Solid sales and resilient earnings trend in spite of macroeconomic challenges

11 February 2016

  • Like-for-like sales increased by 0.1%
  • Reported EBIT rose noticeably to €1,240 million (Q1 2014/15: €876 million)
  • EBIT before special items: €828 million (Q1 2014/15: €891 million) including negative currency effects (about €40 million)
  • EPS before special items: €1.12 (Q1 2014/15 from continuing operations: €1.10)
  • Net debt improves considerably year on year from €1.5 billion to €0.1 billion  
  • New reporting structure at METRO Cash & Carry: customer groups replace regions
  • Guidance confirmed for financial year 2015/16

In the first quarter of financial year 2015/16, METRO GROUP made significant progress in reducing debt, thereby further improving its financial situation. Within the space of one year, net debt fell from €1.5 billion to €0.1 billion, the lowest level in the history of METRO AG. The very good Christmas business made a contribution to this performance, especially in the Group’s home market of Germany, where it generated significant sales growth. Like-for-like Group sales increased slightly - by 0.1 per cent - year on year in Q1 2015/16. METRO GROUP’s reported EBIT rose significantly to €1,240 million thanks to the successful closing on the sale of the Cash & Carry business in Vietnam. EBIT before special items fell from €891 million to €828 million, due mainly to negative currency effects of around €40 million. "In terms of reported earnings, we managed to post significant gains as a result of the closing on the sale of METRO C&C Vietnam, thereby further strengthening our balance sheet and our financial position. Operating performance, especially with regard to like-for-like sales at METRO Cash & Carry and Media-Saturn, was very pleasing despite economic headwind in some countries. This illustrates clearly that we succeeded in growing more attractive for our customers overall," said Olaf Koch, Chairman of the Management Board of METRO AG. "However, the volatile exchange rates and the previous year’s pull-forward effects on sales in Russia had an negative impact on earnings. For the full year, I remain confident on account of the positive developments in many countries that we will meet our sales and earnings targets for METRO GROUP."

METRO GROUP achieved a slight increase in like-for-like sales of 0.1% in the first quarter of 2015/16. Like-for-like sales at METRO Cash & Carry and Media-Saturn maintained their positive momentum, while sales at Real declined. The overall favourable development during the Christmas quarter of 2015 offset the pull-forward effects due to the rouble crisis that are included in the previous year's figure. METRO GROUP sales in local currency also increased by 0.1%. However, exchange rate developments - particularly relating to the Russian rouble - and portfolio effects caused reported sales to decline by 1.3% to €17.1 billion (Q1 2014/15: €17.3 billion).


METRO GROUP
Q1 2014/15
(€ million)
Q1 2015/16
(€ million)
Change
(€)
Sales
17,318
17,090 -1.3%
Germany
6,775
6,809 0.5%
International
10,543
10,281 -2.5%
International share of sales
60.9%
60.2% -

During the first quarter of 2015/16, EBIT at METRO GROUP amounted to €1,240 million (Q1 2014/15: €876 million) and included income of €427 million from the sale of METRO Cash & Carry Vietnam. This income represents a special item. EBIT before special items amounted to €828 million (Q1 2014/15: €891 million). The decline is particularly due to exchange rate losses of about €40 million related to the rouble.

In the first quarter of 2015/16, earnings before taxes (EBT) amounted to €1,106 million (Q1 2014/15: €773 million). Before special items, earnings before taxes totalled €724 million (Q1 2014/15: €781 million).

Profit for the period in Q1 2015/16 totalled €597 million (Q1 2014/15: €459 million). Before special items, profit for the period amounted to €417 million (Q1 2014/15: €501 million). Profit for the period attributable to shareholders of METRO AG amounted to €367 million (Q1 2014/15: €445 million).

In the first quarter of 2015/16, earnings per share amounted to €1.68 (Q1 2014/15 from continuing operations: €0.98). Adjusted for special items, earnings per share amounted to €1.12 (Q1 2014/15 from continuing operations: €1.10).

