Introducción

COMBINED MANAGEMENT REPORT GROUP FUNDAMENTALS

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used by the company itself. At the balance sheet date on February 28, 2015, 25.4 % of the sales areas were owned by the Group. Its associate HORNBACH Immobilien AG and its subsidiaries owned a further 29.3 % of the Group's DIY sales areas. The overriding strategy is for the overall HORNBACH HOLDING AG Group to retain ownership of at least half of the real estate, measured in terms of sales areas, used for oper-ating purposes.

Reporting segments

The delineation of business segments is consistent with the internal reporting structures used by the Board of Manage-ment of the HORNBACH-Baumarkt-AG Group to manage the company. The "DIY store" segment comprises the 146 DIY megastores with garden centers pooled at the HORNBACH-Baumarkt-AG Group (2013/2014: 141). Sales at the HORN-BACH-Baumarkt-AG Group are primarily generated in the DIY store segment, i.e. in the operating retail business. The "Real estate" segment comprises the retail properties owned by the HORNBACH-Baumarkt-AG Group. In this segment, imputed rental payments are charged on at customary market condi-tions within the Group. In the segment report, the income from this imputed charging on of rental payments is fully consoli-dated as "Rental income from affiliated companies". Admin-istration and consolidation items not attributable to segments are summarized in the "Headquarters and consolidation"

reconciliation column.

Management system

The key management figures outlined below are used to manage both the HORNBACH-Baumarkt-AG Group and HORN-BACH-Baumarkt-AG.

Key management figures

For a retail company like the HORNBACH-Baumarkt-AG Group, sales growth is the central management figure for its operat-ing business. Sales directly indicate our success with cus-tomers. Our sales performance is reported on the one hand as net total sales in euros. On the other hand, we also present the change in like-for-like and currency-adjusted sales, which do not include sales at stores newly opened, closed or subject

to major conversion work in the year under report. In the

"Earnings Situation" section, we voluntarily supplement this information by reporting on the change in like-for-like sales including currency items.

The development in the gross margin offers information about our gross trading performance. This margin is defined as gross profit (net balance of sales and cost of goods sold) as a percentage of net sales. This key management figure is chief-ly influenced by developments in procurement and retail prices, changes in the product mix, and currency items result-ing from international procurement.

Selling and store, pre-opening, and administration expenses represent key parameters for assessing the Group's earnings strength. We use cost ratios calculated as a percentage of net sales as key management figures and also as indicators of trends.

Operating earnings (EBIT), i.e. earnings before interest and taxes, are also one of the most important key management figures at the Group. In the income statement, these are calculated as gross profit in euros less costs (selling, store, pre-opening, and administration expenses) plus other income and expenses (net balance of other income and other expens-es). EBIT represents the central key management figure for planning, measuring and managing the Group's operating earnings performance. In the presentation of our earnings performance, we enhance the comparability of earnings be-tween individual reporting periods by reporting on EBIT net of one-off items in cases where special factors have significant-ly influenced EBIT in the reporting or comparative period.

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Further key management figures

In managing its financial and asset position, the HORNBACH-Baumarkt-AG Group pursues the objective of safeguarding the Group's liquidity at all times and of covering the financing requirements for the Group's sustainable growth at the least possible expense.

Other key management figures include cash-effective invest-ments in land, buildings, plant and operating equipment for new and existing DIY megastores with garden centers, and intangible assets. Here, we aim to achieve a balanced rela-tionship between our operating cash flow and our budgeted investments.

For retail companies, the inventory turnover rate is an im-portant indicator of merchandising efficiency. We define

inventory turnover as the ratio of material input costs to average inventories. The arithmetic mean of the period open-ing and period closopen-ing balances is taken as the average volume of inventories. The higher the inventory turnover rate, the lower the inventories and thus the volume of liquidity committed. Our aim is therefore to sustainably improve our inventory turnover rate at an above-average high level com-pared with competitors while simultaneously ensuring product availability.

The Group has not set any defined target for its shareholders' equity. To safeguard our financial stability and independence, our basic objective is rather to permanently ensure a stable, high equity ratio.

0 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000

Financial year

Number of employees

(annual average converted into full-time equivalents) Sales performance of the HORNBACH-Baumarkt-AG Group (net, € million)

0 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2,800 3,000 3,200 3,400

11 | 12

HORNBACH’s DIY market share in Germany (in %)

Financial year

COMBINED MANAGEMENT REPORT GROUP FUNDAMENTALS

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* Plus further shareholdings as presented in the complete overview provided in the notes to the consolidated financial statements. Status: February 28, 2015