Ceconomy : Results Presentation Q1 2019/20

Q1 2019/20

RESULTS PRESENTATION

Dr Bernhard Düttmann, Karin Sonnenmoser Düsseldorf, 07 February 2020

DISCLAIMER

AND NOTES

This disclaimer shall apply in all respects to the entire presentation (including all slides of this document), the oral presentation of the slides by representatives of CECONOMY AG, any question-and-answer session that follows the oral presentation, hard copies of the slides as well as any additional materials distributed at, or in connection with this presentation. By attending the meeting (or conference call or video conference) at which the presentation is made, or by reading the written materials included in the presentation, you (i) acknowledge and agree to all of the following restrictions and undertakings, and (ii) acknowledge and confirm that you understand the legal and regulatory sanctions attached to the misuse, disclosure or improper circulation of the presentation.

To the extent that statements in this presentation do not relate to historical or current facts, they constitute forward-looking statements. All forward-looking statements herein are based on certain estimates, expectations and assumptions at the time of publication of this presentation and there can be no assurance that these estimates, expectations and assumptions are or will prove to be accurate. Furthermore, the forward-looking statements are subject to risks and uncertainties including (without limitation) future market and economic conditions, the behaviour of other market participants, investments in innovative sales formats, expansion in online and omnichannel sales activities, integration of acquired businesses and achievement of anticipated cost savings and productivity gains, and

the actions of public authorities and other third parties, many of which are beyond our control, that could cause actual results, performance or financial position to differ materially from any future results, performance or financial position expressed or implied in this presentation.

Accordingly, no representation or warranty (express or implied) is given that such forward-looking statements, including the underlying estimates, expectations and assumptions, are correct or complete. Readers are cautioned not to place reliance on these forward-looking statements. See also "Opportunity and Risk Report" in CECONOMY's most recent Annual Report for risks as of the date of such Annual Report. We do not undertake any obligation to publicly update any forward-looking statements or to conform them to events or circumstances after the date of this presentation. This presentation is intended for information only, does not constitute a prospectus or similar document and should not be treated as investment advice. It is not intended and should not be construed as an offer for sale, or as a solicitation of an offer to purchase or subscribe to, any securities in any jurisdiction. Neither this presentation nor anything contained therein shall form the basis of, or be relied upon in connection with, any commitment or contract whatsoever. CECONOMY AG assumes no liability for any claim which may arise from the reproduction, distribution or publication of the presentation (in whole or in part). The third parties whose data is cited in this presentation are neither registered broker-dealers nor financial advisors and the permitted use of any data does not constitute financial advice or recommendations.

Historical financial information contained in this presentation is mostly based on or derived from the consolidated (interim) financial statements for the respective period. Financial information with respect to the business of MediaMarktSaturn Retail Group is particularly based on or derived from the segment reporting contained in these financial statements.

Such financial information is not necessarily indicative for the operational results, the financial position and/or the cash flow of the CECONOMY business on a stand-alone basis neither in the past nor in the future and may, in particular, deviate from any historical financial information based on corresponding combined financial statements with respect to the CECONOMY business. Given the aforementioned uncertainties, (prospective) investors are cautioned not to place undue reliance on any of this information. No representation or warranty is given and no liability is assumed by CECONOMY AG, express or implied, as to the accuracy, correctness or completeness of the information contained in this presentation.

This presentation contains certain supplemental financial or operative measures that are not calculated in accordance with IFRS and are therefore considered as non-IFRS measures. We believe that such non-IFRS measures used, when considered in conjunction with (but not in lieu of) other measures that are computed in accordance with IFRS, enhance the understanding of our business, results of operations, financial position or cash flows. There are, however, material limitations associated with the use of non-IFRS measures including (without limitation) the limitations inherent in the determination of relevant adjustments. The non-IFRS measures used by us may differ from, and not be comparable to, similarly-titled measures used by other companies. Detail information on this topic can be found in CECONOMY's Annual Report 2018/19, pages 52-55.

All numbers shown are as reported, unless otherwise stated. All amounts are stated in million euros (€ million) unless otherwise indicated. Amounts below €0.5 million are rounded and reported as 0. Rounding differences may occur.

