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CECONOMY AG

Quarterly Report Aug 31, 2017

75_10-q_2017-08-31_73757872-a72d-4ef6-85d2-217e41428650.pdf

Quarterly Report

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QUARTERLY STATEMENT Q3/9M 2016/17

  • About us
  • 3 Acquisition of around 24% of FNAC DARTY S.A.
  • 3 Positive sales and profit performance in Q3 4 Overview

INTERIM GROUP MANAGEMENT REPORT

  • 5 Results of operations, financial position and net assets
  • Discontinued operations
  • Events after the reporting date
  • Outlook
  • Store network
  • 13 Reconciliation of special items from continuing operations
  • Reconciliation of individual special items

19 INTERIM CONSOLIDATED FINANCIAL STATEMENTS

  • Income statement
  • Balance sheet
  • Cash flow statement
  • Segment reporting Q3 2016/17
  • Segment reporting 9M 2016/17
  • Financial calendar
  • General information
  • Disclaimer

Split of METRO GROUP completed

On 12 July 2017, the District Court [Amtsgericht] Düsseldorf entered the hive-down and spin-off of the wholesale and food retail business in the Commercial Register. The hive-down and spin-off thus became legally valid as ofthat date.On 13 July 2017, CECONOMY AG (formerly METRO AG) was listed independently on the stock exchange for the first time. The name change from METRO AG to the current CECONOMY AG took place on 11 August 2017.

Accordingly, this quarterly statement for the period ending 30 June 2017 was prepared by what is now CECONOMY AG (formerly METRO AG). The information provided below always uses the name that was valid at the time of publication of this quarterly statement on 31 August 2017 – CECONOMY AG when referring to the company and CECONOMY when referring to the Group as a whole – notwithstanding explicit deviations in exceptional cases. The consumer electronics business, which primarily consists of the Media-Saturn sales line together with the relevant holding functions, is recognised as continuing operations of CECONOMY. Discontinued operations of CECONOMY include, above all, the METRO Cash & Carry and Real sales lines, together with their real estate and the associated management and service operations.

About us

CECONOMY is Europe's leading platform that brings together various businesses, concepts, formats and brands in the field of consumer electronics. CECONOMY's market position is owed, in particular, to its strong brands, MediaMarkt and Saturn.

With more than two billion customer contacts each year, these CECONOMY companies offer consumers guidance and solutions to make them fit for future digital life and to enable them to make the most of innovative technologies. CECONOMY develops new concepts and business models that provide key added value for consumers and create new potential for the company and its shareholders. At the same time, we are striving to further optimise the existing multi-channel business of our brands Media-Markt and Saturn.

For CECONOMY and its subsidiaries, digitalisation and technology are the forces for driving change as the market leader, and for fulfilling our claim of simplifying our customers' lives in the digital world to the greatest possible extent.

The financial position of CECONOMY is evidenced by stable investment grade ratings issued by both Moody's and Scope.

Acquisition of around 24% of FNAC DARTY S.A.

We are actively driving the consolidation of the consumer electronics market in order to expand our leading position in Europe. For this reason, we signed an agreement on 26 July 2017 governing the acquisition of about 24.33% of the shares in circulation as of 30 June 2017 of FNAC DARTY S.A. from ARTEMIS S.A. The transaction was completed on 24 August 2017.

This acquisition will enable CECONOMY to participate in the French market, an attractive consumer electronicssegment with annual sales of around €30 billion. FNAC DARTY, which was created when FNAC and DARTY merged in 2016, has a market share of about 23%, making it the leading consumer electronics provider in the French market. Prior to the acquisition, France was one of the few major markets in Europe in which CECONOMY was not yet present.

Positive sales and profit performance in Q3

  • Sales from continuing operations increased by 1.1% or like-for-like by 2.7%; sales growth in Germany was 1.3% or a considerable 5.8% on like-for-like basis.
  • EBIT before special itemsfromcontinuing operationsimproved by €23 million to €–61 million.
  • The result for the period attributable to shareholders of CECONOMY AG before special items from continuing operations increased by €16 million to €–38 million.
  • Earnings per share before special items from continuing operations increased to €–0.12, after €–0.16 in the prior year period.

3

Overview

Q3 2016/171, 2

€ million Q3 2015/16 Q3 2016/17 Change
Sales 4,689 4,739 1.1%
Germany 2,218 2,248 1.3%
International 2,471 2,492 0.8%
International share of sales 52.7% 52.6%
EBITDA3 –26 –4 85.1%
EBIT –100 –91 9.7%
EBIT3 –83 –61 27.2%
Earnings before taxes (EBT)3 –92 –72 21.4%
Profit or loss for the period4, 5 –24 132
Profit or loss for the period3, 4, 5 79 52 –34.0%
Earnings per share (€)5 –0.07 0.41
Earnings per share from continuing operations (€)3 –0.16 –0.12 25.0%
Earnings per share (€)3, 5 0.24 0.16 –34.0%
Investments 87 79 –8.8%
Store network6 1,017 1,041 2.4%

1 From continuing operations.

2 For details of key performance indicators, see METRO GROUP Annual Report 2015/16, pages 54–55 and the footnotes to the tables on pages 102 –103.

3 Before special items. 4 Profit or loss attributable to shareholders of METRO AG (CECONOMY AG).

5 Includes discontinued operations.

6 As of the closing date 30 June.

9M 2016/171, 2

€ million 9M 2015/16 9M 2016/17 Change
Sales 16,838 16,891 0.3%
Germany 8,008 8,089 1.0%
International 8,831 8,802 –0.3%
International share of sales 52.4% 52.1%
EBITDA3 431 402 –6.7%
EBIT 222 189 –14.8%
EBIT3 259 228 –11.9%
Earnings before taxes (EBT)3 247 216 –12.4%
Profit or loss for the period4, 5 460 463 0.7%
Profit or loss for the period3, 4, 5 389 457 17.5%
Earnings per share (€)5 1.41 1.42 0.7%
Earnings per share from continuing operations (€)3 0.30 0.22 –26.7%
Earnings per share (€)3, 5 1.19 1.40 17.5%
Investments 229 194 –15.3%
Store network6 1,017 1,041 2.4%

1 From continuing operations.

2 For details of key performance indicators, see METRO GROUP Annual Report 2015/16, pages 54–55 and the footnotes to the tables on pages 102 –103.

