2010 FY Metro - Transcript

8/6/2019 2010 FY Metro - Transcript

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Company Name: Metro

Company Ticker: MEO GR

Date: 2011-03-22

Event Description: Q4 2010 Earnings Call

Market Cap: 15,575.28

Current PX: 47.805

YTD Change($): -6.075

YTD Change(%): -11.275

Bloomberg Estimates - EPS

Current Quarter: 0.100

Current Year: 3.806

Bloomberg Estimates - Sales


Current Year: 70725.515

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Q4 2010 Earnings Call

Company Participants Company Representative

Eckhard Cordes, Chairman and Chief Executive Officer

Olaf G. Koch, Chief Financial Officer and Member-Management Board

Other Participants Fabienne Caron

Sreedhar Mahamkali

Matthias Eifert

James Collins

MANAGEMENT DISCUSSION SECTION

Company Representative

Okay, good afternoon. Welcome to Metro Group's Analysts' Meeting Financial Year 2010. I also welcome all followers

via webcast. Today, we are running on a tight schedule that's why I pass on without any further delay to our CEO, Dr.

Eckhard Cordes. Eckhard, the floor is yours.

Eckhard Cordes, Chairman and Chief Executive OfficerThank you. Well, ladies and gentlemen, good afternoon. Welcome to Metro Group's presentation of 2010 full year

results. Thanks for joining us either here in this room today or online via webcast, as you all know, multi-channel is

very important nowadays.

Now, on today's agenda, Olaf will take us through last year's numbers and then I will present the progress and

performance of our shared program and we'll and also give you some insights on Shape's development in the

divisions. Afterwards, I will touch on our expectations for 2011, and we'll round off with the usual Q&A session.

So let me start off. Ladies and gentlemen, 2010 was a successful year, or in other words, a record, record year for us.

Following a difficult 2009, we saw in 2010 both sales and earnings grow in every division. 2010 excuse me, I'm

suffering from a cold so I [inaudible] some tea, otherwise, I'm getting into trouble here. 2010 was less difficult than

2009, but it was not easy sailing in all countries. That's why meeting or even over-delivering on all our major targets

pleases me greatly.

Group EBIT came in higher than expected at 2.4 billion, a record EBIT result. Shape contributed additionally more

than additionally in 2010, additionally more than 300 million towards its excellent performance. And the stronger

real estate profits, net profit reflecting our more active management of real estate assets drove earnings significantly.

Our dividend proposal reflects the highest increase ever of more than 14% and amounts to 1.35 per ordinary share.

With less CapEx than expected, our [inaudible] store network grew by 100 new store openings across 25 countries. We

entered both Egypt with Metro Cash & Carry and the Chinese consumer electronics market with Media Markt. And for

the first time, we have optimized our country portfolio by exiting a country, namely Morocco with Cash & Carry. And

at present, we are awaiting the green light from the antitrust authorities to exit France with Saturn.


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Furthermore, new business channels and performance are being explored across all divisions. We are changing; thanks

to Shape. But let me speak more about strategy and the way forward later on and I now pass over to Olaf, who will

walk you through the key financials of last year.


Well, thank you, Eckhard. Good afternoon to everybody. I need to switch on the mike, so everybody can hear me. 2010

was not an easy year, as Dr. Cordes mentioned before. We actually have been operating in markets that have seen some

improvement while we're seeing also some deterioration in other parts of our business, and I will talk about that more

in detail later on.

All in all, if we look in sales, METRO GROUP achieved a solid sales growth of 2.6% in 2010. Sales were supported

from currencies and a high number of new store openings compared to last year, namely 100 stores, which we opened.

On a pre-currency basis, the Group achieved a sales growth of 0.9%. Sales at Metro Cash & Carry grew, thanks to

expansion. Despite weaker non-food sales, the food and delivery business grew very well.

Real sales growth came from a very strong development in Eastern Europe. In Germany, the closure of 13 stores

weighed on sales, but like-for-like sales were positive. MediaSaturn sales were driven by new store openings.

Environment and consumer retailing remained difficult though. But we saw some solid like-for-like growth in countries

such as Austria, the Netherlands, Russia and Turkey.

Kaufhof achieved a 1.2% growth on a like-for-like basis. The first year of a positive like-for-like for the division since

2000. Other reflects decline in third-party sourcing from Asia and closures of restaurant business, Grillpfanne, in

Germany.

Let me come to sales by region. Sales in Germany declined 1.4%, mainly due to divestments. Adjusted for those,

revenues remained almost flat. In Western Europe, we had a satisfying sales growth of 2.8%, predominantly driven by

Media Markt and Saturn, where almost all countries contributed positively.

Revenues in Eastern Europe grew by 7.1% and were strongly driven by Russia where Metro Cash & Carry, as well asMedia Markt and Saturn, but also Real, achieved very solid growth rates. Further growth drivers were Poland, the

Ukraine and Turkey. Also currency supported sales growth in this region.

Asia/Africa reached a growth of 17.3%, which reflects the strong performance of Metro Cash & Carry in China and

India. Sales were also here supported by favorable currency movements.

Let's come to the EBIT in Q4. Despite a tough year-end development, which was impacted by harsh weather

conditions, our EBIT came in significantly above previous year's level. Metro Cash & Carry improved its EBIT by 63

million mainly driven by its operations in Eastern Europe and Germany, including further Shape contributions, which

were also driven by productivity improvements.

Real's Q4 EBIT improved especially due to significant margin gains in Eastern Europe. Media Markt and Saturn's

EBIT improved by 19 million, due to a better product mix with a higher share of white goods, which was able to

compensate for the disappointing top-line growth in Germany.

Real Estate EBIT increased by 147 million, mainly driven by disposals of assets in Italy. I come to this in detail a bit

later. Kaufhof achieved a slight improvement despite adverse weather conditions, which had a significant impact on the

business. The decline in Other is partly due to centralization of certain governance related functions. However, the rate

of decline has markedly slowed down as we previously announced. First, results of our restructuring efforts have

helped to turn the trends. Moving forward, we want to further reduce the costs in Other.

Let's come to the EBIT for the full-year. Metro Cash & Carry increased its EBIT by 168 million, implying a margin

gain by 50 basis points, thanks to Shape-related benefits, such as a higher share of own brand sales, improvements in

supply chain management, product mix related improvements, but also customer-centric initiatives like delivery and

our intensified efforts regarding the field force.


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Real's EBIT margin rose to 1.1%, which is the highest level since 2004. The positive contribution came for the first

time from Real International, which made a significant step forward in 2010, breaking even in all countries aside from

the Ukraine, where we only operate one store.

Real Germany continued its upward trends in a tough market environment. Media Markt and Saturn's full-year EBIT

margin demonstrated resilience at 3%, despite difficult trading in Q4 and start-up costs related to China and own

brands, but also the investment into the multi-channel platform which we accelerated during the year.

Galeria Kaufhof achieved an EBIT margin of 3.9% and continued its positive trend of the recent years. The Group

improved EBIT in 2010 by 391 million or 19.3%, which implies an EBIT margin increase of 50 basis points to 3.6%.

Please note that the EBIT affects both disposals, namely the French operations of Media Markt and Saturn, as well as

Metro Cash & Carry Morocco are reported as Shape-related special items.

The Moroccan EBIT special item totals 51 million, of which 21 million is attributed to Metro Cash & Carry and 30

million to the Real Estate segment. The 51 million is reported in the Asia/Africa region. The French Media Markt,

Saturn EBIT special item totaled to 121 million negative is shown in the region Western Europe. Also until the

approval of the antitrust authorities in France, the operating losses continue to be reported in the Media Markt and

Saturn results.