Results Presentation Q1 2019/20

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Agenda

01 02 03

Highlights	Financial	Outlook
	Performance

01

Highlights

CECONOMY's Q1 19/20 in a nutshell

Successful Black Friday period, both in-store and online

Solid growth rates in Online and Services & Solutions

Encouraging earnings improvement driven by Services & Solutions and cost optimization, esp. in Germany

Results Presentation Q1 2019/20

Christmas business impacted by pull-forward effects due to increasing importance of Black Friday

Adverse macro conditions and intense competition in Southern Europe

Poland still with weak performance

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In Q1 we built the foundation for a sound financial year 19/20

-0.5%

289 €m

		Sales change yoy	Adj. EBIT1,2
		adjusted for fx-effects and	excl. associates3
		portfolio changes	+20 €m vs. PY
Note: 1 Adjusted EBIT before non-recurring earnings effects in connection with the reorganization and efficiency program and portfolio changes. 2 Incl. IFRS 16. 3 Companies accounted for using the equity method
	Results Presentation Q1 2019/20		Public	Date: 07 February 2020 // 6

We continued the success of last year and built again a profitable Black Friday

Centrally prepared and orchestrated	New MediaMarkt web platform handling
campaign concepts for entire group supported	double traffic, improved delivery performance
by professional toolkit	and improved availability of offers

Cross-selling of bundles, focus on services & solutions and higher margin product mix

Strong campaigns with focus on services, early access for MediaMarkt club members and Saturn card holders

Results Presentation Q1 2019/20

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After an already strong prior year, we generated solid double-digit sales growth rates in-store and online

+1,000k +15%

More items sold during 5-day Black	More online shoppers visited our
Friday period vs. PY	websites vs. PY

+2%

More customers visited our stores vs. PY

Note: Figures for 5-dayBlack Fridayperiod including Thursday to Cyber Monday compared to the comparable prior-yearperiod. Figures excluding Greek MediaMarkt business (portfolio adjustment).

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Attractive bundles increased attachment rates during Black Friday, driving smartphone, computer hardware and GSM accessories sales

Countries were well prepared to meet high stationary and online traffic (e.g. partly pre-configuratedReady-To-Use items)

Many campaign products were offered as "Ready-To-Use"bundles which supported particularly smartphone and computer hardware sales

GSM accessories with very good development due to good attachment rate

Ready-To-Use

Ready-To-Usenotebooks Screen

smartphonesprotections

+61% +60% +68%

Note: Figures for 5-dayBlack Fridayperiod including Thursday to Cyber Monday compared to the comparable prior-yearperiod. Figures excluding Greek MediaMarkt business (portfolio adjustment).

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02

Financial Performance

Fx- and portfolio adjusted sales1 nearly on prior-year's level (excl. iBood)

Q1	Total sales
	fx- and portfolio adj.1
	(in €m)
		-0.5%
						-0.8%
	6,879	6,821

Q1 18/19Q1 19/20

Sales by segment

(fx- and portfolio adj.1, yoy change)

		11.3%
-0.2%	-2.9%
			-8.9%
DACH	W. & S. Europe	E. Europe	Others

1 Excluding Greek MediaMarkt business (portfolio adjustment).

Q1 Highlights

• Fx- and portfolio adjusted1 sales excl. iBood nearly on PY's level (-0.2%)
• DACH: Germany with strong Black Friday, but offset by softer subsequent Christmas trading; strong performance in Austria and Hungary
• Western & Southern Europe: Spain mainly impacted by shift in campaign plan; Italy impacted by macro environment and competition; Netherlands with declining sales
• Eastern Europe: Turkey with strong double-digit growth; Poland with slight sales decline
• Others: Solid fx-adj. sales increase in Sweden; sales decline due to disposal of iBood

Results Presentation Q1 2019/20

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Date: 07 February 2020 // 11

Online and Services & Solutions are the key growth drivers

Q1	Online sales1
	(in €m)

			+4.3%
				1,043
	1,000
	14.7%	in % of sales	15.4%
	Q1 18/19		Q1 19/20

Services & Solutions sales1

(in €m)

	+10.0%
339	373

	5.0%	in % of sales	5.5%
	Q1 18/19		Q1 19/20

1 Excluding Greek MediaMarkt business (portfolio adjustment).

Q1 Highlights

• Online1 growth +5.9% excl. iBood
• "Black Friday" campaigns with particularly positive effect on online business
• Online business impacted by high comps (+28%) and shift of campaign planning in Spain
• Strong demand for pick-up option at 47% vs. 44% in the prior-yearperiod
• Double-digitgrowth of SmartBar services: Ready-To-Use,screen protection, in-storerepair
• Positive development of extended warranties and mobile business, while consumer financing business was below PY's level

