Leifheit Aktiengesellschaft ($LEI)

Ladies and gentlemen, thank you very much for joining us for Leifheit's conference call on the business development and financial year 2025. First, the management team will present you financial figures and ongoing strategic initiatives. Afterwards, you will have the opportunity to ask questions directly. Please note that the conference call will be recorded. I will now hand over to CEO, Alex Reindler; and CFO, Marco Keul, for the presentation. Mr. Reindler, please go ahead.

Thank you very much. Thank you very much, and a big welcome, ladies and gentlemen. Welcome to our investor call for the full year results 2025. As usual, I will start, then Marco Keul will give you an update, a more detailed update about the financials, and then we give a strategy outlook and obviously, the outlook for 2026. So if we look at where we stand, the 2025 was challenging, was a challenging environment, yet we have done a very good progress on our strategic initiatives and on the strategic transformation of the company. We first see here group turnover, which was down in 2025. Yet on EBIT, we have -- we were very close before special effects on the previous year level. We have a very attractive capital allocation with a strong dividend proposal for the annual meeting, and we have been implementing key strategic projects, especially in terms of efficiency in 2025. So now 2026, the next phase of our strategy execution starts, which means we have 2 pillars. One is the investment into the brand relaunch in our innovations and campaigns. And on the other hand, we continue strengthening our efficiency and resilience with a focused company, which I'm diving more into later. If we see the consumer environment, obviously, it remains challenging. We see quite weak data recently on consumer confidence. The latest data shows a strong decline in income expectation, so in [Foreign Language] in German. And we also saw the tendency to buy at the lowest level since 2008, actually. So relative negative environment we are in. If we now have a look, first of all, at top line, let me go as usual into more detail here. So top line development for the group overall, minus 10.3%, driven by the negative market. Overall, I will come back to the market development and also by the portfolio adjustments we see in the different segments. Household, slightly better, minus 9.6%. There, the core business, especially mechanical cleaning and drying was around about minus 6%. So in line with the market development, the market we are auditing, we get data from was around about minus 6% as well. So driven, therefore, the negative part with electric cleaning and also the noncore business. In Wellbeing, so the brand Soehnle, we see a stronger decline of minus 14.6% was driven and we were reporting about that in the other calls by 2 customers, especially by Blokker, which went into bankruptcy. And there, that was an important customer for -- or there was a big initiative for Soehnle as well as the Blokker impact -- the action -- sorry, excuse me, the action impact. Private label, we see at minus 12.7%. This is twofold. On the one hand, Herby, our dryers, Herby was stronger in the negative because there, the Blokker effect was very critical because this was challenging for a Private Label producer to compensate. On the other hand, Birambeau showed much more resilience with being in the mid-single-digit decline. If we have a look at the different geographies, we see that first of all, the decline goes throughout the different regions. So Germany, we see slightly better with minus 7.8%, especially better via the DIY development, which shows stronger resilience and also the D2C business, the e-commerce business. And on the other hand, Central Europe and Eastern Europe, yes, as usual, a mixed bag of markets. So we see in Central Europe, slightly better the Netherlands, Austria as 2 strong markets we are in and a weaker development in France and Denmark. Then the rest of -- then Eastern Europe, we see especially here weaker development in the e-commerce business in Czech and Slovakia. And on the other hand, the better business in one of our core markets, which is Poland. On rest of the world, which is mainly the business outside Europe, of course, there is especially basically the impact from the U.S. business where we have one customer and which due to stock level have not ordered in 2025 and therefore, resulted into the decline. Anyhow, the business is relatively small. So if we have a look at the different quarters in their development, you see that -- and you remember that the impact for the different quarters in 2025 was different. We had especially impact in quarter 2, quarter 3, a better quarter 1 and also quarter 4 closed slightly better. So definitely a positive tendency in the quarter development at the end of the year, which was driven by better e-commerce, but especially also by the stronger contribution of our innovation, especially in the SUPERDUSTER Duster, but also the black campaign we had for Black Friday. Structurally, our core categories remain very attractive. And you have seen that before, long term, the core categories, mechanical cleaning and drying had a strong CAGR of 4% year-on-year development. So last year, definitely disappointing, of course. The core, as I said before, was minus 6%, and this is in line with the market. So actually, on the market development in Europe, we ordered the mechanical cleaning, which is in that range. We have seen a better quarter 4 for us, so with strong market share gains. So overall, in the year 2025, we are stable market shares. So we don't have structurally losses there. It is driven by the market decline. To highlight 2 of our innovations. First of all, the SUPERDUSTER, we believe that is strategically a very important segment. If we look at mechanical cleaning, the different segments within that, the dust is one is next to floor cleaning, the biggest. If we look at the last 10 years, the entire market growth was only coming from dust. So therefore, for us, very important to get a strong foothold in that market segment. We have with SUPERDUSTER a strong point of difference, a sustainable solution. And we executed that very well last year with strong visibility at point of sale and participating really by the strong growth we have seen. We achieved -- slightly overachieved our budget for the launch. And now in 2026, we are very confident to drive this further with important consumer communication, which is essentially starting in quarter 1 this year. So SUPERDUSTER, very important. And we also on the innovation road map, we will work on further line extensions to continuously support that segment. Then, of course, I think a real success story remains the BLACK LINE. We have been adding new products to that line in quarter 4 2025. And overall, we -- it resulted in a strong growth of 24%. It is now far beyond EUR 10 million, so a significant market segment for us and a very good development. And I'm coming back to that we also in that range also in 2026. This is for growth. If we look at efficiencies, it was very important for us strategically, while the business on the top line was challenging to really keep on working on the strategic pillars, especially if it comes to efficiency improvements. And there, we had, first, the consolidation of the injection molding at our site in Czech. So the transfer from the injection molding still being here in Germany transferred to Czech, which gave us -- will give us efficiency gains going forward. And on the other hand, the implementation of S/4HANA, the new SAP system, which will also give us and we work on that through that continuously on further improvements will also give us further efficiency gains. This being said, I now hand over for more details on the financials to Marco Keul.

