Ceconomy Ag Ord

Good morning, everyone. My name is Stephanie Richel. I'm the Vice President, Investor Relations at Seconomy. Welcome. Welcome to this full year results and strategy update webcast. We're excited to be here today and we have a lot of news to share with you. Before we start, let me briefly address the usual formalities. This replay is being recorded. A replay will be available on our website later today. Please also kindly take note of the disclaimer. Having said that, let me now hand over to our CEO, Bernhard Duttmann. Please go ahead.

Good morning, ladies and gentlemen. You see me smiling because I think it's a very good day for the economy. So welcome to our full year results call with our strategy update. We would have liked to welcome you in person. Unfortunately, this is not possible due to Corona. We also would have liked to be here with three persons. With the CFO Karin and the CEO of MediaMarkt, Aton Farhan. Although this is not possible, Corona again played a Against us, Karin is in quarantine. She is connected with us via her PC and she will be able to answer the questions later live on screen, but she is not with us today here in Dusseldorf. As if we have feared this to happen, we did a pre-recording two weeks ago for some parts of the presentations. And we will make use of it later. So luckily we did that. So we can give you, although Karen is not present at this moment, we can give you the presentations that we have planted. Ladies and gentlemen, when I joined the economy in October 2019, I did it with a clear focus on two tasks. The first task was to finish, to conclude the strategy process for the economy and the way forward of the economy. And the second task was to improve the relationship to the family Kellerhals and if possible to find somehow a solution. And today I'm very happy that we are able to tell you the story that we have found an agreement with Convegenta to roll up Convegenta as a shareholder of the economy and to take full ownership of the Medias Saturn business in the economy. And with this, I would like to begin my presentation to share with you the information on this transaction. So in a nutshell, what did we do over the last weeks? So we found an agreement with the family Kelleherts and now it is very clear with this transaction, we will acquire the 21.62% of Mediamarkt Saturn, which is owned by Convegenta today and bring it into our balance sheet in the economy. And we do it by some kind of contribution in kind by giving out new ordinary shares and some other financial instruments we talk about later. So Convegenta will become a new anchor shareholder of the economy. And they are committed to be in that role. So they have the target to be a stable shareholder and to roll up the shares to the economy. So the financing. of this deal is as follows. We have a mixture of ordinary shares. Secondly, we have a convertible bond and we have some limited amount in cash. This transaction will allow us to unlock a big value creation potential in the economy, which was locked up to this transaction. And with this value creation potential, the transaction will be value accretive from year one. We come to more detail in a minute. The transaction, however, is still pending on the approval of our shareholders meeting in February because the transaction is complex. And for that reason, we put it on purpose to the vote of our shareholders that they all can agree on this transaction. So let's go more into more detail. As I said before, Convergente will roll up or will become a shareholder of the economy. In the beginning of 25.9%, later it can even become more because from the convertible bond, they can move up the shareholding up to 29.9%. And that is the target what Convergente wants to achieve in shareholding. So we have on the one hand, a new shareholder structure, which allow a unified shareholder interest in the company. And all of them are looking forward that the strategy implementation will lead to the success of the economy in the future. In Psyconomy, with 100% ownership of MediaMarkt Saturn, we can simplify our governance. We have a lot faster decision process because we do not have the two-tier board structure in the company, which we had with an advisory board of Convegenta and a supervisory board at Psyconomy. That we will not have in the future. It will make our life a lot easier. Let's have a look. into the value creation potential from this transaction. I think the predominant part of this value creation comes from locked up today tax losses carried forward in this economy. These amount to 1.2 billion each for corporate and trade tax. And that will result in tax savings of 360 million over the next years. On top we have holding costs which were not tax deductible in the past but we can now deduct from our earnings of MediaMarkt.one. So this on top will lead to savings of around 10 million annually. All of this will reduce our tax rate by two to three percentage points, the underlying tax rate. The tax savings will lead to roughly 50 million benefits in the next three years. In the first year, a little less. In the third year, a little more. And that will be increasing over the years. And the major part of the 360 million will last for six to nine years, depending on the tax. The trade tax, they are a little longer than the corporate tax. On top, on the benefits, we also have some holding cost savings. The amount is four million, so you might have expected a little more, but you need to have in mind that we already have reduced our holding costs in the beginning of 2019 by 10 million from 40 to 30 million. So now the savings are a little bit more limited, what we can achieve on top. The third benefit the shareholders will have is that we move the minority share from Convergenda now to the earnings of the economy. This is on top an amount of more than 50 million. And all the elements together will ensure that the transaction is accretive for our shareholders from year one. On the year one would be this year after closing. So what are the key parameters for the transaction? Number one, we have 125.8 million shares, which we will issue as ordinary shares after generally assembly which have a value of 525 million on top we have a convertible bond at a nominal value of 151 million at an issue price of 160 million and we have a cash transaction so we pay upon closing 80 million to the con to convergenta and 50 million we pay only after we have given back the KfW facility. That means the whole transaction has a limited cash-out and debt issue. It is in line with our stable financial profile. Number two, it reflects the intention of Convergenta to become an anchor shareholder up to 29%. And if you add up all the considerations, you come up to a total consideration value of 815 million. When you ask me, so how do you calculate these kinds of values? It's based on a three months average share price, which is at four Euro 17, we measured up to Thursday evening. And with that, the shares of the 125.8 million is exactly the 525 million. Having said all this, there's still a process we have to go through. So we had agreed with Convergenta on the deal. We signed it yesterday, and we also got the supervisory board approval yesterday. Now we have in January 21, we will have the convocation of the annual general meeting. And in February, we have our shareholders meeting in Dusseldorf. It will be virtual meetings this year. And we hope that on that shareholder meeting, we will get the approval from our shareholders and investors to improve the capital increase for the consideration in kind for the shares, for the ordinary shares, for the issuance of the shares and the issuance of the convertible bond. The closing of the transaction would be around end of March, depending on when