Zapf Creation - Setting free a childrens imagination.

19 Feb 2010

Zapf Creation Group made substantial progress in its realignment in 2009

• Considerable increase in operating cash flow to EUR 8.6 million
• Significant reduction in expenses: operating costs down by 16.3%, finance costs down by 26.1%
• Major changes implemented in the Management Board ensure additional efficiency gains in the immediate future
• Expansion of the product range
• 2009 marked by sluggish fourth-quarter demand
• Consolidated revenue down 24.5% year on year
  

Roedental, February 19, 2010 - The Zapf Creation Group today announced that it continued to make substantial progress in its realignment in the 2009 financial year. While cash inflows from operating activities improved considerably, as well as significant reduction in operating expenses, this was not sufficient to offset the decline in sales. The Group is introducing exciting product innovations in new market segments under its global brands and now with its newly acquired Disney license, has strategically evolved the company from a doll manufacturer to becoming a global leader in girl's toys.

The changes in the composition of the Management Board that were announced on January 29, 2010, ensure that the Group will be in a position to swiftly achieve additional efficiency gains. Enhancing the industry expertise within the executive management is also aimed at driving the repositioning of Zapf Creation as a market leader.

Ron Oboler, Chief Executive Officer of Zapf Creation AG: "On the whole, Zapf Creation is on track. We are once again generating robust cash flows from our operating business while working to still further reduce costs. Moreover, we are optimizing the Group's structures. We continue to push our product development in girl's toys innovation. The product pipeline gives us reason to be optimistic. Retailers responded well to the new products introduced at the Nuremberg Toy Fair. Our cooperation with the Disney Group offers great potential. We are confident that the new products will noticeably stimulate business in 2010."

Preliminary financial figures 2009

• At EUR 78.8 million, consolidated revenue was down 24.5% from EUR 104.4 million the previous year owing to the substantial downturn in doll demand in some key markets, especially during the important fourth quarter of 2009.
• Total operating expenses fell by 16.3% in 2009 compared to the previous year while finance costs were down 26.1% year on year. 
• The streamlined cost management was unable to fully offset the decline in revenue. Consolidated earnings before interest and taxes (EBIT) were EUR -3.4 million in 2009, down from EUR 1.3 million the previous year. This amount does not yet contain a possible payment obligation in the amount of EUR 0.9 million under a licensing agreement with MGA Entertainment, Inc. that has not yet taken effect.
• The consolidated net loss after taxes was EUR 9.0 million (2008: EUR 6.3 million). Adjusted for an extraordinary, non-cash effect from provisions for taxes related to the Group's Hong Kong subsidiary, the loss for the period in the financial year just ended was EUR 8.1 million.
• The operating cash flow was positive in 2009, climbing significantly to EUR 8.6 million (2008: EUR 1.1 million). This was mainly due to the substantial improvement in working capital management, particularly as a result of the consistent reduction in both receivables and inventories.

Further information:
Frank Elsner/Jens Heinen   
Frank Elsner Kommunikation für Unternehmen GmbH
Tel.: +49 (0) 54 04 – 91 92 0
Fax: +49 (0) 54 04 – 91 92 29
 

Zapf Creation AG is Europe's leading manufacturer of play and functional dolls with accessories. Among Zapf Creation's best known brands are Germany's best-selling functional doll BABY born®, 15 million of which have been sold worldwide since 1991, plus Baby Annabell® and CHOU CHOU. All branded play concepts share a high standard of design, quality, safety and play value. Headquartered in Roedental, Germany, Zapf Creation was founded by Max Zapf in 1932 and went public in April 1999 (ISIN 0007806002). For further information, please visit:  www.zapf-creation.com.

Key figures for the Zapf Creation Group (IFRS, preliminary)  

* From operating activities
** Excluding the Management Board and trainees

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