Yes. Thanks, Alex. As always, I will go through our financials for 2025 and say a few words regarding capital allocation and our recent communication. And after that, we will give you an update on our strategy and talk about our outlook for 2026. Besides the decline in turnover, we made good progress in terms of profitability in 2025. Firstly, we increased the gross margin another 1.2 percentage points without the additional costs of shifting the injection molding from Germany to Czech of EUR 1.6 million, of course. And we were able to save costs below the gross margin of roughly 10%, mainly in admin and distribution costs. Please keep in mind that the cost for the strategic projects, which Alex mentioned, such as S/4 conversion, brand relaunch, et cetera, are included in that. And that led to an EBIT only slightly below previous year's level without the one-off costs. And of course, an EBIT margin of around 5%, which has not been a bad effort for 2025. Taking into account that we also had no help from our foreign currency result, which has been 0 after EUR 0.5 million in 2025. Let's take a look closely at our margin development, 7 percentage points in the last 4 years and 1.2% better in 2025 than in 2024. One of our strategic goals, as you know, is to strengthen our manufacturing footprint in Europe, which should lead to continuous margin improvement and due to focus on efficiency and flexibility and therefore, lower costs and higher resilience, which will be especially important in 2026, but more on that later. Another important aspect, of course, is the focus on profitable products within our campaigns. And for the second half of 2025, we saw the additional savings of our relocation of the injection molding for the first time. Our free cash flow is still down versus previous year, but massively improved within the second half of the year with plus EUR 10.5 million. I will speak about the details on the next slide. However, on this slide, from my point of view, it's important to notice that we had a cash out of EUR 15 million because we paid good dividends of EUR 11 million and had a cash out of EUR 3.5 million because of the second part of our share buyback program, which ran out in April. But let's have a detailed look on the free cash flow development. On the left, we start with our cash flow at the end of 2025 -- 2024. Our net result for the period reached EUR 6.2 million, which is nonadjusted, of course, and therefore, EUR 1.8 million below previous year. Depreciation and amortization are up EUR 400,000 higher than last year because of the higher investments into our own production and logistics over the last 2 years, speaking of which you see on this chart, the EUR 9.6 million we invested this year. And as you may recall, based on my rough calculation, we will require approximately EUR 10 million per year until 2027. When it comes to working capital, we were able to reduce it again by roughly EUR 2 million, and we still think there's room for improvement. It depends on the growth we are planning and on measures we have to take in order to work against the higher input costs due to the war in Middle East. To put that into perspective, since 2021, we reduced our working capital, which means the trade receivables plus inventories minus the liabilities from EUR 73.5 million to EUR 42.4 million, representing a reduction of EUR 31.1 million in the last 4 years. And so on the right side, with the EUR 11 million dividends and the EUR 3.5 million share buyback, this brings us to the cash of EUR 32.6 million at the end of 2025. Of course, our commitment to shareholder value remains unchanged. We will stick to our attractive dividend policy. And I think you have seen our proposal to the general assembly to keep the dividend stable. And as you know, share buybacks or share buyback programs is still something we are generally considering, but everything we do has to be balanced against the necessary investments in our capabilities, especially when it comes to innovations such as the SUPERDUSTER or optimization projects for the manufacturing, for example. In addition, we proposed capital reallocation to this year's Annual General Meeting, in line with our commitment to shareholder value. We decided to convert the capital surplus, which underlies specific restrictions so that it could be used for distribution to shareholders. On this slide, again, our proposal for this year's dividend, which would correspond to a fairly high dividend yield of 7.9% after 7.6% in 2024. And with that, thanks for your attention, and I give the word back to Alex, who will give you an update on our strategy.