3 Before special items.

4 Profit or loss attributable to shareholders of METRO AG (CECONOMY AG).

5 Includes discontinued operations. 6 As of the closing date 30 June.

INTERIM GROUP MANAGEMENT REPORT

Results of operations, financial position and net assets

Key performance indicators relating to management

CECONOMY is managed on the basis of key performance indicators derived from IFRS (International Financial Reporting Standards)specifications. Alternative key performance indicators are also used, including like-for-like sales growth in local currency ("like-for-like sales growth"), EBIT before special items, EBITDA before special items, and net debt. Details of key performance indicators used in management can be found in the METRO GROUP Annual Report 2015/16 on pages 54–55 and in the footnotes to the tables on pages 102–103.

Sales

Sales increased by 1.1% to €4.74 billion and by 2.7% on a likefor-like basis in the third quarter.

Sales for the quarter were 1.3% higher in Germany (like-for-like: 5.8%),slightly lower in Western Europe, declining by –0.5% (likefor-like: –1.1%), and significantly higher in Eastern Europe, increasing by 5.1% (like-for-like: 3.9%).

Online sales posted a strong increase of 16% in Q3, reflecting the success of ourmulti-channelstrategy.Online salesaccounted for 10.6% of total sales. The pick-up ratio remained high, at 41%.

Services & Solutions sales increased by 2.3% in the quarter, accounting for 6.5% of total sales.

€ million Q3
2015/16
Q3
2016/17
Total sales in € (as reported) 4,689 4,739
Total sales in local currency1 4,688 4,737
Sales of stores that were not part of the
like-for-like panel in Q3 2016/172
295 226
Like-for-like sales in local currency 4,393 4,511

1 Sales in local currency of the previous year were calculated by converting reported sales of the previous year at the average exchange rate of the current financial year.

2 Not included in the like-for-like panel, for example, are new openings, stores in the start-up phase, closures, cross-divisional service companies and major refurbishments.

Earnings

EBIT including holding costs totalled €–91 million in Q3 (prior year quarter: €–100 million). Before special items, EBIT improved by €23 million year on year, to €–61 million, due to a significant improvement in the gross margin, which increased by 0.7 percentage points to 20.2% of sales.

Earnings were positively impacted by strong online growth, tight cost control and focused marketing spend. Earnings improved in Germany and Spain, but deteriorated in Italy.

The net financial result weakened in Q3 by €3 million to €–11 million. Key reason for this slight decline were currency effects. The net financial result essentially comprised the net interest result of €–5 million and the other financial result of €–7 million.

Earnings before taxesimproved by €7 million to €–102 million in Q3. Before special items, EBT amounted to €–72 million (prior year quarter: €–92 million).

The reported tax expense was calculated in accordance with the regulations governing interim financial reports using the socalled integral method. Calculation was based on the current budget figuresfor the company at financial year end. Comparing tax expense with pre-tax earningsinitially producesthe expected tax rate for the Group as a whole.

The same procedure is adopted, as specified in the applicable IFRS 5 regulations, to determine the tax rates for continuing and discontinued operations. The application of these rates to the relevant pre-tax earnings for the nine-month period produces the reportable tax expense. The tax rate reported for Q3 constitutes a purely arithmetical calculation of the difference between the cumulative figure for nine months and the cumulative figure for six months. The integral method is used to calculate these cumulative figures.

The tax rate for the reported tax expense was 74.8% over the nine-month period. The rate for the prior-year period was 47.4%. The tax rate before special items was 52.2% (prior year: 43.7%). Following a tax rate of 56.2% for the first half-year, the arithmetical result calculated for Q3 is reported tax income of €24 million (prior-year quarter: €25 million). Tax income before special items was €29 million in Q3 (prior-year quarter: €23 million).

The result for the period generated by continuing operations increased by €7 million to €–78 million in Q3. The result before special itemsimproved by €26 million to €–43 million. The result for the period generated by discontinued operations increased from €46 million to €207 million, with continued suspension of depreciation in accordance with IFRS 5. Before special items with continued suspension of scheduled depreciation in accordance with IFRS 5, the result for the period dropped from €136 million to €90 million.

The result for the period generated by continuing and discontinued operations totalled €130 million in the reporting period (prior-year quarter: €–38 million).

Accordingly, earnings per share from continuing and discontinued operations amounted to €0.41 following €–0.07 in the prior year quarter. After adjustment for special items with continued suspension of scheduled depreciation in accordance with IFRS 5, earnings per share from continuing and discontinued operations amounted to €0.16 (prior-year quarter: €0.24).

Special items

In Q3, EBIT special items from continuing operations amounted to €30 million compared to €17 million in the prior year. These items were primarily the result of restructuring efforts in Russia, remaining closures and measures to integrate redcoon companies into the respective country organisations, and the launch of a Group-wide restructuring and efficiency improvement programme.

EBIT attributable to discontinued operations included special items of €14 million in Q3, mainly for store closures and costs relating to the demerger of METROGROUP into two independent companies.

Investments

Investments by the continuing operations of CECONOMY amounted to €79 million in Q3 2016/17 (prior-year quarter: €87 million).