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Solid operational EBIT improvement mainly driven by Services & Solutions and cost savings

Q1 Gross margin1,2 (in % of sales)

OPEX1,2,3 (in % of sales)

Q1 Highlights

	-0.1%p.	-0.5%p.	 Gross margin with trend improvement, cost
18.4%	18.3%	15.3%	14.8%	savings in PEX and indirect spend
					 DACH: Strong performance in Germany driven
					by Services & Solutions and cost savings
Q1 18/19	Q1 19/20	Q1 18/19	Q1 19/20	 Western & Southern Europe: Spain and Italy
Adj. EBIT1,2 excl. associates (in €m)			impacted by macro environment and
	Q1 18/19	competition; Netherlands also with declining
269	289			Q1 19/20 incl. IFRS 16	result, but with slight trend improvement
247

	197							 Eastern Europe: Poland with ongoing negative
		69	50					trend, Turkey benefiting from market growth
		15	7
						 Others: Severance payment at CECONOMY level
						-12	-15
						and slight decline in Sweden
Group	DACH	W. & S. Europe E. Europe	Others4

1 Excl. non-recurring earnings effects in connection with the reorganization and efficiency program. 2 Adjusted for portfolio changes 3 Sum of SG&A expensesand Other operating expenses. 4 Incl. consolidation.

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Reported EBIT benefited predominantly from positive one-time effect related to Greek transaction

Q1 Adj. EBIT1,2 excl. associates to reported EBIT (in €m)

	319
	-1
30
289	− Operational result
	Greece
	− Regular Fnac
+ Transaction-	Darty D&A
related effect	component
Greece
− Expected trailing
restructuring
expenses

Adj. EBIT Q1 19/20	Restructuring-related earnings effects	Other adj. items	Reported EBIT Q1 19/20
		(portfolio, associates)

Note: EBIT incl. IFRS 16 effect. 1 Adjusted EBIT excl. associates and non-recurring earnings effects in connection with the reorganization and efficiency program announced on 29 April 2019. 2 Adjusted for portfolio changes.

Results Presentation Q1 2019/20

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Date: 07 February 2020 // 14

EPS improvement mainly driven by higher earnings and lower tax rate

€m	Q1 2018/19	Q1 2019/20	Change
EBITDA	291	509	218
EBIT	234	319	84
Net financial result	1	9	8
Earnings before taxes	235	327	92
Income taxes	-88	-105	-17
Tax rate	37.4%	32.0%	-5.3%p.
Profit or loss for the period	147	222	75
Non-controlling interest	40	53	13
Net result	107	170	62
EPS (in €)	0.30	0.47	0.17

Note: reported EBIT/DA; EBIT/DA inCY incl. IFRS 16 effect. 1 Before associates, M.video and restructuring-related effects.

Q1 Highlights

• Reported EBITDA includes c. 138 €m IFRS 16 effect
• Reported EBIT includes c. 2 €m IFRS 16 effect
• Reported earnings in CY include positive effect related to Greek transaction; PY impacted by expenses for restructuring and management changes
• Net financial result benefited from payment of M.video dividend in the amount of 13 €m
• Tax rate improved to 32% mainly due to non- taxable gain related to Greek transaction; underlying tax rate1 at 38%
• EPS increased by 0.17 € yoy

Results Presentation Q1 2019/20

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Date: 07 February 2020 // 15

Adjusted Free Cash Flow below prior-year's level mainly due to restructuring-related cash outflows and higher cash taxes

Q1 2019/20: Free Cash Flow (in €m)

Q1 Highlights

	1,119				1,421			 Change in NWC improved slightly due to
		-29				1,272
		-105	-74			higher increase in trade payables, mainly
				-149
							resulting from higher starting point as of 30
509								September 2018
EBITDA	NWC	Tax	Other	Cash	FCF	Lease	Lease	 Cash tax payments in prior-year period
				investments		repaym.	adj. FCF1	benefited from tax optimization in FY 17/18

2018/19: Free Cash Flow (in €m)

 Other OCF Q1 19/20 mainly impacted by

1,099

61

1,394

1,393

restructuring-related cash outflows and reversal

-4

-52

-1

of non-cash effects related to Greek transaction

291

 Other OCF Q1 18/19 lower trade tax

receivables and the settlement of receivables in

connection with Russia transaction turn into

EBITDA

NWC2

Tax

Other

Cash

FCF

Lease

Lease

tough comparison base this year

investments

repaym.

adj. FCF1

1 Lease adjusted free cash flow subtracts the repayment of lease liabilities for better FCF comparability under IFRS 16 2 Prior-yearadjustments due to changes in presentation and definition.

