Ceconomy : Results Presentation Q3 2019/20

Q3 2019/20

RESULTS PRESENTATION

Dr Bernhard Düttmann, Karin Sonnenmoser, Ferran Reverter Düsseldorf, 13 August 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.

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Agenda

01 02 03 04

Highlights	Business	Financial	Outlook
	Update	Performance

01

Highlights

CECONOMY has successfully navigated through this challenging time…

	Pre-Corona	Lockdown phase		Recovery phase
			COVID-19 store closures
	October - February	March - April		May - July
	Profitable Black Friday period,	Sales and gross margin strongly			Strong sales momentum also driven
	in-store and online	impacted by store closures		by release of pent-up demand

Progress on strategic initiatives with	Accelerating sales momentum in the		Traffic shortfall compensated by
promising results	online channel		higher bon and conversion rates

Encouraging group earnings

Mitigating measures helped to slow

Sustained strong online sales

improvement

down earnings shortfall

momentum despite store re-openings

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CECONOMY's Q3 19/20 in a nutshell

Strong sales recovery following easing of				COVID-19 induced channel shift and lower Services
COVID-19 restrictions				& Solutions income weigh on gross margin

Online business with ongoing strong performance

despite store reopenings through May and June

Stock age structure still negatively influenced by

store closures from March to May

Better than expected result despite extraordinary impact from COVID-19thanks to pro-active,ruthless execution of contingency measures

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The excellent business recovery is already reflected in the third quarter results, which were above expectations

-8.4%

-45 €m

		Sales change yoy	Adj. EBIT1,2
		adjusted for fx-effects and	excl. associates
		portfolio changes	on prior year's level
1Adjusted EBIT before non-recurring effects. 2Incl. IFRS 16.
	Results Presentation Q3 2019/20		Public	Date: 13 August 2020 // 7

Despite the pandemic, we have not lost sight of our strategic initiatives

OMNI-

SERVICES &

CATEGORY &

ORGANIZATION &

CHANNEL

SOLUTIONS

SUPPLY CHAIN

COST STRUCTURE

MANAGEMENT

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02

Business Update

We continued to make noticeable progress in many areas

OMNI-

CHANNEL

• 3m new online customers since March, also driven by increased online marketing
• Launch of marketplace in July with good initial momentum
• Store traffic recovering step by step (pickup back to >40%)
• Efficiency improvements in stores through employee app
• Re-brandingin Austria and Luxembourg

SERVICES &

SOLUTIONS

• Sales recovery to previous year levels in June, also driven by improved attachment measures in stores and online
• Launch monthly subscriptions with warranty extension G+ in German online channel
• Aftersales & repair IT platform roll-out completed in Germany and progressing in Austria

CATEGORY &

SUPPLY CHAIN

MANAGEMENT

• Introduction of standardized assortment and supplier framework for each country
• Strong increase in centralized procurement (now >95% centralized on country level)
• Launch of new product category pilots
• Continued enhancements in logistics leading to impoved customer experience

ORGANIZATION & COST STRUCTURES

• Continued focus on flexibilization of costs, e.g. turnover rents
• New operating model blue- print and roadmap defined

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We also learnt key lessons for the next phase of our transformation

We demonstrated	An agile group-	Embedding a more
that we can react	wide contingency	central approach
fast to	approach proved	and agility in the
fundamentally	highly effective	organization to
changing	and successful	accelerate the
conditions		transformation
Results Presentation Q2/H1 2019/20	Public	Date: 13 August 2020 // 11

Our New Operating Model will introduce standardized organization and operations across all countries & stores

New Operating Model

HQ & Country	 Introduction of group-wide standardized organization and operations across
functions	all countries
	 Central definition and roll-out of operational strategy including core concepts
	 Clusters of countries
	Leaner structures and consistent, faster processes
Store	 Implementation of new store organization
organization

 Transfer administrative tasks from stores to the countries and HQ

 Higher degree of centralized processes, more customer focus in stores

Ensure maximum customer orientation and a consistent customer experience with an efficient organization

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We will establish unified structures with clear responsibilities…

Clear responsibilities	Harmonized HQ and country functions
Clear responsibilities for
strategic guidelines, standard design	Managing	(General)	Managing
and execution of activities	Director	Managing	Director
	Commercial	Director Sales	Finance

Unified structures
Identical organizational design of
management structure in countries	Examples of country clusters
and for stores
Customer focused	BeNeLux
Customer oriented central structures -
leaner, clearer accountability and faster	Iberia
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…and empower store employees as well as free up resources to offer outstanding customer service

Efficient organization

Standardized, unified structures and clearly defined responsibilities to fully focus on the customer

