METRO : remains on stable business course

08/05/2014 

During H1 2013/14, METRO GROUP increased its sales by 0.3% after adjustment for currency and portfolio effects. As a result of company disposals, foreign exchange effects and Easter shift, reported sales came in at €33.0 billion, below the previous year's level (H1 2012/13: €34.9 billion). A good sales development in April was able to offset the lack of Easter business in Q2, thereby food business in particular showed a very strong development. EBIT was impacted by special items and totalled €861 million in H1 2013/14 compared with €987 million in the previous year's period. Due to the significantly reduced real estate sales in particular, EBIT before special items produced in the first six months of the current financial year finished the period below the previous year's level. "The shift of the Easter business from March to April, negative currency effects and portfolio adjustments had a negative impact on our figures," said Olaf Koch, the Chairman of the Management Board at METRO AG. "Adjusted for these effects, however, we clearly see that we are taking the right operational approach and that, in particular, METRO Cash & Carry's systematic focus on the customer is increasingly paying off." 

Above all, METRO Cash & Carry has made measurable progress in the food business. By continuously refining its assortment, the wholesale subsidiary is gaining importance among its professional customers. Additional momentum is expected to be generated by the upcoming World Cup football championship and the wide range of events being held this year to mark METRO Cash & Carry's anniversary. For this reason, among others, METRO GROUP continues to expect that it will fulfil its sales and earnings guidance for financial year 2013/14.  

METRO GROUP will continue to press ahead with its international expansion: alongside Russia, China and Turkey, India will count among METRO GROUP's key growth countries in future. The footprint of the wholesale business METRO Cash & Carry is set to expand considerably in India. By 2020, the company plans to operate 50 METRO Cash & Carry wholesale stores in the country. METRO GROUP currently has 16 wholesale stores in 12 Indian cities. 

In the area of consumer electronics, METRO GROUP is sharpening its focus on multichannel marketing: with the aim of strengthening its position as Europe's leading multichannel consumer electronics retailer, the sales line Media-Saturn will undergo a strategic and organisational transformation. Pieter Haas, member of the Management Board of METRO AG, has already been delegated as Deputy Chairman of the Management Board of Media-Saturn-Holding (MSH) and will continue the successful course of Horst Norberg, who resigned as Chairman of the Management Board of MSH on Tuesday this week. Pieter Haas and the other managing directors will continue to press forward with the strategic transformation and the necessary reorganisation of the consumer electronics retailer. In his position as Deputy Chairmann he will formally assume the role of Acting Chairman of the Management Board. "Pieter Haas is an absolute expert in the consumer electronics market and also has crucial knowledge in key areas of innovation," said Olaf Koch.

In future, all multichannel activities will be bundled in the subsidiary Media-Saturn E-Business GmbH. This cross-channel entity will unite all related operational business areas - including the stationary business. The focus of Media-Saturn's transformation is the continued strategic development of all product ranges and channels as a way of responding to changing market conditions and customers' shopping behaviour. 

Sales and earnings development at METRO GROUP

Sales produced by METRO GROUP's own brands, online retailing and the delivery business continued to grow during H1 2013/14: delivery sales grew markedly by 13.4% to €1.3 billion (in local currency: +17.5%). In Q2, delivery sales climbed by 9.4% to €0.6 billion even without the important Easter business (in local currency: +13.3%). The sales share of own brands rose in H1 2013/14, increasing to 11.0% compared with 10.7% in the previous year's six-month period. Q2 was particularly successful as the sales share of own brands rose from 11.0% to 11.6%. In H1 2013/14, METRO GROUP generated online sales of €0.8 billion, up 37.0% on the previous year's six-month period. In Q2 2013/14, online sales rose to €0.4 billion (+27.0%). 

