Bastei Lübbe : Group 9-month report April 1 to December 31, 2022

QUARTERLY

STATEMENT

1 APRIL - 31 DECEMBER 2022

Quarterly statement as of 31 December 2022

At a glance

Financial indicators (IFRS) in € millions

Revenues

EBIT

EBIT margin (%)

Net profit for the period

Earnings per share (in €)

Revenues

EBIT

EBIT margin (%)

Net profit for the period

Earnings per share (in €)

Total assets

Equity**

Equity Ratio (%)

Net financial assets

1 April - 31		1 April - 31
December		December
2022	2021*		Change
73.2		74.4		-1.6%

4.8 12.1 -60.5%

6.6%		16.3%		-9.8 Pp

2.6 8.0 -67.6%

0.19		0.60		-68.3%
1 October -		1 October -
31 December	31 December
2022	2021*		Change
29.1		33.2		-12.3%

3.9 7.6 -49.1%

13.3%		23.0%		-9.6 Pp

2.5 4.7 -46.8%

0.19			0.35		-45.7%
31 December		31 March
2022	2022		Change
105.2			104.3		0.9%
53.6			56.3		-4.9%
50.9%			54.0%		-3.1 Pp
14.8			14.2		3.7%

*) Previous year adjusted

**) incl. non-controlling interests

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Quarterly statement as of 31 December 2022

Economic report

Underlying conditions

In the course of 2022, the German economy came under pressure from the uncertain situation with regard to energy supplies and shortfalls in input products and employment. In addition, consumer price inflation, which was significantly higher in Europe from August to December 2022, ranged between 10.1% and 11.5% year-on-year, peaking in Germany at 10.4% in October. The German government's efforts to cushion the effects of the economic downturn by adopting broad-based relief programmes are expected to reduce the significantly higher inflation rate from an average of 7.8% in 2022 to 6.4% in 2023.1 Although gross domestic product (GDP) rose by 1.9% over the previous year despite all the adversities in 2022 according to an initial estimated published by the Federal Statistical Office, the German economy only grew in the first three quarters of the year, while the fourth quarter saw a slight decline of 0.2% in economic output.2 While gross domestic product is likely to shrink in the winter half of 2022/2023 and the German economy is thus entering a recession, initial forecasts by the ifo Institute indicate that it will be milder than previously assumed. Accordingly, the researchers have raised their forecasts for economic growth for 2022 to 1.8%, up from their previous projection of 1.6%.3 Economic output should contract by only 0.1% in 2023, compared with the decline of 0.3% that had been forecast in autumn 2022.4

The high inflation rates of recent months have taken their toll on consumer confidence in Germany.5 Although the November forecasts of the HDE consumption barometer indicate that consumers are willing to utilise the savings that they had involuntarily amassed during the pandemic in order to maintain their usual spending levels,6 these effects are likely to be only of a short-term nature. In addition, a return to previous price levels is fairly unlikely.

Industry environment in the Bastei Lübbe business segments

After showing a year-on-year decline in sales from May to November 2022, book market registered a slight increase of 0.1% again for the first time in the final month of the year.7 Between January and December 2022, revenues in the central distribution channels - retail book trade, e-commerce including Amazon, railway station book stores, department stores, consumer electrics stores and chemists - were down 2.1% on the previous strong year, with the number of books sold contracting by 3.0% during this period. Although stationary book retailers, which had suffered from the months-long store closures in 2021, failed to return to their pre-pandemic level, they were able to regain lost revenues. Accordingly, they closed 2022 with a 4.8% increase in revenues over 2021. Like the market as a whole, most product groups also sustained lower revenues over the previous year. Thus, guidebooks, for example, closed the year down 6.8% and non-fiction down 8.7%. Only two product groups were able to post higher revenues: fiction increased its revenues by 4.3% while travel books, which had suffered greatly in the wake of the pandemic, gained 13.4%. Although children's and youth books fell short of the previous year by 3.3%, revenues from books for young people were

1. https://www.ifo.de/publikationen/2022/zeitschrift-einzelheft/ifo-schnelldienst-sonderausgabe-dezember-2022
2. https://www.destatis.de/DE/Presse/Pressemitteilungen/2023/01/PD23_037_811.html
3. https://www.ifo.de/pressemitteilung/2022-12-14/rezession-faellt-milder-aus-als-bislang-erwartet
4. https://www.ifo.de/pressemitteilung/2022-12-14/rezession-faellt-milder-aus-als-bislang-erwartet
5. https:// https://www.ifo.de/fakten/2022-09-12/ifo-konjunkturprognose-herbst-2022-inflation-wuergt-privaten-konsum-ab-deutsche 3
6. https://einzelhandel.de/konsumbarometer
7. https://www.boersenverein.de/markt-daten/marktforschung/branchen-monitor-buch/