the court will register the new shares. So far, for the News of the day for the economy. And I think this news is an incredible news for us because it solved something which was in the room for many, many years. And finally we have done it. I'm really proud on my team that we have gone so far in achieving this. And I think with that one, We can now continue with our normal program, which we have intended for you to present. And that is to the results from last year, the strategy update, which is, I think, also important in light of all the new news from the outside world, what we get. And that is what we start now. So let's take a look back into the beginning of 2019. At the time when I joined, we had to set the reset button because the economy was off track and we need to stabilize the business. One of our main conclusion at that point in time was that it was not the insights we were missing what needed to be done. No, it was lacking the timely and consistent implementation. For that reason, we shifted our focus to relentless execution for all our strategic initiatives. And we defined four initiatives, and we have defined it in four tiles, and you might remember them. And the first one was omni-channel. In omni-channel, we delivered tangible results. We consolidated, first of all, the different online shops we had for the different brands. We also consolidated the IT platform from six different webshop platforms to one. In Germany, we implemented an improved webshop front end. And we introduced new apps which were far better in user experience than the existing ones. In last July, we introduced the marketplace for Germany. And we are pretty convinced that we, as the third largest online player in Germany, after Amazon and Otto, will have a marketplace with high relevance. We are already pleased by the momentum which we see in our marketplace, and the interest from suppliers who want to sell in our platform. The second tile was one of service and solutions. We implemented the harmonized service offering for our smart bars across all countries and all stores. At the same time, we tendered and refined our insurance and warranty packages for Germany and Austria. And we also launched the monthly subscription for extended warranties. The third one, category supply chain management. This is key for us. It is key in the transformation from the decentral structure to the central one. And the most important project we had was the launch of a centralized category management approach. We have given guidelines to all countries how to define the assortment. So the products in each country might be different slightly, but it is in a framework, in a clear framework. And that has been defined by the central category management department. And most important, With that approach, we have shifted the category management or the ordering of products from the stores to the countries. So much more centralized. If you now look how much we buy centrally, we have achieved on a country level a level of more than 95%, which we buy centrally on a country by country level. Lastly, Category and supply chain is also about logistics. We are in the process of improving our logistics also to a more central structure. It will need some more time as the whole category will need more time because category management needs systems in place and logistics in place. And both things are underway, but they still need time to be finished. The fourth tile was the tile of organizational cost structures. Actually, this was a tile which we started with to get back to a competitive cost structure for the group. And in August, we implemented the new operating model where we harmonized the organizational structure across the group and also introduced standardized processes. which are now a prerequisite for all countries. This new operating model will help us to reduce costs, but will even more help us to increase speed in the transformation. All that helped to stabilize the company in the year 2018 and 19. And we were very confident that we will be able to show in the year 19-20 sales growth and higher earnings. What we all know, it came differently. So let's have a look back how the corona pandemic influenced our business. So the year started quite well with an excellent Black Friday campaign and we finished the first quarter with good results. We increased the sales and we increased the earnings. So on both elements, we were successful. In January, we increased the level of sales development. In February, even we passed the January development and in March, we were even stronger. Up to mid-March, we're at a sudden point in time within one week, all of our stores, no, not all, but 90% of our stores were closed. We had to shift all resources immediately to our online activities. Luckily, we had prepared our online tools ahead of the time. So we were able to have a resilient online business which could deliver the high volumes. And you might remember what we reported after the quarter. that in April we had delivered 60% of our previous year volumes just via our online channels. So we managed successfully this phase in the lockdown phase. And at the same time, we prepared for an opening of the stores. The restrictions eased end of May, or in May. And end of May, almost all stores were open again. And There was always a question if Corona was the reason why the business in general would move a lot more towards online. But the post-lockdown phase was a clear evidence that customers want stores. They were coming back to our stores. In the first days, they were queuing to get into our stores. And the customers who came had a strong shopping intention. So they were buying more. So in the three months, June, July, in the four months, June, July, August and September, we had very good sales development. We even exceeded our sales volumes in our brick and mortar stores. At the same time, development on online remained positive. All in all, we were able to really grow our business in these four months, and we could compensate for the sales losses we incurred in the lockdown phase. And that resulted in a sales number where we had to show development only slightly below last year, despite the COVID-19 disruptions. And for EBIT, we achieved a good level Far beyond what we have anticipated in the beginning of the year, where we had no idea what this year would lead to. And also, when we did our internal forecast in July, the forecast was much lower. And also that the result was much better than it was expected from the markets. We did not only work on financials last year. We also worked on our ESG ambition because we have a clear ambition to make our operations sustainable by reducing the carbon footprint. We want to be a responsible partner for society, employees and customers. And we want to work in a compliant way. In terms of sustainability, we were successful in reducing our direct carbon emission compared to the base of 2015 by 75%. In the meantime, 80% of our power supply is provided with green electricity. We are working to extend the lifespan of products with repairs. Last year, we did 2.9 million repairs across the group. More important, what happens if a product comes to an end of its lifetime. We all know that it's e-waste. And in Germany, we take 50% of the total e-waste back from the consumers and feed it back to recycling. In diversity, we want to increase the female share, which stands at 38% today. And we have a good cultural fit with people from 128 nations in our group. Lastly, in our private label company, where we sell products directly from production sites, we have to make sure that these sites are audited for labor and human rights protection. And we achieved that for 97%. With that, I will hand over to Karin for the financial numbers of last year.