Due largely to the lack of the Easter business, sales generated by METRO GROUP in Germany dropped by 2.8% to €13.5 billion in H1 2013/14. In Q2, the shift of the Easter business had a particularly pronounced impact as sales decreased by 5.1% to €5.8 billion. This negative effect was offset by the good Easter business produced in April. International sales fell by 6.8% to €19.5 billion in H1 2013/14. This was due to strong currency impacts and portfolio effects. The currency translation for sales produced in Non-euro-countries, in particular from Russia and from Turkey, had a negative impact. Adjusted for currency and portfolio effects, sales rose by 2.5%, a result showing that the national subsidiaries are generating operational growth. In Q2 2013/14, sales generated by METRO GROUP declined by 9.2% to €8.5 billion. Adjusted for currency and portfolio effects, sales climbed by 2.5%. In Western Europe (excluding Germany), sales generated in H1 2013/14 declined slightly by 0.6% to €9.9 billion (in local currency: -0.5%). In part because of the Easter shift, Q2 sales totalled €4.3 billion, a decrease of 1.4% from the previous year's level. As a result of the disposal of Real Eastern Europe, sales produced in Eastern Europe during H1 2013/14 fell by 14.8% from the previous year's level to €7.8 billion. Adjusted for the portfolio changes, sales in local currency rose markedly by 5.0%. This was also the case for Q2 2013/14: adjusted for portfolio changes, sales in local currency here climbed by 6.3%. In Asia/Africa, sales produced in H1 2013/14 dipped by 0.7% to €1.9 billion. In local currency terms, though, sales rose by 5.5%. Adjusted for the closure of Media Markt China and MAKRO Cash & Carry in Egypt, sales even rose by 9.7%.  

METRO GROUP EBIT in H1 2013/14 amounted to €861 million (H1 2012/13: €987 million). EBIT included special items amounting to €172 million. This relates in particular to a noncash impairment of goodwill of METRO Cash & Carry in the Netherlands. Background is a change in business environment in the country and the need to significantly adjust our commercial model for the future. Moreover, among others, restructuring measures at METRO Cash & Carry in Belgium as well as costs for already announced closures at Real in Germany are reported as special item. Against that, a positive impact by a special item from the disposal of Real Eastern Europe was accounted. EBIT before special items totalled €1,033 million compared with €1.287 million during the previous year's period. The decrease was due in particular to significantly reduced real estate transactions, the loss of earnings contributions resulting from the disposal of Real Eastern Europe and negative currency effects. Adjusted for these effects, EBIT before special items reached the previous year's level.  

In Q2 2013/14, EBIT stood at €-233 million (Q2 2012/13: €1 million). EBIT before special items came in at €-40 million (Q2 2012/13: €14 million). This fall reflects the loss of earnings contributions from the sold Real Eastern Europe business as well as persistent and negative currency effects. Adjusted for these effects, EBIT before special items came in on last year's level. Earnings before taxes (EBT) decreased during H1 2013/2014 to €541 million (H1 2012/13: €734 million). Before special items, earnings before taxes totalled €749 million (H1 2012/13: €1,038 million). Reported tax expenses of €299 million (H1 2012/13: €621 million) correspond to a group tax rate of 55.2% (H1 2012/13: 84.6%). Adjusted for the special items contained in earnings before taxes, the group tax rate was 45.2% (H1 2012/13: 45.9%). Net profit for the period improved markedly in H1 2013/14, jumping from €113 million to €242 million. The increase resulted mainly from the lower tax rate. Net profit for the period before special items totalled €411 million (H1 2012/13: €561 million). Net profit for the period attributable to shareholders of METRO AG amounted to €182 million. Earnings per share climbed steeply in H1 2013/14 from €0.06 to €0.56. Adjusted for special items, earnings per share amounted to €1.07 (H1 2012/13: €1.43). Net debt of METRO GROUP amounted to €5.6 billion on 31 March 2014, a drop of €0.9 billion compared with the total on 31 March 2013. 

Outlook

For the financial year 2013/14, METRO GROUP expects to see a slight rise in overall sales in local currency - even though economic momentum will remain below average and adjusted for implemented and announced portfolio measures.  

In like-for-like sales, METRO GROUP expects to see a trend improvement following the previous year's level of -1.3% and a level of sales that will roughly equal the previous year's level. 

