Expected earnings situation: outlook for METRO GROUP and its segments in 2013 and 2013/14
Change of financial year
On 23 May 2012, the Annual General Meeting of METRO AG took the decision to change, effective 1 October 2013, the financial year at METRO AG from the calendar year to the period of 1 October to 30 September of the following calendar year. For this reason, a short financial year extending from 1 January 2013 to 30 September 2013 will be used this year. In a reflection of this decision, this forecast report addresses both the short financial year 2013 (1 January to 30 September 2013) as well as the next financial year 2013/14 (1 October 2013 to 30 September 2014). Statements made about the short financial year 2013 are based on a comparison with the 9-month period of January to September 2012. Statements made about the financial year 2013/14 are based on a comparison with the period of 1 October 2012 to 30 September 2013.
It is possible to compare the short financial year with the same period in the previous year only to a limited extent due to portfolio actions taken or announced in 2012. This applies in particular to
- the deconsolidation of MAKRO Cash & Carry’s UK activities on 30 September 2012 with retroactive effect from 4 July 2012,
- the divestment of Real’s activities in Eastern Europe (excluding Turkey), an action that has already been contractually agreed on, but that is still awaiting approval by antitrust authorities and
- the discontinuation of Media Markt’s business in China.
Expected sales development at METRO GROUP in 2013 and 2013/14
For the short financial year 2013, we expect – in spite of the continuing difficult business conditions described above – to generate moderate growth in sales (adjusted for the previously described portfolio changes). In the subsequent financial year 2013/14, we expect to see this moderate growth in sales continue compared with the respective period for the previous year. These projections are based on the assumption of virtually unchanged exchange rates.
Expected earnings development at METRO GROUP in 2013 and 2013/14
Earnings trends in the abbreviated financial year 2013 will be impacted by the uncertain economic situation described earlier. As a result, we will continue to closely focus in 2013 and future years on efficient structures and strict cost management.
In the short financial year 2013, we expect EBIT before special items to increase compared to the level achieved in the corresponding period of the previous year (€704 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.
Barring a sustained deterioration of economic parameters, we expect to generate higher EBIT before special items in the financial year 2013/14 compared to the corresponding period of the previous year.
Expected sales development of the segments of METRO GROUP in 2013 and 2013/14
In our forecast for the segments, we are applying the previously discussed expectations regarding general economic conditions and specific sector trends. In the process, we are comparing the short financial year 2013 with the respective period of the previous year (1 January to 30 September 2012). The comparisons made for the financial year 2013/14 (1 October 2013 to 30 September 2014) apply to the period of 1 October 2012 to 30 September 2013.
At METRO Cash & Carry, we expect limited sales growth in the short financial year 2013 (adjusted for the cash & carry business in the UK) and another small increase in sales during the financial year 2013/14.
At our hypermarket business Real (adjusted for Real Eastern Europe excluding Turkey), we expect to generate a moderate increase in sales during the short financial year 2013 and another small increase in sales during the financial year 2013/14.
At Media-Saturn, Europe’s leading consumer electronics retailer, we expect sales generated during the short financial year 2013 to rise slightly (adjusted for Media-Saturn in China) and project another increase in sales in the financial year 2013/14.
At our department store business Galeria Kaufhof, we expect sales during the short financial year 2013 to remain roughly at the previous year’s level in spite of 4 store closings in mid‑2012. For the financial year 2013/14, we expect to generate a small increase in sales.
Expected EBIT development of the segments of METRO GROUP in 2013 and 2013/14
The short financial year 2013 will not include the Christmas quarter that plays such a major role in EBIT. This will have a significant impact on the operative sales lines where the nonfood business plays an important role. For this reason, EBIT before special items in the short financial year 2013 will be determined in particular by METRO Cash & Carry and the real estate business. Barring a sustained deterioration of economic parameters, we expect a slight increase in earnings in all segments in the financial year 2013/14 compared to the corresponding period of the previous year.
Expected development of the financial result
In terms of the financial result, we expect to see a slight improvement during the short financial year 2013 due to the low level of interest rates. Compared with the respective period in the previous year, this improvement should continue in the financial year 2013/14.
Expected tax burden
For the short financial year 2013, we expect an above-average tax rate. This will arise primarily from the lower pre-tax result in the short financial year – due to the absence of the Christmas business. By contrast, tax expenses will be relatively high because no tax benefit from the measurement of domestic tax losses can be considered. A comparison between the tax rate of the 9-month period of 2012 and the expected tax rate of the short financial year is not possible. The reason is that taxes are determined during quarterly reporting under the rules of interim reporting using the so-called integral approach. Under this approach, the reported tax expenses correspond to the forecast tax rate for the year and cover a 12-month period. But the tax result in the short financial year covers 9 months. We expect a lower tax rate in the financial year 2013/14.
In the context of a dynamic dividend policy, the size of dividend payouts principally depends on the development of net profit for the period before special items. In future, we intend to continue to distribute a competitive and attractive dividend. But METRO GROUP generates a large share of its earnings in the final quarter of the calendar year. This all-important quarter will not be included in the short financial year 2013.
Expected employee development
The workforce of METRO GROUP will decrease largely as a result of the portfolio changes. This decline will be only partially offset by new store openings.