Let me now come to the EBIT by region. In Germany, all sales divisions improved their EBIT contribution. The

decline of 63 million is due to a lower real estate contribution from fewer property transactions. You might remember

that in 2009 we sold two shopping centers at the very end of the year. And this year, the real estate transaction was in

Western Europe. Therefore, Western Europe EBIT was up by 318 million and was mainly driven by that disposal of

real estate assets, but also by the operating business of Cash & Carry Italy and France, as well as Media Markt and

Saturn Italy.

Eastern Europe EBIT increased by 152 million, whereas the lion's share came from Metro Cash & Carry and Real.

But also Media Markt and Saturn contributed to that result. All our three clusters for the region were able to improve

EBIT margin, whereas the resource rich countries such as Russia were leading, followed by the manufacturing heavy

such as Poland and debt burden countries such as Greece. We even could improve profitability and total profits indifficult countries like Romania.

EBIT in Asia/Africa declined by 16 million. The gains from the Cash & Carry division in Asia could only partially

compensate for the costs related to the market entry of Media Markt and Saturn in China and Cash & Carry in Egypt.

We are very pleased with the strong margin development of Metro Cash & Carry in China, showing once again a

strong EBIT growth.

Let me come to real estate. The number of owned stores declined to 688, impacted by the disposal of real estate assets

in Italy with 20 stores, as well as the divestment of the Metro Cash & Carry operations in Morocco, which included

eight stores. In the course of the expansion, Metro Cash & Carry net rents rose to 974 million in 2010. Total EBIT

increased by 147 million to 698 million. The main driver was the contribution from real estate transactions.

Let me give you some more color on this topic. For the first time we have applied a closed fund structure to dispose off

Cash & Carry real estate assets. This transaction involved the sale and leaseback of 20 stores in the north of Italy. Thedeal was worth 275 million. This implies a yield of 7.9%, or in other words a multiple of 12.6 times respectively. Our

experience with the closed fund structure has been very positive and we could imagine utilizing this transaction

structure again in the future

Bottom-line real estate portfolio management contributed 155 million, of which the lion's share came from the

aforementioned Italian deal. We always say that in a normal year real estate disposals contribute around 50 million

bottom line. This also reflects the historic average. If you deduct this 50 million normal contribution from the 155

million in 2010, you come to the difference between our guided 2.3 billion EBIT and the 2.4 billion delivered EBIT.

The 2010 net contribution compares to 18 million in 2009, which was revised upwards by 9 million due to technical

effects. The breakdown of owned real estates by region is included in the appendix.


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Let me come to net profit. Net interest result declined due to lower interest rates on deposits and higher interest

expenses caused by an extension of long-term financing in 2008 and 2009 in actuarial losses incurred. Other financial

result improved by 103 million mainly driven due to favorable currency movements in Eastern Europe.

The income tax rate in 2010 is at 37.9%. A main part of taxable losses were incurred in the German tax group of

METRO AG. Although these losses can be carried forward indefinitely, we still follow a conservative accounting

approach and therefore did not capitalize the whole amount of possible or expected deferred taxes on losses carried

forward. Additionally, the tax expenses were influenced by income tax provisions concerning the German tax audit of

former years. In 2011, our tax rate is likely to remain on an elevated level. However, our strategic corridor for income

taxes of 30% to 33% remains valid.

Earnings per share items grew by 49% to 3.12 from 2.10 in 2009.

Let me now come to capital expenditure. 2010 capital expenditure of 1.7 billion was below our original 1.9 billion

guidance, due to good progress regarding CapEx efficiency, which is also one of the initiatives, which we started in the

context of Shape. CapEx per store was slightly down, owed to smaller stores opened as well. In total 100 new stores

spread across 25 countries were opened in 2010. This has led to a higher degree of investments against depreciation

compared to 2009.

Let's have a look into net working capital. In total net working capital increased by 168 million. Relatively weak

demand in Q4 and expansion led to a higher stock level by the end of the year. Furthermore, accounts payable have

been reduced due to less orders made, also influenced by the year-end sales development. Galeria Kaufhof continued

its progress on improving net working capital management. Please remember that our goal remains to achieve the

negative working capital figure at our department store business and we are well on track. There was also some higher

later income at Media Markt and Saturn, which led to higher receivables from suppliers. All in all, we expect net

working capital developments to rebalance over the course of Q1.

Let's have a look into the cash flow. One technical remark about changes in definitions: bills of exchange were

previously disclosed as short-term financial debt; however, these bills are now classified as trade payables because the

underlying transaction is the supplier payment. Therefore, net debt now excludes bills of exchange, which results in anadjustment of net debt by 507 million in 2009. 2009 cash flow was also affected and adjusted correspondingly. Total

operating cash flows from continuing operations increased by 20 million despite a deterioration in net working capital

as explained before. Also the lower cash flow from investing due to more cash inflow from the disposal of fixed assets

had a positive effect on net debt. Net debt improved by 246 million.

Let's have a look at into the rating metrics. In terms of net debt against EBITDAR, as well as funds from operations

against net debt, METRO GROUP achieved an improvement during 2010 underpinning our current rating. Moreover,

this also reflects Metro's good standing on the international debt capital markets.

On the financing side, we strengthened our long-term financing profile with the seven year bond issue totaling 750

million. At the end of the year, we renegotiated syndicated loans amounting to 1.5 billion with the tenure of five years

On this basis, we will take advantage of low funding costs in the commercial paper market.

Ladies and gentlemen, let me now pass back to Eckhard.


Olaf thanks a lot. Ladies and gentlemen, in recent years, we have been talking a lot about macroeconomics. Despite all

up and downs, METRO has developed an incredible toolbox called Shape, which enables us also to be less dependent

on economic swings and concentrate and what we do best, obviously retailing. In 2010, Shape delivered what was

promised, more than 300 million, additionally. Simply put, Shape has contributed over 0.5 billion in EBIT since the

program was launched two years ago. That is more than a third of the originally targeted EBIT improvement potential.


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Shape has become an integral part of METRO in our corporate DNA. We have become more customer orientated, more

efficient, more international and hence a better retailer. On the non-financial side of the program, the reorganization of

the group is done and as expected is already reaping substantial benefits especially with regard to procurement.On the financial side, the majority of the cost-saving measures are implemented. This allows us now to concentrate on

productivity gains. That means generating higher gross margins and top line growth.

Our goal of increasing EBIT by gross 1.5 billion by the end of 2012 is still valid and we endeavor to achieve this

target. The net effect or bottom line impact, you know that depends on market conditions and price investments. Last

year market conditions improved due to favorable currency movements while in the crisis year 2009, EBIT was

significantly burdened. In total, market conditions are still negative at almost 400 million. On the right, as you can see

the implementation [inaudible] four and five have grown steadily since the beginning of the program.

Of course, we will continue to closely monitor the progress and target achievement of the Shape program and even

intensify our efforts to ensure consequent and sustainable implementation of the various initiatives. In this context, we

will also continue to invest into partly new capabilities such as delivery and active field force but also the revitalization

of our non-food competence.

2012, it's the first real year in which productivity gains will contribute to earnings. To achieve our Shape target, we've

set up group wide building blocks, which you'd probably remember from the kickoff of the Shape program. A main

objective of Shape was always to increase our customer orientation. Today, for example, our food divisions are using

their customer data much more effectively. The deployment of our field force at Metro Cash & Carry is paying up with

significant sales uplifts with HoReCa customers. At Real, the customer target management and customer centric

concept modules have led to much higher customer satisfaction levels.

We must also improve and innovate our sales channels. New business models are being developed across all divisions.