Passion for customer

Omni-channel and service-oriented perspective through a dedicated employee training program

Store productivity

Digital tools for the improvement of service quality and efficiency

New store leadership structure

Chief Customer

Business

Officer

Backoffice

Analyst

Customer

Customer

Fulfillment

B2B

Sales &

Experience

Solutions

& Services

Store productivity tools

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We will further optimize our store network, which remains a key element of our omni-channel approach

 14 stores across Europe to

be permanently closed in

response to COVID-19

impacts

Personal consultation

Pick-up points

Optimization of store network

 Further potential closure of

loss-making stores subject

to further monitoring of

the store network

 Continue right-sizing of

stores

 Continued flexibilization of

rental costs

Store Network

>1,000 stores

Product excitement

Visibility for brands

In-store customer services

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Our goal is to achieve savings of slightly more than 100 €m per year towards an improved cost base

Savings run-rate

Expenses1

Slightly more than 100 €m

c. 180 €m

Program expected to run for 24 - 36 months, majority of savings in FY 22/23 expected

Significant part of expenses expected to still become earnings effective in FY 19/20

Cash pay-back period of <1.75 years

A total of up to 3,500 FTEs expected to be reduced, primarily outside Germany

1Includes c.5 €m non-cashaccounting effects.
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The New Operating Model is the fundament for the next phase of our transformation

The ultimate goal is to become customer's 1st choice

Further develop omni-channel	Improve customer experience and	Embrace technology and big data to
proposition combined with new
operational excellence	build fast & efficient operations
income pools

New Operating Model

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03

Financial Performance

Negative sales development exclusively related to COVID-19 lockdowns

Q3	Total sales
			fx- and portfolio adj.1
	(in €m)
				-8.4%
						-10.0%
			4,565	4,107

Q3 18/19

Q3 19/20

Sales by segment

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

-7.3%			-9.3%
	-9.9%	-11.1%
DACH	W. & S. Europe	E. Europe	Others

1Excl. Greek MediaMarkt business (portfolio adjustment).

Q3 Highlights

• Fx- and portfolio adjusted1 sales excl. iBood at -8.1%
• DACH: Germany, Austria and Switzerland impacted by store closures in April followed by noticeable sales recovery in May/June
• Western & Southern Europe: Italy and Spain faced sharp decline due to store closures in April and restrictions in May; Netherlands recorded a strong increase in sales
• Eastern Europe: Turkey and Poland impacted by store closures in April and May, recovery in June
• Others: Positive sales momentum in Sweden, segment decline due to disposal of iBood

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Group sales rebounded in May and gained momentum in June after COVID-19 induced headwinds in March and April

Total sales1,2 growth yoy

Online sales2 Open stores3 growth yoy

+1%	+8%			+3%	+12%
		-28%
			-43%
			+209%
				+133%	+97%
		+58%
	+17%
+3%
Jan	Feb	Mar	Apr	May	Jun
			14%
100%	100%	59%		70%	100%

1Sales adjusted for currency and portfolio change effects. 2Excluding Greek MediaMarkt business (portfolio adjustment). 3Monthly average.

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Strong online sales momentum, while Services & Solutions business was mainly impacted by store closures

Q3	Online sales1
	(in €m)

+145.1%

1,446

	590	in % of sales	35.2%
	13.0%
	Q3 18/19		Q3 19/20

Services & Solutions sales1

(in €m)

	-17.8%
274	225

6.1%	in % of sales	5.5%
Q3 18/19		Q3 19/20

1Excl. Greek MediaMarkt business (portfolio adjustment).

Q3 Highlights

• Online1 growth +153.1% excl. iBood
• Strong online performance continued, despite gradual reopenings
• Almost 3 million new online customers recorded in our webshops since March
• Pick-uprate at 32% vs. 46% in PY, pick-up rate also recovering (back to >40% in June)
• Services & Solutions business impacted by store closures, lower traffic thereafter and lower service attachment rate online
• Services & Solutions sales recovered to prior year's level in June

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COVID-19 related cost reductions compensated lower gross margin

Q3

9M

Gross margin1,2 (in % of sales)			Absolute	Q3 Highlights
OPEX1,2,3 (in % of sales)
	-2.8%p. including			cost savings:
	non-recurring effects			 Gross margin impacted by COVID-19 induced
			185 €m
-2.6%p.	-2.4%p.
	channel and product mix effects, higher delivery
18.7%		20.5%
16.1%		18.1%	costs, lower Services & Solutions income and
					stock-related effects
Q3 18/19	Q3 19/20	Q3 18/19	Q3 19/20	 Gross margin with monthly trend
improvement in May and June

