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COMPANY REPORT

Metro Cash & Carry’s, MediaMarktSaturn’s sales improve in Q2 of ’16-17
Thursday, 13 July, 2017, 08 : 00 AM [IST]
Dusseldorf
In the second quarter and the first half of financial year 2016-17, the Metro Group has seen a continued trend improvement in the sales performance of MediaMarktSaturn and Metro Cash and Carry. Like-for-like sales of the continuing operations increased by 0.3 per cent in the second quarter of 2016-17. MediaMarktSaturn in Germany, in particular, showed a strong performance with a growth in like-for-like sales of 3.4 per cent. Online sales of the sales brands MediaMarkt and Saturn continued to develop positively across all countries and grew by more than 40 per cent, reaching a share of almost 12 per cent of total sales. Earnings before interest and taxes (EBIT) before special items of the continuing operations was impacted in the second quarter by a high comparison base and by investment in the transformation, such as information technology (IT) and customer relationship management (CRM). In addition, earnings were reduced by investments in start-up activities, such as the Retail Media Group and Deutsche Technikberatung, and measures to strengthen the market position in various countries. Accordingly, as a result of investing in the restructuring of the group of companies, EBIT before special items fell to -19 million Euro in the second quarter from 38 million Euro in the previous year.

Like-for-like sales of the discontinued operations decreased by 1.1 per cent in the second quarter. This was also due to the negative calendar effects, especially for Real. Reported sales of Metro Cash and Carry showed a significant increase of 5.4 per cent, which was also partly due to the acquisition of Pro à Pro. This contributed to the increase of more than 30 per cent in delivery sales of the sales line to a record high of 16.1 per cent of the total sales. EBIT before special items of the discontinued operations improved significantly to 90 million Euro compared to -27 million Euro in the same quarter last year in particular due to real estate income and positive currency effects.

For the first half of 2016/17, like-for-like sales of the continuing operations grew slightly by 0.1 per cent. EBIT before special items amounted to 289 million Euro compared to 342 million Euro in the previous year. Like-for-like sales of the discontinued operations were down by 0.4 per cent. EBIT before special items increased from 496 million Euro in the previous year to 603 million Euro.

“In the second quarter of financial year 2016-17, the positive trend in terms of the sales performance of Metro Cash and Carry and MediaMarktSaturn continued. The transformation of the Metro Group towards a customer-centric company is progressing further. With the delivery business, we have reached a new record regarding the share of total sales of Metro Cash and Carry. We have also seen strong growth in online sales,” said Olaf Koch, chairman, management board, Metro AG. “We are on the home straight of the demerger of Metro Group into two strong, successful and strategically focused companies.”

Pieter Haas, member, management board, Metro AG, and designated chief executive officer, CECONOMY AG, said, “We will continue to pursue our strategy focusing on multi-channel and service. With our core business of MediaMarktSaturn, we further increased our like-for-like sales in the second quarter as well as the total market share in the first half of the year and once again improved online sales of the sales brands MediaMarkt and Saturn by more than 40 per cent to currently nearly 12 per cent of total sales.”

An important milestone in the group’s repositioning was reached on February 6, 2017, when Metro AG’s annual general meeting authorised the group’s demerger into two independent, stock-listed companies. As a result, the consumer electronics segment, essentially consisting of the MediaMarktSaturn sales line including the relevant holding functions, is recognised as a continuing operation. The discontinued operations of the Metro Group include, above all, the Metro Cash and Carry and Real sales lines, including associated real estate assets as well as related management and service activities.

Like-for-like sales of continuing operations increased by 0.1 per cent in the first half of 2016-17. Sales in local currency matched the previous year’s level. Overall, currency effects were slightly positive, with positive effects from the development of the Russian rouble outweighing the negative effects from the development of the Turkish lira.

Despite the calendar effect (leap day in the previous year), like-for-like sales rose by 0.3 per cent in the second quarter of 2016-17. However, sales in local currency declined by 0.5 per cent. As this was offset by slightly positive currency effects, quarterly sales matched the previous year’s level at €5.3 billion.

The EBIT of the Metro Group’s continuing operations essentially comprise the MediaMarktSaturn sales line and the holding functions that are part of continuing operations. In the first half of 2016-17, EBIT totalled 280 million Euro (in the first half of 2015-16, it was 322 million Euro). This figure includes special items totalling about nine million Euro (in the first half of 2015-16, it was 20 million Euro). EBIT before special items amounted to 289 million Euro (in the first half of 2015-16, it was 342 million Euro). The decline is due, in particular, to measures aimed at adding market share in various countries of the MediaMarktSaturn sales line, such as the value-added tax

campaign at Saturn Germany in January.
In the second quarter of 2016-17, the EBIT of the Metro Group’s continuing operations totalled -34 million Euro (in the second quarter of 2015-16, it was 25 million Euro). Special items amounted to about 14 million Euro (in the second quarter of 2015/16, it was 12 million Euro). Special items particularly concern restructuring and efficiency-enhancing measures. EBIT before special items came in at -19 million Euro (in the second quarter of 2015-16, it was 38 million Euro).

