Hornbach Hldg Ag

Welcome to our hybrid analyst and investor conference of Hornbach Group. My name is Antje Kelbert, head of investor relations at Hornbach. On behalf of Hornbach and the entire investor relations team, I am delighted to welcome you today here in Frankfurt, as well as digitally as participants of our hybrid format. I would like to extend an equally warm welcome to our board members. From Hornbach Management AG, our CEO Albrecht Hornbach and our CFO Karin Dom are with us today. Hornbach Baumarkt AG is represented by CEO Erich Harsch. According to today's agenda, Mr. Hornbach and Mr. Harsch will first provide an overview of the past financial year 2022-23 and present the group's key developments. Ms. Dohm will then conclude with a tour through our financial results. Afterwards, you have the opportunity to put your questions to the speakers. This will not only be possible for participants here in the room, but also for our digital participants. Questions cannot be asked via the webcast tool, but only by telephone. To do so, please dial in using the telephone dial-in details that were sent to you by email upon registration. If you need the help of an operator during the conference call, please press star and zero on your phone. I would like to draw your attention to the fact that the conference will also be broadcasted by video stream and telephone, so that also video and audio recording will be undertaken from the entire conference and subsequently be published on the company's website. If you continue to participate in the conference, you declare your consent to this data processing. Please also note our disclaimer, which is valid for the presentations as well as the Q&A session. And now I would like to hand over to our CEO Albrecht Hornbach and looking forward for the upcoming presentations. Thank you.

Thank you, Mrs. Kelbert, ladies and gentlemen. I would like to offer you a warm welcome to our 2023 Analyst and Investor Conference. We are delighted to see your interest as well as the guests present here. We would also like to warmly welcome everyone who is joining us online. My colleagues Karin Dom, CFO, and Erich Harsch, CEO of Honbach Baumarkt AG and I will report to you today on the performance of the Honbach Group in the 2022-2023 financial year. And we would also like to provide you with some insights into our plans for the current fiscal year. Last Friday, the supervisory boards of Honbach Management AG and Honbach Baumarkt AG took some important decisions which set out the way ahead for our group. My colleague Erich Harsch will, in addition to his activities as CEO of Honbach Baumarkt AG, be appointed to the Board of Management of Honbach Management AG as of June 1st, 2023, where he will be responsible for the do-it-yourself store division. Following the successful delisting of the Hornbach Baumarkt AG shares at the end of February 2022, we thus aim to underline that we see Hornbach as one retail company. Our key success factors are people, the customers who shop with us every day and the colleagues who each day give their best. The second major decision is to appoint Christa Theurer, Jan Hornbach and Nils Hornbach to the Board of Management of Hornbach Baumarkt AG. Christa Theurer studied business administration and has been with Honbach since 1994. She began her career as a procurement assistant. Since October 2019, she has been a member of the management of Honbach Baumarkt AG in its Germany region and in this function responsible for the operative business. Jan Hornbach also studied Business Administration and joined Hornbach as a trainee on October 1, 2009. Since June 2016, Jan has been the Managing Director of Hornbach International GmbH and thus responsible for the operative business of our foreign companies. Niels Hornbach studied mathematics in England as well as logistics and supply chain management. In May 2015, he joined Hornbach as team leader for customer logistics network management. Since October 2019, Niels Hornbach has been a member of the management for the e-business and customer logistics division. And since October 2021, he has managed the group-wide e-business division. The appointments of these new members of the Board of Management will strengthen the overall management of our operative business, not least because this will allow the country managing directors, divisional directors and Board of Management to now work more closely together. Not only that, the appointment of two family members to the Board of Management of Honbach Baumarkt AG marks further commitment by the founding family to the company and its future as a family-run business. Ladies and gentlemen, only those who are prepared to change can successfully shape the future. Today, more than ever, we need the entrepreneurial spirit and power of innovation that enabled previous generations to build the successful business we see today. That is exactly where we plan to start, as a successful retail company with a long tradition and great relevance for the future. As a crisis-resistant employer for more than 25,000 colleagues across Europe, and as a reliable supplier to families, to people who like to do things themselves, to home improvement enthusiasts and to our professional customers. Our aim is to be available across all channels to everyone who would like to enhance their home and garden or make their living space more energy efficient. And that regardless of whether they prepare to use our app, our website, any of our 171 do-it-yourself stores and garden centers, or one of our 39 builders merchant outlets to make