Yes. Thank you very much, Marco. Exactly. This is what I'm going to do. So strategy update as well as an outlook because you will be very interested to hear more about 2026. So first of all, the focus is execution of the strategy. The strategy remains, I think, especially in the environment we are a perfect fit. It is focused on what is our strength, where we are best at. We want to be specialists and leader in mechanical cleaning and drying. It is a focus on consumers where we make a difference, ideas that make life easier. That's the focus. And we want to invest into our brand to really drive growth. These are the 2 elements which I was mentioning at the beginning. So the phase in 2026 is the next phase of our strategy execution. And these are the 2 important pillars. One is really investment into growth. We have and we want to come back to growth in 2026. Therefore, we have a lot of initiatives, especially around the Leifheit's brand relaunch. And on the other hand, we also want to drive -- continuously drive and drive even stronger our efficiencies with optimizing our processes and reducing our structural and therefore, increase margins. Let me tell you first about growth. This is what you have been seeing before. Our 4 growth drivers is -- and let me talk about especially brand positioning today and innovation. Aside that, it is to see how we grow outside Germany and how we scale our e-commerce digital model where I can give you an update in the next call. Brand relaunch. It was from the beginning when we crafted the strategy, it's obvious that we have an opportunity with really refreshing, rejuvenating and modernizing the brand. This is what we are now doing. So the brand relaunch will take place as we speak during the course of 2026. It is a sharper brand positioning, really focusing on the promise ideas that make life easier. We will see that on point of differences in the specific products and in communication. We have expanded marketing campaigns, so we will need more investments into our campaigns to drive growth. This we will be doing in a very targeted manner, very focused where we can win. And we will continue to launch product innovations, which are significant to the consumer and also to our growth ambition. So as a target, we want to generate a new growth momentum. After last year, we need growth, and we want to achieve growth by these key measures. Let me talk you through a couple of important elements. So first of all, it is the investment into the brand, into the biggest asset we have. And we do this via targeted marketing campaigns in the best sellers to drive growth. We do this across different channels from TV to streaming to obviously digital also to drive our e-commerce share. And we do this with these 4 campaigns you see there. One is in mechanical floor cleaning is our Clean Twist campaign. Then you see the SUPERDUSTER campaign. So for the first time, actually, we now communicated to consumers in media, then important, the Pegasus standing dryer, as well as the Linomatic, the rotary dryer. These are the 4 campaigns. We focus very strongly on 3 key markets with strong investments, which is Germany, Netherlands and Poland. At the same time, we have product changes, which are now coming up. and which are also visualizing the new brand image, being younger, being fresher, being more modern. We started already, and you see this already at some point of sales with the relaunch of our ironing boards. We come with more modern covers. And at the same time, on the right side, you see that with a better point-of-sale execution, which drives navigation on shelf. These products are placed usually as you see there on the screen. So they are easier to navigate, they're easier to find with the respective point of difference and consumer benefits. So new packaging and new presence at point of sale will drive navigation and sellout. Here, another example, a small change actually, which makes a big difference for consumers because we know that consumers also wish to hang small items at the large Linomatic. So we have an improved version, actually the best Linomatic we have ever done, the Linomatic Deluxe ClipFix, which we introduced now beginning of February. So there's more innovation to come. And as usual, I can't tell you much more today, but we will come back to that, obviously, in our next calls that will be launched in the second half. On the one hand, we will have an important extension of our BLACK LINE. This will be in the area of floor cleaning. And on the other hand, we will have an innovation in laundry care. And I can promise you already, it's the best product in laundry care we have ever done by far the best. And I think that's great news for a very important and big segment where we are market leader and where we want to further strengthen our market leadership in Europe. So these are the innovations which are going to come. Now on the efficiency side, you will be interested to learn more about our program focus. First, I think it is very important that from the start of the new strategy, we will continuously focusing on efficiency to generate profitable growth. I spoke a lot about growth here. It's about efficiency. We