Newly independent Metro sees higher profits ahead

Metro on Wednesday forecast stronger profitability in 2017/18 in a sign that the German retailer expects to see some of the benefits soon from its split from consumer electronics group Ceconomy.

Metro Cash & Carry – Metro

Metro, which runs wholesale stores in 35 countries as well as Real hypermarkets in Germany, separated from Ceconomy in July, hoping that this new structure would boost performance and allow more acquisitions.

“With the stock exchange listing of the new Metro, we created the foundation to deliver even more focus, innovation and growth. This ultimately also improves our operative earning power,” Chief Executive Olaf Koch said on Wednesday.

But Metro’s shares which have so far failed to meet expectations for a rerating since the Ceconomy split.

They were up 1.9 percent by 1121 GMT, while Ceconomy, which reports results next week, also rose 1.9 percent.

Koch said Metro needed to do more to improve the operating profit margin in its cash-and-carry stores in Germany, which was just 0.4 percent in the 2016/17 fiscal year, including by offering more services for hotel and restaurants.

He told a news conference that he was not unhappy with Christmas trading in what is Metro’s most important quarter, although decisive days are still ahead.

Metro said it expected sales growth in 2017/18 of at least the 1.1 percent achieved in 2016/17 and like-for-like sales to “slightly surpass” the 0.5 percent growth of the previous year, with the wholesale business expected to be the main driver.

It said earnings before interest, tax, depreciation and amortization (EBITDA), excluding contributions from real estate deals, should rise by around 10 percent, with both its wholesale and Real contributing to that improvement.

Analysts had forecast a 2 percent rise in sales for the 2017/18 year and a 5 percent rise in reported EBITDA.

It also set a new target for its wholesale delivery business to reach 20 percent of sales by 2020, from 16 percent in 2017.

Metro will seek in future to give more details about its main wholesale markets Germany and Russia while also splitting out real estate gains, expected to come in at 175 million euros in 2017/18, said finance chief Christian Baier.

Metro’s fourth-quarter earnings before interest and taxation (EBIT) and adjusted for special items came in at 267 million euros ($313.89 million), but were flattered by 49 million from real estate deals.

“Headline result is in-line but a miss once one-off tax impact and property profits are removed,” said Bernstein analyst Bruno Monteyne. “The underlying wholesale and retail business was clearly weaker than consensus anticipated.”

Metro also proposed a dividend of 0.70 euros per share, compared with average analyst forecasts for 0.71 euros.
 

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