Statement of financial position

Compared to the end of the financial year on 30 September 2016, total assets of continuing and discontinued operations increased by €0.1 billion to €25.1 billion. Year on year as of 30 June 2016, total assets declined by €0.2 billion.

Disregarding the demerger, the equity of CECONOMY amounted to €5.4 billion as of 30 June 2017. As part of the process of demerging METRO GROUP (now: CECONOMY), a liability to distribute non-cash assets as a dividend was recognised following adoption of the corresponding resolution by the Annual General Meeting of METRO AG (now: CECONOMY AG) on 6 February 2017. Pursuant to IFRIC 17, this liability must be measured at fair value, while the carved-out assets and liabilities of the discontinued operations must be measured at amortised carrying amounts. The liability was remeasured as of 30 June 2017.

A Level 2 measurement method as specified in IFRS 13 was used to calculate the fair value of the liability based on market data. This involved, firstly, taking the stock market value of the new METRO Wholesale & Food Specialist AG shares as calculated following the listing on 13 July 2017. Then, the stock market value was calculated based on the development of the overall stock market value of the former METRO AG (now: CECONOMY AG) as of 30 June 2017, prior to METRO Wholesale & Food Specialist AG being admitted to trading. This produced a fair value of the liability to distribute non-cash assets as a dividend of €5.88 billion. The liability is reported at €2.28 billion less than the previous quarter due, primarily, to a change in measurement method, as the liability was recognised as of 31 March 2017 on the basis of an appraisal derived from the company's budget plans (Level 3 method). The reduction of the liability increased equity purely temporarily with no effect on cash flow. Taking account of the liability to distribute non-cash assets as a dividend, the consolidated statement of financial position of CECONOMY reported negative equity of €–0.4 billion as of 30 June 2017. Following completion of the demerger, equity will turn positive again due to the reportable gain fromthe demerger.

Net debt, after netting cash and cash equivalents as well as financial investments with financial liabilities (including finance leases), totalled €–0.5 billion (net deposits) as of 30 June 2017. The comparable figure as of 30 June 2016 was also €–0.5 billion (net deposits).

Cash flow

Cash inflow from the operating activities of continuing operations of CECONOMY amounted to €111 million between October 2016 and June 2017. The comparable figure for the previous year was €170 million, although this cash inflow included repayment of a receivable amount of around €220 million from a benevolent fund. Adjusted for this effect, cash flow improved by €161 million.

The cash flow result also includes a change in net working capital of €–66 million over the nine-month period that is primarily due to seasonal effects and which constitutes a significant improvement over the figure of €–266 million for the prior-year period. Higher liabilities and lower receivables from suppliers contributed to this improvement.

Cash flow from investing activities of continuing operations totalled €–210 million compared to €–225 million in the prior year period. The decline was partly due to lower outflows for acquisitions, which had amounted to €30 million in the previous year, mainly in connection with the purchase of RTS.

The cash outflow from financing activities of continuing operations amounted to €103 million (9M 2015/16: cash outflow of €361 million). The lower cash outflow was mainly due to the issuance of a promissory note for around €250 million in March 2017. The cash flow also includes profit distributions of €–360 million compared to €–372 million in the previous year.

Together with a cash flow from discontinued operations of €–386 million (9M 2015/16: €–2,399 million) and currency effects of €–22 million (9M 2015/16: €–8 million), cash and cash equivalents decreased by €–610 million compared to €–2,823 million in the prior-year period.

Media-Saturn

Sales (€ million)
Change (€)
Currency effects
Change (local currency) Like-for-like
(local currency)
Q3
2015/16
Q3
2016/17
Q3
2015/16
Q3
2016/17
Q3
2015/16
Q3
2016/17
Q3
2015/16
Q3
2016/17
Q3
2015/16
Q3
2016/17
Total 4,689 4,739 1.5% 1.1% –1.7% 0.0% 3.2% 1.0% 1.2% 2.7%
Germany 2,218 2,247 7.4% 1.3% 0.0% 0.0% 7.4% 1.3% 3.8% 5.8%
Western Europe
(excl. Germany)
1,898 1,890 –2.3% –0.5% –0.5% –0.1% –1.8% –0.3% –2.8% –1.1%
Eastern Europe 573 602 –6.5% 5.1% –11.7% 0.8% 5.1% 4.2% –3.5% 3.9%
Sales (€ million)
Change (€)
Currency effects
Change (local currency) Like-for-like
(local currency)
9M
2015/16
9M
2016/17
9M
2015/16
9M
2016/17
9M
2015/16
9M
2016/17
9M
2015/16
9M
2016/17
9M
2015/16
9M
2016/17
Total 16,838 16,891 1.1% 0.3% –1.2% 0.1% 2.3% 0.2% 0.7% 0.8%
Germany 8,008 8,089 4.6% 1.0% 0.0% 0.0% 4.6% 1.0% 2.5% 2.4%
Western Europe
(excl. Germany)
6,825 6,716 1.0% –1.6% 0.1% –0.1% 0.9% –1.5% –0.4% –1.9%
Eastern Europe 2,006 2,086 –10.6% 4.0% –8.7% 0.9% –1.9% 3.2% –2.3% 3.9%

In Q3 2016/17, sales increased by 1.1% to €4.74 billion, or by 2.7% like-for-like. Total sales growth lagged behind like-for-like sales growth mainly because of the restructuring of redcoon and the latter's exclusion from the like-for-like panel as a result. Now that the restructuring of redcoon is complete, this discrepancy is expected to be much smaller in future quarters.

Online sales generated by our two sales brands, MediaMarkt and Saturn, increased by 33% inQ3. Group online sales, including redcoon, increased by 16% to €504 million, accounting for 10.6% of total sales. The comparable figure for the previous year was 9.3%. Our pick-up option (collection in store of goods ordered online) again contributed to this sales growth. This option was selected in 41% of all transactions generated online. Our campaign celebrating the 5th anniversary of our MediaMarkt Online Shop in Germany also had a positive impact on both sales and gross margin.