have set up a new organization, mostly in marketing and sales. We have a very strong focus on lean manufacturing, especially for the D2C business, also in logistics, where we established the Central European logistics hub in France. I spoke about the consolidation of the injection molding last year and the implementation of S/4HANA. Now in 2026, we started already. We are in the progress of the performance program FOCUS. And let me give you a little bit more details to that. What is the target of that program? First, the overall target is obviously to structurally reduce costs, but also strengthen the resilience of the company, especially in the environment we are navigating. This means that we look at our structures and end-to-end processes. We want to simplify them. We want to make them more agile and therefore, reduce costs and increase margin. We want, therefore, afterwards, align the organization towards that, towards profitable growth. And as I said before, we want to strengthen especially resilience and also competitiveness when it comes to having a more agile and a faster organization and structure. We need to be faster than competition. And therefore, it is very important for us to look at the different elements of processes of organization and of resilience. So that's, I think, a very exciting and very important project. We will -- we will finish the project around about mid of the year, so mid-2026, and we can then give you obviously more information about the results. So now coming to the outlook of 2026. So as I said, it's important for us to return to growth. And as a result, we will keep earnings stable due to the investments. So it is a very complex environment. Obviously, we are navigating, but it is a very clear strategic response from our side. We see a very challenging economic environment, obviously, now for around about 4 weeks, we see the conflict in the Middle East, which gives additional uncertainty and drives energy and commodity prices up strongly. On the other hand, we also see in the environment that, as I said, the consumer sentiment remains low. That was always our hypothesis for the year. But of course, now the conflict in the Middle East is definitely not helping to come to better sentiment there. So challenging economic environment. On the other hand, again, we want to drive growth. We want to actively drive demand and sellout. And therefore, we have the clear focus on our best sellers within the core categories, which work where we have proven communication. We will, on the other hand, also continue our innovation progress and target new segments or also improve existing products make them more attractive for consumers and shoppers. And therefore, we need increased marketing investment to support this brand relaunch and the innovations to drive demand and to drive growth. On the investments, obviously, they have an impact on our earnings. So the higher investment in marketing will be particular in the first half of 2026 and will temporarily impact our EBIT. Therefore, earnings are on previous year level. And last but not least, I spoke about the FOCUS project, very important that at the same time, while we come back to growth, we also intensively work on our efficiencies, on our structural costs and on our resilience. Therefore, the efficiency improvements in -- next to production digitalization to look into the processes, especially as part of the performance program FOCUS. So that's the package. That's the strong response to the environment and to be more competitive. So this brings us to the outlook of 2026. You have seen that on group turnover, we expect slight growth versus 2025 versus previous year. We expect that in the Household segment. We have slightly different outlook for Wellbeing that will be in the mid-single-digit decrease. And on the other hand, for Private Label, we estimate a high single-digit growth. EBIT will be roughly on previous year level and cash flow will also be roughly on previous year level. So that's the outlook. What still is in place is our midterm outlook. It remains in place, and it remains absolutely valid for us. Top line was not in line with expectations in 2025, but still, we are sure that we can achieve the ambition in the mid and in the long term and develop this company to a growth in the mid-single digit and to a much better margin as outlined in the midterm vision. Okay. So as a summary in a nutshell, we believe that Leifheit remains very attractive in terms of profitable growth and as Marco outlined, in terms of attractive shareholder returns. We have a strong vision and focus strategy, which we are executing now continuously. We have potential to expand via our different growth drivers based on the brand relaunch, based on growth outside Germany with innovations and with e-commerce. At the same time, we have a lot of efficiencies when it comes to production logistics, but also in terms of structures and organization and very attractive capital allocation. You have seen that with the proposed dividend to the Annual Meeting 2026. Perfect. That's it from our side. Thank you very much for your attention. And now we are very happy to take your questions or comments.

