of this bar of 2020 there, you could see a minus EUR 69.1 million, financing effect from net working capital, which if you compare it less than right of that bar is a strong number for our company. That was an exceptionally financing activity from net working capital there. And that went back to normal, it changed back to normal. And the reason for that is mostly driven by the corona effects fading out. And this is exactly what you can see in the box underneath in our color code here on these 2 charts we just looked at is the blue color always explains effects, changes, movements we are allocating to corona in terms of either ramping up or ramping down corona effects. And what you can see here is a clear ramp down of financing the net working capital from corona. Because last year, for instance, just to give you one example of the box underneath -- because last year, end of the year, we had a great business, online business through our retail partners, online orders for photofinishing. We had the incoming payments from the consumers, and we had the payment in our house by the end of the year from the consumers. We were allocating that to liabilities on our side to our retail partners, and we were paying this cash in out to the retail partners. We paid their fair share in January of the year '21. That means that was a big liability end of 2020, contributing to our financing and that is, for instance, a big share in the light-green part on the bottom of 2020, which is the EUR 69.1 million. But other payables as well, we had tax payments, for instance, where we didn't have to pay all the tax payments in '20. We paid part of that in '21, that was something that helped the financing of [indiscernible] so on and so on. There's many details in there, if you go through, there's a lot of financing from net working capital. And that went back to normal, and that is why we see this increase in capital employed here, although the normal balance sheet has actually showed actually a reduction in terms of balance sheet size. Other than that effect we just looked at, this not a lot to mention on the balance sheet. So if you move over to the cash flow, what does this mean movements we just have seen on the balance sheet, what does it mean on the cash flow side. You would expect it, and you can see pretty much similar developments. It's not the same numbers, but the same topics pop up here again. And again, a reminder, blue color means corona-driven effects. And you can see that on the left-hand side on the box explaining the minus 20 -- sorry, the minus EUR 76.7 million in terms of the cash flow from operating business down to EUR 65.6 million, minus EUR 76.7 million in operating cash flow as a change compared to last year is strongly driven by corona effect. By corona effect fading out supporting a lot to why we had such a high cash flow from operating business in 2020. You see the plus EUR 142.3 million there. And that effect came back to normal, and that is why we are looking at the EUR 65.6 million into the cash flow of 2021 here now. And exactly these payments is higher tax payments, it's payments to our retail partners. It's even higher tax prepayments for the year '21 because obviously, tax authorities just continue the trend of the big profit we were able to show for the year of 2020. That's why we had higher tax prepayments in year 2021, actually more tax payments -- tax prepayments than we actually had in terms of taxes we will have to pay for the year 2021 in the end of the day. So all these effects contribute to this big decrease there. But we are back on a more normal level, even a bit lower than normal level there, that sense probably. Net operating cash flow. If we move on to the investment cash flow, you see that we are pretty much on the same level, EUR 39 million last year, EUR 44 million this year. The difference in there is a bit more investment into buying the last shares of Cheerz. So that's fine, no big changes there. All in all, if you add it up on the right-hand side, the free cash flow, you see a strong decline, obviously driven by operating cash flow, strong decline from EUR 103.3 million free cash flow last year down to EUR 21.5 million free cash flow, down by more than EUR 80 million. Now if you see the strong decrease in free cash flow, you've got to ask the question, so is that a structural effect? We saw all the blue explanations already that were driving these points, you can pretty much guess, no it's blue structural effect. And that's the way it is, and we are trying to make the point on the next chart here. If you move to the middle part of these 2 bars that we see here, there we do see that the free cash flow of '21 of 2020, we do see the number of EUR 103.3 million on top of the light bars on the left-hand side, the right -- light bar there. Now there is EUR 103 million, and you see the EUR 21 million free cash flow of the year in 2021 next to it at the bottom in the dark red color. So there is the difference of EUR 103 million compared to EUR 21.5 million. And how did we communicate the EUR 103 million last year. We said already in our communication 1 year ago, the EUR 103 million actually is not an operational EUR 103 million, it's a lot driven by one-off effect due to corona. And I'm now moving on the right-hand side into the table, where you see we had a tax payment postponed from '20 to '21, EUR 18.9 million. We had the collection -- debt collection from consumers, which we still have to pay to our retail partner, EUR 7.5 million. So those 2 added up to EUR 26.4 million, which is exactly what we got to deduct from the EUR 103.3 million to get to a more normalized free cash flow of the year 2020. So we are down to EUR 76.9 million. That is something we already continued to communicate last year to you. And now we are seeing not the EUR 21.5 million that you see as a free cash flow of '21 there is actually a bit too low. There are one-off effects that you're going to add back to get to a more normal free cash flow. And these are -- and I'm now moving to the very right column of this table there. These are expecting the 2 effects I mentioned for the year 2020. Because obviously, we did pay our tax payments for the year 2020 in '21. So there is cash out that doesn't belong to the year '21. Of course, we did pay the money to our retail partners. And we also had some tax payments, as I mentioned already in '21, that are exceeding the tax expense of '21 actually. So there is additional cash out in terms of tax asset that [indiscernible] shouldn't have happened in that sense. So there's EUR 23.7 million in terms of normalization, we could add back to the free cash flow of '21. And then we have the additional payment into the Cheerz shares that we did exert end of last year. So we're adding up a correction level to EUR 42.2 million there. And if you add that number to the EUR 21.5 million, you arrive at a normalized free cash flow '21 of EUR 63.7 million. And that makes a lot more sense if you compare '20 the EUR 76.9 million normalized cash flow last year to the EUR 63.7 million normalized cash flow '21. There is a difference in between there of EUR 30 million, and that can exactly be explained by, for instance, the EBITDA, which is a bit -- which shows a reduction of a bit more than EUR 10 million. So that explains pretty much that difference. That was a long story maintenance point. Don't worry about the reduction of 80% in the free cash flow. There is no structural effect. Just moving back to normal from the old corona effects that we had in 2020, otherwise, all is as it should be. Moving from the cash flow on to the ROCE side, you can see which 2 numbers that make up for the ROCE numbers, the 27 -- sorry, the EUR 72.2 million EBIT you saw already before. We have a slight increase in the average capital employed over the last 4 quarters. We talked in length about the increase in capital employed we had in 2021. So obviously, that needs to be reflected some in the average of the 4 quarters, but that's the reason why it increases here. And if you divide the number of EBIT through the number of capital employed, we arrived at this 17.5% there in terms of ROCE, which is a great level, which is higher than 2019. And the question, obviously, whether CEWE creates value or not can be answered easily. Yes, CEWE clearly creates value. And with that, I would love to pass over to Reiner Fageth, who is going to talk about the progress in terms of artificial intelligence at CEWE.

