EBITDA margin 5.2% 6.1%
EBIT margin 3.3% 4.3%
Tax rate 29.7% 27.3%
(Differences due to rounding up or down to nearest € million)
Earnings performance of the HORNBACH-Baumarkt-AG Group Consistent with expectations, the earnings of the HORNBACH-Baumarkt-AG Group for the 2012/2013 financial year fell short of the previous year’s record figures. This was mainly due to a weakening like-for-like sales performance in the DIY store segment, a development that accelerated in the second half of the year, and the resultant deterioration in cost ratios.
Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) dropped by 15.5% to € 155.8 million (2011/2012: € 184.3 million). The EBITDA margin (as a per-centage of net sales) slipped to 5.2%, down from 6.1% in the previous year. Consistent with the forecast we issued after the first nine months, the consolidated operating earnings (EBIT) of € 99.3 million fell short of the previous year’s figure of
€ 128.4 million (minus 22.7%). The EBIT margin is reported at 3.3% (2011/2012: 4.3%).
A positive one-off operating item of € 5.5 million relating to electricity tax in Germany was credited to earnings and recog-nized under other income and expenses in the 2012/2013 financial year (please see comments on DIY store segment).
Consolidated earnings before taxes (EBT) dropped by 30.1%
to € 74.4 million (2011/2012: € 106.5 million). This decrease, higher in percentage terms than that in EBIT, was primarily due to the deterioration in net interest expenses from minus
€ 19.3 million to minus € 24.0 million. The reduction in this item mainly resulted from lower interest income than in the previous year and from the additional interest expenses in-curred upon the premature repayment of the corporate bond (ISIN XS0205954778, WKN: A0C4RP) as of February 25, 2013, which originally had a term running until November 15, 2014.
This factor was countered by an improvement in negative currency items (including forward exchange transactions) from minus € 2.5 million to minus € 0.9 million. Overall, net financial expenses deteriorated from minus € 22.0 million to minus € 24.9 million.
Consolidated net income fell by 32.4% to € 52.3 million (2011/2012: € 77.4 million). The Group’s tax rate increased from 27.3% to 297%. The return on sales after taxes de-creased from 2.6% to 1.7%. Earnings per share (please see Note 9) are reported at € 1.64 (2011/2012: € 2.43).
Earnings Performance
GROUP MANAGEMENT REPORT Earnings Performance
45
Key earnings figures for the DIY store segment Key figure
(€ million, unless otherwise stated)
2012/2013 2011/2012 Change
Net sales 3,019 3,000 0.6%
of which in Germany 1,741 1,729 0.7%
of which in other European countries 1,279 1,272 0.6%
Like-for-like sales growth (1.4)% 2.8%
EBITDA 107.7 152.0 (29.1)%
EBIT 74.2 115.7 (35.9)%
EBITDA margin 3.6% 5.1%
EBIT margin 2.5% 3.9%
Gross margin 37.3% 37.4%
Store expenses as % of net sales 31.1% 30.3%
Pre-opening expenses as % of net sales 0.3% 0.2%
General and administration expenses as % of net sales 4.1% 3.5%
(Differences due to rounding up or down to nearest € million)
Earnings performance of the DIY store segment
The DIY store segment comprises the operating retail busi-ness at the HORNBACH DIY megastores with garden centers within the Group. At the balance sheet date on February 28, 2013, we were operating 138 DIY retail outlets across Europe (2011/2012: 134). Net sales in this segment showed slight growth of 0.6% to € 3,019 million in the 2012/2013 year under report (2011/2012: € 3,000 million).
In the 2012/2013 financial year, the key operating earnings figures in the DIY store segment fell significantly short of the high previous year’s figures. This was chiefly due to a weaken-ing like-for-like sales performance, particularly in countries outside Germany. Overall, the sales momentum in the DIY store segment slowed noticeably compared with the previous 2011/2012 financial year. As a result, cost ratios were signifi-cantly less favorable, even though selling and store, pre-opening and administration expenses as a whole were even within their respective budget targets.
Gross margin
The gross margin almost matched the previous year’s level in the 2012/2013 financial year under report. As a percentage of net sales, the gross profit amounted to 37.3% (2011/2012:
37.4%). We virtually managed to offset increases in procure-ment prices with the assistance of a slight rise in retail prices and changes in our product mix. Currency items in our inter-national procurement activities played a negligible role in the year under report.