Today, the Internet plays a decisive role and the market channel approach is key. For example, Media Markt and Saturn

will be rolling out their e-commerce activities later this year also to Germany, whereas Real and Kaufhof are constantly

expanding their online offerings.

At Metro Cash & Carry delivery sales are growing impressively and the success of new store formats such as the citystores, satellites, drive-ins are confirming the need to innovate. We are also developing our own brand assortments

across all divisions. The share of sales is growing and the gross margin impact is impressive. Group-wide owned

brands constitute less than 10% of total sales. So you can see we still have quite some way to go and a lot of sales

potential still to [inaudible].

Customer orientation starts with procurement. We are constantly listening to our customers and developing more

attractive product ranges such as offering local produce more fresh and ultra-fresh via direct sourcing and also

improving our non-food offerings. Here, Real is a good example. The division made significant progress and increased

the non-food sales share notably. By establishing direct supply sources, we provide access to high quality products and

better value for money for our customers.

Last but not least, our store operations and supply chain management measures are being continuously improved.

Going forward, the KPI to measure future share progress with regard to productivity gains will be sales and earnings

growth. But of course, we shall continue to provide you with granularity on key areas such as delivery sales, ownedbrand share of sales and online sales progress.

Let's now move on to our divisions. Despite the challenging market conditions in certain parts of Europe, our largest

and most international division Metro Cash & Carry grew in 2010 exceedingly profitably. All regions were able to

improve their EBIT margins thanks to the effect from Shape cost-saving measures and partly on the back of

like-for-like sales growth. Total EBIT grew by nearly 18% and the division's return on sales jumped by 50 basis points

to 3.6%. And remember, it's on the fully leased basis.

In 2010, expansion accelerated and we opened 38 new stores across 14 countries and therefore surpassed our original

growth plan. Our international footprint was strengthened by entering Egypt in the summer and retreated from Morocco


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late last year in light of insufficient growth perspectives. Despite the current political unrest in the MENA region, we

remain convinced of this region's potential.

In Eastern Europe, sales rebounded in 2010 and moved back into positive territory. However, some austerity-boundcountries like Greece and Romania are still not the easiest places to trade in but also here Shape has had a positive

impact and the businesses became more profitable.

A further highlight in 2010 was the space extension via satellite stores in Romania, Poland, Bulgaria, Serbia and the

Ukraine, 13 in total. Eastern Europe remains a focal area for expansion and we are very glad to have such an

established base to grow from.

Shape played a huge role at Metro Cash & Carry. Not only was the holding company integrated into Metro AG, but

also many measures introduced to generate productivity gains are kicking in. Currently, the if I may put it that way,

new field force has been introduced in 29 countries and will unleash its potential going forward. To give you some

color on the potential benefit, Metro Cash & Carry in Spain achieved around 22% sales uplift with advised customers,

thanks to a more professional and personal customer management approach.

Delivery sales in 2010 hit 1 billion and the service is offered now in 27 countries. This growth is quite remarkable. In

the area around Frankfurt for instance, the operations reached such a scale that we needed a distribution center which

opened in November. Delivery is a major growth driver for our business and a very important selling point for our field

force.

New store formats aimed to increase the store density and increase customer proximity. We now penetrate inner-city

locations to gain new customers and enlarge our outreach of our satellite to consolidate our market position.

Last but not least, own brands. In 2010, our share grew by 170 basis points to more than13% of total sales. Here we are

constantly extending and improving our ranges to meet professional customer needs.

Coming now to our regional growth driver, Asia. In 2010, like-for-like sales grew here in all countries with the

exception of Japan and the EBIT margins improved accordingly, especially China saw a significant earnings jump. In

India, we introduced our Genesis store concept to meet the essential needs of our professional customers. The layout

comprises a smaller selling area of less than 4,000 square meters, and incorporates special features like the, what we

call, mandi or what is called the mandi concept.

In 2010, 14 new stores were opened and going forward, this region will see the lion's share of space growth. 2011, we'll

see Metro Cash & Carry step-up expansion; especially China and India will see further space growth. In addition, we

will prepare the market entry into Indonesia.

Ladies and gentlemen, at the 2008 Analysts' Meeting, I told you that I wanted to as I said then, see signs of clear

progress towards meeting Real's EBIT target. Today, I'm happy to present you the restructuring progress. Real sales

grew in 2010, also like-for-like, thanks to the successful implementation of more than 1,000 new concept modules over

the course of the last two years. Furthermore, this streamlined, the German store network, by 29 stores since 2007, that

is more than 8%, 8%. However, we only lost just 3% of sales.

The negative EBIT reported in 2007 has since improved by nearly 100 million. In Germany, the 2010 EBIT margin

improved further and came in 20 basis points higher at 1.2% on the back of strong non-food sales and the better margin

mix. And for the first time ever, for the first time ever, the Eastern European operations contributed positively to

earnings and not insignificantly. Looking back, Real was in 2007, a distressed asset. Today, Real is profitable and has

turned from a problem into an opportunity. In contrast to 2007, today we have options with regard to Real future; in

2007, we did not.

In 2010, a further 13 underperforming stores were successfully disposed of in Germany. Abroad, one store in Romania

and one in Russia was opened. In future, the number of new stores openings in Eastern Europe will pick up again and

already this year, we should see double the number of openings.


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Despite the good progress at Real, we are not resting on our laurels. On the country, our focus lies clearly on improving

the business further.

One major source of productivity gains that you know is own brands. Our own brand share of sales in Germany is thesecond highest in the sector and abroad we saw the sales share grow. This is something we are constantly working on

and improving further.

Today, I want to present you some further building blocks for Real Germany is working on. Last year, Real, again,

roll-out a considerable number of concept modules in order to become a more attractive hypermarket. The concept

modules led to a significant sales uplift and to higher satisfaction levels. Also, in 2011, we continue our roll-out with a

further 400 modules.

Furthermore, we are optimizing our assortments by aligning product ranges to target customer needs by making better

use of our vast customer data. We're also changing store layouts according to a new merchandise structure. We are

even trialing an entrepreneurial store manager ownership participation similar to Media Markt and Saturn. The first

result from our trial stores are quite encouraging. Furthermore, Real is testing new business models such as its pick and

collect drive-in concept and its web shop. As you can see, there are lots of wheels in motion to drive frequency andmargin enhancing top line growth.

The foreign business, as I already mentioned, has become earnings accretive. All countries with the exception of the

Ukraine were EBIT positive, despite still challenging conditions. Russia, Romania and Turkey all turn profitable, so to

speak, joining Poland. The region should continue to markedly increase its earnings contribution going forward and

that support the EBIT margin target of 2% to 3% by 2012.

Ladies and gentlemen, in 2010, Media Markt and Saturn has once again confirmed its market leadership in all relevant

markets. In spite of discretionary spending still being under pressure in many countries, sales grew by nearly 6%. Also

thanks to 60 newer store openings across 15 of our 17 countries.

Even increase despite the start-up costs incurred for our online trials, the own brand development and the market entry

into China. In 2011, we want to accelerate our international expansion and prepare the market entry into Norway. By

doing so, we would enlarge our Scandinavian footprint following the stellar sales growth in Sweden in 2010.

Our French market exit is still pending and we hope that the French antitrust authorities come to a positive conclusion

very soon. This exit allows us to focus management attention on growing the business more profitably.

On the next chart, you can see that nearly across-the-board, Media Markt and Saturn has once again gained market

share. And please allow me to remind you that this is market data in that this market data includes online sales, that

means there are many, many customers out there who appreciate store-based retailing. Thanks to our entrepreneurial

business concept and competitive pricing, we remain a very attractive shopping destination.