Sales performance in our Services & Solutions business was also positive, totalling €306 million in Q3 – equivalent to an increase of 2.3% over the prior-year quarter – and accounting for 6.5% of total Media-Saturn sales. This was boosted by the expansion of our "SmartBars", which meanwhile offer repair and other services in 565 stores. Mobile communications contracts and the financing business also recorded strong growth.

Our two customer loyalty programmes – MediaMarkt Club and Saturn Card – continued to develop very satisfactorily. The MediaMarkt Club in Germany welcomed around 460,000 new members in Q3, taking total membership to 2.8 million as of 30 June 2017, while the number of holders of our recently launched Saturn Card has meanwhile risen to 265,000 in Germany. As of 30 June 2017, our customer loyalty programmes counted more than 13 million members in total internationally.

At the end of the third quarter, our network comprised 1,041 stores in total. Seven new stores were opened – of which four are located at MAKRO in Belgium. Additional new stores were opened in Spain, Greece and Turkey. No stores were closed. Alongside measures to reduce the sales area of existing stores, the smaller format of these newly opened stores resulted in a decrease of the average sales area over all stores of 3.5% to 2,843 square metres. Back at the end of Q3 2015/16, the average store area was 2,947 square metres.

Sales in Germany rose by 1.3% to €2.25 billion in Q3 2016/17. The like-for-like increase – excluding redcoon, as explained above – was considerable, at 5.8%. The strong like-for-like growth in Germany was mainly driven by strong demand for white goods and mobile communications. Proceeds from TV receivers due to the switch from analogue to digital cable television also contributed to higher sales.

Sales in Western Europe totalled €1.89 billion in Q3, declining slightly by –0.5% and –1.1% like-for-like. As had already been the case in Q2 2016/17, Italy and Switzerland, in particular, were responsible for the lower sales in Q3 2016/17. These two countries were particularly affected by lower footfall in the stores, which could not be compensated by higher online sales. Added to which, Italy continued to labour under an aggressive market with massive advertising campaigns. Sales growth in Spain was not able to fully compensate the declines in these two countries.

In Q3 2016/17, we increased sales in Eastern Europe by 5.1% to €0.6 billion, or like-for-like by 3.9%. Strong overall demand for consumer electronics and improved category management boosted sales again in Turkey. The growth was more than sufficient to compensate the continuing negative development in Russia.

€ million 9M 2015/16 9M 2016/17 Change Q3 2015/16 Q3 2016/17 Change
EBIT 238 216 –9.3% –94 –83 11.8%
EBIT before special items 275 253 –8.1% –77 –55 28.3%
Investments 229 193 –15.6% 87 78 –9.6%

EBIT before special items improved by €22 million year on year to €–55 million in Q3 helped, not least, by a significant improvement in gross margin (ratio of gross profit on sales to total sales) of 0.7 percentage points to 20.2%. This played a major role in narrowing the gap from H1 2016/17.

Strong growth in online sales and tight cost control had a positive effect on the profitability of Media-Saturn. In addition, our customer loyalty programmes allowed us to focus our advertising budget, which – together with other measures aimed specifically at enhancing efficiency – helped to lower our marketing spend.

Earnings improved considerably in Germany, boosted by strong sales of white goods, in addition to a solid increase in sales generated online and even clearer focus of our marketing activities.

Earnings performance in Western Europe was particularly positive in Spain, aided by a marked increase in Services & Solutions sales and lower marketing expenses. The satisfactory performance in Spain was, however, notsufficientto compensate the lower earnings in Italy. Thanks to strict cost management and less aggressive pricing competition, the aforementioned sales decline in Switzerland did notsignificantly affect the overall result for the country, unlike Italy.

In Eastern Europe, the slight dip in earnings in Russia was more than compensated by higher earnings in Turkey.

Special items amounted to €28 million in Q3. These items were primarily the result of restructuring efforts in Russia, remaining closures and measures to integrate redcoon companies in the various country organisations, and the launch of a Group-wide restructuring and efficiency improvement programme.

Reported EBIT amounted to €–83 million in Q3, equivalent to an improvement of €11 million year on year.

Other (continuing operations)

€ million 9M 2015/16 9M 2016/17 Change Q3 2015/16 Q3 2016/17 Change
Sales 0 0
EBIT –16 –27 –64.7% –6 –8 –17.3%
EBIT before special items –16 –25 –51.0% –6 –5 17.1%
Investments 1 1

The Others segment comprises, in particular, activities relating to CECONOMY AG in its capacity as strategic management holding company, and operations of smaller companies.

This segment did not generate any notable sales in Q3. EBIT before special items amounted to €–5 million, equivalent to a slight increase of €1 million year on year. Special items amounted to €2 million in the reporting period. As such, reported EBIT totalled €–8 million.

Discontinued operations

Following the Annual General Meeting's adoption of the resolution approving the demerger, the discontinued operations of CECONOMY were measured and recognised in the quarterly statement as of 30 June 2017 in accordance with IFRS 5 Non current Assets Held for Sale and Discontinued Operations. However, the key performance indicators described at the top of page 5 remain relevant for the management of these activities, regardless of IFRS 5 measurement. As a result, the figures for discontinued operations include both the reported figures – based on IFRS 5 measurement – and the figures relevant for the management ofthese activities which would have been reported if measurement had not been dictated by IFRS 5, i.e. the figures before special items and with continued suspension of scheduled write-downs of depreciable assets in accordance with IFRS 5.

Sales

Like-for-like sales in local currency increased noticeably, by 2.6% in Q3 2016/17. Both METRO Cash & Carry and Real contributed to this growth. This performance was helped by the late Easter. Sales in local currency increased by 3.7%. The currency effects were positive.Overall,totalsales of €9.3 billion were significantly higher year on year, increasing by 4.9%.