Gross margin development1,2 19/20 vs. PY



OPEX reduction due to successful contingency

measures: lower personnel expenses mostly

-0.1%p.

due to short-time work, lower advertising and

-1.4%p.

location costs

 Ongoing operational cost savings, also in

connection with Reorganization & Efficiency

5M

Mar

Apr

May

Jun

9M

Program

1Excl. non-recurring effects. 2Adjusted for portfolio changes. 3 Sum of SG&A expenses and Other operating expenses.
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Adjusted EBIT on prior year's level despite COVID-19 impact on business

Q3 Adj. EBIT1,2 excl. associates (in €m)

				-43
						-45
				Q3 18/19			Q3 19/20
Adj. segment EBIT1,2 excl. associates (in €m)				Q3 18/19
				3						Q3 19/20 incl. IFRS 16
-9		-8		-4	-7	-11
								-22
				-30
		DACH	W. & S. Europe	E. Europe			Others3

1Excl. non-recurring effects. 2Adjusted for portfolio changes. 3 Incl. consolidation.

Q3 Highlights

• Adj. EBIT on prior-year's level, driven by COVID-19related cost measures and sales recovery in May and June
• DACH: Solid performance in Germany mainly driven by COVID-related cost reductions; EBIT in other countries broadly on prior year's level
• W. &. S. Europe: Significant sales- and margin- related decline in Spain and Italy; Netherlands with slight earnings increase
• Eastern Europe: Lower earnings in Poland; stable result in Turkey despite COVID-19 induced sales disruption
• Others: Earnings increase in Sweden and lower CECONOMY HQ expenses

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Expenses related to COVID-19 induced permanent store closures impacted reported EBIT

Q3 Adj. EBIT1,2 excl. associates to reported EBIT (in €m)

	− Expenses for
	COVID-19
	induced store
	closures
	+ Restructuring
	gain (1 €m)
-45		− Regular Fnac
	Darty D&A
	-18	component
		-1	-64

	Adj. EBIT Q3 19/20	Non-recurring effects	Other adj. items	Reported EBIT Q3 19/20
					(portfolio, associates)
1Excl. non-recurring effects. 2Adjusted for portfolio changes.
		Results Presentation Q3 2019/20			Public		Date: 13 August 2020	// 24

EPS impacted by higher taxes despite higher year-on-year earnings

€m	Q3 2018/19	Q3 2019/20	Change
EBITDA	-69	154	223
EBIT	-126	-64	61
Net financial result	12	-13	-25
Earnings before taxes	-113	-77	36
Income taxes	51	-54	-105
Profit or loss for the period	-62	-131	-69
Non-controlling interest	-14	-27	-13
Net result	-48	-104	-56
EPS (in €)	-0.13	-0.29	-0.16

Note: From continuing operations and based on reported figures; EBIT/DA in CY incl. IFRS 16 effect.

Q3 Highlights

• Reported EBITDA includes c. 133 €m IFRS 16 effect
• Reported EBIT includes c. 1 €m IFRS 16 effect
• Net financial result in prior year benefited from sales of 5.4% METRO AG stake
• Tax rate in 9M 19/20 at -54.5%; negative tax rate essentially due to Fnac Darty impairment in Q2 19/20
• EPS declined by -0.16 € yoy due to higher taxes as a result of integral tax approach, despite higher earnings

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Adjusted Free Cash Flow improved year-on-year

9M

2019/20: Free Cash Flow (in €m)

766

6

50

27

-654

-141

-403

-376

EBITDA

NWC

Tax

Other

Cash

FCF

Lease

Lease

investments

repaym.

adj. FCF1

2018/19: Free Cash Flow (in €m)

305

-644

55

-105

-131

-521

-4

-525

EBITDA

NWC2

Tax

Other2

Cash

FCF

Lease

Lease

investments

repaym.

adj. FCF1

9M Highlights

• Adj. Free Cash Flow improved by 149 €m yoy
• Change in NWC broadly stable: Comparatively lower increase in inventories and a comparatively higher reduction in receivables from suppliers compensated for significantly lower trade liabilities
• Tax refunds relating to cash tax prepayments in the previous year led to a cash inflow; also, comparatively fewer tax prepayments as a reaction to COVID-19 were made
• Increase in cash investments due to cash- effective investment into the joint venture in Greece; modernization and expansion investments below prior year

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

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04

Outlook

Underlying assumptions for remainder of FY 19/20

Based on the preliminary business development in 9M 19/20 and the current insights, the outlook for FY 19/20 was specified on 16 July 2020

Assuming no further COVID-19 related restrictions in the remaining months of FY 19/20

