- Group sales adjusted for currency effects increase by 0.2% in 2009
- Market share gains in numerous countries
- EBIT before special items reach €2,024 million and beat market expectations
- Shape 2012 takes effect: Already €208 million earnings contribution
- Stable dividend of €1.18 per ordinary share proposed
- 80 new store openings despite worldwide economic downturn – market entry into Kazakhstan
- Metro Cash & Carry affected by currency and price effects
- Real with robust like-for-like sales development despite economic crisis and deflation in Germany: EBIT significantly above prior year’s level
- Media Markt notably strengthens market positions
- Galeria Kaufhof increases EBIT before special items for the 5th consecutive year
- Positive sales development, however below 6% growth rate targeted in mid-term
- Tangible earnings growth compared to 2009 expected; mid-term growth target raised to more than 10% annually
- Around 95 new store openings
- Market entry into Egypt by Metro Cash & Carry and into China by Media Markt
2009 was a successful year for METRO Group. Adjusted for currency effects, METRO Group increased sales by 0.2% despite the worldwide economic crisis and gained market shares in many countries. Operating cash flow before financing activities increased significantly, and net debt decreased noticeably. The earnings contribution from the efficiency- and value-enhancing programme Shape 2012 was significant. Three out of four sales divisions succeeded in increasing their EBIT before special items. All in all, EBIT before special items was €2,024 million. "The comprehensive reorganisation of the Group bore, gratifyingly fast, fruit", says Dr Eckhard Cordes, CEO of METRO Group. "We propose an unchanged dividend of €1.18 to participate our shareholders appropriately in this success. Shape 2012 is well on track and we expect a tangible increase in earnings in 2010."
Overview Financial Year 2009
In financial year 2009 sales decreased by 3.6% to €65.5 billion. However, adjusted for currency effects, sales increased by 0.2%.
Sales in Germany declined by 0.6% to €26.5 billion. In this context, it should be noted that METRO Group temporarily supplied the Extra supermarkets, which were sold on 1 July 2008, until the third quarter of 2008. In addition, the Group divested the operative business of AXXE Reisegastronomie during the reporting year. Adjusted for these effects, sales in Germany were almost on prior year’s level (-0.1 percent). Hence METRO Group’s sales outperformed the German market, which declined by 1.5%.
International sales were impacted by negative currency effects, especially in Eastern Europe, and declined by 5.5% to €39.0 billion. However, adjusted for currency effects, international sales increased by 0.7%. The international share of sales was 59.5%.
In Western Europe sales remained almost stable at €20.9 billion and, grew by 0.3% when adjusted for currency effects. Sales in Eastern Europe declined by 12.8% to €15.8 billion as a result of the economic crisis and strong currency effects. However, in local currency sales grew by 1.4%. In Asia/Africa sales increased by 4.8% to €2.3 billion (in local currency: +0.6%).
EBIT before special items
METRO Group’s EBIT before special items declined by 8.9% to €2,024 million.
The sales divisions Real, Media Markt and Saturn, as well as Galeria Kaufhof and Real Estate were able to increase EBIT before special items year-on-year despite the economic and financial crisis. Conversely, Metro Cash & Carry fell short of the prior year level and suffered most from currency effects.
Shape 2012 already strengthens earnings in 2009
METRO Group’s efficiency- and value-enhancing programme Shape 2012 was in the planning before the start of the global economic crisis and commenced in January 2009. Already in its first year, Shape’s earnings contribution of €208 million has been significant. "Shape 2012 enabled us to compensate a large part of last year’s crisis-related earnings effects", says Cordes. "This demonstrates the potential this programme has."
This results from the Group’s structural reorganisation in the first phase of Shape 2012. One core element thereof was the disintegration of centralised procurement. The sales divisions gained thus full responsibility for the operating business. For METRO Group this decentralisation means a paradigm change. "We entrench more entrepreneurial spirit in the whole Group. The sales divisions’ enlarged room for operational manoeuvre contributes essentially to the Group’s dynamic growth", Cordes emphasises. On the other hand, strategic management functions, like Finance, Controlling and Compliance, have been more centralised.