 

   Before special items
After special items
METRO GROUP earnings (€ million) Q1 2014/15 Q1 2015/16  Q1 2014/15
Q1 2015/16
EBIT
891 828  876 1,240
Earnings before tax
781
724
 773 1,106
Profit for the period from continuing activities
416 417  374 579
Profit for the period from discontinued activities after tax 85
0  85 0
Profit for the period 501 417  459 597
Profit for the period attributable to shareholders of METRO AG
445
367  404 549
thereof from continuing operations
360
367  319  549
thereof from discontinued operations
85
0  85 0
Earnings per share (€) 1.36
1.12  1.24 1.68
thereof from continuing operations
1.10
1.12  0.98 1.68
thereof from discontinued operations
 0.26 0.00  0.26 0.00

As of 31 December 2015, net debt of METRO GROUP improved markedly from €1.5 billion to €0.1 billion compared with the previous year. This was the lowest net debt recorded in the history of METRO AG. In addition, this figure does not include cash inflow from the sale of METRO Cash & Carry Vietnam in the amount of €0.4 billion, which was recorded at the beginning of January 2016 and thus during the second quarter of 2015/16.

 

Outlook

The METRO GROUP forecast is based on the current group structure and refers to currency-adjusted figures. In addition, it is based on the assumption of a persistently complex geopolitical situation.

For financial year 2015/16, METRO GROUP continues to expect a slight increase in overall sales, despite the persistently challenging economic environment.

In like-for-like sales, METRO GROUP foresees a slight increase that will follow the 1.5% gain in the previous year. METRO Cash & Carry and Media-Saturn are expected to be the key drivers of total sales and like-for-like sales growth; METRO GROUP projects an improvement compared with the previous year for the Real sales line.

In financial year 2015/16, earnings development will also be shaped by the persistently challenging economic environment. Nevertheless, METRO GROUP remains confident that it can continue its earnings growth as a result of the progress it has made and will continue to make in transforming its business models. Aside from operational improvements, METRO GROUP will again closely focus on efficient structures and strict cost management in 2015/16 in this context.

For these reasons, METRO GROUP expects EBIT before special items to rise slightly above the €1,511 million achieved in financial year 2014/15, including income from real estate sales. METRO Cash & Carry and Media-Saturn are expected to be the key drivers of the increase. Developments at the Real sales line will depend on the successful implementation of the measures that have been initiated.

 

METRO Cash & Carry

METRO Cash & Carry launched the New Operating Model in financial year 2014/15 to improve its business steering. In the context of the introduction of the new management model, the individual METRO Cash & Carry countries were divided into the following segments:

  • Horeca: focusing on hotels, restaurants, catering firms
  • Multispecialists: focusing on Horeca, traders and service companies and offices
  • Trader: focusing on independent resellers such as kiosk operators, bakers and butchers
  • Others: trading offices and countries from which METRO Cash & Carry has withdrawn in order to allow comparability.  

This categorisation was guided by the respective national subsidiary's strategic focus on customer groups and expected market potential. With nearly half of the entire sales, the Horeca segment currently accounts for the largest share of METRO Cash & Carry sales. Under the New Operating Model, strategy and financial planning (Value Creation Plans) starts with the customer and the various market segments with the objective of identifying and exploiting the additional potential for METRO Cash & Carry in the individual countries. To achieve this objective, the company specifically aims to better understand the requirements of selected key customer groups to support the transformation from a transaction-based partner into a systemically important partner.

Starting in the first quarter of 2015/16, sales and earnings of METRO Cash & Carry are reported based on this new structure. The new segments thus replace the previous reporting regions of Germany, Western Europe, Eastern Europe and Asia/Africa. The Horeca segment includes France, Germany, Italy, Japan, Portugal, Spain, Turkey and Classic Fine Foods. The multispecialists segment covers Austria, Belgium, Bulgaria, China, Croatia, India, Kazakhstan, Netherlands, Pakistan, Russia, Serbia, Slovakia, Czech Republic and Hungary. The trader segment includes Moldavia, Poland, Romania and Ukraine.