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Quarterly statement as of 31 December 2022

still significantly above their pre-pandemic level thanks to the strong growth achieved in earlier years.8

As of the reporting date, more recent data is currently not yet available for the full calendar year 2022. Börsenverein des Deutschen Buchhandels (German Publishers & Booksellers Association) reported slower growth in the e-book market in the first half of 2022. After rising significantly by 17.8 percent in the first six months of 2020 and by 9.6 percent in 2021, e-book revenues in the general-interest market increased by only 3.0% compared to the same period in the previous year in the first half of 2022.9 Despite this, e-book unit sales were up 2.5% over 2021, rising from 20.3 million to 20.9 million units.10 However, the proportion of e- books in the general-interest market in the first half of 2022 widened only slightly by 0.2% over the previous year and now stands at 8.1%.11

Revenues from physical audiobooks sustained a significant year-on-year decline in the period from January to December 2022, according to Börsenverein des Deutschen Buchhandel, falling short of the previous year by 24.8% in cumulative terms.12

1. https://www.boersenverein.de/presse/pressemitteilungen/detailseite/buchmarkt-bilanz-2022-kaufzurueckhaltung-zeigt-sich-auch-bei-buechern/
2. https://www.boersenverein.de/presse/pressemitteilungen/detailseite/e-book-markt-2022-leichter-zuwachs-im-ersten-halbjahr/
3. https://www.boersenverein.de/markt-daten/marktforschung/e-books/
4. https://www.boersenverein.de/presse/pressemitteilungen/detailseite/e-book-markt-2022-leichter-zuwachs-im-ersten-halbjahr/

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Quarterly statement as of 31 December 2022

Business performance

Results of operations

The Executive Board of Bastei Lübbe AG remains satisfied with the Group's operating performance and confirms the revenue and earnings guidance for the 2022/2023 fiscal year after pleasing Christmas business. In view of the existing risks posed by muted consumer confidence primarily as a result of the worryingly high inflation rates, Bastei Lübbe AG's revenues, which came close to the previous year's figure, testify to the Group's strategic course. In the period from April to December of the 2022/2023 fiscal year, Bastei Lübbe AG posted Group revenues of €73.2 million, down from €74.4 million in the same period of the previous year. This translates into a decline of 1.6 % compared with the previous year. It should be borne in mind when comparing this figure with the one for the previous period that the celebrity authors Ken Follett as well Dirk Rossmann and Ralf Hoppe published two top selling blockbusters ahead of Christmas business in the previous year.

Group EBIT fell to €4.8 million, down from €12.1 million in the same period in the previous year. The main reason for this was the impairments of €2.0 million recognised on the goodwill and other intangible assets of Business Hub Berlin UG ("smarticular") as well as the reduction of around €0.8 million in earnings contributed by the subsidiary compared with the previous year. Adjusted for the impairments of €2.0 million, EBIT would have reached €6.8 million after nine months , translating into an adjusted EBIT margin of 9.3%. In addition, the higher-than-expected paper and printing prices in the Group's core business and the expected increase in personnel costs made themselves felt. As well as this, associated company Räder GmbH had distributed a dividend of €1.2 million to Bastei Lübbe AG in the previous year.

Group revenues include the fully consolidated subsidiary CE Community Editions GmbH for the first time in the period under review (revenues in the previous year: €4.7 million; revenues in the period under review: €5.1 million).

Changes in inventories of finished goods and work in progress came to €-40 thousand, i.e. €0.4 million up on the previous year (previous year: €-0.4 million).

At €0.2 million, other operating income was lower than in the previous year (€0.8 million), partially as a result of the deconsolidation gains of €0.2 million on the sale of the shares in J.P. Bachem Editionen GmbH in the previous year.

Despite the lower revenues, the cost of materials came to €35.6 million, thus slightly exceeding the previous year (previous year: €35.2 million). Significantly higher paper and printing costs were more or less offset by a more favourable product mix in terms of royalties compared to the previous year.

Personnel expenses climbed from €13.5 million in the previous year to €15.0 million. In addition to the regular salary adjustments, this is also due to the higher number of employees as a result of increased recruiting at Bastei Lübbe AG (up €1.0 million) and the full consolidation of CE Community Editions GmbH (up €0.4 million).

Other operating expenses increased from €13.2 million in the previous year to € 13.9 million. Higher sales, IT and travel costs were offset by lower advertising and consulting costs.

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