Investor Presentation 30 May 2017 Investor Presentation 30 May 2017 - - PowerPoint PPT Presentation

Investor Presentation

30 May 2017

Investor Presentation 30 May 2017

Disclaimer

2 This presentation has been prepared and issued by Otto (GmbH & Co KG) and is intended for professional customers and institutional investors. The information in this presentation is based on data obtained from sources considered to be reliable. No representations or warranties, expressed or implied, are made by Otto (GmbH & Co KG) with regard to the accuracy or the completeness of the information contained in this presentation and any liability therefore (including in respect of direct, indirect or consequential damages) is expressly excluded. Further, the information given in this presentation contains predictions which are based on current assumptions and forecasts. Such predictions are subject to known as well as unknown risks, uncertainties and influences which may lead to a business development, final results and a financial situation which deviate from those given in the estimates. Otto (GmbH & Co KG) does not assume any obligation to update any forward-looking statements. This presentation is for information purposes only. It is not intended to be and should not be construed as an offer or solicitation to buy or sell any of the securities or issues mentioned in this presentation.

Investor Presentation 30 May 2017

Agenda

1 The Otto Group at a glance 2 Financial review 3 Strategy and outlook 4 Summary 3

Investor Presentation 30 May 2017

The Otto Group is one of the world’s largest online retailers

• Founded as the mail-order company “Otto

Versand“ in 1949, the Otto Group has been a family business since its foundation

• Today, the Otto Group consists of 123 major

companies operating in more than 30 countries in Europe, North and South America and Asia

• The Otto Group is divided into three strategic

segments: Multichannel Retail, Financial Services and Services

• Currently, the Otto Group employs

approximately 50,000 people

• The Otto Group is one of the largest online

retailers worldwide 4

Investor Presentation 30 May 2017

5

1950s and 1960s 1970s ~2000s to present 1980s and 1990s

Foundation as a mail order business Development of the segments Financial Services and Services Internationalisation of the Otto Group Transformation and innovation in the e-commerce age

1949 Werner Otto established the “Otto Versand” mail-order business 1950 The first catalogue is published 1969/74 Establishment of the Financial Services segment with the foundation of Hanseatic Bank and EOS Group 1972 Development of the Services segment with the foundation of Hermes Versand Services 1974-1998 Expansion to France, UK, the Netherlands, Japan, Spain, Austria, Italy, Hungary, Switzerland, USA 1987 Otto is the world‘s largest mail order business 2010/2011 Internet sales exceeded catalogue sales for the first time 2015

• Dr. Michael Otto transfers majority stake to

Michael Otto Foundation 2016 Trend towards mobile commerce: Mobile exceeds desktop traffic for the first time 2017 Alexander Birken takes over as 5th CEO in the company’s history

Otto Group: A success story for more than 65 years

Werner Otto (1949-1966) Günther Nawrath (1966-1981) Hans-Otto Schrader (2007-2016)

• Dr. Michael Otto

(1981-2007)

CEO

Alexander Birken (since 2017)

Investor Presentation 30 May 2017

• More than 98% of the shares in Otto (GmbH & Co KG)

are owned by members of the Otto family and by the Michael Otto Foundation

• Dr. Michael Otto transferred his majority stake to the

“Michael Otto Stiftung”, a non-profit foundation, in 2015. He continues to have influence through his position as the chairman of the Foundation Board

• As a family-run business, the Otto Group follows a long-

term oriented business strategy

• The Otto family pursues a conservative dividend policy
• Otto (GmbH & Co KG) serves both as holding company

and as the operating entity for OTTO, the Otto Group’s company with the highest sales

6 Otto (GmbH & Co KG)

Otto family and Michael Otto Foundation (> 98%)

Multichannel Retail Financial Services Services OTTO Aktiengesellschaft für Beteiligungen GSV Aktiengesellschaft für Beteiligungen

Ownership position of the Otto family

Investor Presentation 30 May 2017

7

Sustainability is part of the Otto Group’s core values

• Sustainability has been a guiding principle for the Otto Group since the 1980s
• Our family owners are also committed to sustainability with activities outside the Otto Group,

e.g. via the Michael Otto Foundation for Environmental Protection

Sustainability is a matter of conviction to our family owners

• Reconciling economic goals with social and ecological sustainability is a central part of the

shareholders’ mandate to the Executive Board

• All members of the Executive Board are incentivised to reach the Group’s Corporate

Responsibility targets

Corporate Responsibility is a top-management task

Investor Presentation 30 May 2017

Revenue by region 2016/17

8

Germany 61.5% Europe

(excl. Germany / Russia)