€ million Q3 2015/16 Q3 2016/17
Total sales in € (as reported) 8,900 9,334
Total sales in local currency1 8,996 9,328
Sales of stores that were not part of the
like-for-like panel in Q3 2016/172
765 887
Like-for-like sales in local currency 8,231 8,441

1 Sales in local currency of the previous year were calculated by converting reported sales of the previous year at the average exchange rate of the current financial year.

Not included in the like-for-like panel, for example, are new openings, stores in the start-up phase, closures, cross-divisional service companies and major refurbishments.

Earnings

EBIT of CECONOMY's discontinued operations totalled €385 million in Q3 2016/17 (Q3 2015/16: €64 million) and included special items of €14 million (Q3 2015/16: €172 million), mainly relating to store closures and costs associated with the demerger of METRO GROUP. EBIT before special items and with continued suspension of scheduled depreciation in accordance with IFRS 5 amounted to €226 million (Q3 2015/16: €237 million). The decline was mainly due to the figure for the prior-year quarter containing higher earnings from real estate transactions.

Investments

Investments by discontinued operations amounted to €185 million in Q3 2016/17 (prior-year quarter: €299 million).

Events after the reporting date

On 12 July 2017, the District Court [Amtsgericht] Düsseldorf entered the hive-down and spin-off of the wholesale and food retail business in the Commercial Register. The hive-down and spin-off thus became legally valid as ofthat date.On 13 July 2017, CECONOMY AG (formerly METRO AG) was listed independently on the stock exchange for the first time.

A euro-denominated commercial paper programme with a maximum volume of €500 million has been available to CECONOMY AG since 14 July 2017.

On 26 July 2017, CECONOMY AG signed an agreement governing the acquisition of a minority interest in FNAC DARTY S.A. from ARTEMIS S.A. FNAC DARTY is France's leading retail company selling consumer electronics, white goods and entertainment electronics, and operates in nine other countries, as well. The stake constitutes Artémis' entire share in FNAC DARTY, equal to about 24.33% of the shares in circulation as of 30 June 2017.

The transaction was completed on 24 August 2017.

The name change from METRO AG to the current CECONOMY AG took place on 11 August 2017.

Outlook

The following outlook focuses on continuing operations. The forecast is based on currency-adjusted figures. In addition, it is based on the assumption of a continuously complex geopolitical situation.

Sales

For financial year 2016/17, we expect a slight increase in overall sales from continuing operations, despite the persistently challenging economic environment. We expect like-for-like sales from continuing operations to trend slightly higher again.

Earnings

We expect EBIT before special items from continuing operations to increase slightly compared with the figure of €466 million for financial year 2015/16.

Store network

Store network of continuing operations as of 30 June 2017

Media-Saturn/Total Q3 2016/17 Media-Saturn/Total 9M 2016/17
31/03/2017 Openings
Q3 2016/17
Closures
Q3 2016/17
30/06/2017 30/09/2016 Openings
9M 2016/17
Closures
9M 2016/17
30/06/2017
Germany 426 426 424 +2 426
Austria 50 50 49 +1 50
Belgium 24 +4 28 23 +7 –2 28
Italy 115 115 111 +4 115
Luxembourg 2 2 2 2
Netherlands 49 49 49 49
Portugal 10 10 9 +1 10
Spain 80 +1 81 79 +2 81
Sweden 27 27 27 27
Switzerland 27 27 28 –1 27
Western Europe
(excl. Germany)
384 +5 389 377 +15 –3 389
Greece 11 +1 12 11 +1 12
Hungary 24 24 22 +2 24
Poland 84 84 83 +1 84
Russia 57 57 61 –4 57
Turkey 48 +1 49 45 +6 –2 49
Eastern Europe 224 +2 226 222 +10 –6 226
Total 1,034 +7 1,041 1,023 +27 –9 1,041

Reconciliation of special items from continuing operations

Q3 2016/17

Special items
by continuing segments
As reported IFRS 5 measurement Special items Before special items
€ million Q3 2015/16 Q3 2016/17 Q3 2015/16 Q3 2016/17 Q3 2015/16 Q3 2016/17 Q3 2015/16 Q3 2016/17
EBITDA –41 –32 16 28 –26 –4
thereof Media-Saturn –35 –24 16 26 –19 2
Others –6 –8 0 2 –6 –5
Consolidation 0 0 0 0 0 0
EBIT –100 –91 17 30 –83 –61
thereof Media-Saturn –94 –83 17 28 –77 –55
Others –6 –8 0 2 –6 –5
Consolidation 0 0 0 0 0 0
Net financial result –8 –11 0 0 –8 –11
Earnings before taxes (EBT) –109 –102 17 30 –92 –72
Income taxes 25 24 –2 4 23 29
operations Profit or loss for the period from continuing –84 –78 15 35 –69 –43
operations after tax Profit or loss for the period from discontinued 46 207 –126 89 9 136 90
Profit or loss for the period –38 130 –126 105 43 67 47
non-controlling interests Profit or loss for the period attributable to –14 –3 –2 2 0 –12 –5
from continuing operations –17 –5 2 0 –15 –5
from discontinued operations 3 2 –2 0 0 3 0
METRO AG (CECONOMY AG) Profit or loss attributable to shareholders of –24 132 –124 102 43 79 52
from continuing operations –67 –73 13 35 –54 –38
from discontinued operations 43 205 –124 89 8 132 90
Earnings per share in € (basic = diluted) –0.07 0.41 –0.38 0.31 0.13 0.24 0.16
from continuing operations –0.20 –0.22 0.04 0.11 –0.16 –0.12
from discontinued operations 0.13 0.63 –0.38 0.27 0.03 0.40 0.28

