Metro : IFRS 16 Restatement 2018/19 (Continuing Operations) - Presentation (Englisch)

IFRS 16 RESTATEMENT 2018/19

(CONTINUING OPERATIONS)

03 February 2020

DISCLAIMER AND NOTES

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 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. Many of these risks and uncertainties relate to factors that are beyond METRO AG'sability to control or estimate precisely. The risks and uncertainties which these forward-looking statements may be subject to include (without limitation) future market and economic conditions, the behavior of other market participants, invest in innovative sales formats, expand in online and multichannel sales activities, integrate acquired businesses and achieve anticipated cost savings and productivity gains, and the actions of government regulators. Readers are cautioned not to place reliance on these forward-looking statements. METRO AGdoes 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 and should not be treated as investment advice or recommendation. It is not, and nothing in it should 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. This presentation may not, at any time, be reproduced, distributed or published (in whole or in part) without prior written consent of METRO AG.

Not all figures included in this presentation have been audited and certain figures may also deviate substantially from information in the consolidated financial statements of METRO AG, thus, may not be fully comparable to such financial statements. The hypermarket business for sale is reported as a discontinued operation as of 30 September 2018 due to the ongoing sales process. Following the signing of the contract for the disposal of a majority stake in METRO China to Wumei Technology Group, METRO China has been reported as discontinued operation as of 30 September 2019. METRO will retain only 20% stake in METRO China. The discontinued segment primarily includes Real, majority of METRO China and some other individual companies or assets. All following explanations of the business development will focus on the continued operations unless stated otherwise

This presentation includes supplemental financial measures which are or may be non-GAAP financial or operative measures. These measures should not be viewed in isolation as alternatives to financial measures presented in accordance with IFRS. Other companies that disclose similarly titled measures may calculate them differently. All amounts are stated in million euros (€ million)unless otherwise indicated. Amounts below €0.5 millionare rounded and reported as 0. Rounding differences may occur.

02/03/2020 © METRO AG.

KEY PRINCIPLES AND MAIN IMPACTS (1/2)

Background and Key Principles

Why? Conceptual framework perspective

• IFRS 16 was introduced by IASB in January 2016 in order to provide more transparency on companies' lease assets and liabilities and to improve comparability between companies that lease and those that borrow to buy
• It is effective for most companies that report under IFRS since 1 January 2019 and replaced IAS 17 (the earlier leasing standard)

How? METRO specific application

• IFRS 16 was applied from 1 October 2019 onwards, using the fully retrospective method (for group and segments); previous year financials (Q1, Q2, Q3, Q4 & FY 2018/19) were restated correspondingly
• METRO has exercised the option of not applying theright-of-use approach to low-value assets and short-term leases. Rental expenses for these assets will therefore continue to be recognised directly in the income statement
• The option to separate lease andnon-lease components (e.g. service) is not exercised and the non-lease components are included in the right-of-use assets to be recognised

02/03/2020 © METRO AG.

KEY PRINCIPLES AND MAIN IMPACTS (2/2)

Main Impacts

• Previously, lease contracts where either classified as operating or finance lease. With IFRS 16, operating leases are accounted for as finance lease (with selected exceptions)
• • Operating leases capitalised on the balance sheet, assets depreciated over time
  • Lease expense hence "becomes" interest expense and amortization
• Different components of income statement, balance sheet, and cash flow statement are affected
• • EBITDA strongly increases (due to lower lease expense), EBIT increases (due to lower lease expense only partially compensated

by higher depreciation) and net financial result decreases (due to additional interest expense)

• • However, as the sum of depreciation and interest is roughly on the same level as the replaced rent, the restated earnings before taxes (EBT), profit for the period and earnings per share (EPS) only increase slightly
• Total assets and liabilities increase significantly, equity decreases
• No impact on total cash flow, whereas operating cash flow will increase at the expense of financial cash flow

No economic impact on the business, our strategy or capital allocation policy

02/03/2020 © METRO AG.

IFRS 16 IMPACT ON KPIS (1/3)

Group Performance 2018/19

	18/19	Effect of	18/19
€ million1	before
IFRS 16	Restated
	IFRS 16
Sales (net)	27,082	-	27,082
EBITDA excl. RE gains	1,021	371	1,392
Real estate gains	338	1	339
Total EBITDA	1,359	372	1,731
D&A	-532	-243	-774
EBIT	828	130	957
Net financial result	-119	-111	-230
EBT	709	19	728
Net income	411	16	427
Earnings per share (in €)	1.12	0.04	1.16

Comments

• GroupSales completely unaffected
• As operating lease expenses are being replaced by depreciation and interest expensesEBITDA excl. RE gains increasesby 371m€
• This equals anincrease in EBITDA margin by 1.4%-pointsto 5.1%
• Additional depreciation(-243m€)leaves an EBIT increase of 130m€
• Additional interest expenseslower net financial result(-111m€), which also faces higher FX volatilitydue to some lease contracts in foreign currency
• Earnings before Tax and net income increases by 19m€ and 16m€ respectively resulting in anEPS uplift of 0.04€

02/03/2020 © METRO AG.

