Annual report 2014

METRO GROUP

FRANZ HANIEL & CIE. GMBH
The METRO GROUP made additional progress in its strategic realignment and increased revenue adjusted for business combinations and disposals as well as currency translation effects. However, operating profit decreased due to one-off expenses, negative currency translation effects, portfolio measures as well as lower income from property sales. Therefore, the Haniel Group’s investment result from the METRO GROUP was significantly below that of the previous year.

STRATEGIC REALIGNMENT CONTINUES

The strategic objective of the METRO GROUP is to create added value for the customer. In order to achieve this objective it intends to expand its supply and multi-channel activities, improve product ranges and strengthen own brands. The METRO GROUP made further progress in all of these measures in 2014. For example, METRO Cash & Carry increased revenue significantly from its delivery business, which is now offered in all sales countries. In addition METRO Cash & Carry made additional investments in its own delivery warehouses, from which parts of the delivery business are settled. Online revenue at Media-Saturn was also increased significantly. This is attributable in part to the expansion and close networking of the sales channels at Media-Markt and Saturn. For example, customers can order merchandise online, and if available, pick it up the same day at the store or use services there. On the other hand, pure GROUPonline offerings are being further expanded, in particular under the Redcoon brand. Real further increased the revenue share of own brands primarily by adding to the product portfolio.

ADJUSTED REVENUE HIGHER

The METRO GROUP ’s revenue fell by 4 per cent in 2014 to EUR 62,625 million. The primary causes for this were negative currency translation effects as well as the disposal of the Real’s eastern European business. Adjusted for business combinations and disposals as well as currency translation effects, revenue increased by 2 per cent. One particular reason for this was the expansion of the international location network: METRO GROUP opened 55 new locations in nine countries during the financial year. The Christmas business was also positive overall in 2014.

Revenue at Metro Cash & Carry fell by 3 per cent. The decisive cause of this was negative currency translation effects, in particular as a result of the exchange rate trend of the Russian rouble. Adjusted for currency translation effects, however, revenue increased. This was due in part to international expansion, above all in China and Russia, and also to slight organic growth. The drivers here were Asia and eastern Europe, including Russia. Development in Germany was stable, while revenue fell in the other western Europe.

Media-Saturn increased revenue by 1 per cent – despite negative currency translation effects in particular as a result of the development of the rouble. The expansion of the distribution chain, in particular in eastern Europe, was of decisive importance here. Following somewhat restrained development in the first nine months of the year, organic revenue growth edged into the black due to positive Christmas business in all regions. However, development in Germany, the core country, declined slightly overall.

The disposal of Real’s eastern European business in Romania, Russia and Ukraine was completed in 2013; Poland and Turkey followed in 2014. This resulted in a significant decline in revenue for the sales line Real. In the remaining business in Germany, revenue fell slightly due to location closings. Organic revenue growth remained stable, however. The intense competition, in particular by discounters, was countered by successfully modernising numerous locations.

Revenue from Galeria Kaufhof was at the previous year’s level. Here, the positive development of the online business offset the rather weak textiles business selling winter wear.

ONE-OFF EXPENSES WEIGH DOWN OPERATING PROFIT

The METRO GROUP’s operating profit was EUR 1,187 million in 2014, following EUR 1,797 million in the previous year. The reason for this decrease was higher one-off expenses in 2014, stemming primarily from write-downs on goodwills at Metro Cash & Carry, Real store closures and restructuring measures at Media-Saturn.

Adjusted for one-off expenses, the operating profit declined from EUR 1,801 million to EUR 1,678 million. This was due primarily to negative currency translation effects, the missing earnings contribution from Real’s eastern Europe business, which was sold off, and lower income from property sales. This was offset by cost savings and improved margin, in particular at Media-Saturn. On a like-for-like basis, the operating profit was above the previous year’s level.

LOWER EARNINGS CONTRIBUTION FOR HANIEL

The significant decrease in the METRO GROUP’s operating profit had a proportionately negative impact on the investment result the Haniel Group derives from the METRO GROUP. Despite the METRO GROUP’s improved result from financing activities and lower tax expense, its investment result declined from EUR 96 million in the previous year to EUR 14 million in 2014. The improvement in the METRO GROUP’s result from financing activities was due to in particular lower indebtedness as well as income from the disposal of the equity interest in Booker Group PLC.

SIMPLIFICATION OF THE METRO SHAREHOLDING STRUCTURE

Haniel ended the pooling agreement with the Schmidt-Ruthenbeck family as at 31 October 2014. This agreement primarily served to pool voting rights and was a structure which was effectively not required. The ending of the pooling agreement allowed the shareholding structure in METRO AG to be simplified significantly.

FRANZ HANIEL & CIE. GMBH