RECONCILIATION OF SPECIAL ITEMS FROM CONTINUING OPERATIONS 14

9M 2016/17

Special items

by continuing segments

As reported IFRS 5 measurement
Special items
Before special items
€ million 9M 2015/16 9M 2016/17 9M 2015/16 9M 2016/17 9M 2015/16 9M 2016/17 9M 2015/16 9M 2016/17
EBITDA 401 366 30 36 431 402
thereof Media-Saturn 418 394 30 34 448 427
Others –16 –27 0 2 –16 –25
Consolidation 0 0 0 0 0 0
EBIT 222 189 37 39 259 228
thereof Media-Saturn 238 216 37 37 275 253
Others –16 –27 0 2 –16 –25
Consolidation 0 0 0 0 0 0
Net financial result –12 –12 0 0 –12 –12
Earnings before taxes (EBT) 210 177 37 39 247 216
Income taxes –100 –133 –8 20 –108 –113
operations Profit or loss for the period from continuing 110 45 29 59 139 103
operations after tax Profit or loss for the period from discontinued 396 456 –217 –94 162 302 401
Profit or loss for the period 506 500 –217 –65 221 441 504
non-controlling interests Profit or loss for the period attributable to 46 37 –3 6 14 52 48
from continuing operations 33 20 6 13 39 33
from discontinued operations 13 17 –3 0 1 13 15
METRO AG (CECONOMY AG) Profit or loss attributable to shareholders of 460 463 –214 –72 207 389 457
from continuing operations 77 25 22 46 100 71
from discontinued operations 383 439 –214 –94 161 289 386
Earnings per share in € (basic = diluted) 1.41 1.42 –0.65 –0.22 0.63 1.19 1.40
from continuing operations 0.24 0.08 0.07 0.14 0.30 0.22
from discontinued operations 1.17 1.34 –0.65 –0.29 0.49 0.88 1.18

Reconciliation of individual special items

Continuing operations

Q3 2016/17

Q3 2016/17

Special items
€ million As reported IFRS 5
measure
ment
Portfolio
changes
Restructuring
and efficiency
enhancing
measures
Risk
provisions
including
impairment
losses of
goodwill
Other
special
items
Before
special
items
EBITDA –32 –2 28 2 –4
EBIT –91 –2 30 2 –61
Net financial result –11 –11
EBT –102 –2 30 2 –72
Income taxes 24 41 29
Profit or loss for the period from continuing
operations
–78 –2 30 7 –43
Profit or loss for the period from discontinued
operations after tax
207 –126 –3 6 6 90
Profit or loss for the period 130 –126 –5 36 13 47
Profit or loss for the period attributable to
non-controlling interests
–3 –2 01 –5
from continuing operations –5 01 –5
from discontinued operations 2 –2 01 0
Profit or loss attributable to shareholders of
METRO AG (CECONOMY AG)
132 –124 –5 36 13 52
from continuing operations –73 –2 30 7 –38
from discontinued operations 205 –124 –3 6 6 90
Earnings per share in € (basic = diluted) 0.41 –0.38 n/a n/a n/a n/a 0.16
from continuing operations –0.22 n/a n/a n/a n/a –0.12
from discontinued operations 0.63 –0.38 n/a n/a n/a n/a 0.28

RECONCILIATION OF INDIVIDUAL SPECIAL ITEMS 16

Q3 2015/16

Special items
€ million As reported IFRS 5
measure
ment
Portfolio
changes
Restructuring
and efficiency
enhancing
measures
Risk
provisions
including
impairment
losses of
goodwill
Other
special
items
Before
special
items
EBITDA –41 6 10 –26
EBIT –100 7 10 –83
Net financial result –8 –8
EBT –109 7 10 –92
Income taxes 25 –21 23
Profit or loss for the period from continuing
operations
–84 7 8 –69
Profit or loss for the period from discontinued
operations after tax
46 5 162 –77 136
Profit or loss for the period –38 5 169 –70 67
Profit or loss for the period attributable to
non-controlling interests
–14 21 –12
from continuing operations –17 21 –15
from discontinued operations 3 01 3
Profit or loss attributable to shareholders of
METRO AG (CECONOMY AG)
–24 5 169 –72 79
from continuing operations –67 7 6 –54
from discontinued operations 43 5 162 –77 132
Earnings per share in € (basic = diluted) –0.07 n/a n/a n/a n/a 0.24
from continuing operations –0.20 n/a n/a n/a n/a –0.16
from discontinued operations 0.13 n/a n/a n/a n/a 0.40

RECONCILIATION OF INDIVIDUAL SPECIAL ITEMS 17

9M 2016/17

9M 2016/17

Special items
€ million As reported IFRS 5
measure
ment
Portfolio
changes
Restructuring
and efficiency
enhancing
measures
Risk
provisions
including
impairment
losses of
goodwill
Other
special
items
Before
special
items
EBITDA 366 –2 46 –8 402
EBIT 189 –2 49 –8 228
Net financial result –12 –12
EBT 177 –2 49 –8 216
Income taxes –133 201 –113
Profit or loss for the period from continuing
operations
45 –2 49 12 103
Profit or loss for the period from discontinued
operations after tax
456 –217 –5 84 82 401
Profit or loss for the period 500 –217 –7 133 94 504
Profit or loss for the period attributable to
non-controlling interests
37 –3 141 48
from continuing operations 20 131 33
from discontinued operations 17 –3 11 15
Profit or loss attributable to shareholders of
METRO AG (CECONOMY AG)
463 –214 –7 133 80 457
from continuing operations 25 –2 49 –1 71
from discontinued operations 439 –214 –5 84 81 386
Earnings per share in € (basic = diluted) 1.42 –0.65 n/a n/a n/a n/a 1.40
from continuing operations 0.08 n/a n/a n/a n/a 0.22
from discontinued operations 1.34 –0.65 n/a n/a n/a n/a 1.18

