METRO GROUP substantially strengthens its financial foundation despite tough trading conditions

1 August 2013

Guidance reiterated 

  • Sales adjusted for portfolio changes remain on prior year level despite weak economic situation across Europe: +0.1% in H1 (in local currency: + 0.5%) and -0.5% in Q2 (in local currency: +0.1%), also due to the earlier Easter business
  • EBIT after special items reaches €364 million in H1 2013 (H1 2012: €63 million) and €362 million in Q2 2013 (Q2 2012: €71 million) – positive effects from the closings of Real in Russia and Ukraine
  • Operating cash flow up €283 million; net debt considerably reduced by €1.9 billion
  • Sales and earnings guidance for the short financial year 2013 confirmed
  • H1: Delivery service with almost 20% sales growth, share of own brand sales reaches 11.6%, online sales grow by more than 70%

METRO GROUP succeeded in further strengthening its financial foundation in the first half of 2013 despite consumer sentiment remaining weak across Europe. The Düsseldorf-based retailer was able to again significantly improve its EBIT and cash flow as well as its net debt while sales showed a stable trend. And this although many countries, especially in Western Europe, experienced a recession also in the second quarter. "The disposable income and purchasing power of our customers in nearly all European countries were still burdened by austerity measures", said Olaf Koch, Chairman of the Management Board of METRO AG. "Nevertheless, we continued to significantly strengthen our balance sheet and achieved overall a positive business development. This is also one of the reasons why we remain convinced to fulfil our sales and earnings guidance for the stub year 2013". 

At the same time, METRO GROUP and its sales lines achieved important successes in further developing and modernising their business models. "During the past quarter we made significant progress in the customer-orientated realignment of our company", said Koch. "This applies for measures relating to business operations, like for example the expansion of the online and delivery business, and also for the necessary changes relating to structures, processes and portfolio". 

During the period from January to June 2013, METRO GROUP generated €30.8 billion in sales (H1 2012: €31.5 billion). This corresponds to a decrease of 2.3%. In local currency, METRO GROUP sales were down 1.9% on the previous year. Adjusted for the already implemented and announced portfolio changes (MAKRO Cash & Carry in the United Kingdom, Real Eastern Europe and Media Markt China), sales rose slightly by 0.1% (in local currency: +0.5%). In the 2nd quarter 2013, sales receded by 3.6% to €15.3 billion (Q2 2012: €15.8 billion). This is in particular attributable to the earlier Easter Business in the year under review. Moreover, in the year-earlier period, especially Media-Saturn had benefited from the UEFA EURO 2012. Adjusted for the already implemented and announced portfolio changes, sales receded by only 0.5% (in local currency: +0.1%). METRO GROUP continued to intensively implement the customer-centric realignment of the company also in the second quarter 2013. Accordingly, delivery sales rose significantly by 19.2% to €1.3 billion in H1 2013. In Q2, they even climbed by 21.8% to €0.7 billion. The share of own brand sales increased noticeably to 11.6% in H1 2013 (H1 2012: 11.4%). Q2 was particularly successful, since the share of own brand sales rose from 11.7% to 12.1%. In H1 2013, METRO GROUP generated online sales of €0.6 billion, up 72.0% on H1 2012. Online sales came to €0.3 billion in Q2 2013 (+88.5%). 

METRO GROUP sales and EBIT development

In Germany, sales in H1 2013 fell marginally by 0.7% to €11.9 billion. The earlier Easter business and strike action in particular impacted Q2. Sales declined by 2.4% to €5.8 billion. 

International sales decreased by 3.2% to €18.9 billion from January to June 2013. Sales in local currency fell by 2.6%. However, adjusted for portfolio changes, sales increased by 0.6%. The international share of sales amounted to 61.3% (H1 2012: 61.9%). Sales in Q2 decreased by 4.2% to €9.5 billion (in local currency: -3.3%). Adjusted for portfolio changes, sales even increased by 0.8%. The international share in sales amounted to 62.1%. 

Sales in Western Europe (excluding Germany) in H1 2013 fell by 6.0% to €9.0 billion (in local currency: -5.9%) and were mainly impacted by the previous year’s disposal of MAKRO Cash & Carry in the United Kingdom, but when adjusted, sales only dropped by 1.7%. This is also a reflection of the continued decline in economic performance. Sales in Q2 decreased by 5.4% to €4.6 billion (in local currency: -5.2%). Adjusted for MAKRO Cash & Carry, however, sales only fell by 1.0%.  