Good morning, ladies and gentlemen. If I had asked you in March this year how you would or what kind of financial development you would expect from this economy, AG, you would have been certainly very critical on that. Today I can show you that we mastered this corona related year very well. The sales came in slightly below prior year and we finished the financial year with an adjusted EBIT of 236 million euro. But let's start with a closer look at the development of the sales. Despite more than six weeks of stock closure, and the currency and portfolio adjusted sales is only slightly below prior year. It declined by 1.8% year-on-year basis. As Bernhard already mentioned, we have seen in the first five months a very positive sales development. based on successful campaigns during the Black Friday and Christmas period in the last calendar year. The stationary sales losses which we have seen during the lockdown period could partially offset by extraordinary online sales growth. We also have seen a noticeable sales recovery since we reopened the stores. driven by a catch up demand of our customers and by further stronger customer demand until the end of the financial year. If we look at the at the country level, we see different pictures. So Germany, Italy, Spain and Poland were mostly affected by the COVID-19 related stock closures. Turkey, Belgium and Austria were able to fully make up the sales losses of the lockdown period. They even achieved sales above the prior year's level. The Netherlands, Sweden, Hungary and Portugal were not affected by the stock closures and performed well during the last financial year. If we look at the sales development by product categories, we see that we have a high cross rate in the computer hardware as well as in the home appliances, thanks to the work from home trend. But on the other hand, we also have seen a negative cross rate on the brown goods due to the absence of major sport events in the current year. A key factor for us in this financial year was the resilience of our omnichannel business model. The online sales rose sharply by 44% to 4.2 billion euro. And if we look at the online sales share of the last financial year, we have seen a historical high with a share of 20.2%. This high cross was not only limited of the lockdown period. Even after the reopening of the stores, we have seen that the momentum remained high. Since the COVID-19 outbreak, we concentrated our marketing activities and resources on the online channel as customer increasingly switched to the online. On the right side of this slide, there's one figure which is pretty impressive. It is the growth rate of the online business in April. There we have seen a growth rate of more than 200%. And we delivered without any big disruptions. Our IT and logistics worked overall well, despite the exceptional order amount. During this time, we also implemented the shipment from store capabilities in order to use the product availability in the stores in order to fulfill the customer demands. The number underlines our tremendous progress in this whole process. But even after the lockdown, the online sales remain strong. increasingly by 50% on a year-on-year basis. Let's dive a bit deeper in the online sales development in Germany. As Bernhard already mentioned, we have not only consolidated the IT platforms, we also improved the webshop front end and the user interface of our app. These measures supported the online business success in 2020. This chart also illustrates the success of the online business. As you can see, we have consistently outperformed the online market in Germany. We did especially well in the third quarter during the lockdown, but also after the reopening of our stores. Our focus on the online sales activities since COVID-19 was just the right way, and we made it better than any other online player. The development of the services and solutions sales faced COVID-related headwinds. The sales decreased by 7.6% to 1.1 billion euro. The decrease was due to the temporary store closures and after the reopening of the stores based on a lower traffic in our stores. During the first five months we have seen a very positive development of the sales in this segment. We have even seen a double digit growth rate. Especially financing was negatively impacted by the store closures. to a certain part, intentional by the reduction of the 0% interest offers. Despite the lockdown, smart bars or the services on the smart bars which we offer remain stable, even though these services are a pure brick and mortar service. Our new and improved warranty extension showed a strong growth during the whole period and could partially offset the negative development of other service and solution categories. The cross margin, our cross margin, was significantly impacted by COVID-19 as well and declined by 120 basis points to 18.2%. This was mainly due to the COVID-related stock closures again resulting from a channel shift, the higher delivery costs, stock-related issues, and lower service and solution income. Since the store reopened, we could see a noticeable sequential improvement in the cross-margin trend, which continued until the end of this financial year. Please remember that we have seen a stabilization of the cross-margin in the first five months of the last financial year. For the new financial year, that means for the financial year 2020-21, we expect that the cross-margin will be supported by an increase of the stationary sales as well as a higher income from the service and solution segment. Moving down the P&L, let's have a look on the OPEX development. The OPEX ratio improved by 60 basis points to 70.8%. The COVID-related OPEX savings amounted to €227 million, mainly coming from contingency measures, which we rapidly took during the lockdown period in order to mitigate the negative effects. These include the short-time work for our employees. We also made progress in the operational cost savings, in marketing, in personnel, as well as in location costs. These cost efficiencies are related to the reorganization and efficiency program, which we announced in April 2019. The absolute savings in the OPEX came in at €212 million as we incurred some negative effects as well. If we look at the negative effects, we are talking about non-recurring effects. We are talking about 40 million non-recurring efforts, including a provision for legal risks in connection with contractual penalties in Q2, and impairment losses on software and Q4. And we are talking about around 27 million euro resulting from impairments of leasing related right of use assets. As you can see, we could partially compensate the decline in sales and cross margin by significant cost reduction. The adjusted EBIT of the financial year 2019-20 came in at 236 million Euro. That is 167 million Euro lower than the prior year level, but above our guidance, which we updated in July. Looking at the earnings in the segment, despite temporary stock closure, Germany finished the year with a solid operative performance. mainly due to cost reduction. The earnings were slightly below prior year only due to non-recurring effects of 40 millions. These 40 millions include legal risk provision in Q2 and the software impairment in Q4. In the other countries, the earnings development is slightly above prior year. In Western and Southern Europe, Spain and Italy recorded a significant earnings decline due to the negative COVID related sales and margin development. In the Netherlands, earnings were down year on year basis due to margin related factors and based on a highly competitive environment. The negative decline in the region Eastern Europe was driven by a decline of sales and margin in Poland. The EBIT in Poland was additionally impacted by impairments of right of use assets. Turkey showed slightly higher earnings due to a strong sales growth, while currency effects offset a part of the positive earnings development. In the segment others, The increased earnings, which you can see, are due to lower economy headquarter costs and the disposal of iBoot. Sweden, which is also part of the other segment, came in at prior year's level. This slide, ladies and gentlemen, shows you the bridge from adjusted EBIT of 236 million euro to the reported EBIT of minus 80 million euro. And you can see that we have two main columns between. In the first column, we are talking about the non-recurring effect in the financial