Like-for-like sales of METRO Cash & Carry increased by 0.2% during the first quarter of 2015/16, making this the 10th consecutive quarter with a positive sales trend. Measured in local currency, sales rose by 0.4%. Reported sales declined by 2.0% to €8.0 billion. However, it should be noted that portfolio effects had a negative impact on sales.

METRO Cash & Carry's delivery sales continued to develop dynamically, with sales rising by 18.6% to €0.9 billion. As a result, delivery sales accounted for 10.8% of total sales.

Like-for-like sales in the Horeca segment rose by 1.5%. Sales in local currency increased by 3.5%. Reported sales increased by 2.7%. As the largest Horeca country, Germany posted markedly higher sales. Sales were boosted, in particular, by the Christmas business in December. A successful customer offensive that included numerous marketing and communication initiatives supported this positive development. However, sales in Germany also increased over the quarter as a whole. Like-for-like sales developed positively in Turkey, Italy and Spain.

Like-for-like sales in the multispecialists cluster declined by 1.9%. Measured in local currency, sales rose by 0.3%. Conversely, reported sales declined by 3.5%. During the first quarter of the previous year, sales in the multispecialists segment had profited from pull-forward effects in Russia in the context of the rouble crisis. Sales declined compared with this high reference value for the previous year. Overall, however, METRO Cash & Carry performed well in a difficult economic environment in Russia. Like-for-like sales in China only declined slightly despite weaker economic growth and the decision to forgo low-margin volume business. In contrast, like-for-like sales improved in Hungary and India, but declined in Belgium and Pakistan.

Like-for-like sales in the trader segment increased by 3.4%. Lower sales in Poland were more than offset by the positive trend in Romania and Ukraine. Sales in local currency also increased by 3.4%. Conversely, reported sales declined by 2.1% due to currency effects.

During the first quarter of 2015/16, EBIT of METRO Cash & Carry amounted to €877 million (Q1 2014/15: €485 million). This figure includes the sale of METRO Cash & Carry Vietnam as a special item. EBIT before special items amounted to €458 million (Q1 2014/15: €481 million). This decline is due mostly to negative currency effects of about €30 million, which relate particularly to Russia. However, METRO Cash & Carry's EBIT improved in local currency terms.

 

Metro Cash & Carry
Q1 2014/15
(€ million)
Q1 2015/16
(€ million)
Change
(€)
Change (in local currency)
  Like-for-like (in local currency)
Total sales
8,197 8,037
-2.0% 0.4% 0.2%
Horeca 3,702 3,801 2.7% 3.5% 1.5%
Multispecialists 3,468 3,345 -3.5% 0.3% -1.9%
Trader 784 767 -2.1% 3.4% 3.4%
Others
243 124
- - -
EBIT before special items 481
458
€-23 m    

Media-Saturn

Like-for-like sales of Media-Saturn rose by 0.4% in the first quarter of 2015/16 compared with the previous year's quarter. This 6th consecutive quarterly sales increase was particularly pleasing as substantial pull-forward effects in Russia in the first quarter of 2014/15 had boosted sales during that quarter. Media-Saturn's sales in local currency rose by 1.1% while reported sales improved by 0.2% to €6.9 billion due to the effect of currency translation.

During the Christmas quarter, online sales increased by another 12.0% to €0.6 billion. The multichannel business of the Media Markt and Saturn sales lines posted strong growth while sales of Redcoon retreated. The new strategic focus had a negative effect here.

In Germany, like-for-like sales increased markedly by 2.8% during the first quarter of 2015/16. Reported sales rose by as much as 3.2% compared to an already strong Christmas business in the previous year's quarter. As a result, Media-Saturn continued to gain market share.

As an integral component of Media-Saturn's business, the multichannel offering continued its very positive development. The online product range was expanded once again. At the end of December 2015, it consisted of about 217,000 items at Mediamarkt.de and about 194,000 at Saturn.de.