their purchase with us. Wherever they come into contact with Hornbach, they should be absolutely certain the well-being of our customers is the top priority for us as respectable merchants. We are experienced professionals when it comes to projects in home and gardens. In the 21-23 financial year on which we are reporting today, we again managed to convince people of our performance capacity. Despite the inflationary environment and resultant reduction in our customers' purchasing power, we managed to increase group-wide sales by 6.6%. That is particularly pleasing as the 2021-22 financial year before was a record year with exceptionally strong results. And we were able to further significantly expand our market shares compared with pre-pandemic levels in all the countries where we operate our stores and our online shops. Like in previous years, the past financial year was also characterized by a high degree of uncertainty. We were repeatedly called on to act quickly and to respond to difficult external circumstances. Russia's attack on Ukraine, one of the world's largest grain producers, the effect on the European and in particular the German supply of energy and commodities, and the impact of internationally agreed sanctions led to further disruptions in supply chains and to significant rises in the price of food, commodities and energy especially. While Europe began to normalize its approach to dealing with coronavirus, lockdowns in China continued to impede the global flow of goods. As a result, we saw a sharp rise in inflation and falling purchasing power across the world and in all countries in which the Honbach Group operates, factors which placed a massive strain on public and private household finances. To combat inflation, major central banks such as the Federal Reserve Bank in the US and the European Central Bank raised their respective base rates on several occasions and significantly. The security community in Europe and NATO countries, always carefully balanced, received a severe shock, while global investment and spending patterns have changed for the medium term, also in terms of military spending. And even though we face new challenges every day, we must not get tired and rest on our success. More than ever before, successfully running a retail business today means this – speed, adaptability and anticipating people's needs at an early stage. A glance at the Kundenmonitor 2022, the customer survey in which we are ranked first among do-it-yourself stores in Germany for customer satisfaction, shows how well we have managed this in the past year. In Sweden and the Netherlands, we held top position in the retailer of the year 2022 survey. Thanks to our popularity with customers and our attractive range of products and services, and in particular, the focus on our permanent low price guarantee, as well as our highly developed project expertise, we were able to generate consolidated sales of Euro 6.3 billion in the past year. As I have already mentioned, this is a growth of 6.6%. Sales continued to be at a significantly higher level than before the pandemic. They also grew in all quarters of the past financial year, driven by persistently high demand and price inflation. A three-year comparison shows that our like-for-like sales net of currency items has grown by more than 28% in this time period. The online share of do-it-yourself store sales, including click and collect, stood at 14.1% in the 2022-23 financial year. We generated sales of €823 million in this area, but witnessed a reduction of 12.8% compared with the previous year. And that was due to declining demand for click and collect only. We are convinced that we are on the right course with our ICR interconnected retail strategy. Our direct online orders remain high and at a higher level, much higher level than before the pandemic. In other words, we can confirm that online retail is now well established in the do-it-yourself sector. The strong performance despite adverse conditions in the past financial year is also reflected in our adjusted EBIT. Here we were able to generate solid earnings of €290 million in the 2022-23 financial year and this figure came in 20% lower than the record performance in the 2021-22 financial year with earnings performance impacted by the persistent inflation dynamics we saw throughout the year. That said, if we look at the figures for 19-20, also a year with particularly good earnings, we remain 28% above the results in that period prior to the pandemic. Erich Hasch and Karin Dohm will provide you with further figures and more detailed insights into the performance of our group later in the presentation. Ladies and gentlemen, if you watch the news, then you are confronted with a daily flow of information on the manifold challenges we face. From my conversations with colleagues as well as in my personal environment, I have noticed a great deal of uncertainty about the turning point in history that we are currently witnessing. The concerns raised relate on the one hand to the security of our energy supply, affordable living space, investments in buildings and heating systems, and our infrastructure and mobility. On the other hand, they also address the way we deal with each other and the socio-cultural aspects of our communal life. In our forecast for the current financial year, we see ongoing macroeconomic challenges in terms of inflation and product prices. Not only that, the subdued start to the spring this year due to poor weather conditions has also had a noticeable impact on our business. Erich Harschen-Carrington will provide