year 2019-20. which mainly include a positive EBIT effect related to the Greek transaction in Q1, the expenses for already decided store closures announced in Q3, and the expenses related to the implementation of the new operating model, which we also announced in Q3. With regard to the expected 130 million restructuring expenses in the financial year 2019-20, we only booked 72 million. But please keep in mind that this is just the timing effect and the reminder will switch in the financial year 2020-21. But with this effect, you will see a shorter payback period. The other adjustments items are mainly the result of the non-cash effects impairment of the FNAC data stake in Q2. Coming to the free cash flow development. The least adjusted free cash flow came in at 453 million Euro. That's a strong increase of 586 million on a year-on-year base. This development was driven by a strong Q4, but also driven by some positive non-recurring COVID related effects. And these COVID related effects are not sustainable going forward. The significantly better free cash flow was mainly impacted by a networking capital inflow, which was supported by a strong sales momentum in Q4. and a higher purchasing volume in the expectation of a strong sales development during the Black Friday and Christmas period in this calendar year. For the financial year 2020-21, we expect networking capital to normalize. The positive cash tax inflow is due to tax refunds, which we get from prepayments out of the financial year 2018-19. And it is based on a lower tax prepayment in the financial year 2019-20. As you know, we suspended non-essential investments in modernization and expansion. Therefore, we had a slightly lower cash investment compared to the already low level in the prior year. For the financial year 2020-21, we expect cash investments to normalize of around 1.5% of total sales. As you are aware, the uncertainties regarding the further development of the COVID-19 pandemic, as well as the global macroeconomic environment remains high. We are currently again facing local lockdowns and stricter social distancing guidelines. Nevertheless, we decided to provide you with an outlook of our financial year 2020-21. The following outlook assumes that the further impact of the COVID-19 pandemic on both on the overall economic situation and of the group position will not differ significantly from the extent currently known. The achievement of the guidance also requires that there are no additional extensive temporary closures of a significant part of our business. It requires that there are no serious worsening in consumer confidence. And it also requires that the supply chains remain largely intact. The outlook is made, as always, before portfolio changes and associates. In addition, the outlook does not include non-recurring effects in connection with COVID-19 related stock closures, as well as the introduction of the new operating model. We expect a slight increase in Forex adjusted sales. Yes, we had an excellent start in the first quarter so far with a double-digit cross in total sales. But please keep in mind that we will be facing a high comparison base in the second half of the new financial year. Also, we expect some mild recession, especially in Southern Europe. The adjusted EBIT of our outlook exclusive associates is expected to come in at between 320 and 370 million euros. We are confident that this is a solid outlook for the current financial year despite the ongoing pandemic. Ladies and gentlemen, after a short break, we will come back with our strategy and our way forward.

We will now start with the strategy session. So in the last two years, we have worked a lot on our strategic initiatives. And I can say we are now in the middle of our transformation. And I think it's the right time to give some strategy update. You see already in that line what it means for us becoming the first choice. And I will come back to that. There are three parts here. First, we want to talk about our market in which we operate. Then we will talk about how we operate. want to behave in that market, what are our measures, our strategy. And number three, we will go to the financial ambitions, what are our targets we want to achieve. The economy operates in an attractive market. The market has a size of 159 billion euro in the 13 countries in which we operate. We expect that this market is growing to €162 billion by the year 2022-23. This is a moderate growth rate of 0.5% as a CAGR. But the market is also a market which is highly influenced by innovations. We have seen that when the MP3 players were introduced and also with the launch of the iPhone. In these situations, the pace of development increased quite dramatically compared to normal times. And we expect in the future that 5G can play this role. Because 5G will change a lot compared to the technology today. It will boost things like smart home, because devices will be interconnecting and interacting much more than it does today. The same applies to Health and wellness. Products, electronic products for health and wellness. And lastly, artificial intelligence and virtual reality, especially in entertainment, are things which will be much more capable with 5G. This will be complemented by secondary services like warranties, insurances, and other services. And as we already see gradually coming in now, recurring revenues from services just to be booked from consumers. So the market can be much larger in 2023 already. One thing is clear. If you look at the channels in the markets, online channel is a part which will grow. So the growth will be predominantly coming from online. So we expect the share of the online marketing consumer electronics to rise to 33%. But brick and mortar is here to stay. And we believe omni-channel is the winning model. Already today, we see many customers going into various channels, be it online, be it on the app of the smartphone, be it going to the store. And it is these customers who are on all channels active, these are the ones who spend about 50% more than customers who are just on one channel, be it online or just going to the store. And that is the reason why we strive to develop our omnichannel expertise to a higher level to benefit from this development. COVID-19 has changed behaviors. There are many new ways. And the new ways will create new business areas and new opportunities. For example, today more and more customers use online tools with a way of interacting to stores, to people in stores. And this is just one example. And we have to see how this can change behaviors who will stay for some time will influence our roles in the different channels. And I think we have to define the role of the stores in a new way as well, the accelerated omni-channel capabilities, and we have to define how this has an influence and how to define new assortments. So the stores will not have just the role of offering products to be bought by the customers. No, it will be the room for inspiration and exploration. It will be the room where customers take or are in contact to salespeople for personal consultation. And it will also be the area for the fulfillment of online orders in the pickup process in the store. The accelerated omnichannel capability is important to stay in close proximity to the customers across all channels. It needs robust technology in the backend of the online capabilities, especially for the increased volumes we will have. And lastly, we have to define which future assortments are important and are worthwhile taking in. especially when they are becoming more and more electronic products. And the best example here are attractive health and fitness related products. We believe that we have the great assets at hand to succeed in this development. Last year, we had about 570 million customers visiting our stores. To these touch points, we had about 1.8 billion touchpoints via online, which generated 4.2 billion sales. With our 1,000 stores and our online capabilities, we are best positioned to grow profitably as an omnichannel supplier. And as a market leader, I think in Europe, we have a good position. And that defines the vision for us, what we want to be. And I read it to you. We want to be the first choice as the trusted retailer for tailored solutions in a tech-driven world. And I will now hand over to Ferran, who will explain to you in detail how this way forward will be defined in measures.