Thank you, Olaf. Ladies and gentlemen, it's a pleasure for me to inform you what we did in the last year since we last time informed you. On the next slide, you will see all of the AI features we have implemented based mainly on our mobile and artificial intelligence campus, which we launched nearly exactly 4 years ago. Tomorrow, our baby will be 4 years, and I can tell you with features we did, he got pretty mature in the meantime. So we developed a lot of things. Things you know best is that we select automatically the best images. When we do also support the consumers in finding the relevant product on our website. It's also based by an AI algorithm. We help in organizing the photos while doing face-detecting objects in our CEWE myPhotos application. We do detect relevant events in our mobile photo service. I presented that slide to you last year. We do automatic image rotation also for our analog services. So if you get a scan from our image city, you can import it to CEWE myPhotos. It's automatically rotated as well as the images to get from our scan services. We do also support our marketing and making better HDA campaigns with the help of Article intelligence. Last year, I already informed you that we are about to implement so-called super resolution. So we are upscaling images which were downscaled by measures such as WhatsApp. And as Christian said, we got TIPA award for the CEWE CALENDARS, on the A2 size. So we get a lot of images here which are based on WhatsApp images and we upscale it. So even in this huge format, we deliver great quality, which is all the time the intent of the CEWE brand and the CEWE team, best possible quality. In our customer care, we support with AI bots in order to help to get faster and better responsive about delivery time and shipping problems. We help with AI in order to pre-collect or -- pre-collect e-mails to our customer care in a very efficient way, but everything belongs together is presented to the same customer care center. And at retail, we also help our retail partners where to do a predictive analytic pricing. This is, of course, not done fully automatic. This is done as a suggestion that everything as we do listed here on that page, nothing is done without the acceptance and the okay our consumers. That's definitely what we are doing, therefore, we got also a label, which means we are really insisting on being really clear on data and we got the label last year from the digital infrastructure agency of the Lower Saxony administration. And I can tell we also have the same label, which starts from tomorrow again, and we will be as careful as we have been before. On the next slide, you see -- we use the experience of our mobile photo service, we call Tap, tap, wow. I presented it to you last year live that was really, really new. This AI, we select an event, we do the photo selection, which are the relevant photos. We lay out it nicely on predefined layouts. And when the consumer can, of course, modify everything what he or she wants to do. And we got -- and Christian already mentioned it, we are really proud of our R&D business, really one of the best labels we could get. We got the ISA award, the ISA Award is presented by the photo shown to the consumer electronics journalists worldwide to the best CE and photo products, and we got it through our mobile photos. And this, we are really, really, really proud of. But this is only the first part. I told you, we have some real great progress in selecting the best images. On the next slide, you see what we are now working on. Besides selecting the best images, we definitely want also to deliver a much better user experience in design and layout. Here you see it. I will try to show it to you later live, but just to be safe that you see it on the slide here. We automatically do really cropping -- intelligent smart cropping. So you see on the left-hand side, the image taken and skiing from a nice chapel in Austria. I was doing it with a mobile phone. You see the horizon, it's not clear so the system detects the so-called [indiscernible] . What is important, the image takes that the horizon is not really straight. So it crops automatically to the rules of [indiscernible] below on the right-hand side, places it nicely and corrects the horizon. This is already live in all of our HPS desktop software. So if you drop an image and put in the lay out, this is already automatically done. For our analog services you see on the right-hand side, the automatic rotation, if you get scanned film or even sometimes with older digital cameras, rotation is not perfect. So with AI, we ultimately detect the rotation side, and this works really nicely so that people don't have to do the awful work of rotating all the relevant images. We are working on future services. For example, we do take captions. So descriptions automatically out of the image. If you see on the right-hand side, you're riding on a ski, you have a nice environment there, which helps us to, of course, deliver better user experience, layouts and texts to our retail partners. And now as you are used from me, I'm really trying to show you something live. I hold you to this time. So what you see here is our layout engine. This is not available outside what you're seeing here is an internal service, which sometimes has challenges with firewall. I already preselected XL at 30x30-centimeter. CEWE PHOTOBOOK and these are scanned images by the way, from 1982 where I've been to Sweden. So that also works with all images. And so some we see a pretty normal layout, we see basic layout. What we have done with AI, and hopefully, it works now. It's already launching, but the image -- Sorry, I will try it one more time. No -- it's the same problem like we had before. So we would have had layout that highlighted image would be bigger. And what we also can select you can go, for example, CEWE PHOTOBOOK on real photo, lay it where flat, you can put the images over 2 pages. We can select the colors picture available in the background where we get a lot of crowdsourcing. We learned from the images and the CEWE PHOTOBOOK. We have on our websites, which are giving inspirational content to our customers. So we use all of these great PHOTOBOOKS to really detect the best colors for the background, the best play out. And this is what we are working on. And I will show you that live without the firewall problems on our annual shareholders meeting, this is really the way we see is going after selecting the best images. Now we will help you really to get perfectly out in designs and I hope this will support Christian and the sales and the marketing people and as we mentioned, selling more of our beautiful CEWE PHOTOBOOKS from the new images we get hopefully from this validation.