Sales in Eastern Europe dropped by 2.3% to €8.0 billion from January to June 2013 (in local currency: -1.4%). This was mainly due to the sale of Real in Russia and Ukraine. Sales in Q2 decreased by 4.7% to €4.0 billion, and by 3.2% in local currency. Adjusted for the sale of Real Russia and Ukraine, sales declined slightly by 0.1% in Q2.  

Asia/Africa remains METRO GROUP's fastest-growing region by far. Sales rose significantly by 7.5% to €1.9 billion in H1 2013. Sales in local currency even increased by as much as 10.3%. Sales continued to increase dynamically in Q2, despite negative currency effects, and climbed by 5.3% to €0.8 billion. Sales in local currency increased by 8.6%. Adjusted for Media Markt China, sales in Q2 rose by a considerable 19.0%. 

In H1 2013, 22 new stores were opened and 34 were disposed of or closed (H1 2012: 28 new stores and 10 disposals/closures). 9 openings and 20 disposals occurred in Q2. 

METRO GROUP H1 2012

(€ billion)
H1 2013

(€ billion)
Change Change in local currency
Sales 31.5 30.8 -2.3% -1.9%
Germany 12.0 11.9 -0.7% -0.7%
Western Europe (excl. Germany) 9.6 9.0 -6.0% -5.9%
Eastern Europe 8.2 8.0 -2.3% -1.4%
Asia/Africa 1.8 1.9 7.5% 10.3%
METRO GROUP Q2 2012

(€ billion)
Q2 2013

(€ billion)
Change Change in local currency
Sales 15.8 15.3 -3.6% -3.0%
Germany 5.9 5.8 -2.4% -2.4%
Western Europe (excl. Germany) 4.9 4.6 -5.4% -5.2%
Eastern Europe 4.2 4.0 -4.7% -3.2%
Asia/Africa 0.8 0.8 5.3% 8.6%
EBIT in H1 2013 increased considerably to €364 million (H1 2012: €63 million). This figure includes positive special items to the amount of €74 million (H1 2012: €-244 million). The special items mainly comprise positive effects from the sale of Real Eastern Europe. These were offset by costs from the insolvency of Praktiker AG and its subsidiaries. Adjusted for special items, EBIT declined from €307 million to €290 million. EBIT before special items decreased in Q2 2013 from €315 million to €276 million. This was due to the sales development as well as price investments, especially at Media-Saturn, and adverse effects from strikes, particularly at Real in Germany.  
EBT in H1 2013 amounted to €17 million (H1 2012: €-197 million). Adjusted for special items, EBT was €-17 million (H1 2012: €47 million). The net profit for the period attributable to the shareholders of METRO AG improved significantly to €17 million (H1 2012: €-98 million). In the 2nd quarter, by contrast, the net profit for the period attributable to the shareholders of METRO AG rose to €33 million (Q2 2012: €-181 million). The earnings per share came in at €0.05 following €-0.30 in H1 2012. Adjusted for special items, the earnings per share dropped from €0.10 to €0.05. In the 2nd quarter, the earnings per share before special items dropped to €0.06 (Q2 2012: €0.34). 

The operating cash flow of METRO GROUP improved further during the 1st half of 2013: from January to June, cash outflow from operating activities amounted to €2.6 billion (H1 2012: €2.9 billion cash outflow). This reflects the seasonal increase in net working capital. The improvement was mainly as a result of the increase in EBIT. Net working capital was improved thanks to strict inventory management and improved supplier management. 

Income of METRO GROUP (€ million) H1 2012 H1 2013
EBIT before special items 3071 290
Earnings before taxes (EBT) before special items 471 -17
Net profit/loss for the period before special items 281 -3
Net profit for the period attributable to the shareholders of METRO AG before special items 331 15
Earnings per share before special items in € 0.101 0.05
EBIT 631 364
Earnings before taxes (EBT) -1971 17
Net profit for the period -1051 0
Net profit for the period attributable to the shareholders of METRO AG -981 17
Earnings per share -0.301 0.05
Income of METRO GROUP (€ million) Q2 2012 Q2 2013
EBIT before special items 3151 276
Earnings before taxes (EBT) before special items 1771 92
Net profit for the period before special items 1061 1
Net profit for the period attributable to the shareholders of METRO AG before special items 1131 19
Earnings per share before special items in € 0.34 0.06
EBIT 711 362
Earnings before taxes (EBT) -671 141
Net profit for the period -261 15
Net profit for the period attributable to the shareholders of METRO AG -181 33
Earnings per share -0.06 0.10

1 Adjusted due to first-time application of the amended IAS19 

Outlook

For the short financial year 2013 (1 January to 30 September 2013), METRO GROUP expects – in spite of the continuing difficult business conditions – to generate moderate growth in sales (adjusted for portfolio changes). Earnings trends in the abbreviated financial year 2013 will be impacted by the uncertain economic situation described earlier. As a result, METRO GROUP will continue to closely focus in 2013 and future years on efficient structures and strict cost management. In the short financial year 2013, METRO GROUP expects EBIT before special items to increase compared to the level achieved in the corresponding period of the previous year (€706 million). This projection is based on the assumption of higher income from the sale of real estate assets compared to the year-earlier period. Due also to the lack of major sports events, operating earnings are expected to fall short of the level of the first 9 months of 2012. 