Nevertheless, we clearly see the need to increase our customer outreach and open new sales channels. Media Markt and

Saturn's management is now fully committed to building our multi-channel approach, which we have been testing in

Austria and Netherlands since the second quarter last year. Our learning curve in both countries are quite steep.

Retailer pricing strategies have become much more complex. On the one hand you have greater shelf price

transparency through mobile comparison tools that customers can use right in the store or while researching online.

However, thanks to our flexible and entrepreneurial pricing model, our stores are already today in the position to

compete with the Internet.

Our online pricing strategy is not to be the cheapest but offer great value, service and security. And, thus, us going

online has no notable impact on our store-based pricing nor do we expect major gross margin attrition.

One further key learning was that it was right to engage the store manager in the multi-channel approach from the

onset. Not only from cross-selling opportunities arising from the click and collect service, but also from a

compensation perspective. In the second half of the year, we plan to open our German web shop according to our

multi-channel approach. Saturn will lead the way and Media Markt will follow. The latter Media Markt's most probably


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in early 2012.

Furthermore, we are exploring in addition to our multi-channel approach the introduction of a standalone pure play

online brand. We are investigating this very thoroughly and we'll come to a conclusion what to do very soon. InSeptember last year, we announced the launch of our four own brand ranges, ok., KOENIC, PEAQ and ISY. These

products will leverage our leading market positions as well as counter the increasing level of market consolidation and

the declining level of competition among premium brand manufacturers. They will be available exclusively at Media

Markt and Saturn stores and via our e-commerce portals.

The first results have been very promising and many articles such as KOENIC kettles and toasters were the best-selling

items in their respective categories. The gross margin uplifts are impressive too. Very similar to those in our

medium-priced food own brand ranges. We firmly believe that our own brands will appeal to our customers and add a

new and value-creating chapter to the business' success story.

Consequently, own brands is a major building block for Media Markt and Saturn going forward. In 2011, we are rolling

out new products under the ok. and KOENIC brands, but we will also be launching the other two ranges PEAQ and

ISY.

In 2011, we shall continue to expand our online experience in Italy, the Netherlands and Austria. However, [inaudible]

initiative in the area of new business model this year will be rolling out the multi-channel approach to Germany as I

said Saturn will go online in the second half of 2011 in Germany.

Last year, Media Markt opened its first store in China to tap into one of the fastest growing markets in the world.

Chinese consumer electronics retail market is expected to grow by 8% to 180 billion over the next decade, which

would mean that China would be neck-and-neck with the States in 2020. Until 2012, we will be testing the water and

building up a strong presence in Shanghai. By the way Shanghai's market potential is similar in size to that of what

Switzerland or Austria that means roughly 5.5 billion a year. Should Shanghai prove to be successful which we

obviously very much hope we could see a growth potential of more than 100 stores across China in the mid-term

perspective.

These stores will be large-scale and offer the widest assortment available. Excuse me. Our USP for China isstraightforward. Number one, customer focus with expert advice and services; number two, an innovative store design,

and number three, an extensive range of demonstrable products at permanently low prices.

Our second store opened at the end of February and also here the customer response and sales development has been

very encouraging. All in all, Media Markt and Saturn is well-prepared and well-positioned for future.

Last but not least, a few words on our fourth sales division Galeria Kaufhof, the market leader in German and Belgium

department stores. Kaufhof is a decidedly good business and our positioning in the mid-market where the focus on

lifestyle is definitely the right place to be. The business has consistently improved its EBIT year by year, thanks to a

more efficient setup and on the back of positive like-for-like sales growth in 2010, as Olaf mentioned first and ever

since the year 2000, and we expect a further positive development of Kaufhof in future.

In 2011, we have many projects in the pipeline to improve our department stores further. Going forward, we aim to

utilize our customer data more efficiently and thus make better use of the marketing tool kit. Furthermore, we showimproved space allocation in favor of high margin fashion soft lines. By optimizing our internal processes, we come a

step closer to reaching our goal of a negative working capital.

Also for Galeria Kaufhof the Internet re-launch is important and would incorporate a multichannel approach. Thereby,

the assortments are to enlarge, two excuse me, what is it here? Yes, yes, yes. Sorry, sorry, sorry, I made a mistake, I

made a mistake. Sorry again. Multichannel Kaufhof is a must which means that the assortments are to enlarge to

include more fashion, I had a wrong word for fashion, sorry.

Ladies and gentlemen, the division that contributed the second highest EBIT in 2010 was our Real Estate segment. Our

own real estate portfolio comprises 688 properties across 30 countries of which approximately 40% are located in

emerging markets. The remaining 60% are in mature countries where owning property is of little or no for strategic


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importance. Therefore, in many of these countries we see the opportunity to crystallize value from so called dry assets

sites where we see no reason to hold in freehold.

In the coming years, the EBIT contribution from Real Estate is expected to increase due to growing rental income fromexpansion on the one hand and an active and systematic management of our assets on the other.

A new pillar of our strategy is sustainability. In 2010, we signed the UN Global Compact, an initiative comprising 10

universally accepted principles in the areas of human rights, labor, environment and anti-corruption. And just recently,

we joined the roundtable on Sustainable Palm Oil.

Furthermore, we increased our rating within the Dow Jones Sustainability World Index. Here we received more points

in the three covered areas: Economy, ecology and social responsibility, and thus clearly ran above the industry average.

A further achievement was the debut prime rating and thus recommended investment from Oekom research. Our

sustainability board is driving our efforts to make METRO GROUP greener and more responsible going forward.

Ladies and gentlemen, let me now wrap up with our outlook. Consumption in 2010 was a very divergent story with

clear leaders and laggards. Many countries still suffered from stubbornly high unemployment and unresolved problem

in the financial and property sectors. On top of that, numerous countries faced ambitious fiscal consolidation work.

Here trading remained and still remains tough. The day-to-day fight for the customer's discretionary income continues.

Germany profits from very benign export driven economic conditions. However, these did not spark a shopping frenzy

in 2010 and retail sales did not recover the peak pre-crisis level despite lower unemployment. Looking ahead, the

German consumer continues to be burden by higher direct taxes and social security contributions, and a lot depend

therefore on the outcome of the rate negotiations whether these burdens can be compensated.

In Western Europe, economic recovery remains slow. Countries like Spain are still suffering and sales remain under

pressure. We expect the divergent story seen in Eastern Europe in Eastern Europe to continue that means some

countries will continue to show a solid recovery while others still struggle to achieve growth. Nevertheless, Eastern

Europe remains one of our expansion drivers and we are glad to have such a footprint there.

Asia has come through the crisis exceedingly well. The region as a whole, and especially China, saw exceptional retail

sales growth. The METRO GROUP will continue to build its presence here and tap the growth potential in the long

term.

Allow me now a brief word on inflation. Inflation is currently a global concern. Rising demand, rates pressures,

commodity prices and transport costs all begin to squeeze. At Metro, we are disciplined enough to pass on the cost to

consumers but rest assured not all supplies/ demand will be met. Believe me commodity price hikes are very often only

marginal in the context of supplier price hikes. And thanks to our procurement excellence and our experience in the

own brand management we know which commodity prices have increased and where passing this on is possible.

Let me now come to our financial outlook. In our trading statement, we spoke of in January this year trading

statement January this year, we spoke of profitable growth accelerating in 2010 this means we expect sales in 2010 to

grow by more than 4%. Our international expansion is to accelerate and we plan on opening more than 110 new stores.

Assuming that macroeconomic parameters improve, we expect EBIT growth in 2010 of around 10%. This would imply

that we would already reach the medium term target level.