1IFRS 16 restatement figures unaudited

IFRS 16 IMPACT ON KPIS (2/3)

Balance Sheet (as per Sep 30, 2019)

€ million1		18/19	Effect of	18/19
	before IFRS 16	IFRS 16	Restated
Assets		14,497	3,345	17,842
		2,735	-377	2,357
Equity
Liabilities		11,762	3,723	15,485
		2,858	2,561	5,419
Net Debt
Net Debt/EBITDA		2.8x	6.9x	3.9x
(reported information,
not rating adjusted)

Discontinued operations reported as IFRS 5 still part of balance sheet and therefore impacting asset, equity and liabilities | Net Debt includes only continuing operations

Comments

• IFRS 16 results in asignificant balance sheet extension of 3.3bn€driven mainly by non-current assets / liabilities
• Equity decreasesby 377m€ mainly linked to an opening balance sheet adjustment (net difference ofright-of-useassets and lease liabilities)
• Net debt increasesdue to higher non- current and current financial liabilities
• That increase is driven by initial lease terms (2.2bn€) and extension options respectively (0,35bn€)

Significant balance sheet extension and increase in net debt due to recognition of lease liabilities

02/03/2020 © METRO AG.

1IFRS 16 restatement figures unaudited

IFRS 16 IMPACT ON KPIS (3/3)

Cash Flow Statement 2018/19

€ million1		18/19	Effect of	18/19
	before IFRS 16	IFRS 16	Restated
Operating CF	796	397	1,193
	46	-	46
Investing CF
	-1,122	-397	-1,519
Financing CF

Comments

• Cash flow statement mainly affected by shift effects resulting in an…
• • Increased cash flow from operating activities(+397m€ due to rental expenses being excluded)
  • Lower cash flow from financing activities(increase in redemption of borrowings and interests paid)
• Total cash flow unchanged, underlining the nature of the standard which addresses how leases are accounted for, but not change the cash outflow related to the respective leases

IFRS 16 does not affect total cash flow, but results in shift effects

02/03/2020 © METRO AG.

1IFRS 16 restatement figures unaudited

IFRS 16 IMPACT ON EPS

EPS dilutive at beginning of lease	METRO | average over all affected contracts

EPS accretive at end of lease.

€m

Rent

Interest & D&A

Interest

D&A

Time of lease contract

• At the beginning of the lease P/L expenses are higher than cash payments. This effect does get compensated at the end of the lease when P/L expenses are lower than cash payments("front-loadingeffect")
• The totalIFRS 16 effect on EPS depends on the weighted average lease maturity of all lease contracts within a company's portfolio
• Slightly positive EPS effect shows that the contracts inMETRO's lease portfolio are a bit more than halfway expired on average - Status quo differs between and within selective segments and depends on theunderlying lease portfolio

02/03/2020 © METRO AG.

EBITDA (MARGIN) SEGMENTS

Impact on Segment Reporting

	EBITDA excl. RE gains		EBITDA Margin
	18/19	Effect of	18/19	18/19		Effect of		18/19
€ million1	before	before
IFRS 16	Restated		IFRS 16		Restated
	IFRS 16	IFRS 16
Germany	95	33	128	2.0%		0.7%		2.7%
Western Europe	499	137	636	4.6%		1.3%		5.9%
(excl. Germany)
Russia	220	16	235	8.3%		0.6%		8.8%
Eastern Europe	344	41	385	4.8%		0.6%		5.4%
(excl. Russia)
Asia	11	32	43	0.7%		1.9%		2.5%
Others	-148	113	-35	-		-		-
METRO	1,021	371	1,392	3.8%		1.4%		5.1%

Comments

• Impacts of IFRS 16 differ across segments, depending largely on the composition of underlying lease portfolio in terms of e.g.
• • freehold ratios
  • duration of lease contracts
  • the interest rates used for discounting
• DE with lowest ownership share in group but many already existing finance lease contracts limited the IFRS 16 impact
• WE and Asia show higher margin impacts in line with relatively low freehold ratio
• Majority of stores owned in RU and EE

EBITDA margins increase in all segments lifting Group margin by 1.4% to 5.1%

02/03/2020 © METRO AG.

1IFRS 16 restatement figures unaudited

SUMMARY VIEW

IFRS 16 implications on…

Income Statement 2018/19

• Sales completely unaffected in absolute terms and growth rates
• EBITDA excluding real estate transactions increases by €371 million to €1,392 million
• EBITDA margin increases by1.4%-points to 5.1%
• Depreciation changes by€-243 million to €-774 million
• EBIT increases by €130 million to €957 million
• Net financial result decreases by€-111 million to €-230 million
• EPS increases slightly by €0.04 to €1.16

Other impacts

• Total cash flow unchanged
• Net debt increases by €2,6 billion to €5,4 billion
• No impact on credit rating expected
• Outlook for the financial year 2019/20 confirmed

02/03/2020 © METRO AG.

02/03/2020 © METRO AG.

STORE PORTFOLIO

	As of 30.09.2019	Total	Owned		Freehold ratio		Relevant IFRS
		(# of stores)	(# of stores)	(%)		interest rates
						(%)
	METRO		355		52%		1.2 - 37.5%
	678
	METRO Germany	103	10		10%		1.2 - 10.2%
	METRO Western Europe	240	84		35%		1.3 - 10.6%
	METRO Russia	94	90		96%		6.3 - 37.5%
	METRO Eastern Europe	195	153		78%		1.6 - 16.0%
	METRO Asia	46	18		39%		1.5 - 17.6%

02/03/2020 © METRO AG.