19.8% Asia and other regions 1.9% Russia 2.1% North America 14.6%

Besides Germany, the Otto Group is present in more than 30 countries

International market presence

The international setup provides important diversification benefits

The Group includes 123 major companies and is present in over 30 countries Largest online shop for fashion and lifestyle in Germany (otto.de) More than 100 venture capital investments Investor Presentation 30 May 2017

Multichannel Retail

A diversified business: The Otto Group is a globally active group of retailers and retail-related service providers

Services

(Logistics, procurement and other retail-related services) (E-Commerce, catalogue sales and retail stores)

9

Financial Services

(Receivables management, innovative financial services)

Investor Presentation 30 May 2017

Multichannel Retail

• Domestic and foreign retailers with three

distribution channels: e-commerce, catalogue and over-the-counter retail stores

• Product range includes fashion, shoes and

lifestyle articles, furniture and home accessories, toys as well as electronics, sports and leisure goods

• Broad

brand portfolio with diversification across countries, customer groups and price ranges

• E-Commerce is the main growth driver

Financial figures for the segment 10

In mEUR 2016/17 2015/16 Revenue 9,819 9,588 EBITDA 403 433 EBITDA margin 4.1% 4.5%

Investor Presentation 30 May 2017

E-Commerce is the main growth driver

• In FY 2016/17, the Group significantly increased online revenues by 10% on a like-for-like
• basis. E-commerce revenues now stand at 7 billion EUR
• E-Commerce is by far the most important distribution channel of the Otto Group,

representing 71% of the Group‘s retail revenues in FY 2016/17. The operating entity OTTO (otto.de) generates over 90% of its overall revenues online

• Strong trend towards mobile commerce: Mobile already accounts for more than 50% of

traffic at the Otto Group’s online shops

Revenue by distribution channel in the Multichannel Retail segment

11

E-Commerce Catalogue OTC retail

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 38% 31% 44% 35% 28% 24% 20% 57% 48% 53% 43% 61% 65% 68% 15% 12% 13% 12% 11% 11% 12% 71% 16% 13%

Investor Presentation 30 May 2017

Financial Services

• Comprises retail-related financial services with a

focus

• n

debt collection and receivables management

• Segment mainly characterised by the EOS Group
• In addition, minority shareholdings in Hanseatic

Bank and Cofidis Group, which specialise in consumer credit

• The

Financial Services segment is largely independent of the Multichannel Retail segment. More than 95% of revenues are generated with customers outside the Otto Group

Financial figures for the segment 12

In mEUR 2016/17 2015/16 External revenue 732 678 EBITDA 320 233 EBITDA margin 43.7% 34.4%

Investor Presentation 30 May 2017

The Financial Services segment is dominated by the EOS Group, an international leader in receivables management.

EOS Group: International presence in more than 25 countries

13

• Established by the Otto Group

in 1974 as Deutscher Inkasso- Dienst (DID)

• The company operates under

the EOS brand since 2000

• Presence in more than 25

countries via 60 operating companies

• More than 20,000 B2B

customers worldwide trust in the EOS Group

• EOS’ core business is receivables management. Its services include the purchase of non-performing receivables,

fiduciary debt collection and business process outsourcing

• Target industries are the banking sector, utilities and the telecommunications market, as well as the public sector,

real estate, mail order and e-commerce

• For many years the EOS Group has continuously maintained an “A” rating from rating agency Euler Hermes

Investor Presentation 30 May 2017

Services

• Service providers specialising in logistics, mainly
• perated under the Hermes brand
• Focus
• n

parcel distribution and 2-man-

• handling. In addition, further services along the

value chain from procurement to fulfilment

• In Germany, Hermes is the largest alternative to

Deutsche Post in the field of home delivery to private customers and has

• ver

14,000 franchised parcel shops

• International

market presence with logistics providers in the UK, France and Russia

Financial figures for the segment

OTTO International

14

In mEUR 2016/17 2015/16 External revenue 1,961 1,838 EBITDA 90 60 EBITDA margin 4.6% 3.3%

Investor Presentation 30 May 2017

Agenda

1 The Otto Group at a glance 2 Financial review 3 Strategy and outlook 4 Summary 15

Investor Presentation 30 May 2017

16

Highlights of financial year 2016/17

EBT in mEUR EBITDA in mEUR Revenues in mEUR

12,104

2015/16 12,512 2016/17

Growth at constant scope of consolidation: +5%

+3.4%

639

730 2015/16 2016/17

+14.3%

5% like-for-like growth exceeds target Turnaround completed with positive results on all earnings levels Strong improvement in profitability