However, in recent weeks, we've seen that this macroeconomic parameters have deteriorated. No one can assess the

effects from the political unrest in the MENA region, Middle East North Africa. No one at least not at this point in time

can assess the effects from the recent catastrophes in Japan and also the recovery of the austerity bound countries in

Europe, Eastern Europe especially is still questionable. Although EBIT in 2011 will definitely be supported by Shape,

we cannot rule out that downside risks will increase and market conditions deteriorate further. This would burden our

earnings growth. As I said before, Shape makes us less dependent on macro swings, but unfortunately not entirely

immune, but we are still striving for achieving our targets.

A brief word on current trading. Please bear in mind that the first quarter will see a negative impact from the Easter

business, as this completely shifts into the second quarter. So there is no positive impact whatsoever from Easter by


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March because Easter only is when end of April. And last year we had already positive impact in our March in the

March business, because Easter was in April, but earlier in April. What did you say?


First week in April.


First week in April. Yes. Earlier in April, it was the first week in April. So we had a great deal of Easter business in the

first quarter. This year you will see nothing in the first quarter that is related to Easter.

Although, we saw a good start into the year, the macro situation as we just said has deteriorated since February and

impaired sales. Also higher fuel prices are absorbing purchasing power and increasing pressure on our customers'

wallets in many countries.

Ladies and gentlemen, the aftermath of the Japanese earthquake is devastating. Our local Cash & Carry operations are

supporting the affected regions with food, water and blankets and generally helping victims where we can in a fast and

efficient way. METRO GROUP itself is making an in-kind donation to help the victims. Our stores, by the way, in

Tokyo operate normally all nine stores.

All right. Ladies and gentlemen, that was sort of a little bit more than an introduction, a rather lengthy speech. But we

wanted to sort of touch upon many issues that are relevant. I thank you for your kind attention. And now the floor is

open for questions.

Q&A: Ladies first, Fabienne.

: Hi, I'm Fabienne Caron with UniCredit. Three questions, two are numbers from Olaf. First

can you I didn't really understand what the 121 million were for consumer electronic [inaudible]. Can you remember

exactly what it is, where it has been booked and to make sure the EBIT loss are still booked in 2010?

Second question would be, can you quantify the positive currency impact in 2010 on your EBIT? And the third

question for Dr. Cordes, there was some comment in [inaudible] I know you don't like these newspapers that much, but

[inaudible] in Cash & Carry in [inaudible] saying that, you are not so much happy about the test, it won't be ruled out.

Can you comment a bit about Cash & Carry Germany and the pilot store, please? Thank you.

: Okay. Let's start with the question

on southern France. The 120 million roughly basically reflects impairments and provisions made for the closure of the

operations in Saturn the disposals the sales of those operations. And we booked them in the Shape one-off category.

We applied the same with the other portfolio activity in 2010, which was selling Morocco Operations of Cash & Carry,

which gave us a 51 million positive contribution. We did not book that on operating result, but same rules appliedhere. So it was also then booked as a one-off partially to Cash & Carry and partially to the Real Estate business, that's

why it looks a bit odd that we even have a Shape earning in the Real Estate division in 2010.

Now your question on currency is quickly answered. The positive development which you've seen over the course of

the year, especially in Eastern Europe has led to a profit result or profit contribution of some 56 million in 2010.

: And [inaudible] loss of Media Markt and Saturn [inaudible] are seen in 2010?

: Yeah, they are still in the normal

bucket of operations with MediaSaturn and remained there until the antitrust regulation [inaudible].


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: Yes. [Inaudible] I don't see any major or any risk

there in antitrust, you know it went to Brussels first and it was brought back to Paris. It sort of slowed process down,

but I don't see any, or we don't see any major problem there.Cash & Carry Germany, your question? First of all, the good message is that the negative trend, which we have seen for

how many, six years in a row, has been stopped. So we have reached rock-bottom and are now moving in the right

direction, number one, this is I'm talking bottom profit now, EBIT.

Sales remember we mentioned it, I guess many times last year, we sort of actively managed some business down,

tobacco with traders, telephone cards and stuff like that. But this to be honest, had rather a positive impact on EBIT,

because contribution margin was at least partially negative there.

So one has to sort of differentiate when one looks at turnover and EBIT. But a clear very clear message, the negative

trend has been stopped, and we are now moving upward. You were referring to [inaudible] pilot stores, five of which

we are operating, the learnings basically are the following, the most important ones.

Again, I used the word actively managing non-food down because it would be considered excuse me less sexy than

food is not possible and we will not do that. Yes, there is a significant potential out there to increase our food business

with our professional customers very high potential, but you know, tapping this potential and increasing our share

[inaudible] for existing with existing customers or gaining new customers, obviously takes longer, then you would

lose turnover when you say, okay, I don't want [inaudible], I'm exaggerating dramatically now. I don't want

[inaudible] to enter our stores any more.

So what we do is, we sort of have rejuvenated our and will rejuvenate our non-food business. And having said this,

this also means that we will continue to have also will consider [inaudible] customers as relevant for our business

than Traders and HoReCas. So what we this is very, very clear and also leads to a sort of, to some extent shift in

mindset in the organization.

What we do is, we've seen sort of positive be it positive findings and negative findings in those concept stores, and

what we keep albeit the positive things and what's not working for instance too much reduction of non-food will not be

implemented.

: [Inaudible] Two questions, one referring to Media Markt/Saturn, I mean we have seen in Germany like-for-like

sales decline, have seen numerous management changes now currently the sort of battle with the founders of the Group

What's going on there? Is it rather short term that we have seen just too many changes at the same time, or do you think

it's a more structural thing that the Media the division is losing its ability to grow and mature to deliver growth in

mature markets?

Secondly, on the Real Estate division, you are guiding now for a more active management of the 60% of the asset base

in the mature markets. Should we keep in mind now or should we go for a higher EBIT contribution here annually? It

used to be the 50 million. What we should we keep in mind for 2011?

: Maybe Olaf can deal with the second question. I'm

volunteered to answer the first question. First of all, I disagree with you. Allow me to say so because there were no

numerous management changes. There was one. The [inaudible]

: I thought below the line there are other management changes. No?

: No.

: I read about it.

: No.

: Okay.


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: No, no. No. There is one, the CEO left and we put

a new CEO in place, which in [inaudible] was quite normal, right? And we appointed a new Deputy CEO, this is also

new, but [inaudible] had been serving as CFO, continues to serve as CFO, got this wonderful title, Deputy CEO. So thisis the only change. The rest is standard stuff. I mean, even I would say asking a CEO to leave and put a new one is

nothing to write home about I would say. So no numerous management changes, definitely not.

Is you sort of asked, can't MediaSaturn grow in mature markets anymore? The answer is, it can grow in mature

markets. And we have gained market share in most of the European countries, not in Germany, which has to do with a

fact that in 2009, market share peaked because of the 30th anniversary of Media Markt and some very aggressive

marketing measures in 2009.

So and I don't want to paint a rosy picture here. But Media Markt continues to gain market share, but the share we

gained obviously that is at least my assumption, the share we gained comes from other offline players. So we'd sort

of, well, more, I'll call it, powerful or whatever more attractive from offline shoppers. The Internet consumer

electronics retailing market grows or has grown and continues to grow significantly stronger than the consumer

electronics offline retail market. So the Internet portion of the market has grown or has seen higher growth rates than

Media Markt, which is not in contradiction to the fact that you also can continue to gain market share in the offlinestores, right?