you with further information about this later in the session. One thing is nevertheless clear to me, we can only master the challenges if we act with confidence and vigour to tackle the things that lie ahead. So, to conclude my comments, I would like to explain how we address these challenges at Hornbach and what we offer our customers. In six points. First, flexibility. For decades now, we have offered competent advice on projects in people's homes and gardens. Regardless of whether people prefer to do the project themselves, have parts performed by tradespeople, or have the whole project implemented from start to finish by our tradespeople service and thus by professionals, whatever route they choose, we accompany them in their projects as a reliable partner. Second point, trust. In periods of high inflation and increased cost of living, price is especially important. With our permanent low price guarantee, we offer transparency and the price guarantee even after the purchase has been made. If customers shop with us and the price is subsequently reduced within 30 days of their purchase, the difference is automatically credited to the customer account and can be used for their next purchase. This approach offers security, particularly when stocking goods for larger scale projects. And the third, availability. Our product range is structured to optimally meet what customers actually need to implement their projects. That means we do not offer only the core products needed for the projects, but we also offer everything else that is required, such as the right tools, for example. fourth reliability we cultivate relationships based on close partnership with our suppliers and manufacturers we rely on a multi-supplier strategy and are in constant dialogue when it comes to new products commodity prices after all our customers should not only discover and purchase the latest trends with us they should also be certain that they have received the best value for money in the sector And fifth, the right thing for everyone. People who shop at HONBACH are real doers. They generally implement their projects themselves. In structuring our product range, we attach the greatest priority to quality and sustainability. And there has to be the right solution for every budget. Our popular private labels play a key role here. With these, we deliberately cover the whole spectrum of product categories, good, better, best. And the sixth point. with which we aim to inspire our customers in future as well, is especially important to me. It's our colleagues. The dedication they have shown in recent years, the energy and lifeblood that so many people contribute to our company, we simply cannot praise them highly enough. Retail is detail, as they say in English. You can have an amazing product range or the best logistics in the sector, two standards we have set ourselves. In the end, though, it is about the people who sell the products, whether they offer advice in the ails, help customers plan their bathroom, or handle the checkout process. What counts is human interaction. The impression that our customers gain from each and every colleague is what counts. And I assure you we will leave no stone unturned in the future as well to make sure that those who shop with us come away as satisfied customers. Thank you for listening and I want to hand over to Erich Harsch.

Thank you, Mr. Hornbach, for your comments. And dear analysts, investors and capital market representatives, I too would like to welcome you warmly and thank you for attending this analyst and investor conference today to discuss our results for the financial year 2022-2023. Mr. Hornbach, you just spoke about the most important factor driving our success at Hornbach, our people. At HORNBACH, we have 25,118 colleagues who, day in, day out, give their very best to enable our customers to implement improvements to their homes. Or helping customers find exactly the screw they need, mix the right shade of paint, or recommend the best plans for the balcony. Behind the figures we will present you here today and in our annual reports, we should not forget our people and the vital role they play. Alongside our colleagues, It is our customers, of course, who are our most important stakeholders. And they are growing in number. In the 22-23 financial year, more than 300,000 customers shopped with us each day. One development with which we are especially pleased is that the share of commercial customers, who we refer to as professional customers, has reached a good level. We see this segment in particular as harboring great potential for the future. With our product range, our product availability and our professional customer service, we are well prepared. A further benefit of our targeted strategy to attract professional customers is that it also enables us to win over manufacturers who would otherwise only supply professional specialist retailers. Our popularity with customers has enabled Hanbach Baumarkt AG report net sales of EUR 5.8 billion at the balance sheet date as of February 28, 2023. This represents growth of 6.3% compared with the previous year. In terms of our net sales, we have therefore beaten the previous year's record figure. On a like-for-like basis and net of currency items, we generated growth of 3.6% in 2022-23 financial year. The figure for Germany was 2.4%, while our international business achieved 4.7%. Our stores in the Netherlands posted a particularly strong performance, but we were also noticeably ahead of the average in Romania and the Czech Republic Slovakia region as