DR. MARK WÖSSNER
Chairman of the
We wish to express our great thanks for the confidence you have shown in us as well as your strong support for our capital increase, which was approved at the 2010 Annual General Meeting. The capital increase in September 2010 had an impact on Heidelberg comparable to successful construction work on the foundation of a house. Equity was sustainably strengthened, debt was cut in half, and Heidelberg achieved stability. This is a foundation upon which we were able to continue to build, thereby finalizing Heidelberg’s refinancing at the beginning of April in the form of a high interest bond issued and renegotiation of our credit facilities. We thereby succeeded in freeing ourselves from government aid in the form of guarantees and warranties – which had helped us very much over the past two years. We have now been granted ratings by Moody’s and Standard & Poor’s that are appropriate to our situation today. We enjoy a favorable and stable outlook and are again able to stand on our own two feet – more so than a year prior to the planned expiration of the government support.
For the third time in a row, our Company generated a considerable triple-digit loss. Nevertheless, we have every reason to view the future optimistically. Heidelberg’s employees, Management Board, and Supervisory Board have worked hard to achieve the goals that were set for the past financial year. The business upswing in the printing industry provided us with a boost, with incoming orders and sales showing gratifying growth over the previous year. Together with our cost reduction measures, this has now resulted in our again attaining an operating result in the black – in accordance with our planning and as we had previously announced. The reduction in debt will make it possible for us to also realize the progress in the financial result during the current financial year that we had planned. If, as expected, the overall economy develops in a stable manner, the pre-tax result for the current financial year should be break-even. Nevertheless, it is currently difficult to gauge if economic developments could be hampered by various factors.
Our focus on the service business, the expansion of our consumables business, and our assigning priority to the packaging area, represent the introduction of correct strategic measures and have already resulted in initial successes. For example, we will further reduce Heidelberg’s dependence on global economic developments in the future. The decision by the Management Board to reorganize the Company and subdivide Heidelberg’s core business into the divisions Heidelberg Equipment and Heidelberg Services was implemented at the beginning of the financial year. Our third division, Heidelberg Financial Services, continues in operation. Heidelberg has structured all processes to function more efficiently as part of the new organization, which is now subject to our reporting for the first time.
Heidelberg is by far the biggest manufacturer of sheetfed offset printing presses as well as the leading supplier of solutions to the print media industry in this sector. In the face of the crisis, which also affected the other manufacturers, Heidelberg continued to assert its leading position and justified the confidence placed in the Company as a whole. During the current financial year, Heidelberg will further develop its outstanding technical solutions as well as the reliable composition of its product portfolio and service offerings, thereby ideally positioning the Company in advance of the world’s largest trade show for our industry, drupa, to be held in May 2012.
We are projecting a continued upswing for the printing industry during the current financial year should the global economy develop as solidly as expected. Overcoming the crisis has required considerable sacrifice, especially on the part of all our employees, and Heidelberg will not be able to avoid unconditionally strict cost discipline in the future as well. With this in mind, at the end of the financial year we instituted further agreements with the Works Council, which allow us to make use of flexible working-time instruments in order to react to fluctuations in capacity. We hope for you, our loyal shareholders, as well as for our employees that we achieve the projected improvement. The Supervisory Board wishes to express its appreciation and special thanks to all our employees and their representatives on the Supervisory Board, in the works councils, and in the Speakers Committee for everything they have taken upon themselves and achieved.
On the road out of the crisis, again during the financial year the Supervisory Board paid considerable attention to supporting the Management Board in its implementation of required measures and in finding solutions to highly complex responsibilities. We undertook this within the framework of regular and many extraordinary meetings of the Supervisory Board and Committees as well as at meetings with shareholder representatives and with staff representatives. Together, we intensively discussed all the important issues and measures. Shareholder and staff representatives again assembled separately in several meetings in order to evaluate the situation and upcoming decisions from the viewpoint of their respective interests and concerns.