In the first half of 2016-17, earnings before taxes (EBT) amounted to 279 million Euro (in the first half of 2015-16, it was 319 million Euro). EBT before special items totalled 288 million Euro (in the first half of 2015-16, it was 338 million Euro).

In the first half of 2016-17, the profit for the period from continuing operations stood at 122 million Euro (in the first half of 2015-16, it was 195 million Euro). Profit for the period before special items declined from 208 million Euro to 146 million Euro. In consideration of the suspended depreciation/amortisation, profit for the period of discontinued operations declined from 349 million Euro to 249 million Euro. Before special items after renewed depreciation/amortisation that was suspended in accordance with IFRS 5, profit for the period increased from 166 million Euro to 311 million Euro. Profit for the period of the Metro Group, comprising both continuing and discontinued operations, stood at 371 million Euro in the first half of 2016-17 (in the first half of 2015-16, it was 544 million Euro).

In the first half of 2016-17, the Metro Group’s earnings per share, comprising both continuing and discontinued operations, amounted to 1.01 Euro (in the first half of 2015-16, it was 1.48 Euro). Adjusted for special items after renewed depreciation/amortisation in accordance with IFRS 5, earnings per share stood at 1.24 Euro (in the first half of 2015-16, it was 0.95 Euro).

In the second quarter of 2016-17, earnings per share came to 0.40 Euro (in the second quarter of 2015-16, it was -0.20 Euro). Adjusted for special items after renewed depreciation/amortisation in accordance with IFRS 5, earnings per share stood at 0.07 Euro in the second quarter of 2016-17 (in the second quarter of 2015-16, it was -0.18 Euro).

Net debt, after netting cash and cash equivalents as well as financial investments with financial liabilities (including finance leases), totalled -0.7 billion Euro (net deposits) for continuing operations as of March 31, 2017. The previous year’s figure as of March 31, 2016 also included discontinued operations and amounted to 2.7 billion Euro. The comparable figure as of March 31, 2017 was 3.2 billion Euro.

Outlook
Due to the authorisation of the demerger of the Metro Group by Metro AG’s annual general meeting on February 6, 2017, the activities of the Metro Cash and Carry and Real sales lines as well as the associated management and service activities are shown as discontinued operations. As a result, the forecast for the Metro Group will be adjusted, as it now relates exclusively to the continuing operations of the Metro Group.

The forecast is based on currency-adjusted figures. In addition, it is based on the assumption of a continuously complex geopolitical situation.

In financial year 2016-17, the company expects a slight increase in overall sales from continuing operations, despite the persistently challenging economic environment. It expects like-for-like sales from continuing operations to trend slightly higher again.

The company expects EBIT before special items from continuing operations to increase slightly compared with the figure of €466 million for financial year 2015-16.

MediaMarktSaturn
Despite the calendar effect in the first half of 2016-17, like-for-like sales of MediaMarktSaturn increased slightly by 0.1 per cent. However, sales in local currency matched the previous year’s level. The stable first-quarter sales trend continued in the second quarter of 2016-17. At €12.2 billion, sales in the first half of 2016-17 matched the level of the previous year’s period, leading to another increase in the overall market share.

Online generated sales of the MediaMarkt and Saturn sales brands increased by more than 40 per cent in both the first half of 2016-17 and the second quarter of 2016-17. Total online sales rose by more than 25 per cent, reaching nearly 12 per cent of the total sales in the second quarter of 2016-17.

In Germany, like-for-like sales rose markedly by 1.1 per cent in the first half of 2016-17, as the slight decline during the Christmas quarter was more than offset by sales in the second quarter of 2016-17. Overall, sales in Germany increased by 0.9 per cent to 5.8 billion Euro in the first half of 2016-17.

In Western Europe, like-for-like sales fell by 2.2 per cent in the first half of 2016-17. Sales in local currency declined by two per cent. All in all, half-year sales at MediaMarktSaturn amounted to 4.8 billion Euro, down 2.1 per cent from the same period a year earlier. Sales in the second quarter of 2016-17 declined more strongly than it did in the Christmas quarter due to negative sales trends in Italy and Switzerland, among others.