well. The development in our market share is also pleasing. In Germany, our market share rose to 14.9%, back in 2019 it was 13.1%. We achieved the highest market share in the Czech Republic, where we have 34.4% of the market. In addition to this, we are also well positioned in other countries, 26.1% in the Netherlands, 17.8% in Austria and 13.5% in Switzerland. We have opened four new DIY stores and garden centers in the past financial year in Nitra in Slovakia, Enschede in the Netherlands, Constanza in Romania and Leipzig here in Germany. Together with the two specialist flooring stores we manage under the Bodenhaus brand, Hornbach Baumarkt AG currently operates 171 locations in nine countries. and European countries. The DIY store division contributes 93% of sales at the overall group level, with the remainder being generated by Hornbach Baustoff Union, which operates 39 builders merchant outlets in Germany and France, two more than in the 21-22 financial year. Hornbach is the market leader in Germany when it comes to multi-channel retail. That is because we offer our customers a seamless customer journey. We call this interconnected retail and, with sales of EUR 823 million, this e-commerce model is a key pillar of our success. We are also the market leader when it comes to surface productivity. Our sales of Euro 2,925 per square meter put us well ahead of our competitors. And we consistently pass on the advantages generated by this high level of surface productivity to our customers in the form of our permanently low prices. People often ask whether our permanent low-price policy – in other words, the abandonment of bait-and-switch offers – is still the right approach today. In times of high inflation, there is pressure on the gross margin and the profit we can achieve. But if you consistently view your company from the perspective of the customer, as we do, then they should always be able to shop at attractive prices and cover their current needs, not just when the retailer happens to make a special offer. A company who focuses on short-term special price offers is not a genuine partner for the projects of its customers. Ladies and gentlemen, a number of unforeseen challenges arose in the last year. However, we still managed to get a great deal done. One example is the topic of bespoke working hours. This model has five components, three of which enable employees to reduce their working hours. A fourth component allows them to redistribute or compress their working hours, such as in a four-day week. The fifth component permits them to increase their weekly working hours up to 42.5 hours for a period of 3, 6 or 9 months maximum. This model has been in force here in Germany since the 1st of January 2023 and has already been utilized by around 25% of our colleagues. The feedback we have received is very positive. For our colleagues, it offers a good opportunity for them to balance their work and private lives. And it is also very positive for us as a company. After all, satisfied employees create satisfied customers. It is particularly pleasing to note that in planning their working hours, our colleagues are focusing on customers' needs. Extra work, for example, is generally performed during the peak season, with days off being taken off outside this season. Thanks to our successful performance in the past financial year and given the opportunities created by the federal government for inflation compensation payments, we have invested a total of 10 million euros for our colleagues in Germany. One third of this sum relates to the 2022-23 financial year. Full-time employees here in Germany received and will receive an additional monthly payment of €150 from January to June 2023, which is €900 in total. Trainees and members of dual study work programs receive 100 euros a month, making up for 600 euros in total, over and above their normal incomes. Part-time staff receive prorated payments. For our company in Germany, there were two further milestones to highlight. Firstly, the opening of our new store in Leipzig in February. We invested 55 million euros in a listed building on Alte Messe, the historic trade fair site in Leipzig. At this location, we were able to integrate all the innovations we have devised in terms of store module development. Secondly, and this is now outside the 22-23 financial year, the opening of our new logistics center in Essingen in the Pfalz, directly next to the company headquarters at the end of April 23. Since 1999, we have operated a logistics center in Essingen. and this has now been joined by a second center. The new building covers more than 24,000 square meters divided into two halls. The front hall serves a cross-stocking center for lengthy and bulky goods. This is where merchandise that is pre-commissioned by suppliers is handled without having to be stored. We use the second hall as a regional warehouse for goods that are not delivered in the store straight away. we invested more than 25 million euros in this new facility. Before I offer you some insights into our outlook for the current financial year, I would like to turn to one topic that is especially important to me. That is Corporate Social Responsibility . When it comes to CSR, we need ambitious projects and approaches. We have pursued this for decades, long before the topic became a megatrend, back in the times when people still spoke of respectable merchants rather than CSR. At the same time, we also need the right underlying conditions to promote value-based business activity. What I, as a CEO, would like to see is a legal framework that