We extensively advised and monitored the Management Board in its management of the Company as well as its transactions, and fulfilled all the responsibilities incumbent on us under legal provisions and the Articles of Association. The ongoing close cooperation between the Management Board and the Supervisory Board was not limited to the four ordinary and two extraordinary meetings by conference call of the Supervisory Board, during which the Management Board informed us in depth about the Company’s current development and business development. This was also reflected in numerous coordination discussions with the Chairman of the Management Board, the CFO, and their colleagues between meetings. In this manner, the Supervisory Board was always promptly informed in the necessary detail about the Company’s business development and financial position. I further cultivated my close contact with the Chairman of the Management Board during the financial year, thereby ensuring that I was continually kept informed of significant developments and available options at an early stage. Together with the Chairman of the Management Board, I was able to ensure that the Supervisory Board and the Management Board were in a position to continuously and credibly represent the interests of the Company. We were always promptly and extensively involved in all significant decision-making processes. We also passed resolutions in writing for projects that necessitated a quick decision. This occurred three times during the financial year. The work in our committees was again of particular importance. For example, the Human Resources Committee, which is made up of equal numbers of staff and other representatives, met twice; the Management Committee held one meeting and made a decision by circulation. The Audit Committee met five times and also held one extraordinary meeting by conference call. The Nomination Committee met once, reached agreement by telephone on numerous occasions, and recommended candidates for election to the Supervisory Board. The Mediation Committee was not required to meet under the terms of Article 27 (3) of the Codetermination Act. The Special Committee, which was formed to approve the agenda for the 2010 Annual General Meeting, met twice by conference call. N o member of the Supervisory Board took part in fewer than half of the meetings of the Supervisory Board during the financial year.
Our discussions during the financial year focused mainly on preparing and implementing the capital increase in September 2010, as well as on refinancing measures, and on the high interest bond issue for early April 2011. We also concentrated on securing the Company’s liquidity and equity as well as on the successfully implemented restructuring measures. During the financial year, the development of sales and earnings as well as Heidelberg’s financial position were a regular topic of discussion on the Supervisory Board.
The further expansion of the service and consumables segment was also a focus of reporting by the Management Board. This business segment as well as the competitive environment in other areas and the development of certain markets, especially in the newly industrializing countries, were also subject to ongoing analysis.
Further issues that we discussed intensively and passed resolutions on included: the planned utilization of the authorized capital to satisfy the claims of the former shareholders of Linotype-Hell AG following the settlement of arbitration proceedings, as well as the commissioning of Schuh & Co. GmbH, Wuerselen, in which a member of our Supervisory Board is the majority shareholder, within the framework of a consulting project that focuses on complexity management for Heidelberg’s research and development activities. We play a major role in the market thanks to the scope, quality, and competitiveness of our offerings. We also came to the conclusion that this highly technical complexity consulting is beyond the framework of the customary control and advisory responsibilities of a member of the Supervisory Board. Moreover, Professor Dr. Schuh was not personally involved in the consulting process.
In connection with the high interest bond issue, since the beginning of calendar year 2011, on numerous occasions and in the meeting we held on March 30, 2011, we again focused on the completion of the planning process for the current and subsequent financial years. In view of the stabilizing influences and upward trend during the financial year, the Supervisory Board looks to the current financial year with optimism. Assuming that economic developments continue to be stable, we are projecting a balanced pre-tax result. Since, due to various risk factors, future developments cannot at present be predicted with precision, within the framework of our planning control we cannot exclude the necessity of making adjustments in the future.
Finally, the Supervisory Board once again intensively focused on the structure of the Management Board’s remuneration subsequent to corresponding preparation by the Human Resources Committee. The structure of remuneration corresponds to revisions of statutory provisions. We brought in an independent external reimbursement expert for consultations in order to ensure compliance. This expert monitors observance of statutory requirements in terms of the appropriateness of the established remuneration as well as the extent to which remuneration of the Management Board is customary, and endorses the conformity of the reimbursement system with legal provisions.