Thank you Bernhard and good morning from my side. Let me start my presentation saying that we are operating in the right sector. The reason is pretty clear. Digital technology today is becoming so core as part of our life, our society, our economy is embedded everywhere. And that means that retail is the perfect place to learn about it. Why? Because 31% of our world GDP is coming from retail. And that's the same, and that's true for the digital part. That means that we are creating everyday tons of data. And these tons of data will reshape the future of our economy. These tons of data will enable us to become a smart retailer. How we will use this data is what I will try to explain as well during my presentation. Let me reinforce as well the idea from Bernhard that we operate in the right industry. Not only because the new wave is coming and will increase or will make growing our market with the new 5G, augmented reality, it's because COVID has shown that our sector is resistant, that technology and digital life will become even more important. So when I look to our way forward, I would like to start two years ago. Two years ago, when I started in Ingolstadt as the CEO of Media Marsaturn. At this point of time, we had three profit warnings in a row, and the company moved was at point zero. When I was walking to the campus, I only could see sad people. I only could see that the people were rumoring that maybe the company could collapse. But today, when I talk to our people in the stores, in the countries, even in the headquarters, the spirit is totally different. The people you can see it in their face, have passion again. The people have confidence, have trust. Media Marsha Tour is back in the game. And the reason is pretty clear, because we have a clear way forward. We have a clear vision and ultimately we have a clear goal. Our goal is to build the biggest omnichannel platform in Europe. And we have a privileged position to do it, a unique selling proposition. So a lot have been changing in the last two years. And now I would like to explain why I feel confident, I feel optimistic that we are going to get there. Why the best brands in the world want to sell through Mediamar Saturn. In our way forward, we would like always to answer two fundamental questions. The first one, how we can deliver our product to consumer in more relevant way, in more inventive way. The second one, what new habits of consumption have been formed and how do we get there? So our way forward have mainly three pillars. The first one, growth. So we want a growth with our core business, with new families, but as well with new income pools. The second pillar is building a unique value proposition, how we will differentiate. Here we want to strengthen our position as category authority, and we want to provide a superior convenience and experience through our omnichannel model. And finally, Creating an efficient organization and structure will help us to be faster and leaner. So let's move to the first pillar that is the basis for our growth. An efficient organization and structure. Let me say here that when you are innovating, you are changing everything. But you are changing not only the way you deliver the product, you are changing your processes, you are changing your practices in the store, in the company, and you are changing your structure. So this is what we are doing in our operational model. Basically, here we have three main cornerstones. The first one is centralizing and standardizing the organization. We are changing the storage structures, we're changing the country structures, and changing the role of the holding. The second one is scaling our global IT platforms that will help to have fast deployments. If we have one web, one app, one CRM system, one bleeding platform. And finally, we will build a global logistic network. This will help, of course, to have a much faster delivery and a much convenient experience for our customers. So all in all, what we are trying to do is to become more cost efficient, to be a faster implementation, and finally, to give much time, much free time to our people, especially in the stores, to take care of what is the most important thing, our customers. The second pillar is building a unique value proposition. Here, as a key differentiator, we have seven strategic initiatives. Let me remark that knowing more about customer behavior understanding is what is about retail. So now using digital to taking to the next level, the things that we always did well, it will be crucial for our future. So let me start with our brand. Two years ago, we started our transformation. So today, it's time to reposition our brand as category authority, mainly focusing in quality and experience. Our superior convenience and experience coming from our store network will help us to appeal to higher value segments. So let me say that our brand transformation already started with our international campaign, and with the video that I'm going to show you, you will feel the new tone, the new appearance of the brand. That's just the first step.

I see them blue. Whatever I'm looking for, at Media Markt, I find the gifts for the ones I love.

Media Markt. Christmas made for me.