Results Presentation Q1 2019/20

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Date: 07 February 2020 // 16

03

Outlook

Outlook for FY 19/20 confirmed

• Adjusted for portfolio changes
• Excluding non-recurring earnings effects in connection with the reorganization and efficiency program announced on 29 April 2019

	FY 19/20	thereof IFRS 16
	incl. IFRS 16		effect
Fx-adjusted sales	Slight increase
EBIT (excl. associates)	445 - 475 €m		5 - 15 €m

Results Presentation Q1 2019/20

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Date: 07 February 2020 // 18

In Q1 2019/20 we focused on a profitable Black Friday period and further executed our initiatives

1	2		3	4
	Profitable Black	Progressed on	Significant cost	Encouraging
	strategic initiatives
	Friday period,	optimization,	group earnings
	with promising
	in-store and online	esp. in Germany	improvement
	results

In Q1 we built the foundation for a sound FY 2019/20

Results Presentation Q1 2019/20

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Date: 07 February 2020 // 19

26 MARCH 2020

10 AM - 2 PM

STRATEGY

UPDATE

CECONOMY HQ DÜSSELDORF

Q&A

Dr Bernhard Düttmann	Karin Sonnenmoser
Chief Executive Officer	Chief Financial Officer
CECONOMY AG	CECONOMY AG

Results Presentation Q1 2019/20

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Date: 07 February 2020 // 21

CECONOMY AG

Investor Relations

CONTACT Kaistr. 3

40221 Düsseldorf

Germany

Tel.: [phone]

Email: [e-mail] https://www.ceconomy.de/en/investor-relations/

Notes

• All numbers in the presentation incl. IFRS 16 (unless otherwise stated)
• The disposal of the Greek MediaMarkt business is treated as a portfolio effect
• Forecast-relevantEBIT is adjusted for portfolio effects and non-recurring earnings effects in connection with the reorganization and efficiency program announced on 29 April 2019 and excluding associates

Results Presentation Q1 2019/20

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Date: 07 February 2020 // 23

IFRS 16 effects on EBITDA and EBIT

	Adjusted EBITDA1,2	Adjusted EBITDA1,2	IFRS 16 effect
		including IFRS 16
€m	Q1 18/19	Q1 19/20	Q1 19/20
DACH	228	356	80
Western/Southern Europe	87	111	44
Eastern Europe	20	23	12
Others3	-11	-11	2
Total	325	479	138
	Adjusted EBIT1,2	Adjusted EBIT1,2	IFRS 16 effect
		including IFRS 16
€m	Q1 18/19	Q1 19/20	Q1 19/20
DACH	197	247	1
Western/Southern Europe	69	50	0
Eastern Europe	15	7	1
Others3	-12	-15	-1
Total	269	289	2

1 Adjusted EBIT/DA excl. associates and non-recurring earnings effects in connection with the reorganization and efficiency program announced on 29 April 2019. 2 Adjusted for portfolio changes 3 Including consolidation.

Results Presentation Q1 2019/20

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Date: 07 February 2020 // 24

Store network as of 31 December 2019

	30/09/2019	Openings	Closures	31/12/2019
Germany	431	-	-2	429
Austria	52	-	-	52
Switzerland	26	-	-	26
Hungary	32	-	-	32
DACH	541	-	-2	539
Belgium	27	-	-	27
Greece	12	-	-12	0
Italy	117	-	-	117
Luxembourg	2	-	-	2
Netherlands	49	1	-	50
Portugal	10	-	-	10
Spain	88	-	-	88
Western/S. Europe	305	1	-12	294
Poland	90	-	-	90
Turkey	78	-	-	78
Eastern Europe	168	-	-	168
Sweden	28	-	-	28
Others	28	-	-	28
CECONOMY	1,042	1	-14	1,029

Highlights

• Selective expansion with 1 store opening in the Netherlands
• 2 store closures in Germany
• Average store size reduced by c. -1%to 2,622 sqm since September 2019, mainly due to further store rightsizings and store closures