In Eastern Europe, like-for-like sales rose markedly by 3.9 per cent in the first half of 2016-17. In local currency, the increase amounted to 2.9 per cent. As a result, total sales rose by 3.6 per cent to 1.5 billion Euro. Sales also continued their upward trend in the second quarter of 2016-17, with like-for-like sales rising by 2.2 per cent. The key driver behind this positive trend was the development in Turkey, which more than compensated for the negative trend in Russia. While sales in local currency rose by 1.1 per cent, total sales jumped 4.5 per cent to 0.6 billion Euro, thanks to positive currency effects.

In the first half of 2016-17, EBIT amounted to 299 million Euro (in the first half of 2015-16, it was 332 million Euro). This figure includes special items totalling nine million Euro (in the first half of 2015-16, it was 20 million Euro). EBIT before special items declined to 308 million Euro from 352 million Euro. The decline is due, in particular, to measures aimed at adding market share in various countries such as the value-added tax campaign at Saturn Germany in January.

In the second quarter of 2016-17, EBIT before special items declined from 43 million Euro to -4 million Euro.
Discontinued operations
Like-for-like and currency-adjusted sales declined slightly by 0.4 per cent in the first half of 2016-17. This was partly due to developments at Real, which were also dampened by the calendar effect. Sales in local currency fell short of the previous year’s level. Currency effects were positive. At 18.6 billion Euro, total sales exceeded the previous year’s level by 0.5 per cent.

In the second quarter of 2016-17, like-for-like, currency-adjusted sales decreased by 1.1 per cent. While sales at Metro Cash and Carry slightly exceeded the previous year’s level, sales at Real declined markedly partly due to the calendar effect. The previous year’s reporting quarter included both the additional calendar day due to the leap year and the Easter business. Sales in local currency rose by 0.3 per cent. All in all, sales for the quarter increased by 2.4 per cent to 8.5 billion Euro, boosted partly by the stronger Russian rouble and by the acquisitions of Metro Cash and Carry (particularly Pro à Pro in France), which more than offset the decline in sales at Real.

In the first half of 2016-17, the EBIT of the Metro Group’s discontinued operations stood at 614 million Euro (in the first half of 2015-16, it was 884 million Euro) and comprised special items of 106 million Euro, particularly from restructuring at Real and Metro Cash and Carry. The previous year’s figure included positive special items totalling 388 million Euro. These primarily concerned gains from the disposal of Metro Cash and Carry Vietnam. EBIT before special items after renewed depreciation/amortisation in accordance with IFRS 5 reached 603 million Euro (in the first half of 2015-16, it was 496 million Euro). The increase is due to gains from real estate transactions and positive currency effects.

In the second quarter of 2016-17, EBIT totalled 193 million Euro (in the second quarter of 2015-16, it was -59 million Euro). Special items amounted to 13 million Euro (in the second quarter of 2015-16, it was 32 million Euro). Due to the above-mentioned gains from real estate transactions and positive currency effects, EBIT before special items after renewed depreciation/amortisation in accordance with IFRS 5 reached 90 million Euro (in the second quarter of 2015-16, it was -27 million Euro).

In the first half of 2016-17, earnings before taxes amounted to 539 million Euro (in the first half of 2015-16, it was 690 million Euro). Earnings before taxes and special items after renewed depreciation/amortisation in accordance with IFRS 5 reached 527 million Euro (in the first half of 2015-16, it was 314 million Euro).
In the first half of 2016-17, profit for the period from discontinued operations totalled 249 million Euro (in the first half of 2015-16, it was 349 million Euro). Profit for the period before special items after renewed depreciation/amortisation in accordance with IFRS 5 increased markedly from 166 million Euro to 311 million Euro.

Net debt of discontinued operations, after netting cash and cash equivalents as well as financial investments with financial liabilities (including finance leases), totalled 3.9 billion Euro as of the closing date of March 31, 2017 (on March 31, 2016, it was 3.5 billion Euro). The increase of almost 0.4 billion Euro, compared to the previous year, is due to the purchase of Pro à Pro, among others.

Metro Cash and Carry
Like-for-like sales at Metro Cash and Carry rose by 0.4 per cent in the first half of 2016-17. Sales in local currency increased by 1.1 per cent. Thanks to positive currency effects, total sales rose by 2.3 per cent to 14.9 billion Euro. For the first time, the acquisition of Pro à Pro in France, which has been part of Metro since the beginning of February 2017, contributed to total sales. In the second quarter of 2016-17, like-for-like sales increased by 0.1 per cent. However, in local currency, the sales increase was markedly higher at 2.6 per cent, with total sales up 5.4 per cent to 6.9 billion Euro.