promotes a combination of what is needed in economic terms and what makes sense for sustainability. After all, the finest ambitions and measures are of no use at all if they fail to account for the fundamentals of business management and customers' perspectives. Ladies and gentlemen, we expect that sales and earnings alone will no longer safeguard a company's operating capacity in the future. As we look into how the way we live will develop in the future, we can see trends indicating a more away from the growth economy that dominated to date. Value orientation is a topic that is set to play an ever greater role in all its aspects. Time will be a key currency for people in future. We already see this topic today in the discussions around the four-day working week and the balance between work and private lives. We are responding to these developments, for example, with our bespoke working hour model. Sustainable actions are rooted in a sense of awareness of each individual. That is why we are working on a daily basis to promote our value-based approach also in our internal platforms and conferences. As a retail company with operations in nine European countries, it is important for us that everyone should be able to tackle matters on hand and shape developments along these lines under their own responsibility. Our hearts are closed to our DIY customers because we too like to knuckle down and get things done. And the more people who become active and allow themselves to be guided by a clear value-based approach, the better we will be able to solve the challenges that lie ahead. Ultimately, one thing is clear. We have no choice but to reflect again and again on the way we do business and to develop new, even more value-driven strategies for the future. In the documents you have received and in our non-financial group report, you will find extensive information about these strategies, our specific commitments and our CSR policy. In the remuneration report, you can also see details of the individual ESG targets, which, alongside existing financial performance criteria, will in future form the basis for determining variable management remuneration. As a work community, we can be proud of what we achieved in the 2022-23 financial year. If we see persistently high inflation and the rainy weathers in many regions in March and April and account for subdued levels of customer confidence, then it should be clear that success is never guaranteed. Results such as those we have achieved in 2022-2023 require a great effort from us all. After all, competition is very tough in the European retail sector. In response to the challenges we have highlighted, notably the ongoing momentum in inflation and product prices, as well as the poor weather at the start of the season in the first quarter of 2023, we are now increasing the focus on our cost base. That includes optimizing operating expenses at our stores and in our administration. At the same time, we intend to uphold our long-term growth ambitions and our proven permanent low-price strategy. It remains to be seen how much leeway customers will have to consume as the year progresses and which projects are carried out as planned or possibly postponed due to inflation and cost growth. Given the tricky start due to weather conditions in this cold and wet spring season, we cannot exclude the possibility that increased expenses, such as the inflation compensation payments made to our colleagues, will also lead to a lower level of operating earnings. We therefore currently expect first quarter earnings to fall significantly short of the previous year's quarter. In the past, we have always shown that we are resilient and frequently outperform developments in our sector as a whole. One of our strengths is that we do not simply accept given circumstances, but react flexibly and innovatively to changes and attempt to anticipate these in advance. Let's take energy efficiency refurbishment as one example. This is a topic that has moved even more clearly into the foreground due to climate change and the increase of energy prices last year. For several years, we have offered the right solutions that consumers need for individual projects. Whether the project involves full heat insulation, new windows or doors, or heating and sanitary solutions, all the products consumers need are available at our stores at specialist retailer quality. These products are permanently part of our basic product range rather than short-term listings. And because we have offered them for such a long time, we have also built up a high level of advisory expertise. Advisory expertise is one thing. Good ideas are just as important and we have to continue aligning our company to what consumers need. That is why we have set ourselves the standard of regularly reviewing our processes and structures and looking closely to see what we can do without and where we have to invest. That way we will be able to report on our successful business performance in future as well. To conclude, I would like to take this opportunity to thank Albrecht Hornbach and the Supervisory Board of Hornbach Management AG very warmly for appointing me to the Board of Management at Hornbach Management AG and the trust they have placed in me. Together with the additions made to the Board of Management of Hornbach Baumarkt AG, This is a forward-looking decision to secure the future capacity of our group of companies. And now, Karin Dohm, I will hand over to you to offer our guests some further insights into the financial performance. Thank you very much for listening.