In October 2015, one Saturn Connect store each was opened in Trier and Cologne. This new format with selling space of 300 sqm to 700 sqm targets technophile consumers in inner-city locations with high footfall. The assortment focuses on digital lifestyle products and is categorised into four theme worlds: Connected Mobile (telephone, notebooks, tablets), Connected Home (products and solutions for the networked home), Connected Fitness (wearables, action cameras, wellness products) and Connected Discovery (virtual reality glasses and appcessoires). Aside from the product assortment, the stores also provide comprehensive consulting and other services. Shortly after the opening of the first stores, the German Retail Federation (HDE) awarded the new format the quality seal "Store of the Year 2016" in the category "Out of Line".

Like-for-like sales in Western Europe increased by 0.3%, supported by very positive trends in several countries. Measured in local currency, sales rose by 1.7%. Reported sales even rose by 2.6%. Like-for-like sales developed very positively in the Netherlands and Spain while sales declined in Italy and Switzerland.

Like-for-like sales in Eastern Europe retreated by 8.1%. In this region, Russia had profited from substantial pull-forward effects at the peak of the rouble crisis in December 2014. As a result, sales in this country declined noticeably during the Christmas quarter 2015. Even double-digit like-for-like sales growth in Turkey could not compensate for the decline in Russia.

During the first quarter of 2015/16, EBIT of Media Saturn declined from €344 million to €301 million. This figure includes special items totalling €7 million (Q1 2014/15: €5 million). EBIT before special items declined from €349 million to €309 million. Negative currency effects contributed to this development. In additionthe strong result in Russia due to pull-forward effects during the previous year's quarter was a reason for this year-to-year decline. Furthermore, the repositioning of Redcoon made an impact. Media-Saturn offered its customers attractive marketing measures and prices to gain market share. As a result, the sales line added market share in 9 out of 15 countries, with substantial gains in several of these markets.



Media-Saturn Q1 2014/15
(€ million)
Q1 2015/16
(€ million)
Change
(€)
Change
(in local currency)
Like-for-like
(in local currency)
Sales
6,875 6,889 0.2% 1.1% 0.4%
Germany
3,189 3,291 3.2% 3.2% 2.8%
Western Europe (excl. Germany) 2,688 2,758 2.6% 1.7% 0.3%
Eastern Europe
998 840 -15.8% -8.0% -8.1%
EBIT before special items 349 309  €-40 m  -  -

Real

Real's like-for-like sales declined by 1.6% during the Christmas quarter. Due mostly to store closures, reported sales retreated by 3.9% to €2.1 billion compared with the previous year's quarter.

In an environment characterised by intense competition and deflationary price trends, food sales were nearly stable in year-to-year comparison while non-food sales declined. The unusually warm winter weather weighed on weather-dependent assortments in particular. Online sales developed very positively with an increase of more than 70%. However, this increase only partially offset the sales drop in the store-based business.

During the first quarter of 2015/16, EBIT of Real amounted to €84 million (Q1 2014/15: €74 million). This figure includes special items totalling €-1 million (Q1 2014/15: €10 million). EBIT before special items amounted to €83 million (Q1 2014/15: €84 million). Closures of loss-making stores during the previous year, better procurement terms and payment settlement by Markant offset the negative effects of the decline in like-for-like sales.

 

Real Q1 2014/15
(€ million)
Q1 2015/16
(€ million)
Change
(€)
Change
(in local currency)
Sales
2,231 2,144 -3.9% -1.6%
EBIT before special items 84 83 €-1 m  

 

 

METRO GROUP is one of the most important international retailing companies. It generated sales of some €59 billion in financial year 2014/15. The company operates over 2,000 locations in 29 countries and employs more than 220,000 people. The performance of METRO GROUP is based on the strength of its sales brands, which act independently on the market: METRO/MAKRO Cash & Carry, the international leader in the self-service wholesale trade; Media Markt and Saturn, the European market leader in consumer electronics retailing; and Real hypermarkets.