The 2nd quarter marked the bottom of the down cycle caused by the German health reform for Fielmann. Monthly results began to improve in July and they have been particularly encouraging since end of October, when the company launched a nationwide advertising campaign for its new insurance scheme.

Under this rather unique program, in which Carl Zeiss acts as a partner, a private German insurance company offers to pay what the government was previously granting for the replacement of the customer's lenses and frames every two years. The client pays only €10 a year for single-vision correction and €15 a year for a set with progressive or multi-focal lenses. However, he or she must choose from Fielmann's line of basic private label frames and the lenses are supplied by Zeiss.

Fielmann claims that its share of the national market has increased so far this year to 28 percent in terms of value and to 52 percent in volume thanks to its value-priced offerings, and that it continues to go up. In spite of the German health reform, which has led to an estimated 30 percent decline in the country's optical retail market so far this year, the leading German optical retailer saw its total consolidated sales decline by only 12.6 percent in the first nine months of this year to €481,561,000, with a 15.3 percent drop in Germany to €380.7 million from €449.5 million.

The total number of frames sold by Fielmann throughout Europe is down to 3.7 million units for the 9-month period, as compared to 4.4 million in the same period a year ago and 3.8 million units in the first nine months of 2002. However, at 1.3 million units sales showed a certain recovery in the 3rd quarter. With sales expected to show double-digit growth in the 4th quarter as compared to the 2.4 million units sold in the first six months, Fielmann is confident of reaching pre-tax profit of at least €70 million for the full year on sales of €650-700 million.

Fielmann's revenues outside Germany continued to grow in the 9-month period. They increased by 7.5 percent to €51.7 million in Switzerland and by 12.4 percent to €23.5 million in Austria. The profitability of these operations continued to grow, too, but the operating profit in Germany declined by 68.2 percent to €13.1 million as compared to the year-ago period.

Fielmann was able to reduce its personnel charges by 12.3 percent, but the group's operating profit declined by 26.5 percent to €52.8 million. Net interest income continued to increase, reaching €1,930,000, but the overall pre-tax profit declined by 26.4 percent to €52,839,000 and cash flow fell, too. The company managed to post net earnings of €33,364,000 for the first nine months of 2004, down 25.5 percent from the same period of last year, but for the full year they will settle above the average of the last two years.

For the 3rd quarter, which compares with a much stronger period a year ago, the net profit is down by 45.6 percent to €8,622,000. BEfore changes ininventories, total revenues were off by 20.5 percent to €155,244,000. Personnel costs were down by 20.5 percent, too, to €54.8 million.



Investors appreciate the extraordinary financial health and resilience of Fielmann in spite of the depressed market situation in Germany. In the nine months since the introduction of the new health reform, its stock market price has increased by 31 percent in contrast with a 1.8 percent decline in the DAX index and 12.2 percent increase in the MDAX, the German index for mid-cap companies.