Thank you very much, Reiner, and it sure will help. Let me just confirm, since I'm within the firewall, of course, I've seen what our technologists have developed there, and it is indeed fascinating. And it is actually also surely one of these problems that we have to go from one type of CEWE PHOTOBOOK in digital trend, where you have the perfect binding to delay flat where you can actually pull the photos across the binding and that's very, very, very nicely developed here. So it will help us to also upsell, et cetera, et cetera, et cetera. Great job. I'm not so 100% sure that this will go live already this year everywhere, but it will hopefully also make a contribution to what I will present to you as the outlook for 2022. We've given our press release, the headline after a good year 2021, CEWE also plans for strong results in 2022, and that is indeed what we are doing. We remain on a long-term growth path and this is depicted here on the slide from 1990 to 2022, where in the gray column, you see where we expect the sales and the revenues to end up in 2022. It's going to be within the vicinity of the last 2 or 3 years. And it will help us to, hopefully, once the corona crisis is behind us, to then take off to even further growth. If we look at the bottom line, you can see that we have widened the range here to EUR 50 million. We expect the bottom line and EBIT between EUR 65 million and EUR 80 million this year. And we have increased the range of the EBIT target because of the uncertainty that is currently arising from the pandemic and also from general price increases. And let me add here, and we will also have to watch the war in the Ukraine as to what it brings to us. We assume that the company will not be directly affected by the war in the Ukraine as is the case today, neither on the procurement nor on the sales side, as is the case today. Obviously, if that war widens, that makes a significant difference for us. At this point, we are planning for 2022, and we do not take into account any effects again e.g. on the consumer behavior of the war in Ukraine extending in terms of time at our space. What we observe today is that the consumer behavior is as it is. I've shared with you that we are expecting more touristic trips, traveling that we expect that, that actually bounces back towards the region where it was pre-corona. We may probably see less very far traveling to other continents. But certainly, within Europe, the data that we've gathered is for most of the significant countries that there is going to be a switch back to normal, and that will help us in photofinishing. But if that doesn't happen, obviously, our expectations for 2022 will have to be revised. This is where we are in a time of significant uncertainty. But with the team in place, with the people, 4,000 people working in the CEWE Group with the spirit that we have with the can-do attitude and with the team spirit, we believe that this is achievable, and this is where we should be ending our year. We can now look into what this means for other targets that we typically provide you with. As for the total CEWE PHOTOBOOK, operational investments, et cetera, et cetera, this is all derived from the expectation that the revenue and actually is within the bracket of EUR 680 million and EUR 740 million. And the EBIT is within the bracket of EUR 65 million and EUR 18 million. We are well set up. And we are absolutely ready to go actually been going for a few weeks already in this year. We have big things that we want to achieve. And together, we will be able to do so. And with that, I would hand over to Q&A, so for your questions.