Now, this is now shared belief, I emphasize now. So, we've been very openly we've been struggling with

management or some people in top management and also to some extent with our co-shareholders whether or not

how much there is necessity to push Internet for MediaSaturn. This discussion is over. There is complete agreement

now that it's not an option, it's a must.

And I already I think I already said last year, we are late but not too late. It's now a little later but still not too late, this

is my view. And Olaf mentioned that we have significantly invested in IT infrastructure for the online business in 2010

which has already been absorbed in the financial figures in 2010. So we are going full speed now with what we call the

integrated approach under Media Markt and Saturn online brand.

And as I said, we are online in Austria, Netherlands, and since eight years nobody talks about it in Italy, but this is a

somewhat specific case. And Austria and the Netherlands clearly reveal that our IT structure is not powerful enough tohandle a fully-fledged online business. So we have to invest here, and we spend the money, right?

Now, as I said, let me repeat here, in addition to that integrated approach under the also Internet under the brand

Media Markt/Saturn, we are currently debating very intensively so whether or not it is appropriate or if necessary to

open up a second Internet business in addition to the integrated approach, which would mean that we would then run an

additional Internet pure play business, not branded neither Media nor Saturn. We will give an answer in the not too

distant future.

Now, what you've seen in the press especially on Saturday that there are what is the appropriate word, some

disagreements between shareholders, the minority shareholders and us. Yes, that's true. We are the 75% shareholder

and the our co-shareholders' claimed that they have some minority rights where they, to be outspoken and clear,

blunt, could block us in the decision-making progress. And now it's a very complex issue that was true in the past. But

Olaf and I and lawyers from Metro looked into the matter more deeply in 2010 because there was a triggering eventbecause we want we had come to the conclusion that we wanted to bring in a new CEO, and our co-shareholders said

no, we want to extend the employment contract of the old CEO.

And then we were sitting there and saying well, what happens if we cannot come to an agreement. So we said, what do

we do then and as always take the sort of textbook and read what the textbook says, which we did not and we

invested half a year, six months to look into the matter further and we came to various very surprising findings that

we are in a much better position than we thought since four years already, and then we brought in a leading German

law firm to also look into the matter, and they very clearly confirmed our view. And then we talked to our

co-shareholders, which is not something we do not change anything. They have sort of a governance regime that

differentiates who has what rights dependant or in dependant on the question whether you have shareholders who


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play an active management role or not. To put it simpler, these minority rights which they claimed are there, are

relevant as long as shareholders [inaudible] play an active role in management.

In a situation where they do not play an active role in management anymore, they become sort of normal shareholderslike us. And then these minority rights go away. I'm oversimplifying a little bit. And that was in that was, yeah, yeah,

exactly he says, not, not that much, but I want you to understand that, but you can't. But because it's so complex. But

that is the important thing to understand is it's nothing new, but those are paragraphs which had been negotiated 20

years ago and are in the contracts. Sorry, it's my favorite subject at this point in time. So -

: The question on real estate is

basically answered fairly quickly. The model we have used in Italy, of course, we want to apply again and from this

point of view, from today's point of view, there are couple of options in the portfolio. Now, should you expect every

year that we successfully can implement such transaction, the answer is no. However, on a mid-term basis, we would

rather say we want to go north of 50 million contribution but it depends a bit on the identification of portfolio

opportunities, and we will guide you once we have found them soon enough. So you can make your forecast.

: Hi and good morning. Sreedhar Mahamkali from Macquarie. Three questions, please.Take you back to Cash & Carry Germany again, I think a year ago, you've talked to us about targeting 150 million in

2012. It looks like you've made some progress in 2010, but it also looks like you'll need to step up quite dramatically

this year and next to get to that target. How does Schaper integration fit into that? Can you talk a little bit about that?

That's the first question.

And the second one is Real; you've talked about now having options. You're bringing back that subject to having

options in Real. What's the thinking there? I think from my point of view, when you hit even 2%, 3% margin, Real will

barely meet cost of capital. So again, talk about your options there and what's your thinking is, how it's moving

forward?

And finally, Germany, a very brief one I think. Is there anything exceptional or property gains or anything similar

sitting in the 524 million profit this year? The reason I ask is, will we actually see German profits moving forward,

actually the divisional contributions are increasing, but will we actually see that moving forward in 2011?

: Okay, let's start with Cash &

Carry. Overall, as you rightly have remarked the progress in 2010 was quite good. So therefore, we have seen Shape

contribution in both aspects. One of which was cost, of course, yes, we've had an integration of two headquarters,

Schaper and Cash & Carry, our Metro Cash & Carry. On the other hand, we've seen significant progress on

productivity i.e., the own brand share, which actually was expanded in Germany by 270 basis points, 270. So all in all

there, the German development is very encouraging. However, the development we're seeing there is a bit slower than

initially anticipated.

So if we would guide you now on the numbers, and we need to guide you on the numbers, we will say the 150 million

remain as a target but most likely would be one year later, so 2013. That does not correspond with the disappointment

which we have but maybe in other words with learning which was already mentioned on the concept stores where we

have basically adjusted the strategy in a way that we take the good learnings on the professional side, which include

assortment initiatives, but also service initiatives such as delivery and active sales. But, of course, in addition to that wetook the consequences on how we manage non-food which isn't quite attractive opportunity in the German market still.

And therefore the development we have seen since then, since we adopted the strategy here also for the five concept

stores is extremely positive. So the development in Germany is on track, it will take most likely one year more to get to

the 150 million.

: Well, let me make a few comments then on Real. I

mean, in 2007 when I came on board, Real was a distressed asset. We could have sold it in 2007 or early 2008, but in a

way that a potential buyer would have said, here is the check, please fill your number, a number in which you are going

that you are going to pay me. So obviously we refrained from doing so and said okay, give it a try whether we can

sort of turn it around. You might say well you are now in Germany at 1.2% EBIT return, in Eastern Europe at 0.9%,


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which gives a [inaudible] number of 1.1%, this is not good enough. I would accept that. But surely 1.1% EBIT return

for the EBIT group for the variable is not good enough. But we definitely see further potential.

We've come a long way. We've come a long way and there is good momentum now. Now I talked about options. Imean, Olaf already answered the question. Yes, we are still and albeit we do not gain our cost of capital. By the way,

that's the only exception in the group we have. And so there is obviously need for action because well, need for

action, full stop. But we are not in a position with the back against the wall, we do a fire sale, this is not the case. I don't

know whether you would agree.

So, we now said we do not do a fire sale, that we don't do because it in our view would mean destroying value. Do we

disposal or do we rule out disposing of Real? No, clearly no. And I'm personally, and this is based on conversation

with some people that well it is hard to say, we have or will have interested parties out there. Or we have or will have

parties out there who might be interested in Real, Eastern Europe and/or Germany or both, in total or as sort of a joint

venture with us or there might be even other options for financial action so to speak in not 2011, not be but maybe a

little further down the road.

So we decided, now, what is today, March 20 whatever 23rd no fire sale, keep it, continue our efforts to improveit and then we take it from there. That I mean or we mean by options and if I talk about options that we have options,

believe me, we have options. I don't want to be seen as arrogant, but I know what we are talking about.

: [Inaudible] I'd like to flag on a couple of slides here, probably slide 21 maybe, the first thing that could trigger

some interest, and that's about the delivery sales of Cash & Carry Germany, you provided on slide 21 the idea that

increasing the German share of sales to in excess of 10%, is that for full year 2012? Or can you provide us some

numbers on Cash & Carry delivery sales for Germany? That's the first question. And second in this context, how do

you see the delivery platform in [inaudible] performing, is that a blueprint model to be rolled out for other urban areas

this year? That's the first one. Then the second on page on slide 22, your market entry into Indonesia. I would

appreciate if you could sort of provide us with a few ideas on how that is going to be orchestrated.