187

2015/16 262 2016/17

+40.1% Investor Presentation 30 May 2017

17

Key drivers for FY 2016/17 performance

Strong performance of key subsidiaries across all three segments Growth rates of the largest group companies: Divesture of 3SI Commerce (legacy 3 Suisses retail business) successfully completed

• In Multichannel Retail:
• In Financial Services and Services:

+6% +11% +5% +6% +11%

Strong growth in e-commerce and mobile commerce Strong shift towards mobile commerce: First year with more traffic from mobile devices than desktop computers E-Commerce revenues grow by 10% on a like-for-like basis and reach 7.0 bn EUR 1 2 Continued active portfolio management 3 Continued focus on companies with sustainable future prospects going forward

Investor Presentation 30 May 2017

The key credit ratios show the Otto Group’s financial solidity

18

2016/17 2015/16 Net financial debt* (in mEUR) 1.432 1.317

Net financial debt / EBITDA* 2.0x 2.2x Net financial debt / Equity* 1.1x 0.9x Equity / Total assets (in %)* 17.5 21.4

• Discontinuation of French activities and continued investments key drivers behind increase in debt
• Net debt / EBITDA ratio improved due to increase in profitability
• Equity ratio affected by increase in pension obligations due to fall in interest rates
• Improvement in Net debt / Equity ratio targeted for the medium term

* All figures in “FS@equity“ view (Financial Services segment accounted for at equity) in order to allow comparability with pure retail and service peers

Investor Presentation 30 May 2017

Key figures over time

19

The Otto Group has shown stable and profitable growth for many years…

Figures based on the most current financials as published in the Otto Group’s Annual Reports. No restatements of prior years.

3SI Commerce discontinued

*

…and has been able to keep key ratios relatively stable despite restructurings over the past years.

Investor Presentation 30 May 2017

Diversified maturity profile Access to a wide range of funding sources

• 100

200 300 400 500

2017 2018 2019 2020 2021 2022 2023 2024-2034

Diversification of funding sources and a balanced maturity profile are key to the Otto Group’s financing strategy

• Access to a variety of funding sources, including a large and diversified bank group and a proven track record of

issuance in the capital markets

• Well diversified maturity profile
• Financial mix: Medium and long-term loans, ABS, commercial paper as well as longer term bond issues
• Strong liquidity buffer: More than 1 bn EUR in committed credit lines (large majority undrawn)

20

Long-term Capital Market Debts (Bonds) Short-term Capital Market Debts (incl. CP) Long-term bank loans Short-term bank loans Other

Split of drawn financial debt as of 28 Feb 2017 Maturities of long-term debt (excl. short-term drawings and commercial paper) as of 28 Feb 2017

Investor Presentation 30 May 2017

Agenda

1 The Otto Group at a glance 2 Financial review 3 Strategy and outlook 4 Summary 21

Investor Presentation 30 May 2017

Outlook: The strategic priorities for the medium term are clearly defined

Expect further growth at sustained profitability Clear focus on e-commerce as main growth driver 22 Continued active portfolio management, potentially further targeted disposals Growth and investments across all three segments:

Multichannel Retail: Focus on platforms/ecosystems (otto.de, Aboutyou) and brands/verticals (Bonprix, C&B, Witt) Financial Services: Focus on debt collection and receivables portfolios (EOS) Services: Focus on parcel distribution and 2-man-handling (Hermes)

Investor Presentation 30 May 2017

1 2 3 4

Agenda

1 The Otto Group at a glance 2 Financial review 3 Strategy and outlook 4 Summary 23

Investor Presentation 30 May 2017

Summary: Key investment considerations

Commitment from family owners Diversification Market leadership in strong growth sector Financial solidity Long-term orientation Family-owned company with a long tradition, a history of stable management and family owners that are committed to the business Diversification across countries, segments, brands, product ranges and customer groups. Active portfolio management ensures strategic coherence Among the world’s largest online retailers, ideally positioned to benefit from the growth of the e-commerce sector across all three segments Solid financial profile, supportive bank group, ample liquidity and proven access to the capital markets Long-term orientation of the owners allows investments in infrastructure and innovations, which will be the basis for future growth

24

Innovation and transformation Track record of anticipating trends and launching innovations. Successful transformation from catalogue to e-commerce business

Investor Presentation 30 May 2017

25 In case of questions, please contact: creditor-relations@ottogroup.com Otto (GmbH & Co KG) Werner-Otto-Straße 1-7 22179 Hamburg www.ottogroup.com

Contacts

Investor Presentation 30 May 2017