We are happy to take your questions right now. [Operator Instructions] And Christian just asked whether I can read the question the distance and...

I can read out the question you can answer. Why don't we do that. Clearly do.

Yes, I can read probably.

How much of the sales cost of around EUR 165 million on marketing expenses, what you expect in 2022? How much of the marketing expenses goes into Google advertising? Are there new approaches to get closer to the content creators. I see this is probably a question that I have to answer myself.

You got it.

Absolutely. I do not think that I have the number at hand, would I be willing, frankly speaking to disclose that. What I can tell you, however, is that there is a significant amount that goes into Google advertising. We have a very fine-tuned scene of how we are actually -- how we are actually measuring the results of our Google advertising. We are doing so with ever fine-tune -- more fine-tuned controlling. And yes, we are strategically expanding into all kinds of other online advertising, be that closer to concentrators, that would be in social media, that would be with YouTube, where we're all present, but we're also experimenting with TikTok and others that have more younger audiences. All that is on the list. And we have an advantage here and that we can actually trial and test this not only with 1 brand but with multiple brands with Cheerz, with DeinDesign, with [ Pixom ], et cetera, et cetera. And we can such compare our results and learn from each other in fine-tuning our marketing. Then there is a question from Thilo Kleibauer. Your target for PHOTOBOOK unit seems rather reluctant after the significant drop last year. what are your midterm expectations? When do you expect to return to pre-COVID levels? That is a very easy question. As soon as we are back to normal, we will be definitely back to normal plus, I would say. I think that the expectations for the CEWE PHOTOBOOK are careful. We are living in a time of very significant insecurity. These capital targets are clearly the way we look at things and the conservative approach that we have to business overall. But it is indeed a question of how many traveling will take place and where will people travel to. So if people travel to the Baltic Sea and have a great holiday there, there will be a CEWE PHOTOBOOK in the making, but it's going to be a significantly smaller CEWE PHOTOBOOK than if you go to Tanzania on the Safari or do an RV trip in Canada or watch temples in Thailand, do the once in the lifetime trip to Australia, et cetera. Those are more significant and obviously more costly that we could have booked orders that we get from those trips. And so it is the combination of how many trips we will have and also where do they go to? And at this point in time, we have to acknowledge that there is a diverse approach to corona or to COVID. Some countries basically decree there is no specific pandemic anymore. Other countries are very careful still, and we'll have to see what it is. As I said, our expectation for this year is that we'll be going back towards pre-corona normal and we'll then see when we will be back to the 2019 levels, but we absolutely can see and this is maybe the last information for you on this one. We absolutely can see where we do have market data in some of the countries in Europe, we do have market data that is more reliable than the general data that we can buy. In those countries, indeed, we see that we are slightly gaining market share, and that actually supports our perception and our belief that we will not only come back to pre-corona levels, but we have also the potential to exceed those. And then there's a question from [indiscernible] . Now this one is really for Olaf. Decline in immaterial assets, is it more an effect of a changed outlook or of higher discount rates or a mix?