In the financial year 2013/14, the earnings development will also be affected by the continued below-average economic growth. As a result, METRO GROUP will continue to closely focus on efficient structures and strict cost management in 2013/14. The announced changes in the real estate strategy will impact earnings. Last year, EBIT before special items of €2,000 million contained income from real estate sales that exceeded typical levels. In addition, the comparative base is reduced by the contributions from portfolio changes. Adjusted for these effects totalling about €300 million, the comparative level from the previous year is €1.7 billion.

METRO GROUP remains on course to meet its EBIT before special items target of around €1,750 million in the financial year 2013/14, provided that exchange rates remain constant. From today's point of view earnings will be burdened by negative exchange rate effects in the mid-double-digit € million area. Due to the slow development in the consumer electronics industry, METRO GROUP expects EBIT before special items at Media-Saturn to approximately match the prior year's level (previously: sharply rising earnings). METRO GROUP expects to be able to compensate for the development at Media-Saturn through higher earnings contributions from other segments. 

METRO Cash & Carry

Like-for-like sales at METRO Cash & Carry rose by 0.9% in H1 2013/14. As a result of exchange rate developments, sales converted into euros fell by 2.0% to €15.4 billion. Measured in local currency, though, sales rose by 2.1%. While foods sales did very well, non-food sales declined. In Q2, the positive trend continued as like-for-like sales rose by 0.8%. Without the Easter effect, growth would have been even stronger.  

Sales generated by the delivery business continued to perform very well, climbing by 13.4% to €1.3 billion (H1 2012/13: €1.2 billion). Measured in local currency, delivery sales rose by 17.5%. In Q2, momentum eased slightly. This resulted from the lack of the Easter business, which plays a major role for many delivery customers. Nonetheless, sales climbed substantially at 9.4% (in local currency: +13.3%). The own-brand share rose once again as well. In H1 2013/14, own brands' share of total sales jumped from 16.3% to 16.6%. 

In Germany, sales declined by 2.1% to €2.4 billion in H1 2013/14 (like-for-like sales: -2.1%). While food sales almost matched the previous year's figures, non-food sales recorded a decline as a result of targeted measures to streamline product ranges. In Q2, the Easter business impacted sales, which fell by 2.1%. 

Sales in Western Europe totalled €5.2 billion in H1 2013/14, slightly below the previous year's figure. In like-for-like terms, sales were down by 1.2%. In Q2 2013/14, the loss of Easter business impacted sales, which fell by 1.8%. By contrast, business in France and Spain was very positive, while sales in the Netherlands declined and were lower than expected.  

In Eastern Europe, sales measured in local currency climbed by 4.6% during H1 2013/14. Like-for-like sales rose strongly by 3.0%. As a result of negative currency effects, sales converted into euros fell by 4.3% from the previous year's total. In addition to Russia, business was very positive in Turkey and Poland. By contrast, sales declined particularly in Ukraine, in the wake of the political unrest there, and in Romania. 

Sales in Asia/Africa rose by 2.2% to €1.9 billion during H1 2013/14. Exchange rates had a negative impact here as well. In local currency terms, sales even jumped by 8.7%. On a like-for-like basis, sales also climbed sharply in virtually all countries and rose by 4.7% in the region. In Q2 2013/14, sales growth continued, even though the rate slowed from the pace set in Q1 2013/14. 

In H1 2013/14, EBIT stood at €451 million (H1 2012/13: €649 million) and included special items of €132 million. They relate in particular to a non-cash impairment of goodwill of METRO Cash & Carry in the Netherlands. Background is a change in business environment in the country which is accompanied by the need to adjust the local business model for the future. Moreover, amongst others, restructuring measures in Belgium were reported as special item. EBIT before special items amounted to €583 million (H1 2012/13: €697 million). This decrease resulted primarily from the lack of income from real estate transactions in France generated during the previous year's period and negative currency effects. At €43 million, EBIT before special items for Q2 2013/14 equalled the amount produced in the previous year's period (Q2 2012/13: €43 million). Adjusted for the negative currency effects, the figure would have markedly exceeded the previous year's level.  