Selling and store, pre-opening and administration expenses Selling and store expenses in the DIY store segment rose by 3.3% to € 940.1 million (2011/2012: € 909.7 million), and thus increased moderately. Personnel expenses (including bonuses), the largest cost block within selling and store expenses, showed growth of plus 2.3%, and thus below aver-age compared with this item as a whole. Not only that, the year-on-year increase in rental and operating expenses, albeit lower than planned, was countered by a reduction in advertis-ing expenses in absolute terms. Utility expenses and deprecia-tion were more or less at the same level as in the previous
46
GROUP MANAGEMENT REPORT Earnings Performanceyear. As a percentage of net sales, selling and store expenses rose from 30.3% to 31.1%.
Due to the higher number of new store openings, pre-opening expenses grew from € 6.2 million to € 9.6 million (please also see Note 4). After three new store openings in the 2011/2012 financial year, operations began at five new HORNBACH loca-tions in the year under report. The pre-opening expense ratio increased from 0.2% to 0.3% as a result.
Administration expenses grew by 16.2% to € 123.2 million in the year under report (2011/2012: € 106.1 million). As in the previous year, a major share of this increase was due to im-portant forward-looking projects in the Group’s administrative departments. Among others, these include developing and extending our online retail and customer service activities, as well as innovations aimed at further optimizing our operating processes. In view of this, the administration expense ratio increased from 3.5% to 4.1%.
Other income and expenses
Other income and expenses showed a marked increase from
€ 15.7 million to € 20.5 million in the year under report. One prime reason for this increase was the conclusive clarification of outstanding issues in connection with the supply of utility energies in Germany by the energy-related services provider we commissioned to this end. On this basis, it was possible to reverse provisions of € 3.9 million recognized in previous years. Other than this, other income and expenses also in-clude an amount of € 1.6 million for compensation not yet
invoiced, net of service amounts. A further reason for the increase in this item related to income from the group alloca-tion, which rose from € 3.6 million to € 4.1 million. Further-more, other income and expenses were positively influenced by a base effect within other non-operating income and ex-penses. In the 2011/2012 financial year, impairment losses in Romania were the main reason for negative other non-operating income and expenses of minus € 1.4 million. In the year under report, by contrast, there were no material non-operating items within other income and expenses.
EBITDA and EBIT
EBITDA in the DIY store segment fell 29.1% to € 107.7 million in the 2012/2013 financial year (2011/2012: € 152.0 million), equivalent to an EBITDA margin of 3.6% (2011/2012: 5.1%).
Operating earnings (EBIT) dropped 35.9% to € 74.2 million (2011/2012: € 115.7 million). EBIT was equivalent to 2.5% of net sales in the year under report (2011/2012: 3.9%).
Earnings performance in the real estate segment
All the real estate activities in the HORNBACH-Baumarkt-AG Group are pooled in the real estate segment. Its main busi-ness activities involve building and subsequently letting DIY store properties within the Group. These either remain in group ownership or are sold following construction to an external investor and then leased back. The respective DIY store properties are charged to the DIY store segment on rental and other terms customary to the market. Earnings in the real estate segment were significantly ahead of the previ-ous year’s figures in the 2012/2013 financial year.
Key earnings figures for the real estate segment
Key figure (€ million, unless otherwise stated) 2012/2013 2011/2012 Change
Rental income 143.6 132.5 8.4%
GROUP MANAGEMENT REPORT Earnings Performance
47
Earnings from rental activities
Rental income in the real estate segment, 99% of which comprises internal rental income, grew by 8.4% to
€ 143.6 million in the year under report (2011/2012:
€ 132.5 million). Driven mainly by higher operating expenses and depreciation, real estate expenses for the same period nevertheless rose less markedly, increasing by 5.5% to
€ 97.8 million (2011/2012: € 92.7 million). Earnings from rental activities grew by 15.1% to € 45.8 million in the year under report (2011/2012: € 39.8 million).
Disposal gains/losses and net real estate income
We generated marginal disposal gains of € 0.3 million in the year under report. These contrasted with disposal losses of
€ 0.5 million from real estate transactions in the 2011/2012 financial year. Net income on real estate activities rose by 17.4% to € 46.1 million (2011/2012: € 39.2 million).