Results Presentation Q1 2019/20

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Net Working Capital1

€m	30/09/2018	31/12/2018	Change	30/09/2019	31/12/2019	Change
Inventories	2,480	3,229	749	2,548	3,348	801
Trade receivables and other receivables	610	579	-32	455	543	87
Receivables due from suppliers	1,241	1,789	549	1,295	1,851	556
Trade payables and other payables	-5,745	-8,136	-2,391	-5,321	-7,857	-2,536
Net Working Capital	-1,415	-2,539	-1,124	-1,023	-2,115	-1,092

1 Prior year adjustments due to changes in presentation and definition
Results Presentation Q1 2019/20	Public	Date: 07 February 2020 // 26

New simplified NWC definition as of Q1 2019/20 with all items easily readable from balance sheet positions

Old NWC definition

New NWC definition

Assets

Liabilities

	Inventories
	Receivables due from suppliers
	Trade receivables
	Receivables from credit cards
	REMOVED1
	Advance payments on inventories
	REMOVED2
	Trade payables

Liabilities to customers

Deferred revenues from vouchers and customer loyalty programmes

Provisions for customer loyalty programmes and rights of return

Prepayments received on orders

Without liabilities for rights of return

Inventories

Receivables due from suppliers

Trade receivables and other receivables

Contract assets
NEW

Trade payables and other liabilities

Deferred revenues from
warranty extension	NEW
Contract liabilities
NEW

1 Reclassified as Cash and cash equivalent due to similar character 2 Removed due to non-material amount

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Comparison of new vs old NWC definitions

		€m	30/09/2018	30/09/2019
		Inventories	2,480	2,548
		Trade receivables and similar claims	613	417
		Receivables due from suppliers	1,239	1,295
		Receivables from credit cards	71	51
Old		Advance payments on inventories	0	1
	Trade payables and similar payables	-5,277	-4,914
		Liabilities to customers	-45	-13
		Deferred revenues from vouchers and customer loyalty programmes	-137	-133
		Provisions for customer loyalty programmes and rights of return	-23	-22
		Prepayments received on orders	-46	-45
		Net Working Capital	-1,125	-815
		€m	30/09/2018	30/09/2019
New		Inventories	2,480	2,548
	Trade receivables and other receivables	610	455
	Receivables due from suppliers	1,241	1,295
		Trade payables and other payables	-5,745	-5,321
		Net Working Capital	-1,415	-1,023

• NWC becomes easily readable from balance sheet positions
• New definition ensures completeness of NWC positions
• Due to revised disclosure under new definition, NWC is more negative than under old definition
• Redefinition has no economic impact

Results Presentation Q1 2019/20

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Date: 07 February 2020 // 28

IFRS 16 applied as of 1 October 2019 - estimated P&L impact in FY 19/20

	ESTIMATED
	EFFECT 1
Leasing expenses		Decrease by 525-565 €m as leasing expenses are recognized as D&A and interest cost
EBITDA		Increase by 525-565	€m equalling the amount of leasing expenses
D&A		Increase by 515-555	€m due to depreciation of capitalized operating lease asset
EBIT		Increase by approx. 5-15 €m as lease expense is replaced by D&A and interest
Interest expense		Increase by a low double-digit €m amount due to interest cost component
Earnings before taxes		Reduce by a low single-digit €m amount due to higher interest during first years

1 Estimated effect on financials of FY 19/20 as first year of IFRS 16 application; financial effects based on preliminary and unaudited impact analysis as of 11 November 2019.

Results Presentation Q1 2019/20

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Date: 07 February 2020 // 29

IFRS 16 applied as of 1 October 2019 - estimated balance sheet and cash flow impact in FY 19/20

	ESTIMATED
	EFFECT 1
Assets		Increase by around 2.3	€bn due to recognition of lease contracts as rights of use assets
Liabilities		Increase by around 2.4	€bn due to recognition of lease contracts as lease liabilities

	ESTIMATED
	EFFECT 1
Operating CF		Increase by 525-565 €m as leasing expenses shift to financing CF
Financing CF		Decrease by 525-565 €m as leasing expenses are recognized as interest and amortization

1 Estimated effect on financials of FY 19/20 as first year of IFRS 16 application; financial effects based on preliminary and unaudited impact analysis as of 11 November 2019.

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Financial calendar and events

Financial calendar

Annual General Meeting

Capital Markets Day

Q2/H1 2019/20 results

Q3/9M 2019/20 results

Q4/FY 2019/20 trading statement

FY 2019/20 results

Upcoming events

Roadshow London

Roadshow Paris

12 February 2020

26 March 2020

14 May 2020

13 August 2020

23 October 2020

15 December 2020

10 February 2020

18 February 2020

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