Then on slide 25, you mentioned the entrepreneurial management style, which has been copied in from the successful

Media Markt/Saturn recipe. I was just wondering whether you could also flag a bit on your experiences and how that is

being orchestrated with the store managers? Then one question for Olaf on slide 34.

: [Inaudible] Could you give us some time to answer questions? [Inaudible].

: Yes. Just one more please because this is something which we I didn't understand. On 34 you said you targeted

a net working capital for the department store business a negative net working capital. At the moment, working capital

is around 474 million of around annual sales of 3.6 billion. Can you just outline how you want to arrive at negative

net working capital? Thank you very much.

: So the first one was delivery sales at Germany you

mean, right?

: Yeah.

: Cash & Carry in Germany. Well, I mean first of all

the let me repeat the numbers, we increased delivery sales worldwide at Cash & Carry from 500 million to 870

million worldwide. Thereof Germany increased from 250 million to 293 million, which is a little bit less than or

what is it, 40%, no, 20%, a little bit less than 20%.

So you know that so far we have been following a process or a system or approach here when it comes to delivery

services picking out of store. And I said for the time being and what you can, the conclusion here is, obviously, this

must not be relevant for eternity.

In the Frankfurt area [inaudible] you mentioned this already has come to we have already reached a situation that it

was not doable anymore. So we sort of opened sort of a, how would you call it, a delivery center I guess we call it,

which is working well. So, I mean, this delivery thing is you have to sort of we take a very cautious approach here


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and, but nothing is excluded. So if we see we really come to grips with it and I think, I'm convinced we will, we have to

make a decision as to what is the future concept. I don't want to be more precise at this time. But I just want you to

know that we do not rule anything out. We'll see what we can do.And Olaf also mentioned field force. I mean, field force or beefing up of our field force for our professional HoReCa

and also trader customers is to some extent linked to an efficient delivery service. So the more successful we are there,

the more successful we will be at delivery and vice versa.

So again long story, to cut a long story short, conservative approach take out of store, were not doable anymore sort of

delivery centers. If that would not be sufficient any more, then take it to the next step. But I'm not talking about it at

this point in time.

Now, in yeah, yeah we have taken quite some time to discuss it, whether or not to tackle the Indonesian market.

You might recall that in 2008 we were involved in the process of acquiring the Makro the Makro business owned by

SHV but then Lotte, the Korean player, they were ready to pay a price which was up there in the skies and we refrained

from buying it. But then back in 2008, we had come to the conclusion that Indonesia itself is an attractive market. I

mean, it's a 250 million people country, in our assessment stable economic system, a pragmatic modern country and I,or we went to Indonesia last year and also entertained some talks with leading politicians. I have to say quite

impressive people.

Just to give you a flavor, the ministry (sic) [minister] of investment policy is an ex-partner of Goldman Sachs in

Singapore, just imagine we had a Goldman Sachs partner as a German minister, Jesus Christ. What would happen here?

Anyway, so all in all we came to the conclusion at the Board of Management, it's an attractive country and we still have

an option to tackle or penetrate the country from scratch. So we have invested a lot of research if you will, market

research and we will come up with a very, very, how would you call it, innovative Cash & Carry concept, a

combination.

Right from the start delivery, stores open and I guess we get the agreement 24 hours a day because customers for

instance in Jakarta who would come and to our stores would probably come at night because you know, you know the

traffic jams in Jakarta. But we will have a combination of sort of mother store, how would you call it delivery center

satellites and then also delivery even with motorbikes during the day and we have it's an innovative conceptspecifically designed for major cities with traffic jams. And I'm absolutely convinced it will work and could then be

even rolled out to other mega cities maybe like Moscow or so.

So, I'm sorry. And we have already picked the management team. I think we have a first-class management team that is

sort of burning to start and yeah, so we go. And it's a very detailed concept, which in my view, [inaudible] there is one

open question also do we open, we're still debating the question whether or not we should team up with a partner, a

minority partner. That's an open question.

Now, yes, there are entrepreneurship. Yes, I mean this concept which MediaSaturn applies to give pretty much

decentral decision-making power to store managers has worked extremely well. And not only has it worked but it

works well, and will continue to work well. So at Real, it was decided to sort of test this concept. We have picked three

They are stores in Germany as test markets, France will come [inaudible]. And well, they've just started in the I guess

it was in the second half of 2010, we give to them exactly what we do at MediaSaturn the sort of ultimate power todecide what to put in the shelves or which products to be listed in their stores and which not.

So they can make decisions on product range, on pricing, product placement, advertising, internal processes and

personnel. So the if that works, we will roll that out. Again, it's another test to increase flexibility, entrepreneurship in

other sales lines.

And to be honest, my view is that a retail store wholesale company with lots of outlets or lots of businesses, a store is a

business, and it's always a local business that I mean a store in Hamburg competes in Hamburg and not in Berlin,

obviously I'm saying the obvious. So who knows better than the local guy who runs operations how the market works,

who competition is, is there fierce competition, less fierce competition, blah, blah, blah, blah, blah, blah. So I mean

thinking about it, you must come to the conclusion that some local decision-making power could enhance, could


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improve the business and that's what we test now. Let's see whether it works.

First segments we get are very encouraging.

: Okay. Can I just ask, what's the equity stake that they have?

: The stake because they can't have an equity stake

and in my view now, maybe I have a dissenting view from some others, the equity stake as such is not the decisive

factor. I mean, yes, you're sort of pointing your fingers at MediaSaturn. There we here in Germany, each and every

store is a separate legal entity, right, with lots of accounting stuff behind and lots of administrating work and

administrative complexity, and a store being a separate legal unit, obviously the store manager can hold an equity stake

in the store.

Media, excuse me, Real stores are not separate legal entities. Real in Germany is a separate legal entity, but you can

create virtual equity, so at the end of the day, in my view, it's not and you could even provide balance sheet for a

virtual balance sheet for a store if you want. I think the decisive thing that sort of triggers or steers behavior is the

financial incentive system, is my variable pay linked well, first of all, do I have variable pay or do I have fixed pay

only?

If I have variable pay, what is it linked to? What is the variable what factor decides whether I get more or less? And

that obviously is then triggered by store EBIT and/or other KPIs which might or might not be relevant for a certain

store, that might even change from store to store. So it can't [inaudible] to transfer or give more decision-making

power, decentralized decision-making power to store managers is definitely not dependent on whether he or she holds

real equity. It could also be managed through sort of virtual equity.

: There's still the question open on

working capital with Kaufhof. We did not forget. So the answer to the question, maybe I just stand with the track

record of Kaufhof, is actually improving now over three years, which comes from a very high inventory basis and

actually a very old stock. So the age ratio we had was pretty high. By introducing an automatic impairment of

collections after the sales period, we actually have reinforced to sell stuff off the warehouse. And therefore we have

been considerably successful in reducing inventory.

We have improved working capital by 70 million in 2010. We are now marginally positive and to your number, with

the 470 million, that's inventory, and we will never be able to reduce inventory to zero, but Kaufhof was the only unit,

the only unit basically, that does not cover inventory with payables. In all the other sales lines, our payables are way

higher than inventories and therefore we have negative working capital.

Now to your question, what are we planning to improve further, I think there is still some headroom on inventory and

that will be addressed in 2011. But what has not been addressed for quite a while, and I think it's unusual, especially in

apparel, is payment terms. So we'll have a very thorough view on payment terms, as we do think today there is some

room for improvement. So we are in a way, and we are targeting to get Kaufhof also to a net working capital in the

planning period.