The work of the project teams on roughly 6,000 individual measures is proceeding well. Significant earnings contributions are to be achieved not only by cost savings, but also from productivity gains. After successful implementation, Shape 2012 targets an annual earnings improvement potential of €1.5 billion in 2012 and sustainably thereafter. Broken down, c.€800 million from cost savings and c.€700 million from productivity gains. The resulting earnings improvement from Shape 2012 depends on the development of market conditions. The largest part of the cost savings and productivity gains is allocated to the sales divisions Metro Cash & Carry and Real. Currently, numerous measures of the sales divisions focus on improving customer orientation and, at the same time, productivity. With regard to content, the programme is managed on the basis of the core areas: customer orientation, procurement, private label products, new business models, store operations, administrative processes as well as logistics and supply chain management.
The financial result was €-631 million and reflects especially the lower interest income as a result of a decreased interest level.
EBT before special items amounted to €1,393 million. Here €343 million expenses were adjusted in connection with Shape 2012. These expenses came in slightly below the announced amount of €350 million.
The Group income tax rate before special items was around 40% and above the long-term average of approximately 30-33%. One of the main reasons for this increase results from the fact that in 2009 a large part of expenses was incurred in subsidiaries with tax losses carried-forward (in particular in Germany). Due to conservative accounting rules, tax losses carried-forward are only capitalised as deferred tax assets to a limited extent. As a result, a large part of the aforementioned expenses do not provide a corresponding tax shield.
The net profit for the period before special items increased by 14.1% to €824 million. After minority interests, profit attributable to shareholders of METRO AG increased by 21.4% to €686 million.
Earnings per share from continuing operations before special items reached €2.10 following €3.04 last year. The decrease reflects, aside from the EBIT development, the lower financial result and the increased tax rate.
Capex in the financial year 2009 amounted to €1.5 billion and came in slightly below the announced budget. This strategy of foresight and caution had positive effects on the net debt, which enabled a decrease of €369 million to €4.2 billion year-on-year. The equity ratio declined slightly from 17.9% to 17.8% mainly due to currency effects.
Capex was predominantly invested in the continued international expansion of the divisons Metro Cash & Carry, Real, as well as Media Markt and Saturn. The required land and buildings are thereby reported in the Real Estate segment. All in all, METRO Group opened 80 new stores, thereof 18 Metro Cash & Carry stores, 12 Real hypermarkets and 50 Media Markt and Saturn consumer electronics stores.
The pre-tax return on capital employed (RoCE) before special items amounted 12.4%.
For the financial year 2009, the Management Board and Supervisory Board propose to the Annual General Meeting on 5 May 2010 the payment of a stable dividend of €1.18 per ordinary share, and of €1.298 per preference share.
METRO Group will continue on its profitable growth course and thus expand its position as one of the leading international retail groups over the next few years. Also 2010 will not be an easy year and it remains to be seen whether macroeconomic trends reverse during the course of the year. Whether the current year will bring this trend reversal depends particularly on economic developments in Eastern Europe. The negative trend had not intensified further by the end of the fourth quarter of 2009. Whether this can be interpreted as an indication of a trend reversal remains to be seen during the course of the first half of 2010.
However, METRO Group feels well prepared for the future and can build on a successful portfolio of sales divisions. In addition, with Shape 2012, the company is implementing a programme that will accompany METRO Group into a successful and profitable future.
METRO Group maintains its medium-term forecast of over 6 percent sales growth per year. For 2010, the company expects sales to exceed the previous year’s level but to still fall short of this target level. Aside from the macroeconomic situation, this is attributable to the lower number of new store openings in 2009 and 2010.
METRO Group’s strategy aims for long-term profitable growth, that is, disproportionately higher growth of earnings than sales. The company’s medium-term growth target for EBIT before special effects is more than 10 percent per year. Shape 2012 will unleash its positive earnings impact successively and become fully effective from 2012. Previously, the medium-term growth target was 8 percent per year.
Due mostly to the contributions of Shape 2012, METRO Group projects earnings before special items for 2010 tangibly exceeding the level of 2009. The extent of the earnings improvement, however, depends decisively on the development of macroeconomic parameters.
METRO Group expects a tax rate of around 35% in financial year 2010. The tax rate should decrease gradually in the course of the following years again.
New store openings
All in all METRO Group plans to open around 95 stores. Thereof around 30 are Metro Cash & Carry stores, five Real and about 60 Media Markt and Saturn stores.
METRO Group’s Sustainability Report describes the company’s objectives for improvement in the areas of supply chain/products, environment, employees as well as society and social affairs. One long-term objective is to reduce the company’s specific carbon dioxide (CO2) emissions by 15 percent by 2015 from 406 kilograms per square metre of selling space in 2006. An interim report on the realisation of these objectives will be included in the Sustainability Report 2009, which will be published in May 2010.