METRO Cash & Carry

From January to June 2013, sales at METRO Cash & Carry fell by 2.9% to €14.8 billion (in local currency: -2.1%). However, adjusted for the sale of MAKRO Cash & Carry in the United Kingdom, sales remained almost on par with the previous year's level. Sales also declined in Q2 due to the earlier Easter business and the continuously challenging macroeconomic conditions. Adjusted for MAKRO Cash & Carry in the United Kingdom, sales only decreased slightly. Sales from the delivery business continued to grow very dynamically, rising by 19.2% to €1.3 billion (H1 2012: €1.1 billion). 

Sales even climbed by 21.8% in Q2. The share of own brand sales also rose once more, from 16.7% to 17.0% in H1 2013, and from 16.9% to 17.4% in Q2. In Germany, sales in H1 2013 declined by 4.6% to €2.3 billion. In Q2, the earlier Easter business impacted sales, which fell by 5.1%. Non-food sales, in particular, were unsatisfactory. The store in Düsseldorf remodelled its non-food offering and reduced the number of products available. Further stores are expected to be remodelled by the end of the calendar year. 1,500 food articles were identified as being of particular relevance to HoReCa customers. Some 300 of these were added to the product range by the end of June. Sales in Western Europe amounted to €5.1 billion in H1, down 9.1% as against H1 2012, primarily due to the sale of MAKRO Cash & Carry in the United Kingdom; adjusted for these portfolio measures, sales only fell by 1.6%. Despite the earlier Easter business, the sales trend improved in Q2: the drop in like-for-like sales amounted to 1.9% compared to a 3.1% decline in Q1 2013. At €5.6 billion, H1 2013 sales in Eastern Europe were on par with the previous year. Sales in local currency increased by 1.0%. The sales development in Q2 improved quarter-on-quarter and sales were on par with the previous year's figures. Russia continued to be the region's most important growth country. Sales in Asia/Africa rose by a considerable 10.7% to €1.9 billion in H1 2013 (in local currency: +13.8%). The sales development in Q2 followed the positive development in Q1. Sales increased significantly in China, in particular. 

EBIT in H1 2013 increased significantly to €182 million (H1 2012: €45 million). This was due to special items in the previous year from the disposal of MAKRO Cash & Carry in the United Kingdom as well as expenses incurred from stopping expansion into Indonesia and from implementing restructuring measures in Portugal and at the headquarters of METRO Cash & Carry in Germany. Special items in H1 2013 amounted to €27 million (H1 2012: €176 million), primarily for goodwill amortisation at METRO Cash & Carry in Denmark. EBIT before special items in H1 2013 totalled €209 million (H1 2012: €222 million). EBIT before special items decreased only slightly in Q2 2013 from €247 million to €241 million. A large proportion of the sales-related decline in earnings was compensated for by cost savings and efficiency-enhancing measures as well as by the lapsed loss generated by the business in the United Kingdom. In addition, further price investments were made. 
METRO Cash & Carry H1 2012
(€ billion)
H1 2013
(€ billion)
Change Change in local currency
Sales 15.2 14.8 -2.9% -2.1%
Germany 2.4 2.3 -4.6% -4.6%
Western Europe (excluding Germany) 5.6 5.1 -9.1% -8.9%
Eastern Europe 5.6 5.6 -0.1% 1.0%
Asia/Africa 1.7 1.9 10.7% 13.8%
EBIT (before special items) 222 1 million 209 million -13 million  
METRO Cash & Carry Q2 2012
(€ billion)
Q2 2013
(€ billion)
Change Change in local currency
Sales 8.0 7.7 -3.0% -1.9%
Germany 1.2 1.2 -5.1% -5.1%
Western Europe (excluding Germany) 3.0 2.7 -8.4% -8.1%
Eastern Europe 3.0 3.0 0.0% 1.7%
Asia/Africa 0.8 0.8 10.1% 13.7%
EBIT (before special items) 2471 million 241 million -6 million  

