Desire to slow down
A trend towards wellness and slowing down can be observed all across generations of people. The primary reason for this is the greater stress at the workplace. In many cases, this results in the desire for products that promote relaxation at home. Leifheit sees opportunities here for its wellbeing product category. We will use our products that focus on increasing wellbeing under the Soehnle brand to address the needs described.
Increasing number of households
An increasing number of households, especially single-person and two-single-person households, is forecast for Germany. This should increase sales of household items since the formation of households is always an incentive to renew long-lasting household products. For this reason, we assume that this development will have a positive effect on the Leifheit Group in the future and we see a growth opportunity in this.
Strategic business opportunities
There are strategic business opportunities for Leifheit from its position as one of the leading companies in the household products sector in Europe focusing on innova-tive products. We continue to concentrate our offering on the cleaning, laundry care, kitchen goods and wellbeing product categories in order to further expand our market position in the future by offering ground-breaking pro-ducts. To take advantage of the opportunities that arise from product innovations and enhancements, we count on our own development department and invest in the expansion of internal and external expertise. Our pipeline to medium-term and long-term innovation projects will come from this department. It is constantly developing new and innovative products that offer added value to our customers. At the same time, we are shaping our organisation into something that can react with flexibility in the development area when opportunities arise from market trends and customer needs.
Furthermore, we see strategic business opportunities in the expansion of our market presence in home-shopping with e-commerce and in high-street retailing. To take advantage of the opportunities arising from this, we will invest in the future in various distribution channels and support them with smart communication concepts.
Greater penetration of existing markets and further regional diversification offer us opportunities. Leifheit currently focuses its business activities on the so-called DACH region as well as specific countries in Europe and the big cities of Russia. We are planning to increase our market presence in Turkey significantly in 2014. Country-specific
sales programmes should help us expand our local pres-ence and develop international key customers even more effectively. There is also an opportunity for us to earn disproportionate profits from the major and rapidly grow-ing markets, especially in emerggrow-ing economies, through close and faithful cooperation with our distributors – and this without using our own investment capital. We are also constantly evaluating the potential development of markets where Leifheit still has no presence.
We regularly monitor our current and future markets in search of opportunities for strategic acquisitions and part-nerships. We can thus identify opportunities for expanding our product portfolio in a meaningful way, boosting our market position and achieving disproportionate growth.
Economic performance opportunities
There are economic performance opportunities for Leifheit especially in business operations, cost management and greater efficiency.
In terms of business operations there are significant op-portunities in achieving greater success through the effec-tive combination of our product portfolio and innovaeffec-tive sales activities. Integrated communication at the point of sale and point of interest draw the needed attention of consumers.
In terms of cost management and greater efficiency, there is opportunity to boost the long-term earning power of Leifheit through the improvement of operations and re-duction of expenditures. In particular, the optimisation of various production and distribution processes across the entire value-added chain is what we have in mind. As part of our Leifheit Go! strategy we have implemented a series of optimisation projects in the past that should also have a positive effect in the future. This applies especially to our purchasing operations, the production location in Blatná and the expansion of our distribution centre in Zuzenhausen. We regularly check whether products from suppliers can be manufactured more efficiently at our own facilities. Specific relocation of the production of specific products can boost our flexibility and competitiveness and might even reduce costs.
Other opportunities
Our employees are the creative directors of our innovations and the mainspring of long-term growth for the company.
We regularly invest in our staff‘s expertise so that we can take advantage of growth opportunities. To this end we promote various activities to boost the commitment and motivation of our employees.
Cooperation with our sales partners provide us with further opportunities. In high-street retailing our distributors are relying more heavily on our expertise in category man-agement. The cooperation allows us to place products optimally in the framework of the POS Excellence initiative in order to minimise search times and thus increase lead times.
Risks
We are exposed to various risks as part of our business activities. We have therefore set up a risk management system that allows us to identify risks early, analyse them and take suitable countermeasures. We use this system to identify potential incidents that can have major disad-vantageous effects on our business, net assets, financial position and results of operations as well as our reputation or could even compromise the survival of the company.
To ensure the effectiveness of risk management, allow the aggregation of risks and facilitate transparent reporting, we use a company-wide uniform approach to risk manage-ment. As a listed stock corporation with headquarters in Germany, the company‘s its Board of Management set up a monitoring system in accordance with section 91 para. 2 of the German stock corporation act to ensure compliance with statutory regulations and an effective management of risks. In addition, the Board of Management is responsible for the effectiveness of the internal control system.
Risk management system
The risk management manual issued by the Board of Management governs the handling of risks within the Leifheit Group and describes a uniform methodology that applies to all company divisions. This manual delineates responsibilities for the execution of risk management tasks as well reporting structures. The effectiveness of the risk management system is controlled by regular revi-sion checks. In addition, auditors carry out annual checks of whether our early risk detection system is capable of promptly identifying risks that jeopardise the company.
Our risk strategy is based on the global objective of ensur-ing the continuation of our business activities.
Our risk management organisation consists of a risk man-ager working right across the Group and risk owners in the individual operational areas. The risk manager is respon-sible for updating the risk management manual as well as the uniform implementation of the described methods, for the risk aggregation and standardised risk reporting to the various levels of the company. The Brand Business and Volume Business segments are completely divided
into independent risk areas. The respective risk owner is responsible for risk management within the risk areas. It is the job of the risk owner to identify and evaluate all risks continuously, notify the company about them, and monitor the implementation of countermeasures. Opportunities are not determined as part of risk management.
The central element of the risk management system is the systematic risk management process that is cycled on a regular basis. It includes the risk identification, risk evaluation, risk aggregation, risk control, risk monitoring and risk reporting phases. This process begins with risk identification, during which all risks, sources of hazards, damage and potential disruptions are systematically docu-mented in uniform risk tables and afterwards analysed biannually. In case of the appearance of new risks that could have a significant effect on the economic results or the further development of the company, the risk owner immediately notifies all responsible offices within the Group and the Board of Management, in particular, as part of ad hoc reporting.
Identified risks are assessed and categorised according to the extent of their effect and their probability of occurrence.
In addition, individual risks are systematically analysed for dependencies and merged into new risks if required. The aggregated form of all individual risk tables that emerge from this is the risk inventory.
This is represented graphically in a risk map and com-municated to the Board of Management as well as the Supervisory Board. In risk management, each risk owner defines, documents, actively implements and monitors measures to avoid, reduce or transfer risks in each case using the risk table. The status of each countermeasure is also documented in the risk table by the risk owner.
In risk monitoring, general warning indicators are defined as well as case-by-case indicators for specific individual risks. All indicators are regularly observed in order to better monitor risks and the effectiveness of introduced countermeasures.
Our risk management was thoroughly revised in 2012 and then subjected to an internal review. No significant changes were made to the risk management system in the financial year 2013 compared to the prior year.