Outlook

Future development of METRO

METRO continues its long-term strategy of focusing on wholesale and, in particular, on HoReCa and Traders 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 Sustainable Development Goals. 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 previous year, 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 IFRS 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 to 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 efficiency 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 EBITDA 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 years level.