The basis of our value proposition of our unique value proposition is the product. So what are we trying to achieve here? We are trying to offer the right assortment at the right place at the right price. So with Catman, we can create a creative assortment in our stores. We will generate a free space for new families, for services and experience areas. So we will reduce 30% of the storage I use in the future to generate this free space. The second topic that is crucial for us is availability. We're introducing state of the art technology to improve our demand planning and our stock management. So you could see already that in our top 300 products, we improve our availability by eight points. And finally, we need to ensure a consistent and competitive pricing. This is the tool that helps to steer our business. We have been talking a lot about this tool. This is a tool that comes basically from the data analytics, from the price elasticity, and it's really helpful to steer our business. Technology, we were saying, is going to be embedded everywhere. And that open a lot of opportunities for Media Marsa Tour to get into new families. New families like smart home, for example, that is already implemented to all of our stores, to all of our countries that allow us to enter in new families like lighting or like IP cameras. Already solar panels are being implemented in Germany and in Spain as a test phase of urban mobility. for e-scooters or e-bikes. Health and wellness is being tested as well in some sub-families, and we will have the result in short term. Nevertheless, for me, what is important here is to understand that we have the right prerequisites to scale these families, because we have a distinct go-to market. In one hand, We have, or we will have, in some countries it's not there yet, we will talk later, the marketplace, which gives high speed to introduce new families with a very low investment, with no stock. And the scalability will come from our omnichannel having much better experience and better advice. These new families, these new categories will help us to sell more than 500 million euros until 2023. Catman as well, it will be a game changer for our own brands. We have been talking a lot about our own brands in the past. The problem of our own brands was not the products itself. In fact, this year we have getting more than 60 awards for our products, for the quality of our products and the great value for money. The problem in the past is that we didn't have logistics, and we were a decentralized company. So today, with decentralized category management and scaling our logistics, we see clear that our in-house share of our own brands will be more than double in 2022-2023. All of us know that services are a big part of our profitability. In the last two years, we have been standardizing our services and roll it out in all of the countries, especially in combination with our smart bars. Here, for the next year, we have three clear priorities. The first one is improve the operational excellence of the existing services, because there is room for improvement still, and to introduce new services like cloud services, content services, like Apple Music and repair services at home. All in all, we are preparing all of new services to help to continue growing. The second important priority is the attach in online. This priority has become even more important due to the COVID-19, due to the shifting channel sales that we are experimenting. So all in all here, we are deploying a modular spaces in every single touch point of our web to increase our attachment. In fact, this is already improving our sales, especially in Germany and in Austria. And we will roll it out during next year to the rest of the countries. And finally, what we call the recurring revenue models, the subscription models. We know that with the subscription models, we have a much better customer lifetime value. So we want to shift the one-time commissions to the revenue models for the services or commissions that we already have today, like warranties, like Apple Care Plus, and for the new services that are coming, for example, for the cloud services. All in all, our services will grow until 2023 for more than 30%. When we look at to our web platform, we want to continue to scale it, to continue boosting ourselves, but in combination with profitability. So, you know, and we kind of have been talking that we have been achieving a triple digit growth in some months especially during the pandemic, and we want to continue keeping this momentum. For this, we need to improve the usability. This is a day to day job. We need to increase our traffic, optimizing our marketing performance. We have been learning a lot during the pandemic when we switch off our marketing offline and we focus in the marketing online. So our role has improved a lot. And finally, we need to improve, and we are on our way, and we will see later, our fast and convenient delivery. When we talk about profitability, basically, it's oriented to personalization and recommendation as a first step for solutions, taking in consideration customers' insights, improving the attachment of the services, of course, I've been talking one slide before, and finally, improving our logistic cost from the cost unit point of view, but as well, increasing permanently the pickup ratio. And this we will do it with the new store formats that we will present later. But all in all, it's important that you understand that our digital sales, the in-house share in the future, what we expected is to be in 30%. When we talk about omnichannel, our apps, consumer and employee apps are crucial. Let me say that for me, the consumer app is the major driver to scale our digital business. It's the perfect combination of the web and the store experience. It's where we get our best data profile from our customers. The new app, honestly, is a step change in usability, in design, and in content. We have been putting a lot of features like price alert, like digital receive, a lot of services in, like financing. So all in all, all of these features are boosting our traffic in our web, are improving our conversion, and obviously our attachment. But more features will come in the future, are already in our roadmap plan, like virtual trial, virtual reality trial, sorry, appointment scheduling, or delivery tracker. All in all, our app, it will be the most important tool for our club members in the future. This app will be the remote control of the digital life of our club members. I will talk later on about the club in the last part of my presentation. Employee app, probably the highest return on investment. Why? Because 85% of our employees works in the store. And ultimately, in retail, our employees in the stores are the ones that drive the decision. And just putting the customer insights in their hand will make the difference. In fact, it's already making the difference. You know that our employee app is already live in Germany. in Benelux, in Sweden, and all of the insights that we are getting is that it's a better experience for our customers. So the MPS is going up because our sales guys feel more confident. They have the stock, they have the features, so they can advise much better, better conversion, better attachment. You can see 24% more attachment in services and as well, better productivity. And better productivity for us means that our people will have, will generate free time to do other tasks like B2B calls, like customer training in the future and so on. So for me, all in all, the employee app is the perfect tool in combination of our training program, passion for customer that we are rolling out about in all of our countries to transform our people. stores. The stores are our key differentiator of our omnichannel strategy. But we understand that the role of the stores in the future will change a lot. We have mainly three store formats, plus what we call the shopping shops when we cannot open the smart formats. But let me explain what we are trying to do here. We are trying to do an omnichannel approach by city or by region. What does it mean? So we are trying to combine our web platform with our three store formats to achieve a higher penetration, higher sales, better experience, better next years and less cost. So basically what we will have, we will have one or two lighthouse in a city that is our experience stores. Where the people still will drive longer, it's our brand promise that it's more than 3,000 square meters, the biggest showrooms in the cities. These will be in combination with our core formats, the formats that we have today that we will right size, that we will adapt to the turnover that they need. So we are always talking that we will reduce a lot of part of the portfolio to 2,000 square meters. This core format is related to availability. to advice, to services. And finally, to cover the white spots, we will have the smart concept that is in test. So we will have the results next quarter. That is the convenience store. It's the fulfillment store for pickup, for returns, for repairs. So this triple combination will help us to have a much better approach by city or by region. Let me say that the shopping shop is already in test in Hungary with very promising numbers and will be extremely helpful to cover some areas that we cannot cover with the three format stores. As well, I have good news for you because in July we already launched what we call our Lighthouse format in Milano. And the numbers are impressive. 13% more points in MPS, 38% more sales, and what is even more impressive, 2.8 points in EBIT margin. But let's take a look in a video to see exactly what is this new Lighthouse format. Lighthouse

Red roses, too. I see them bloom for me and you. And I say to myself, oh, what a beautiful world. I see skies of blue. See the skies are also on the faces of people walking by. I see friends shaking hands and say, how do you do? They really say, I love you. I see breeze of green, red roses too. I see them bloom.

