Press Release: Lecia Digs In
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.
Posted: Thu - June 2, 2005 at 11:14 PM