RECONCILIATION OF INDIVIDUAL SPECIAL ITEMS 18

9M 2015/16

Special items
As reported IFRS 5
measure
ment
Portfolio
changes
Restructuring
and efficiency
enhancing
measures
Risk
provisions
including
impairment
losses of
goodwill
Other
special
items
Before
special
items
401 12 19 431
222 18 19 259
–12 –12
210 18 19 247
–100 –81 –108
110 18 10 139
396 –444 236 113 302
506 –444 255 123 441
46 61 52
33 61 39
13 13
460 –444 255 117 389
77 18 4 100
383 –444 236 113 289
1.41 n/a n/a n/a n/a 1.19
0.24 n/a n/a n/a n/a 0.30
1.17 n/a n/a n/a n/a 0.88

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Income statement

€ million 9M 2015/16 9M 2016/17 Q3 2015/16 Q3 2016/17
Sales 16,838 16,891 4,689 4,739
Cost of sales –13,462 –13,520 –3,774 –3,780
Gross profit on sales 3,376 3,371 916 959
Other operating income 103 122 28 31
Selling expenses –2,876 –2,897 –916 –940
General administrative expenses –377 –401 –127 –138
Other operating expenses –4 –6 –1 –2
Earnings share of operating companies recognised at equity 0 0 0 0
Earnings before interest and taxes (EBIT) 222 189 –100 –91
Earnings share of non-operating companies recognised at equity 0 0 0 0
Other investment result 0 0 0 0
Interest income 16 13 5 4
Interest expenses –24 –19 –10 –9
Other financial result –4 –6 –3 –7
Net financial result –12 –12 –8 –11
Earnings before taxes (EBT) 210 177 –109 –102
Income taxes –100 –133 25 24
Profit or loss for the period from continuing operations 110 45 –84 –78
Profit or loss for the period from discontinued operations 396 456 46 207
Profit or loss for the period 506 500 –38 130
Profit or loss for the period attributable to non-controlling interests 46 37 –14 –3
from continuing operations 33 20 –17 –5
from discontinued operations 13 17 3 2
Profit or loss attributable to shareholders of METRO AG (CECONOMY AG) 460 463 –24 132
from continuing operations 77 25 –67 –73
from discontinued operations 383 439 43 205
Earnings per share in € (basic = diluted) 1.41 1.42 –0.07 0.41
from continuing operations 0.24 0.08 –0.20 –0.22
from discontinued operations 1.17 1.34 0.13 0.63

Balance sheet

Assets
€ million 30/09/2016 30/06/2016 30/06/2017
Non-current assets 13,369 13,193 1,614
Goodwill 3,361 3,372 525
Other intangible assets 497 510 100
Property, plant and equipment 8,141 7,930 840
Investment properties 126 131 0
Financial assets 104 70 21
Investments accounted for using the equity method 188 195 4
Other financial and non-financial assets 289 279 23
Deferred tax assets 663 706 101
Current assets 11,583 12,024 23,441
Inventories 5,456 6,016 2,893
Trade receivables 808 765 419
Financial assets 1 3 0
Other financial and non-financial assets 2,734 3,417 1,352
Entitlements to income tax refunds 216 202 92
Cash and cash equivalents 2,368 1,594 746
Assets held for sale 0 27 17,938
24,952 25,217 25,054
Equity and liabilities
€ million 30/09/2016 30/06/2016 30/06/2017
Equity 5,332 5,203 –4451
Liability to distribute non-cash assets as dividend pursuant to IFRIC 17 –5,880
Equity before liability to distribute non-cash assets as a dividend pursuant to IFRIC 17 5,332 5,203 5,435
Share capital 835 835 835
Capital reserve 2,551 2,551 2,551
Reserves retained from earnings 1,934 1,820 2,028
Non-controlling interests 12 –3 21
Non-current liabilities 5,950 6,126 1,098
Provisions for pensions and similar obligations 1,414 1,458 695
Other provisions 383 386 57
Borrowings 3,812 3,945 266
Other financial and non-financial liabilities 191 195 75
Deferred tax liabilities 150 142 4
Current liabilities 13,670 13,888 24,401
Trade payables 9,383 9,243 4,835
Provisions 705 675 157
Borrowings 947 1,511 8
Liability for distribution of non-cash assets as a dividend pursuant to IFRIC 17 0 0 5,880
Other financial and non-financial liabilities 2,465 2,281 1,058
Income tax liabilities 170 178 97
Liabilities related to assets held for sale 0 0 12,366
24,952 25,217 25,054

Consolidated equity of METRO GROUP is temporarily negative due to recognition of a liability for distribution of non-cash assets as a dividend as part of the demerger of METRO GROUP as per resolution adopted by the Annual General Meeting of METRO AG on 6 February 2017. Following completion of the demerger, equity will turn positive again due to the reportable gain from the demerger.