So finally, in our unique value proposition, we have logistics. What we are trying to do here, we are trying to build the Europe's largest omnichannel supply chain. And this is based in three corn stores, what we call one order. So that means that we will have one order despite of any touchpoint, any customer touchpoint. One inventory, that means that we will have the visibility of the stock through the different channels, and one transport. That means that we will have a pan-European logistic network that will give enough visibility to reduce and to have more efficient routes. Our approach here is very clear. We don't want any more online or offline warehouses. We want omni-channel disease. These omni-channel DCs we will open in strategic positions all around Europe, and from these omni-channel DCs we will deliver most of the customers, we will deliver to our stores, and we will use our repair centers. These omni-channel DCs we will complement with what we call the urban hubs for two main handling products, for services, at home or services installations, and for returns. All in all, I have to say that we are fully on track on our logistic expansion. As an example, I could say that in Germany, we will open in May our biggest omni-channel DC in Göttingen, 75,000 square meters, and middle of next year, we will as well have available what we call one inventory platform to see stock availability everywhere in Germany and in Netherlands. We will roll out next year as well, hubs in Germany, Benelux and Poland. So what we are trying to achieve with our logistics, we are trying to have a higher customer satisfaction. That means delivery needs to be faster. and having more options, more flexible, and a state of the art of omnichannel network. This is what we are trying to do with our omnichannel disease. And obviously, we are trying to reduce the cost per unit. We believe that we can reduce the cost per unit 3% in the next years, year by year. Obviously, when we talk about logistics, we talk about our delivery promise, our last mile. And we have to say that here we are well on track. Nevertheless, good is not enough. So we have seen since April that our MPS is going up five points and that we are already in more than 80% next day delivery in parcels in Germany. Next steps that we want to achieve, because what I was saying that it's good is not enough, is to improve our same-day pickup. Today, we are achieving, thanks to our pick and pack, two hours pickup, but we want to move to 29 minutes. This is already possible, for example, in Spain. Regarding next-day delivery, we want to improve next-day delivery. So, for example, in Germany, we will move in the next month the cutoff from 7 p.m. to 9 p.m. Scheduling delivery, which is crucial for to main handling, is already live in Netherlands and in parts or in some regions of Germany. But we want to have it for the rest of the countries during next year. And finally, we would like to have same day delivery that is referring to two to four hours. And we want to use the bikes in the main cities. We are talking about 80 cities by 2023 that will support our zero carbon delivery. So all in all, a lot of things will come during next year in logistics to have a much better customer experience. And finally, the last pillar, the accelerating growth. When we talk about accelerating growth, we are talking that we want to build four platform for new income pools these four platforms are marketplace b2b marketing services and the club all of these platforms will have some financial impacts in 2023 but the big value will come in 2025 but it's important to say here is that all of these four platforms are reinforcing each other what does it mean Marketplace and B2B will help us to be more relevant for our customers and for our suppliers. Generating more traffic, we will get more members. And the combination of having more members and more traffic will help definitely our marketing service platform to be more relevant for our partners. So let's take a look to these new income pools. The first one is marketplace. Well, our marketplace will help to increase the relevance for our customers and our suppliers, will boost our organic traffic, will push our own retail and service sales. And finally, it will be extremely helpful to test the new categories with less investors. Let me say that I know that there are already in place a lot of marketplace. And what I see different from our marketplace is that we will offer to our customers and our suppliers a higher convenience and experience thanks to our store network. Our customers and our suppliers can take the advantage of the pickup, of the returns, of the unboxing in the stores. Even our suppliers can launch their products through our stores, putting a special space for them. That is why it's really different from our marketplace solution, from our omnichannel proposition. Our marketplace is already live since July. So, you know, it's in the test phase and we already onboarded 70 sellers and we have more than 50,000 SKUs today. The strategy is to fill the gaps in the existing categories, for example, in gaming. And I can say already that the results are quite promising. So all in all, what we are trying to achieve with our marketplace is to generate more than a billion GMB opportunity for 2025. The second income pools, it's about B2B. We want to step into the small and medium enterprise business segment. Today, we operate in the B2C segment in combination so-called Soho market. The companies that they have less than five people. Addressing this new market, we will increase 50% the potential market. How we want to do it? Basically, until today, we have been rolling out our B2B people in more than 500 stores, but in a passive mode. What does it mean? We were fishing in the carpet. We were detecting the customers and we were calling back. To scale our B2B, we want to create a central team being proactive. The central team will act as an account manager. The central team in midterm we'll create solutions for the small and medium enterprise vertical, like education, like healthcare, that will take advantage of all of our services. Let me explain what I'm saying. Basically, we will go, for example, in a school and we will digitize the classroom. We will provide the devices and we will provide the services. The services can come from insurance, from financing, or from installations needed for the classroom. All in all, we think that we have the perfect proposition for our customers, for the new customers that are the small and medium enterprises. The third income pool that we want to address is our marketing service platform. This is a really strategic decision. Why? Because today the online advertisement is almost a monopoly and we need to change this dynamic. Why? Because we have the most important asset, the consumer behavior data. This is in our hand. Here we want to do three things. First, because our partners, our brands, our suppliers are a little bit tired to invest in these online channels that they are rising their prices. We want to work because the transaction is happening in our platform in a much deeper partnership. It will be much more effective from them to invest in our platform. The second thing that we want to do here is related to the gross margin. We need to get this income. Customers' expectations are growing up. Our customers are becoming much more demanding. So we cannot continue giving away our advertising in different platforms. We will need this gross margin in the future to invest to fulfill these expectations. I don't think we have an option here. And finally, building this platform, we are protecting our data. We are not giving away. We don't know where this information is going on. So all in all, we are very convinced that this is a very strategic decision. I would like to say that we already have a leading marketing people in place with track record. So some of them, they already did it in the past. So I'm very grateful. to have all of them on board. And that gives us an opportunity of half a billion of 2025. And finally, loyalty, retention, our club. We want to move from 23 million members to 40 million. And for this, we need to reshape our club. We need to change the benefits of our club. Our benefits will be much more oriented to services and to entertainment. We know that one loyal customer have much better customer lifetime value. In fact, we know that the customers that are more than three years with us in our club, they double their purchase. So here we see more than a billion increase in 2025. But to give a better flavor how it will look, our club, let's see the video. So all in all, we have a clear roadmap, a clear priorities that we have been summarizing in this slide. I will not go into the detail. You can check it. I've been explaining during my presentation and we will be tracking these in the next month. Ladies and gentlemen, we have every reason to be optimistic. We are convinced that this company has a bright future. Let me conclude my presentation highlighting four success factors. First, we have the right team on board. We have an international experience team with the right skills and what is even more important with the right mindset. We have been demonstrated our ability to execute. We have strong growth opportunities. And we are building the biggest omnichannel platform in Europe. Thank you.