1Adjusted due to first-time application of the amended IAS19 

Real

In H1 2013, sales at Real decreased by 6.2% to €5.0 billion (in local currency: -6.2%). This drop was mainly due to the disposal of Real in Russia and Ukraine; adjusted for these two countries, sales only fell by 2.8%. Sales in Q2 were impacted by the earlier Easter business and therefore declined more than in Q1. In Germany, sales in H1 2013 fell by 1.4% to €3.9 billion. In like-for-like terms, sales were down 0.5%. This means that Real maintained its good position in the hypermarket sector. In Q2, the earlier Easter business impacted sales, which fell accordingly. Furthermore, operations were also disrupted by strike action, which negatively impacted the business development. Sales in Eastern Europe in H1 2013 fell by 19.7%. This is mainly due to the fact that Real Ukraine and Real Russia have no longer been included in the consolidated financial statements of METRO GROUP since 1 March 2013 and 1 April 2013, respectively. The disposals of Real in Romania and Poland are expected to be conducted during the course of the year. The Romanian competition authorities approved the sale of Real Rumania to Groupe Auchan on 29 July 2013. In Poland the approval is still subject to the approval from the relevant antitrust authorities. 

EBIT increased significantly to €83 million (H1 2012: €-4 million). This figure includes €92 million special items that resulted primarily from the sale of Real Eastern Europe. EBIT before special items decreased to €-9 million (H1 2012: €-6 million). EBIT increased considerably in Q2 2012, from €19 million to €106 million, due to positive special items. EBIT before special items fell from €17 million to €-2 million, mainly due to the missing EBIT contribution from Russia, as well as to sales decreases in Germany, additional price investments and the strike action. 
Real H1 2012
(€ billion)
H1 2013
(€ billion)
Change Change in local currency
Sales 5.3 5.0 -6.2% -6.2%
Germany 4.0 3.9 -1.4% -1.4%
Eastern Europe 1.4 1.1 -19.7% -19.7%
EBIT (before special items) -6 million -9 million -3 million  
Real Q2 2012
(€ billion)
Q2 2013
(€ billion)
Change Change in local currency
Sales 2.7 2.4 -11.5% -11.4%
Germany 2.0 1.9 -3.3% -3.3%
Eastern Europe 0.7 0.5 -34.5% -34.1%
EBIT (before special items) 17 million -2 million -19 million  

Media-Saturn

Although the overall market remained difficult in H1 2013, sales at Media-Saturn rose by 0.9% to €9.6 billion (in local currency: +1.0%). Media-Saturn thereby underpinned its position as European market leader and continued to ex-pand its market share in many countries. Sales only declined slightly in Q2 2013 despite the fact that Q2 2012 profited greatly from the effects of the European football championship. Online sales continued to grow dynamically, with sales rising by 76% to €565 million in H1 2013, accounting for 5.9% of total sales. The growth rate even amounted to more than 90% in Q2. British mobile phone specialist Carphone Warehouse and METRO GROUP are examining an extensive co-operation for the sale of mobile phone devices, contracts and services. Following a successful test phase at Media-Saturn in the Netherlands, now also the 17 Dutch wholesale stores of METRO's subsidiary MAKRO Cash & Carry are testing com-mon concepts with Carphone Warehouse. Opportunities for a co-operation are also being examined for the other METRO GROUP sales lines. In Germany, sales in H1 2013 rose by 2.5% to €4.5 billion. Like-for-like sales increased by 0.9%. Sales in Q2 declined by a slight 0.3% against a very high prior year base of comparison. The European football championship and the digital switchover of analogue satellite transmission drove sales of digital satellite set-top boxes and TV sets with integrated digital satellite receivers. Despite an overall shrinking market, Media-Saturn gained additional market shares in Q2.Customers continue to positively receive the multichannel offer. The online product range has been further expanded and now comprises more than 13,000 products at Mediamarkt.de and almost 19,000 at Saturn.de. The in-store pickup rate remained high at approximately 40%. In H1 2013, sales in Western Europe decreased by 1.8% to €3.9 billion (in local currency: 1.8%). The difficult economic environment continued to significantly impact demand for consumer electronics, particularly in Southern Europe. Against this backdrop, Media-Saturn was nevertheless able to selectively increase its mar-ket shares. The sales development in Q2 was better than in Q1. In Eastern Europe, sales in H1 2013 increased significantly by 8.3% to €1.3 billion (in local currency: +9.2%). The sales development at Media-Saturn in Q2 was similar to that seen in Q1. 