I think in that sense, in the immaterial assets, I can't tell you or the top of my head, which changes. We will look it up and I'll get back to you.

Then we have the increased cost of material, energy and staff. Did you already increase prices for your products if yes, by how much. We did increase prices already towards the end of last year. The how much it's a difficult question because, obviously, there is different price increases for different products for different countries in different brands, et cetera, et cetera. But I can also confirm to you that we have a significant price increase program that is in the making and is already being communicated as far as our trade partners are concerned. And we have every intention to roll over the cost increase that we face to our trade partners because there is no other way than to handle it this way. Do you price plan price increases for fiscal year 2020? Yes, there is an amount of price increase in there. But obviously, we will fine-tune our price increases through an amount that will cover our cost increase and maintain our profitability. And so it may actually be the case given the inflation numbers for Germany, for example, that were published yesterday that the budgeted for price increase may not be sufficient. And if you have a time [Indiscernible]

[Indiscernible]

[indiscernible]

If yes, in which product categories and segments? You can actually be sure that this applies to all product categories and all segments. And adjust that this was the price increase question still.

Yes.

Do we expect a further EBIT improvement in commercial online printing in 2022, Olaf?

Do we expect a further one? It depends on where we are with the overall business in commercial online print. We have seen a great improvement in '21, as you could see, and that was largely driven by the -- on the level of one-off costs we have '20. And of the cost savings that have been done in '20 and '21 really paying off. Now that was a big improvement in'21. There's not improvement like this from cost savings to come again. But nevertheless, we are looking at the overall business area and if the overall business in commercial online print pick up again due to the improvement in the overall business environment as such, i.e., corona fading out more and more, then for sure, there's more to come. If it remains on a quite low revenue level as it was in 2021 when there is a little bit movement but not a lot.

Next question is about CapEx. Increase in CapEx EUR 22 million to EUR 60 million, could you highlight some projects?

Yes, clearly. And the EUR 60 million we had in there is actually quite the same number as we communicated last year. Last year, we communicated something about EUR 50 million. This time, we communicate something around 50 -- EUR 60 million. Because we know already that there is going to be roughly EUR 10 million, not quite of real estate investment going to be in there because we had to reduce the rented areas here in our headquarters. We had to buy an office close to our headquarter here, very much related to our headquarter. And that's why there's an additional EUR 10 million compared to what we had communicated to you a year ago. Other than that, we are operationally on the level of EUR 50 million. And as you know, in the last years, we frequently did not quite spend it. And the same way is our way of proposal looking at the EUR 50 million of this year -- or the EUR 60 million of this year, obviously.

So at this point in time, I hope we've covered all of your questions. There are no new questions that I can see here. If you have any questions, please feel free to take them in even short-form questions can be answered here. If there is no other question...

I'm just looking at the answer. Could I have the question from Winfried Becker again?

Yes, that one. Decline in immaterial assets '21, is it more in effect of a changed outlook or of higher discount rates or a mix?

Okay, the immaterial assets, it's -- the way I take your question, Winfried, is about the software assets going that we have and the price allocation assets we are seeing there. And that is just the normal depreciation we are applying to those assets. So other than that, there is no real changes in there. No changes in the way we handle things. It's just that the depreciation is a bit smaller than the investment we have there. I hope that picks up your question the right way. Other than that, we do not see further questions, if I'm not mistaken.

Then I will take this opportunity to thank you very much for your interest, for your continued interest in the CEWE group. I hope we have made it transparently to you on where and how the results for 2021 have come together. I hope come across that this is the hard work of more than 4,000 people in this group who have actually very successfully worked against an ongoing corona pandemic. And I hope you've also seen how we are positively looking at 2022 despite of the critical circumstances in our world these days and in the way that we are very much relying on the teamwork and on the togetherness of those 4,000 people who have made a very strong result possible in 2020 and 2021 and to very reliably will work towards an equally strong result in 2022. Thank you for your continued interest. We are very much looking forward to keeping in touch with you and for you to follow our development. Thank you, and you have a great day.