[Operator Instructions] So we start with Mr. Breitenbach.

Can you hear me now?

Yes.

Yes, I have one question regarding the development in new regions in 2026. So do you expect a similar performance as we saw in 2025? Or do you see any growth in any regions?

Yes. Thank you, Mr. Breitenbach. I just want to make sure I got your question. So you are asking about the different regions and our growth expectations in the same regions?

Yes.

Okay. Yes, right. I mean we don't give an outlook per region. But as I said, we have strong investments in our home market, Germany. So this is definitely where we expect growth. And otherwise, as I mentioned, in Netherlands, Poland, as example, so Western, Eastern Europe, I think overall, also, we want to come back to growth. So we expect for these 3 regions, slight growth, I would say. We have different focuses on different countries. They are in Eastern, Western Europe and obviously, Germany as a home market remains very important.

[Operator Instructions] So we continue with Mr. Kaiser.

Now can you hear me?

Yes.

Perfect. I would start with the top line development. Could you shed some more details on kind of a split? What was kind of nonrecurring negative impact? You mentioned the insolvency in the Netherlands, for example, and some portfolio changes? And what was the kind of the volume price effect on the decline of the top line? Any insights would be helpful.

Yes. Thank you very much, Mr. Kaiser. Thanks for the question. So I think the key is for our core business that we have no structural effects, but it was driven by the market. As I told you, if you take the market data we have, the market was declined depending a bit on the market around about 5% to 6%. Our core business in net sales, are pretty much the same. And also in market share, we did not see that we lose market shares. We had a very good quarter 4, as an example, in market shares. So therefore, the decline comes from the nonfocus and noncore businesses. We had still some decline on electric floor cleaning, which we are phasing out. And then we had some other promotional effects also in the segments I was mentioning, Blokker as a customer had an effect -- so Blokker we had an effect with Blokker, which was especially in the Private Label business, an effect which is more structural, I would say. In price effect, we had -- I mean, we do generally broadly slight price increases, price adjustments. We have done that also in '25, of course, at a very low level. This might change this year. So therefore, we had some price effects. But overall, we saw mostly a volume decline, and this was also visible in the market. So the markets were declining mostly on volume. We have some more promotional activity, but this was not to the extent you might expect.

Perfect. Very, very helpful. And then you've indicated that the cost saving from the FOCUS program will be used to finance increased marketing activities, particularly in the first half of the current fiscal year. And can you quantify the incremental marketing spend you plan for this year, maybe also compared to last year to get an idea of the potential magnitude of those spendings, if it's possible?

Marco, do you want to take that question?

If I understood correctly, I had some delays. I think you're referring to or you're asking about the increase in marketing spendings in 2026. Is that correct?

Yes, more or less on the overall sum you earmarked for marketing that we get an idea of the magnitude and maybe set it in contrast to what you invested in marketing in 2025.

Okay. What I can say about that is you will see in the first quarter and especially in the first half of the year that we'll see an increase in our marketing spending, let's say, mid-single or low to mid-single-digit million euros. And that -- there will be no effects of the focus project in the first quarter or first half of the year in that increased marketing spending to finance that. But overall, if you look at the second half of the year and the years following might be, but not in 2026.

Perfect. Very, very helpful. And my last one is with regards to your guidance and the Middle East escalation. You guide for slight growth in top line and flat EBIT, mainly because of the increased marketing spending. Is there anything potentially negative already included in your EBIT guidance, rising prices -- raw material prices from the current conflict?

Yes, of course, it is. We are expecting that in our current forecast or in our guidance, we're expecting that we will see effects on our input costs in the whole year 2026. So therefore, actually, the biggest effect that the additional input costs we expect -- we are expecting and which we use to calculate our guidance is a bigger effect than the additional marketing spending. But of course, you are working with different scenarios. And like I said, the scenario which we use is that we will see higher input costs or effects on the input costs until year-end. And of course, countermeasures to reduce those additional costs. And overall, then it brings us to our guidance that we currently think that we should be able to achieve within that environment the previous year's level on EBIT.

So Mr. Breitenbach, you are still raising your hand. Any follow-up questions from your side?

No, sorry, there are no follow-up questions.

[Operator Instructions] So gentlemen, there do not seem to be any further questions for today. Your closing words, please, Mr. Keul and Mr. Reindler.

Yes. Thank you very much, ladies and gentlemen. Thank you very much for participating in our call today. So let me summarize. 2025, definitely a challenging environment with a weak market growth as a result. On the other hand, we structurally improved efficiencies in our cost base, and we further developed the strategic transformation of the company. For 2026, we now have growth planned via brand investments, via innovations via our core categories. And we have planned to even stronger continue our work on efficiencies. So the efficiency program will improve margins midterm. And on the other hand, as you know, we have a strong balance sheet, and we have a very attractive dividend, which remains a key part of our equity story. So that's it from our side for today. Thank you very much again for participating and see you very soon on one of the conferences or in our next call. Thank you.

So we will now close the conference call. Goodbye to everyone.