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METRO GROUP : ANNUAL REPORT 2010 : BUSINESS → GROUP MANAGEMENT REPORT : 12. SUPPLEMENTARy ANd FORECAST REPORT Games, innovative products can generate additional growth in 2011. we also expect a rise in sales as well as growth in earnings for 2012. At the same time, we intend to expand the market position. Galeria Kaufhof For Galeria Kaufhof, 2010 unfolded quite satisfactorily, a development we also want to build on in 2011. we will expand the current online presence and extend the breadth and depth of the assortment, particularly the clothes selection. By taking this approach, Galeria Kaufhof can plot a growth path independent of department store locations and attract new customers from all areas. Overall, Galeria Kaufhof expects solid sales development in connection with increased profitability. Real Estate As a result of the increased expansion in the growth regions of Asia and Eastern Europe, we expect to generate higher earnings from rising rental income over the next few years. The professionalisation of real estate management and more active portfolio management already led to a higher earnings contribution for the segment in 2010. we expect this development to be sustainable and to also contribute to METRO GROUP’s overall earnings this year. As part of our energy and resource management, we are rigorously pursuing our goal of markedly reducing our CO 2 emissions. Aside from our conscientious and efficient use of resources, we also expect our bundled energy procurement activities to result in lower costs for the sales divisions. METRO GROUP The economic situation improved in 2010, even surpassing pre-crisis levels in some countries. But this does not change the fact that unresolved structural problems will continue to exist in 2011. Overall, however, we anticipate economic recovery to continue. Expected sales development In the medium term, METRO GROUP expects sales growth of more than 6 percent a year. In 2011, METRO GROUP expects sales growth of more than 4 percent. we continue to expect an economic recovery and moderate price increases, particularly in the area of energy and raw material prices. In addition, we assume that the fiscal → p. 140 policy measures to stabilise public budgets will have been largely implemented in our major sales markets. Expected earnings development METRO GROUP’s strategy aims for long-term profitable growth, that is disproportionate earnings growth compared to sales growth. The Company aims for annual earnings growth, measured in terms of EBIT before special items, of more than 10 percent over the medium term. In the process, Shape 2012 will generate incremental positive earnings contributions and will be fully effective from 2012. Assuming that macroeconomic parameters continue to improve, we currently expect to reach our medium-term target for earnings growth before special items as early as 2011 based on EBIT before special items of €2,415 million for 2010. The degree of earnings growth essentially depends on the continued improvement of macroeconomic parameters and the extent to which price increases on the procurement side can be offset. Expected development of key items of the income statement we project disproportionately low increases in the expense items of the income statement in 2011 – adjusted for special items from Shape 2012. The Shape 2012 measures will primarily reduce operating expenses and general administrative expenses. As the majority of cost-saving measures have now been implemented, they will have a full-year effect for the first time in 2011. In addition, the programme will have a positive impact on gross profit and contribute to an increase in the gross margin. due to an optimisation of the maturity structure, we expect interest expenses to drop slightly in 2011. Expected dividend development Ever since its establishment 15 years ago, METRO AG has disbursed an annual dividend. In the context of a dynamic dividend policy, the size of dividend payouts principally depends on the development of earnings per share before special items. In future, we intend to continue to pay a competitive and attractive dividend compared to other dAX 30 companies and retail groups. we expect that the projected rise in profits for both 2011 and 2012 will lead to dividend increases. Expected employee development due to the Company’s expansion efforts, the number of METRO GROUP employees will rise by a large four-digit figure.
METRO GROUP : ANNUAL REPORT 2010 : BUSINESS → GROUP MANAGEMENT REPORT : 12. SUPPLEMENTARy ANd FORECAST REPORT Expected financial position Planned financing measures Private as well as institutional investors regard METRO GROUP as a solidly financed company. The redemption of two bonds with a total volume of about €1.1 billion falls due in the first half of 2011. These maturities will be refinanced again in 2011 through ongoing short-term and/or long-term capital market issuance programmes. In taking these steps, METRO GROUP has for years benefited from outstanding access to international capital markets. Planned investments Our medium-term plans comprise annual investments of more than €2.2 billion for the modernisation of our store network and international expansion. In 2011, we plan to make investments totalling €2.2 billion. Besides modernisation measures, the budget is primarily allocated to new store openings. In the medium term, we plan to increase the number of new Metro Cash & Carry stores in the coming years. For Real, we want to open 10 new stores a year; for Media Markt and Saturn, we want to open more than 70 new stores every year. In 2011, Metro Cash & Carry plans to open 40 new stores. Real will add about 5 new locations, and Media Markt and Saturn will add a minimum of about 70 consumer electronics stores. Expected cash development Our liquidity and debt are characterised by a high share of fourth-quarter sales in total annual sales. At the end of the year, we have above-average liquidity as well as higher trade payables. during the first quarter, both debt and liquidity return to a more normal level. The measures already introduced in the context of Shape 2012 will have a positive effect on the relevant cash figures. In addition, we aim to generate further liquidity by continuing to improve our working capital. Opportunities Opportunities from changed economic parameters After the global economic crisis slackened, some countries and regions were able to return to pre-crisis levels. Asia, in particular, developed very positively. we can benefit from the improved economic climate in terms of sales and earnings. In addition, many countries where we operate have growing populations. This leads to higher demand. → p. 141 Strategic business opportunities Our sales divisions enjoy strong name recognition and most are leaders in their respective markets. The objective is to consolidate and build on this position. In addition, weaker market players are expected to drop out of the market or be put up for sale in the coming years. In these cases, we are reviewing if it would make sense to acquire these competitors or individual store locations. One opportunity for location-independent sales is via the Internet. Through online sales we can reach new customers. All of our sales divisions are preparing relevant concepts that offer real added value compared with pure Internet providers thanks to the multichannel approach. Performance-related opportunities The aim of Shape 2012 is to sustainably increase our earnings. The profit improvement potential targeted for 2012 and beyond amounts to €1.5 billion compared to 2008. Overall, Shape 2012 comprises more than 7,500 individual measures. The majority of cost-saving measures have already been implemented and have taken effect. Now, productivity is to be increased. A large number of concepts have been developed for this, including the continued improvement of delivery services and the introduction of own-brand products. The respective sales share is to be increased further and have a profit-boosting effect in future. Opportunities through qualified employees and managers Employees form the foundation of our success. Their development produces opportunities. As a result of demographic change, it is anticipated that recruiting qualified employees and managers will become increasingly difficult in the coming years. For this reason, we are intensifying our dialogue with universities and implementing internship programmes, among other activities, that not only comprise work in operating departments, but interdisciplinary training events as well. The Metro Academy provides training and further education at an international level to METRO GROUP managers. Building on these measures, we strive to retain qualified and motivated employees over the long term and tap the related potential. Overall statement by the Management Board of METRO AG on the expected course of METRO GROUP we will continue on our profitable growth course and thus expand the position of METRO GROUP as one of the leading
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