Media-Saturn

Media-Saturn sales declined by 2.1% to €11.5 billion in H1 2013/14. In local currency, the decrease amounted to 0.8%. Adjusted for store closures in China, sales in local currencies decreased by 0.4%. Performance in Q2 2013/14 was unable to match performance in Q1 2013/14 due to the consistently challenging market environment. Online sales continued to grow dynamically. Online sales rose by over 35% in H1 2013/14 to €0.8 billion and accounted for almost 7% of total sales. Multichannel sales from Media Markt and Saturn, as well as those from Redcoon, contributed to this performance.

In Western Europe, sales almost matched the previous year's level at €4.6 billion. The previous year's figure was matched in terms of sales in local currencies. Media-Saturn succeeded in increasing its market share in a number of countries. The performance in the Netherlands remained pleasing. In Belgium and Turkey, Media-Saturn ended its two-brand-strategy and now fully concentrates on further developing the brand Media Markt. By doing so the company aims to increase market shares as well as the awareness level and to further strengthen the brand. In Q2 2013/14, sales remained behind the level reached in Q1 of the current financial year. Sales developments in the Netherlands were positive. Here, double-digit sales growth ended a trend of declining sales. The decline in sales in Eastern Europe by 2.8% to €1.5 billion during H1 2013/14 was solely due to negative currency effects. Measured in local currency, sales rose by 6.5%. In Q2 2013/14, sales trends improved substantially. Measured in local currency, sales rose by 9.1%. High double-digit growth rates were again generated in Hungary and Turkey. EBIT in H1 2013/14 came to €266 million (H1 2012/13: €226 million). This figure includes special items of €9 million. EBIT before special items amounted to €275 million (H1 2012/13: €318 million). The decline resulted largely from like-for-like sales development in Germany and Eastern Europe. In Q2 2013/14, EBIT before special items remained at the previous year's level, totalling €-14 million. Sales-related declines in earnings were able to be compensated overall through cost savings and margin improvements.

Real

Mainly due to the disposal of Real in Russia, Romania, Poland and the Ukraine, sales at Real decreased significantly by 21.5% to €4.5 billion (in local currency: -21.1%) in H1 2013/14. Like-for-like sales fell by 3.9%. The lack of Easter business had a major impact, leading to a corresponding decline in sales in Q2 2013/14. This decline was offset in April.  

In Germany, sales declined by 4.4% to €4.1 billion in H1 2013/14. In like-for-like terms, sales fell by 4.1%. The decline in Q2 2013/14 was greater, primarily as a result of the lack of Easter business and the resulting drop in food sales. As a result, non-food business developed much better than food sales. Moreover, business was also impacted by extensive construction measures at 30 hypermarkets. These upgraded stores were already producing significant sales gains in April. Until end of FY 2013/14 it is planned to roll out the concept to 20 additional stores. 2015 more stores are to follow. Through this the company gradually modifies the store portfolio in order to prepare it for the future. In H1 2013/14, the sales share of own brands climbed substantially from 15.9% to 16.4%.  

As a result of the disposal of Real Ukraine, Russia, Romania and Poland, the sales produced by Real in Eastern Europe dropped by 71.5% in H1 2013/14. Real Turkey generated like-for-like growth in H1 2013/14. Sales trends improved in Q2 2013/14.

In H1 2013/14, EBIT stood at €34 million (H1 2012/13: €27 million). This included special items of €23 million relating in particular to the already announced closure of hypermarkets in Germany. Before special items, EBIT came to €56 million after €127 million in the previous-year period. This decline was largely due to the loss of earning contributions from the sold Real business in Eastern Europe. In Q2 2013/14, EBIT before special items came to €-41 million (Q2 2012/13: €11 million). This also reflects the loss of earnings contributions from the sold Real business in Eastern Europe and the shift in Easter business. 

Galeria Kaufhof

EBIT stood at €157 million in H1 2013/14 (H1 2012/13: €187 million). EBIT before special items also came in at €157 million (Q2 2012/13: €187 million). The decline was primarily due to the real estate transactions in the same period of the previous year. In Q2 2013/14, EBIT before special items rose slightly year on year to €-2 million (Q2 2012/13: €-3 million).