: Yes, hello. [inaudible]. Some questions, coming back to your options regarding Real. So what's your time

schedule here for the next decisions and under which conditions you would go for the one or the other option?

Second is on Cash & Carry, last year 38 stores, this year more than 40 stores. You want to you will speed up the

expansion. So what is your mid-term figure in absolute terms, what can you think to open, what kind of number, what

kind of growth rate is the mid-term target here? And also on Cash & Carry, in the press there were some speculations

about potential acquisition targets in Latin America. Is it possible to think of it, perhaps one word on that?

And last but not least is regarding Media Markt and Saturn. In the past, we spoke about potential IPO also here. So how

is your understanding here right now and under which conditions? Thank you.

: Well, I'll start and then maybe Olaf can support me

a little bit. Options Real, and time schedule, and is there a fixed decision making point? No, there is not. I mean, it is


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Company Name: Metro


Date: 2011-03-22



Current PX: 47.805





Current Year: 3.806




Page 17 of 21

the first question we had to answer is it a conceivable option to keep Real in our portfolio, that was the first question, or

are we forced to sell?

We dare say now we will not be forced to sell. There is an option to keep it in our portfolio. Having said this, it's all ofan ongoing discussion process. I mean it's not that we say, okay, on what should I say now, on June 30, we discuss it

again. It's constantly on the agenda, as is how do we optimize our business. It's dependent on so many factors, which

come and go and the situation changes all the time. So again, the only thing we decided, we have options now, keep,

sell, cooperate, all three exist. What the path or the route we'll be pursuing is open and dependent also on others,

because as you know, it takes two to tango, just on your own it's a little bit boring, number one.

Number two was well, let me start with Cash & Carry potential acquisition targets, because I messed it up. Last week

when I participated in a sort of discussion at the University of Cologne I didn't mess it up, I wasn't precise enough,

sorry. So, I mean, we say our focal points for expansion for rapid expansion, are Eastern Europe and Asia. And I was

asked how about Latin America, because after all there is BRIC countries, how about the B? And then I said what a

great, great, great region, and my view is anyway biased because I lived there for four years in my life. And since then

the economic prospects have improved significantly, and especially so since Mr. Lula was around.

Now, can one enter the Latin American market from scratch, like we do it in Indonesia, absolutely no, because Latin

America/Brazil is not an emerging country anymore. It's sort of between, what do you say, between emerging and

mature. And now I try to be precise, the only option to enter those markets is through acquisition. Is there an

acquisition target out there? No. Will there be one in 10 years from now? I don't know. If there is one, would you at

least look at it? Yes. I can't say more.

So it's an attractive region, we could have been there, management decided 15 years ago or 12 years ago not to go

there. In hindsight, big mistake, but in hindsight you're always smarter than before. And so nothing hot. Yes nothing

hot. We stick to our focal regions Eastern Europe and Asia.

MCC store openings. Yes, we said 40, is it 40 for 2011? I don't give you a precise number for the years to come. But it

and there is also one reason and I tried to explain it to you but it will it can be, you can definitely expect higher

numbers for the years to come. There is one big question we are discussing internally, is Satellite store. Just how big,

2500 meters, as big as an Eco store. Is it a store or is it not a store? If it's a store then boom, you know, the numberwould be significantly higher. But if we would in my view, there is no reason whatsoever not to count it as a store

because it is you know, people come, buy, it's a store, it's a smaller store.

So it's packed but we are sort of being sort of scientifically driven. We are discussing it internally whether Satellite is

a store. Maybe we can shorten the discussion a little bit, but then not only because of this, the number of store openings

will go up. But even in the absence of being of this Satellite option, in the midterm the number would be higher than

40. I don't give you an exact number. We are discussing an internal number, but then you ask me next year how close

have you got? Which you must, by the way, it's not a complaint.

Media, that's one IPO, we always said it's an option. It continues to be an option, but I would say what we do your

homework first and do it completely. What do I mean by that? First of all, we should have proven to the market, to

financial markets and to the outside world, that we can also sort of leapfrog MediaSaturn into an Internet player,

continue to leverage our strength in the offline business and the store business and add significant strength on theInternet site.

And if you could listen to discussions the MediaSaturn top management is having on Internet, you would be absolutely

surprised because they said, okay, we are a late starter but we want to get as close to Amazon as possible in the shortest

possible timeframe. So that's number one.

Number two, a question was asked your discussions with your co-shareholders. They should also be sort of finalized

so then we have a clear picture. So it remains it continues to be on the agenda but it's definitely nothing for 2011.

Again, I repeat, homework first and then we see what we can do.

: In the light of Dr. Cordes' health got maybe time for two more questions. Matthew?


18/21

Company Name: Metro


Date: 2011-03-22



Current PX: 47.805





Current Year: 3.806




Page 18 of 21

: Yes. Thank you. Just one question on Media Markt/Saturn . And I wonder if you can give us an idea of how

much the 2010 EBIT was burdened by the first special factors, the investment cost online and private label, of the

start-up in China and the French operating loss, was it somewhere in the region of 5% to 10% of EBIT. And how youexpect those to develop next year, obviously, you can't tell on France, we might be able to on the others.

: Yeah, we can do that, as we

disclosed over the course of the year. That the Chinese market entry has cost us quite some money. We have actually

had a budget, which we [inaudible] for entering the markets in the magnitude of roughly 30 million slightly north of

30 million. And almost the same amount is applicable to what we have been doing around the multichannel platform

and on own brands. So all in all, if you take the pieces I've just mentioned, it's north of 60 million, actually roughly

70 million, which we had in the business in 2010. And how we think that might develop next year?

: I think, he also asked the once again the burden, which we had from exiting the French business, right?

: The ongoing losses in France?

: The ongoing losses in France in

2010 you mean?

: Exactly. [inaudible].

: And also gives an idea about how

the other cost may develop in 2011?

: Yeah.

: The EBIT margin in France was

actually minus 10 above minus 10, north of minus 10% in 2010. Regarding your question whether the cost which we

have seen in those projects will unwind, the answer is yes, but it would take some time. So we are expecting some

further cost of course for extending market operations in China. Some costs will come down as we have now on

infrastructure and a back office, which is installed and the systems are in place, people are hired. So some of the ramp

up cost actually will come down.

On the multichannel platform, however, we think 2011 is going to be almost the same level of effort which we will

need to have to make it work as we want to make it as scalable and robust as it needs to be for such a big business. I

mean, that's the big point about going online with Media Markt Saturn, is not about just running the online shop, we

know how to do that. And that is working very well in both pilots and as well as in Italy. But to scale it up, to make it

totally fault-tolerant, take some effort, which we will not ignore and underestimate. So we will take necessary

investment.

: The last question?

: [Inaudible] from Redburn. You said you have a plan to rejuvenate your non-food in the Cash & Carry especially

Germany, I presume maybe the whole of Europe. That's obviously easier said than done especially in the current macro

environment. And also in terms of the skills you need and maybe the procurements. So just give an idea of what areas

you're addressing specifically there and the sort of rough timeframe that you might see some, expect someimprovement on a sort of stable macro basis? Thanks.

: Answering that question, I don't

want to elevate it to a high macro level but actually the development you have seen over the last two to three years with

the Cash & Carry to some degree was a self-made reduction as Dr. Cordes, mentioned before we have [inaudible] side

of the business any more. And therefore what we are actually doing since spring 2010 is reinvesting into capabilities

and expertise and assessing based on the data we have, as we have all the customer data for those markets and the

different productivities of the categories, how we can enhance them and that is not only a German phenomena but is of

course an international phenomena.

8/6/2019 2010 FY Metro

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