Cash flow statement

€ million 9M 2015/16 9M 2016/17
EBIT 222 189
Depreciation/amortisation/impairment losses/reversal of impairment losses of assets excl. financial investments 179 177
Change in provisions for post-employment benefit plans and similar obligations –27 –28
Change in net working capital –266 –66
Income taxes paid –140 –124
Reclassification of gains (–) / losses (+) from the disposal of fixed assets 2 3
Other 200 –40
Cash flow from operating activities of continuing operations 170 111
Cash flow from operating activities of discontinued operations 261 236
Cash flow from operating activities 431 347
Acquisitions of subsidiaries –30 –13
Investments in property, plant and equipment (excl. finance leases) –200 –180
Other investments –21 –44
Financial investments 0 0
Disposal of subsidiaries 0 0
Disposal of fixed assets 28 30
Gains (+) / losses (–) from the disposal of fixed assets –2 –3
Disposal of financial investments 0 0
Cash flow from investing activities of continuing operations –225 –210
Cash flow from investing activities of discontinued operations –266 –531
Cash flow from investing activities –491 –741
Dividends paid
to METRO AG (CECONOMY AG) shareholders1 –349 –346
to other shareholders2 –23 –14
Redemption of liabilities from put options of non-controlling interests –4 –2
New borrowings 22 255
Redemption of borrowings 0 0
Interest paid –23 –12
Interest received 16 13
Profit and loss transfers and other financing activities 0 3
Cash flow from financing activities of continuing operations –361 –103
Cash flow from financing activities of discontinued operations –2,394 –91
Cash flow from financing activities –2,755 –194
Total cash flows –2,815 –588
Currency effects on cash and cash equivalents –8 –22
Total change in cash and cash equivalents –2,823 –610
Total cash and cash equivalents as of 1 October 4,417 2,368
Cash and cash equivalents shown under IFRS 5 assets 2 0
Cash and cash equivalents as of 1 October 4,415 2,368
Total cash and cash equivalents as of 30 June 1,594 1,758
Cash and cash equivalents shown under IFRS 5 assets 0 1,012
Cash and cash equivalents as of 30 June 1,594 746

The reported dividends include dividends to minority shareholders in the amount of €–19 million (previous year: €–22 million) whose shareholdings are shown under debt capital due to put options. 2 The reported dividends include dividends to minority shareholders in the amount of €–5 million (previous year: €–5 million) whose shareholdings are shown under debt capital due to put options.

Segment reporting Q3 2016/17

Operating segments

Media-Saturn METRO Cash & Carry1 Real1 Others2
€ million Q3 2015/16 Q3 2016/17 Q3 2015/16 Q3 2016/17 Q3 2015/16 Q3 2016/17 Q3 2015/16 Q3 2016/17
Sales 4,689 4,739 7,113 7,550 1,771 1,783 17 2
EBITDA –35 –24 217 358 42 33 –18 –14
EBITDA before special items –19 2 352 360 42 33 15 –4
EBIT –94 –83 101 248 6 –3 –52 –45
EBIT before special items –77 –55 241 255 6 –3 –19 –35
Investments 87 78 227 108 44 39 28 38

Operating segments continued

Consolidation2 METRO GROUP
(CECONOMY) –
continuing and
discontinued operations
Discontinued operations
incl. IFRS 5 measurement
METRO GROUP
(CECONOMY) –
continuing operations
€ million Q3 2015/16 Q3 2016/17 Q3 2015/16 Q3 2016/17 Q3 2015/16 Q3 2016/17 Q3 2015/16 Q3 2016/17
Sales 0 0 13,589 14,074 8,900 9,334 4,689 4,739
EBITDA 1 3 207 356 249 387 –41 –32
EBITDA before special items 1 3 391 394 417 398 –26 –4
EBIT 2 3 –36 121 64 212 –100 –91
EBIT before special items 2 3 154 165 237 226 –83 –61
Investments 0 0 385 264 299 185 87 79

1 Includes discontinued operations only.

Includes both continuing and discontinued operations.

Segment reporting 9M 2016/17

Operating segments

Media-Saturn METRO Cash & Carry1 Real1 Others2
€ million 9M 2015/16 9M 2016/17 9M 2015/16 9M 2016/17 9M 2015/16 9M 2016/17 9M 2015/16 9M 2016/17
Sales 16,837 16,889 21,648 22,417 5,715 5,502 53 24
EBITDA 418 394 1,291 1,112 180 127 –11 –20
EBITDA before special items 448 427 1,059 1,137 180 173 2 18
EBIT 238 216 966 780 73 18 –105 –117
EBIT before special items 275 253 737 818 73 65 –92 –79
Investments 229 193 399 369 201 72 82 92

Operating segments continued

Consolidation2 METRO GROUP
(CECONOMY) –
continuing and
discontinued operations
Discontinued operations
incl. IFRS 5 measurement
METRO GROUP
(CECONOMY) –
continuing operations
€ million 9M 2015/16 9M 2016/17 9M 2015/16 9M 2016/17 9M 2015/16 9M 2016/17 9M 2015/16 9M 2016/17
Sales 0 0 44,253 44,831 27,414 27,941 16,838 16,891
EBITDA –5 –1 1,873 1,612 1,471 1,245 401 366
EBITDA before special items –5 –1 1,684 1,754 1,253 1,352 431 402
EBIT –2 1 1,170 898 948 709 222 189
EBIT before special items –2 1 992 1,057 733 829 259 228
Investments 0 0 911 725 682 531 229 194

Includes discontinued operations only.

Includes both continuing and discontinued operations.

Financial calendar

Trading Statement Financial Year 2016/17 Wednesday 25 October 2017 7:00 a.m.

All time specifications are CET

General information

CECONOMY AG Benrather Strasse 18–20 40213 Duesseldorf, Germany

https://www.ceconomy.de/

Published: 31 August 2017

Contact

Phone +49 (211) 6886-1300 Email [email protected]

Visit our website at www.ceconomy.de, the primary source for publications and information about CECONOMY.

Disclaimer

This quarterly statement contains forward-looking statements that are based on certain assumptions and expectations at the time of its publication. These statements are therefore subject to risks and uncertainties, which means that actual results may differ substantially from the future-oriented statements made here. Many of these risks and uncertainties relate to factors that are beyond CECONOMY AG's ability to control or estimate precisely. This includes future market conditions and economic developments, the behaviour of other market participants, the achievement of expected costsavings and productivity improvements, as well aslegal and political decisions. CECONOMY AG does not undertake any obligation to publicly correct or update these forward-looking statements to reflect events or circumstances that have occurred after the publication date of this material.

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