Sales momentum from June continued in July, but expected to soften over the course of Q4, due to potential phasing-out of catch-up effects and prevailing macroeconomic uncertainties

Trailing COVID-19 related headwinds expected in Q4, regarding supplier income and partial reduction of aged overstock

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Outlook for FY 19/20

• Adjusted for portfolio changes
• Excluding non-recurring earnings effects in connection with (1) the reorganization and efficiency program announced on 29 April 2019,
  (2) COVID-19 related store closures and (3) the introduction of the New Operating Model

	FY 19/20	thereof IFRS 16
	incl. IFRS 16		effect
Fx-adjusted sales	Slight decline
EBIT (excl. associates)	165 - 185 €m		5 - 15 €m

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Key take-aways

1	2		3
		We have not lost sight	The New Operating
	We demonstrated our	of our strategic
	Model is the
	initiatives and also
	ability to act during	fundament for the
	continued to make
	the Corona crisis	next phase of our
	noticeable progress in

many areas	transformation

We are confident regarding the long-term prospects for us

as the market leader for CE products in Europe

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Q&A

Dr Bernhard Düttmann	Karin Sonnenmoser	Ferran Reverter
Chief Executive Officer	Chief Financial Officer	Chief Executive Officer
CECONOMY AG	CECONOMY AG	Media-Saturn-Holding GmbH

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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
• Guidance-relevantEBIT excludes associates and is adjusted for portfolio effects. Non- recurring earnings effects in connection with (1) the reorganization and efficiency program announced on 29 April 2019, (2) COVID-19 related store closures and (3) the introduction of the New Operating Model are also not included.

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Phasing of expenses and savings for the New Operating Model and the further optimization of our store network

Annual gross savings

>100

>100

(in €m)	80-90
	20-30

Total P&L expenses1	Up to c.130
(in €m)

Up to c.50

Timing		FY 19/20	FY 20/21	FY 21/22	FY 22/23		FY 23/24
1Includes c.5 €m non-cashaccounting effects.
	Results Presentation Q3 2019/20			Public		Date: 13 August 2020 // 34

IFRS 16 effects on EBITDA and EBIT

			IFRS 16 effect	IFRS 16 effect
			in EBITDA	in EBITDA
€m		Q3 19/20	9M 19/20
DACH		80	241
Western/Southern Europe		40	129
Eastern Europe		12	36
Others1		2	9
Total	134	415
			IFRS 16 effect	IFRS 16 effect
			in EBIT	in EBIT
€m		Q3 19/20	9M 19/20
DACH		1	3
Western/Southern Europe		0	1
Eastern Europe		2	4
Others1		-1	-2
Total	1	7
1Including consolidation.
		Results Presentation Q3 2019/20		Public	Date: 13 August 2020	// 35

Store network as of 30 June 2020

	31/03/2020	Openings	Closures	30/06/2020					Q3 Highlights
Germany	428	-	2	426
	 1 store opening in Italy and 2 store closures in
Austria	52	-	-	52
Switzerland	26	-	-	26		Germany
Hungary	32	-	-	32
DACH	538	-	2	536		 Average store size at 2,608 sqm at the end of
Belgium	27	-	-	27
	June 2020
Italy	116	1	-	117
Luxembourg	2	-	-	2
Netherlands	50	-	-	50
Portugal	10	-	-	10
Spain	88	-	-	88
Western/S. Europe	293	1	-	294
Poland	88	-	-	88
Turkey	78	-	-	78
Eastern Europe	166	-	-	166
Sweden	28	-	-	28
Others	28	-	-	28
CECONOMY	1,025	1	2	1,024
	Results Presentation Q3 2019/20					Public		Date: 13 August 2020 // 36

Net Working Capital1

€m	30/09/2018	30/06/2019	Change	30/09/2019	30/06/2020	Change
Inventories	2,480	2,802	322	2,548	2,780	232
Trade receivables and similar claims	610	530	-80	455	467	12
Receivables due from suppliers	1,241	1,157	-83	1,295	970	-325
Trade liabilities and similar liabilities	-5,745	-5,270	476	-5,321	-4,557	763
Net Working Capital	-1,415	-781	634	-1,023	-340	683

1Prior-year adjustments due to changes in presentation and definition.
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Financial calendar and events

Financial calendar
Q4/FY 2019/20 trading statement	23 October 2020
FY 2019/20 results	15 December 2020
Upcoming events
Virtual Roadshow KeplerCheuvreux
		1 September 2020
Virtual Roadshow Paris, Bryan Garnier	2 September 2020
Commerzbank Corporate Conference, Frankfurt	3 September 2020
Baader Investment Conference, Munich	21 September 2020
9th German Corporate Conference 2020, Munich	23 September 2020
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