Orell Füssli : Shareholder Letter 2023

The business result for the first half of 2023 presented in this document confirms our forecast for the year. The increase of 7.6% in turnover compared to the previous year was mainly due to Book Retailing and the integration of hep Verlag. In the first, typically weaker, half of the year, Orell Füssli generated a revenue of CHF 105.0 million (PY: CHF 97.6 million) with an EBIT margin of 5.2% (PY: 7.6%). The investments in the development of the digital business areas were made as planned in the first half of the year.

Editorial

The economy performed surprisingly positively in the first half of the year despite uncertainties in the market due to geopolitical tensions and continuing high inflation. Orell Füssli observed strong consumer sentiment in our bookshops, especially in the first quarter. The number of tenders in the banknote sector and investment interest in Zeiser printing equipment were also encouraging developments for the Group. The lower EBIT compared to the previous year can be explained by the product mix in the first half of the year and the sale of a property in 2022.

Security Printing benefited from good capacity utilisation in the first half of the year. Orell Füssli won tenders to print banknotes for several customers in the global south. Despite high international inflation, prices on the market only reflected this to a very limited extent. Some competitors are coming under noticeable strain as a result of the market

situation and the pressure on margins remains very high, but can be partially offset by internal gains in efficiency.

Orell Füssli was responsible for the design and production of the new Swiss driving licence made of polycarbonate. The new driving licence has been in circulation on schedule since mid-April 2023. Around 600,000 credit-card-sized driving licences are produced every year. They meet the highest international and European standards for driving licence security.

Zeiser's revenue and EBIT are at the budgeted level after the first half of the year. Incoming orders are trending upwards. It should be noted that in the previous year's period, around CHF

1 million was contributed to the operating result (EBIT) by the sale of a property. Nevertheless,­ Zeiser has introduced measures to increase efficiency, the majority of which will not have a positive impact until 2024.

Editorial

Zeiser's project business is geared towards the long term, as new printing systems for customers involve high investments and long evaluation processes. The strategy for the track & trace business, used for tracing products in Security Printing and paper mills, was strengthened and specific projects are currently being finalised with various customers. The track & trace service offered by the US subsidiary was once again in high demand in the reporting period.

Book Retailing performed very well in the first half of the year, further increasing revenue. Following good sales in the first quarter, momentum slowed somewhat in the second quarter. Nevertheless, growth is well above the market as a whole. In January, Orell Füssli opened its first branch in the canton of Solothurn in the Ladedorf shopping centre in Langendorf. Since the beginning of 2023, Orell Füssli has also been operating two ETH stores - in the city centre and on the Hönggerberg campus - as well as a new branch occupying around 80 square metres in the Neumarkt shopping centre in Zurich-Altstetten. With 57 locations, Orell Füssli is the market leader in German-­ speaking Switzerland. More store openings

are planned in the second half of 2023. These include a second branch in Thun as well as new locations in Bern central station and Weinfelden.

The integration of hep Verlag into Orell Füssli Publishers has been successful. The company was acquired by Orell Füssli in mid-2022, after which the teaching and learning media programme was centralised at hep's main location in Bern. For the first time, purely digital learning media were launched on the market, with myKV and myDetailhandel being the two most successful in Switzerland in terms of numbers. This broadens Orell Füssli's value creation in the strategic focus area of education. Manuel Schär, Chairman of the Board of Directors of hep, was elected as Chair of the Swiss Book Retailing and Publishers Association. This position increases the visibility of Orell Füssli and hep in the Swiss education landscape.

With "Globi bei den Yaks" (Globi and the Yaks) and "Globis neue Abenteuer im Nationalpark" (Globi's New Adventures in the National Park), two more Globi bestsellers were published in the first half of 2023. After the space laboratory lab toy set, the

forest lab set is the second collaboration between Orell Füssli Publishers and ETH Zurich for children with a thirst for knowledge.

Orell Füssli legal media reported a good first half-year. The revised commentary on the "Handelsregisterverordnung" (Swiss commercial register ordinance) was published to coincide with the Swiss revision of company law and the revision of the Swiss commercial register ordinance. The "Repetitorium Gesundheitsrecht" (revision of Swiss health law) was published for the first time and covers a practical cross-sectional area of law in the upswing as well as new challenges.

The implementation of the 2028 growth strategy, as presented to the public in autumn 2022 and described in detail in the 2022 Annual Report, is well on track.

Orell Füssli is focussing its activities on the development of the new business field of legally binding digital credentials.

The draft law for a new Swiss eID is expected to be passed by the Swiss Federal Council after the summer period and then discussed by the Federal Assembly. To

ensure that the eID can be put into use as quickly as possible, conceptual and technical preparatory work is running in parallel to the legislative process. With Procivis, Orell Füssli is represented in working groups on the standardisation of digital verification and is conducting preparatory technical projects with other companies using the Public Sandbox Trust Infrastructure.

Following the successful acquisition of Procivis AG in 2021, Orell Füssli assessed its position at the beginning of the year. The business plan for digital identities in the public sector will be extended to verifiable digital credentials as well as private sector customers and use cases. A specific software solution is currently being developed. Due to the new focus in the scaling phase, Procivis founder and CEO Daniel Gasteiger has decided to concentrate on his responsibilities as a member of the Board of Directors of Procivis AG and to step down from his operational management position. The search for a successor is underway. In the meantime, the Chairwoman of the Board of Directors, Désirée Heutschi, is managing Procivis AG as interim Managing Director.

Editorial

Editorial

At the 133rd Annual General Meetingheld at the SIX ConventionPoint in Zurich on 10 May 2023, the shareholders of Orell Füssli AG approved all the proposals of the Board of Directors. Over 75% of the share capital was represented at the meeting. For management, the Annual General Meeting provides an important opportunity to check in with shareholders.

Orell Füssli plans to continue growing its revenue in the second half of the year. The strong seasonal business in book retailing and publishing will more than compensate for the lower profitability in Security Printing in H2. Overall, we expect higher revenue with better profitability in the second half of the year. The EBIT margin

for the full year will be slightly lower overall than in 2022, as already communi- cated. This is primarily due to the development of the new business fields and especially the investments in additional skilled labour.

We are proud of our employees across all locations and thank them for their significant contribution to the progress we have made.

We would also like to thank you, our shareholders, for your trust in our work and your willingness to support Orell Füssli's growth strategy, as well as our customers and partner organisations, to whom we are thankful for their loyalty and positive cooperation.