Metro Cash and Carry’s delivery sales continued to develop positively, with sales rising by more than 23 per cent to 2.1 billion Euro in the first half of 2016-17. At 14.2 per cent, the sales share of the delivery business thus reached a new record high. The acquisition of Pro à Pro contributed to this increase. As a result, growth was even higher in the second quarter of 2016-17, with delivery sales increasing by more than 30 per cent to 1.1 billion Euro, reaching 16.1 per cent of the total sales of Metro Cash and Carry.

Like-for-like sales in the hotel, restaurant and cafe (HoReCa) segment declined by 0.9 per cent in the first half of 2016-17. However, sales in local currency rose by 2.3 per cent. Total sales increased by 1.3 per cent to 6.9 billion Euro and were dampened slightly by negative currency effects. In the second quarter of 2016-17, the calendar effect had a negative impact on like-for-like sales, which fell by 0.4 per cent. Despite negative currency effects, though, total sales rose by 3.6 per cent to 3.2 billion Euro, driven mostly by the acquisitions of Pro à Pro and Rungis Express. Partly due to the calendar effect, like-for-like sales declined in Germany, the largest HoReCa country. Like-for-like sales in Turkey, in turn, continued their strong growth.

Like-for-like sales in the multi-specialists segment rose by one per cent in the first half of 2016-17. Sales in local currency increased by 1.7 per cent. Thanks to positive currency effects, sales rose by 5.7 per cent to 6.5 billion Euro. In the second quarter of 2016-17, like-for-like sales fell by 0.4 per cent. Negative developments in Russia and the Netherlands were partly compensated by positive trends in Pakistan and India. Thanks to positive currency effects, sales rose by eight per cent to 3.1 billion Euro.

Like-for-like sales in the traders segment rose by four per cent in the first half of 2016-17, with Ukraine and Romania as key drivers. Sales in local currency climbed by 1.7 per cent. As a result of negative currency effects, however, sales increased by just 0.1 per cent to 1.4 billion Euro. Developments improved in the second quarter of 2016-17 and sales rose by 3.4 per cent to 0.6 billion Euro, thanks also to slightly positive currency effects.

In the first half of 2016-17, EBIT amounted to 603 million Euro (in the first half of 2015-16, it was 865 million Euro) and included special items amounting to 31 million Euro, which essentially concerned restructurings. The previous year’s figure included positive special items totalling 368 million Euro. These primarily concerned gains from the disposal of Metro Cash and Carry Vietnam. At 563 million Euro, EBIT before special items after renewed depreciation/amortisation in accordance with IFRS 5 was 66 million Euro higher than in the comparable period of the previous year.

In the second quarter of 2016/17, EBIT before special items after renewed depreciation/amortisation in accordance with IFRS 5 totalled 132 million Euro (in the second quarter of 2015-16, it was 38 million Euro). The distinct improvement is due, in particular, to a real estate transaction in China, which contributed about 80 million Euro to earnings. In addition, EBIT was bolstered by positive currency effects of 24 million Euro that primarily related to Russia.
Real
In the first half of 2016-17, like-for-like sales at Real decreased by 3.4 per cent. Due mostly to store disposals, sales declined by 5.7 per cent to 3.7 billion Euro compared with the previous year's period. In the second quarter of 2016-17, like-for-like sales fell by 5.4 per cent. This decline is partly attributable to the negative calendar effect. Stronger increase in food prices also dampened footfall. Due to nine store closures, sales fell more steeply by 7.8 per cent to 1.7 billion Euro year-to-year.

Online sales continued to develop very positively, rising markedly by more than 40 per cent from 37 million Euro to 53 million Euro in the first half of 2016-17. In the second quarter of 2016-17, sales even grew by nearly 60 per cent. Since mid-February, Real has been offering more than five million products in its online store, thanks to the full integration of the Hitmeister online store.

In the first half of 2016-17, EBIT stood at 45 million Euro (in the first half of 2015-16, it was 66 million Euro). This figure includes special items from restructuring measures totalling 47 million Euro (in the first half of 2015-16, it was 0 million Euro). EBIT before special items after renewed depreciation/ amortisation in accordance with IFRS 5 amounted to 68 million Euro after 67 million Euro in the previous year’s period.

In the second quarter of 2016-17, EBIT before special items after renewed depreciation/amortisation in accordance with IFRS 5 increased to -3 million Euro (in the second quarter of 2015-16, it was -16 million Euro). Positive effects from the closure of loss-making stores in the previous year’s period, higher value added from trade transactions and lower selling and administrative expenses as well as a one-time gain from a real estate transaction more than offset the sales-related earnings decline.
 
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