Hornbach : meets earnings forecast and forges ahead with multichannel retail

2018

2017/18 Annual Report published:

• Consolidated sales grow by 5.1 % to Euro 4.14 billion in 2017/18 financial year
• Stable operating earnings strength despite high volume of digitization expenses
• Adjusted operating earnings (EBIT) rise by 3.7 % to Euro 166 million

Frankfurt/Main, May 24, 2018. The Hornbach Group (Hornbach Holding AG & Co. KGaA Group) is pressing energetically ahead with the digital transformation of its DIY store retail business: In the 2017/18 financial year alone (March 1, 2017 to February 28, 2018), the Group shouldered expenses in excess of Euro 60 million, or more than 13 % higher than in the previous year, to expand its multichannel retail. These funds were channeled in particular into filling the final gaps in the online DIY retail business, upgrading the technological infrastructure, and further enhancing the service provided to customers. Having launched its web shops in Slovakia, Sweden, and Romania in the second half of the 2017/18 financial year, Hornbach now has both stationary and online operations in all of the European countries in its network. Despite the high volume of expenses incurred in connection with digitization, the family-managed company with a long tradition and roots in the Palatinate region successfully upheld the stability of its earnings strength. Operating earnings (EBIT) adjusted to exclude non-operating one-off items rose by 3.7 % to Euro 165.6 million. Consolidated net income grew by 6.5 % to Euro 95.7 million. For the current 2018/19 financial year, the Hornbach Group has forecast sales growth in a medium single-digit percentage range and EBIT adjusted to exclude non-operating earnings items at around the previous year's level.

'We are convinced that these substantial investments in dovetailing our stationary stores and online retail business are not just an option, but rather a necessity to enable us to satisfy customers' ever more sophisticated expectations in the digital age', commented Albrecht Hornbach, Chief Executive Officer of Hornbach Management AG, general partner of Hornbach Holding AG & Co. KGaA, when presenting the annual results in Frankfurt.

Multichannel meant having technology on a par with the leading online pure players. Albrecht Hornbach added: 'This way, we can even more effectively exploit our unassailable advantage - the ability to offer a stationary shopping experience with professional specialist advice at excellently located and generously dimensioned stores.'

Hornbach is the most productive of Germany's top-ten DIY store operators

'We can only afford this because our stationary business is successful and profitable. That enables us to finance the high costs needed to upgrade our technology and nevertheless present robust results', stressed Albrecht Hornbach. Sector statistics showed that the Hornbach Baumarkt AG subgroup generated by far the strongest growth among Germany's ten largest DIY store operators in the past year. Not only that, it further extended its lead as the most productive DIY store operator among the top ten. Based on its own information, Hornbach's net sales of Euro 2,135 per square meter of sales area are around 60 % ahead of the relevant average figure for the competition.

The Hornbach Group met its sales and earnings forecasts for the past financial year. As already communicated in the trading statement on March 22, 2018, net sales at the Hornbach Group in the 2017/18 financial year grew by 5.1 % to Euro 4,141 million. Hornbach Baumarkt AG, the largest operating subgroup, increased its overall sales by 4.9 % to Euro 3,891 million and its like-for-like sales net of currency items by 3.6 %.

Earnings slightly up on previous year

Hornbach also increased its earnings compared with the previous year. EBIT adjusted to exclude non-operating one-off items - the indicator of the Group's operating earnings strength - rose by 3.7 % to Euro 165.6 million. This growth was driven above all by the dynamic sales performance in conjunction with a stable gross margin and improved cost ratios for store operations and pre-opening expenses. Consolidated operating earnings rose by 2.8 % to Euro 161.2 million. Operating earnings include non-operating one-off charges on earnings, mainly relating to impairments and provisions, of Euro 7.2 million (2016/17: Euro 6.4 million). These were partly offset by non-operating income of Euro 2.7 million mainly resulting from the disposal of real estate no longer required for operations and write-ups (2016/17: Euro 3.4 million). Consolidated net income before minority interests rose by 6.5 % to Euro 95.7 million, leading to earnings per share of Euro 5.11 (2016/17: Euro 4.84).

Consistent dividend

In its dividend policy, Hornbach is adhering to its principle of continuity. The general partner and the Supervisory Board of Hornbach Holding AG & Co. KGaA will be proposing a dividend of Euro 1.50 for each no-par ordinary bearer share in the KGaA with dividend entitlement, and thus unchanged on the previous year, for approval by the Annual General Meeting on July 6, 2018. At Hornbach Baumarkt AG, the proposed dividend of Euro 0.68 per share is also unchanged on the previous year.

2018/19 forecast: operating earnings at around the previous year's level

In the current 2018/19 financial year, the Hornbach Group intends to continue investing heavily in digitizing its business in order to expand its strategic competitive position in the European DIY market. 'Here, it is about finding a healthy balance between safeguarding our earnings strength on the one hand and securing our future operating capacity on the other, and about doing this in a way that strengthens our business in the long term', commented Albrecht Hornbach. Against this backdrop, the Group aims to achieve sales growth in a medium single-digit percentage range in 2018/19 and to maintain its EBIT adjusted for non-operating earnings items at around the previous year's level.

Key figures of the Hornbach Group (Hornbach Holding AG & Co. KGaA Group)

Key figures Hornbach Holding AG & Co. KGaA Group (in Euro million, unless otherwise stated)	2017/18 financial year	2016/17 financial year	± in %
Net sales	4,141.0	3,940.9	5.1
of which Hornbach Baumarkt AG subgroup	3,890.7	3,710.1	4.9
- Germany	2,071.0	2,040.2	1.5
- Other countries	1,819.7	1,669.9	9.0
Like-for-like sales growth (DIY)	3.6%	3.0%
of which Hornbach Baustoff Union GmbH subgroup	247.9	228.9	8.3
Gross margin (as % of net sales)	36.6%	36.6%
EBIT	161.2	156.8	2.8
of which Hornbach Baumarkt AG subgroup	102.5	97.5	5.1
Adjusted EBIT1)	165.6	159.8	3.7
Consolidated earnings before taxes	131.6	130.1	1.2
Consolidated net income before minority interests	95.7	89.9	6.5
Earnings per share (basic/diluted in €)	5.11	4.84	5.6

Misc. key figures Hornbach Holding AG & Co. KGaA Group	February 28, 2018	February 28, 2017	± in %
Shareholders' equity as % of total assets	54.8%	52.8%
Number of DIY stores with garden centers	156	155	0.6
Sales areas in 000 m² (BHB)	1,822	1,806	0.9
Number of employees	19,614	18,835	4.1

Differences due to figures being rounded up or down; percentage changes calculated on basis of Euro 000s.

¹⁾ Adjusted to exclude non-operating income and expenses

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