EBIT in H1 2013 amounted to €-104 million (H1 2012: €-79 million) and included €4 million positive special items. EBIT before special items fell to €-108 million (H1 2012: €-79 mil-lion). In Q2, EBIT before special items amounted to €-94 million (Q2 2012: €-59 million). This is a reflection of price investments to gain additional market shares as well as lower advertising subsidies. 
Media-Saturn H1 2012
(€ billion)
H1 2013
(€ billion)
Change Change in local currency
Sales 9.5 9.6 0.9% 1.0%
Germany 4.4 4.5 2.5% 2.5%
Western Europe (excluding Germany) 3.9 3.9 -1.8% -1.8%
Eastern Europe 1.2 1.3 8.3% 9.2%
Asia (China) 0.1 0.0 -69.0% -69.2%
EBIT (before special items) -79 million -108 million -29 million  
Media-Saturn Q2 2012
(€ billion)
Q2 2013
(€ billion)
Change Change in local currency
Sales 4.5 4.5 -0.3% -0.1%
Germany 2.1 2.1 -0.3% -0.3%
Western Europe (excluding Germany) 1.9 1.8 -0.8% -0.9%
Eastern Europe 0.6 0.6 7.6% 9.4%
Asia (China) 0.0 0.0 - -
EBIT (before special items) -59 million -94 million -35 million  

Galeria Kaufhof

Sales at Galeria Kaufhof declined slightly by 1.3% to €1.4 billion in H1 2013. However, like-for-like sales were up 0.8% year on year. Although the cold weather lasted for a long period and led to a slump in sales in the textile market, Galeria Kaufhof still gained additional market shares. Q2 also developed very positively – despite the Easter shift. In Germany, sales at Galeria Kaufhof, the market leader in the German department store business, fell by 1.3% to €1.3 billion in H1 2013. This was due to the store closures in the previous year. However, like-for-like sales increased by 0.9%. The positive sales development continued in Q2, despite the earlier Easter business, unfavourable weather conditions and strike action at a number of stores. Galeria Kaufhof gained additional market shares. The modernised webshop also continued to perform very well, with sales more than doubling. Sales in Western Europe fell by 1.4% from January to June 2013. However, the sales development picked up in Q2 against Q1 and was almost on par with the previous year's level. Busi-ness profited from a good textile sales development. 

EBIT fell in H1 2013 from €-23 million to €-34 million. However, EBIT before special items increased from €-23 million to €-19 million. In Q2 2013, EBIT decreased to €-11 million (Q2 2012: €1 million). This figure primarily includes expenses of €15 million incurred for the three planned closures in Düsseldorf, Heilbronn and Augsburg; the rental contracts for these stores, which expire between the end of 2014 and the end of 2015, will not be renewed. Galeria Kaufhof generated positive earnings in Q2 thanks to EBIT before special items of €4 million, thereby clearly increasing on the previous year’s quarter by €3 million. In addition to a higher gross profit from an improved margin mix, the rise is also a result of further strict cost management. 
Galeria Kaufhof H1 2012
(€ billion)
H1 2013
(€ billion)
Change
Sales 1.4 1.4 -1.3%
Germany 1.3 1.3 -1.3%
Western Europe 0.1 0.1 -1.4%
EBIT (before special items) -23 million -19 million +4 million
Galeria Kaufhof Q2 2012
(€ million)
Q2 2013
(€ million)
Change
Sales 686 679 -1.0%
Germany 644 638 -1.1%
Western Europe 41 41 -0.3%
EBIT (before special items) 1 million 4 million +3 million

Real Estate

The Real Estate segment comprises all real estate assets of METRO GROUP as well as real estate-related services. As per 30 June 2013, METRO GROUP owned 610 locations (31 December 2012: 620). 

Earnings of the Real Estate segment mainly constitute rental income from the sales lines of METRO GROUP. EBIT amounted to €300 million compared to €237 million in the previous year. The positive special item relates to income from the closing of the sale of Real Russia, which more than offset the risk provisions from the effects of the insolvency of Praktiker. EBIT before special items amounted to €276 million (H1 2012: €282 million). 

METRO GROUP is one of the largest and most international retailing companies. In 2012 the Group reached sales of around €67 billion. The company has a headcount of more than 280,000 employees and operates around 2,200 stores in 32 countries. The Group's performance is based on the strength of its sales brands which operate independently in their respective market segment: METRO/MAKRO Cash & Carry – the international leader in self-service wholesale, Real hypermarkets, Media Markt and Saturn – European market leader in consumer electronics retailing, and Galeria Kaufhof department stores.