Earnings position outlook: outlook for METRO

METRO continues its long-term strategy of focusing on and, in particular, on and customers. Against this background, we will continue to put emphasis on simplifying and streamlining our portfolio in the coming year. This includes in particular the closing of the sale of a majority stake in METRO China and the sale of our Real hypermarket business. METRO expects to generate a net cash inflow of more than €1 billion upon completion of the sale of METRO China (expected in the first half of 2020, subject to regulatory approvals). The remaining minority stake in METRO China will be reported as at-equity investment in the Asia segment. For the hypermarket business, METRO expects a successful closing of the transaction shortly. Neither METRO China nor the hypermarket business is included in the outlook either before or after completion of the transactions.

As announced in November 2019, we are also planning to implement a number of efficiency measures in the coming financial year 2019/20. These measures concern in particular the simplification of administrative structures, processes and business activities. The measures will be associated with estimated one-time costs of €60 million to €80 million in 2019/20 and estimated sustainable savings in the mid-double-digit million euro range through an increase in operating performance. The associated costs from efficiency measures will be reported separately as transformation costs. The outlook is made before such transformation costs. Expected pro rata savings in 2019/20 in the low-double-digit million euro range are reflected in the outlook.

METRO’s strategy further includes strengthening and expanding its core business, wholesale, in become a ‘360-degree supplier’ – the Wholesale 360 approach. This includes further localisation of the business, expansion of our delivery business, development of new channels and customers (for example via the online marketplace METRO MARKETS) as well as an increase in customer loyalty and an associated enhanced exploitation of customer potential, for example through digital solutions. In addition, we plan to selectively expand our business activities through acquisitions. The mergers and acquisitions activities should thereby focus on companies that increase our presence in a market (densification) and thus contribute to market consolidation. The outlook does not include such potential mergers and acquisitions transactions.

We also continue to implement our sustainability goals defined on the basis of the UN . The focus is on reducing food waste, making our range of products and services more sustainable and promoting more conscious consumption.

The outlook is based on the current segment structure. Unlike in the , METRO China has been reported as a discontinued operation since 30 September 2019, so that the composition of the Asia segment has changed in this respect. In addition, changes in key figures resulting from the first-time application of 16 (see also the respective specifications in the notes to the group accounting principles and methods) are initially not taken into account in the outlook. METRO will finalise the retrospective adjustments as planned in the first quarter of 2019/20. Based on that, METRO will publish a reconciliation of the relevant key figures, which shows both the old and the new standard, prior to our next quarterly statement and update the outlook accordingly.

Outlook of METRO

The outlook is based on the assumption of stable exchange rates and no further adjustments to the portfolio and only covers METRO's continuing operations. The main opportunities and risks that could influence our outlook are explained in the opportunity and risk report. The achievement of our sales and earnings outlook is further based on our assumptions for 2019/20 regarding macroeconomic developments.

Sales

Due to the advancing and successful focus on the HoReCa and Traders customer groups, the Management Board expects total sales and like-for-like sales to grow by 1.5% to 3% in financial year 2019/20 (2018/19: 2.2% growth of total sales and 2.1% growth of like-for-like sales). As a consequence of this focus, a further trend improvement is expected in Russia. Germany is expected to show a flat sales development, while the Western Europe (excluding Germany), Eastern Europe (excluding Russia) and Asia segments are expected to grow at the previous year's level. Across all segments, the Management Board sees the delivery business in particular and the synergetic interaction of the various channels as well as the focus on HoReCa and Traders customers as growth drivers.

Earnings

An important focus of METRO is on increasing operating performance and portfolio simplification. Against this background, the Management Board announced to adopt various measures on 19 November 2019. In financial year 2019/20, the Management Board expects this to result in one-time transformation costs of €60 million to €80 million. Before transformation costs for these efficiency measures, the Management Board expects excluding earnings contributions from real estate transactions to be roughly at the level of the past financial year (2018/19: €1.021 million). Earnings in Russia are expected to decline by between €20 million and €30 million as a result of the ongoing repositioning. Earnings growth in Germany and Western Europe (excluding Germany) is expected to compensate for this. For the remaining segments, EBITDA is expected to remain roughly at the previous year's level.

 

2018/19

Outlook 2019/201

1

At constant exchange rates, excluding further portfolio adjustments and transformation costs.

Sales trend (like-for-like)

2.1%

1.5%−3% growth

METRO Germany

0.3%

Stable sales development

METRO Western Europe (excl. Germany)

1.3%

Previous year’s level

METRO Russia

−4.3%

Trend improvement

METRO Eastern Europe (excl. Russia)

6.3%

Previous year’s level

METRO Asia

5.3%

Previous year’s level

Sales trend in local currency

2.2%

1.5%−3% growth

METRO Germany

−0.6%

Stable sales development

METRO Western Europe (excl. Germany)

1.3%

Previous year’s level

METRO Russia

−3.3%

Trend improvement

METRO Eastern Europe (excl. Russia)

6.4%

Previous year’s level

METRO Asia

7.3%

Previous year’s level

EBITDA excluding earnings contributions from real estate transactions in € million

1,021

Previous year’s level

METRO Germany

95

Earnings growth

METRO Western Europe (excl. Germany)

499

Earnings growth

METRO Russia

220

Decline between €20 million and €30 million

METRO Eastern Europe (excl. Russia)

344

Previous year’s level

METRO Asia

11

Previous year’s level

Others

−148

Previous year’s level

Wholesale, METRO Wholesale
The METRO Wholesale segment comprises the METRO Wholesale sales line of METRO AG with 678 wholesale stores across 34 countries worldwide. This also includes the delivery business (Food Service Distribution) with the METRO delivery service and companies like the delivery specialists Classic Fine Foods, Pro à Pro and Rungis Express.
Glossary
HoReCa
Short for hotel, restaurant and catering businesses. The HoReCa segment is an important customer group for METRO Wholesale.
Glossary
Traders
The term ‘Traders’ at METRO Wholesale refers to the customer group of independent resellers such as operators of small grocery stores and kiosks, street food vendors, gas stations and wholesalers.
Glossary
Sustainable Development Goals (SDGs)
Under the title ‘Transforming our world: the 2030 Agenda for Sustainable Development’, the United Nations established political goals that are aimed at the entire international community, companies and private individuals. The agenda has formulated 17 main objectives that take into account all 3 dimensions of sustainability: economic, social and environmental. METRO is aware of its responsibility and contributes to the achievement of the goals.
Glossary
Previous year
Period of 12 months, usually cited as reference for statements in an annual report.
Glossary
IFRS (International Financial Reporting Standards)
Internationally applicable rules for financial reporting developed by the IASB. Contrary to the accounting rules under the German Commercial Code, the IFRS emphasise the informational function.
Glossary
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation)
Profit or loss before interest result, income taxes, depreciation/amortisation/impairment losses/reversals of impairment losses on property, plant and equipment, intangible assets and investment properties. This key figure serves the purpose of comparing companies with accounting systems that follow different accounting rules.
Glossary