Other income and expenses
Other income and expenses (excluding disposal gains/losses) are reported at minus € 1.4 million for the 2012/2013 finan-cial year (2011/2012: minus € 1.7 million). Earnings for the year under report were reduced by other expenses and provi-sions for the refurbishment of DIY store properties, as well as by impairment losses recognized for pieces of land.
EBITDA and EBIT
Thanks to higher rental income in conjunction with a less marked increase in real estate expenses and a year-on-year reduction in charges on earnings due to real estate develop-ment, we were able to report pleasing earnings growth in the real estate segment in the reporting period from March 1, 2012 to February 28, 2013. EBITDA thus rose by 22.8% to € 57.7 million (2011/2012: € 47.0 million) and EBIT grew by 19.2% to € 42.8 million (2011/2012: € 35.9 million).
Earnings performance by geographical region
Our German retail business gained further significance in terms of the Group’s earnings performance in the 2012/2013 financial year. As is apparent from the breakdown by geo-graphical regions in the segment report, the weighting of earnings contributions has shifted in favor of the Germany segment. This reflects the robust performance in like-for-like sales in the domestic business, which thus contributed to a significantly more stable earnings performance than that in the other European countries segment.
EBITDA in Germany fell by 3.6% from € 68.2 million to
€ 65.8 million, thus contrasting with the 15.5% downturn in EBITDA on group level. The domestic share of the Group’s EBITDA rose from 37% to 42%. EBIT in the Germany segment decreased from € 33.9 million to € 29.6 million. The domestic share of operating earnings thus improved from 26% to 30%
in the 2012/2013 financial year. The EBIT margin in Germany amounted to 1.7%, as against 2.0% one year earlier.
In the 2012/2013 financial year as well, the domestic share of operating earnings included significant expenses for sustain-able innovation projects. A major portion of the project-related administration expenses of around € 22 million (2011/2012:
around € 13 million) related to the further expansion in our online store, which since being launched in December 2010 has offered ever more articles, order possibilities, and service information. The costs attributable to the planned interna-tional rollout of online retailing have been charged on within group allocations. Not only that, we also pressed ahead with developing the Customer Service Center for German stores.
Alongside these projects, we also worked on a series of other development projects in the fields of procurement, logistics, and operations at DIY megastores with garden centers which are intended to promote the Group’s further growth.
Against this backdrop, administration expenses in the Ger-many segment increased by 9.0% in the year under report. If these upstream costs for central forward-looking projects are deducted from the income statement of the Germany segment, then our administration expenses were at the same level as in
48
GROUP MANAGEMENT REPORT Earnings Performancethe previous year, as a result of which our adjusted domestic EBIT for the 2012/2013 financial year was around ten percent higher than the previous year’s figure.
Earnings contributions from our international activities, which are pooled on the level of the HORNBACH International GmbH subgroup, reduced year-on-year on account of the weaker like-for-like sales performance. With EBITDA of € 90.1 million in the period under report (2011/2012: € 116.1 million), the international business accounted for around 58% (2011/2012:
63%) of EBITDA at the HORNBACH-Baumarkt-AG Group. EBIT in the international business dropped from € 94.5 million to
€ 69.8 million. As a result, the international share of EBIT decreased from 74% to 70%. With an EBIT margin of 5.5%
(2011/2012: 7.4%), the other European countries segment remains more profitable than the Germany segment.
Dividend proposal
The Board of Management and Supervisory Board of HORN-BACH-Baumarkt-AG will propose a dividend of € 0.50 per ordinary share with dividend entitlement (ISIN:
DE0006084403), and thus unchanged on the previous year, for approval by the Annual General Meeting on July 4, 2013.
DIY stores Real estate Headquarters and consolidation
116
36
-23 74
43
2012 / 2013 -18
2011 / 2012 2012 / 2013
2011 / 2012 EBIT by segment
(€ million)
EBIT by region (share in %)
Other European countries Germany
€ 29.6 million
€ 33.9 million
€ 69.8 million
€ 94.5 million 30 %
26 %
70 % 74 %
GROUP MANAGEMENT REPORT Earnings Performance
49
* Plus further shareholdings as presented in the complete overview provided in the notes to the consolidated financial statements (status: February 28, 2013)