Thank you, Farhan. Ladies and gentlemen, I now show you how our way forward translates into the financial ambition. Our financial ambition for the financial year 2020 22, 23, is that we will reach Forex adjusted net sales more than 22 billion euro. And our EBIT, adjusted EBIT margin range will go at between 2.5 and 2.7%. Our aim was to have a tangible time horizon for our targets. The target should be not too far away, yet it should be long enough so that we are able to show you substantial financial improvements. Therefore, we decided for this three years horizon for our financial ambition. As Ferran laid off, we will grow market share by stepping in new business models with our marketplace, with improved B&B solutions and with the offer of marketing services to our suppliers. Furthermore, we have a clear focus on margin uplift. In particular, the service and solution segment will significantly contribute to the improvement of our cross-margin going forward. We expect capex to return to a normalized capex level of 1.5% of total sales. Overall, with all these factors, we expect a positive development of the free cash flow. And this is how the strategy initiatives are reflected in our EBIT margin ambition for the financial year 22-23. In order to have a clean base to begin with, the pre-COVID adjusted EBIT margin of the financial year 2018-19, that was 1.9%, is a starting point of our bridge. In the last weeks, we have seen that more and more customers are switching to the online channel. As a result, we are expecting that the online sales share will move towards 30% in the financial year 2023. The increased online penetration goes along with the pressure on our cross-margin, from mixed effects in categories and also based on higher delivery costs. But we are confident that we can compensate these effects to some extent with an online margin uplift. Our work on the omnichannel spine and also with further IT enhancements. Nevertheless, It remains a headwind of between 115 and 140 basis points over the coming years. But the good news is that we have already incurred considerable portion of the impact in the financial year 2019-20. As you know, we have already made a lot of progress on the efficiency and cost side. Our relentless work on efficiency measures will help us to overcompensate the cost inflation and general a slight EBIT margin uplift over the years. The most important driver for the cost optimization is the operating model. Let's look at the unique value proposition, the middle of our strategic pyramid. The measures out of this part will contribute most to the EBIT margin ambition. We expect here a margin of uplift of around 145 to 170 basis points. The increase of our highly profitable service and solution business is by far the biggest lever for the margin uplift. Further initiatives like the expansion of our category offering and Cadman initiatives but also the optimization of the store footprint will support the margin uplift. So let's go to the top of our pyramid, to the accelerated cross path. Here we expect to gain 20 to 45 basis points in margin until 2022-23. The platforms for new income will reach the full upside potential beyond 2023. However, there will already be a positive contribution until the financial year 2022-23. In total, our adjusted EBIT margin ambition for the financial year 2022-23 is 2.5% to 2.7%. In light of the elevated uncertainty, we have also addressed the impact of different macroeconomics on our EBIT ambition. So we have actually three cases. The assumption for the base scenario, that means the adjusted EBIT margin range of 2.5 to 2.7, have the following assumptions. We expect an accelerated customer shift towards the online channel. in the direction of 30% of sales. And we anticipate a mild recession in some countries. The assumptions for the upside scenario in which we see a potential of plus 20 basis points include a stronger consumer climate and a less pronounced channel shift of our customers. And the assumptions for the downside scenario with a downside potential of minus 20 basis points are a deeper recession going along with a decreased consumer climate and an even more pronounced channel shift. Let me now explain how we plan to allocate our cash. In order to become the customer's first choice, We need to invest in our business for further growth. At the same time, of course, we recognize the importance of dividend payments to our investors. But please keep in mind that at the moment we still have the KfW credit in place. This credit requires from us to suspend dividend payments for the duration of the facility. We will intend to consider future dividend payments once we have a clearer view on the macroeconomics environment and the impact of COVID-19 on our business. But it's also clear that when we determine future dividend payments, the current balance sheet structure must be taken into account accordingly. Ladies and gentlemen, in order to take you along our journey, we have defined a set of KPIs for the three elements of our strategy. We will report these KPIs on an annual basis and some of them even on a quarterly basis. To track our accelerated growth path, we will report marketplace GMV, sales uplift from new categories, B2B sales share and the marketing service uplift. In order to track our unique value proposition, we will report, for example, the online transactions and the number of total contracts. We will also report the availability of our top 300 products to track our category management progress. And in addition to that, We will start reporting our NPS. Going forward, it's a key metric to track our success in becoming the customer's first choice. Besides the financial figures, we also have ambitious sustainability targets for the financial year 2022-23. One of our targets is that we reach a zero direct carbon emission of our own operations. That includes scope one and two. The second target is that we reach for the fact that the suppliers of 80% of our sales are audited for labor and human rights compliance. And the third target is that we want to double the number of sustainable products in our assortment compared to today. With the set, we want to make our progress transparent to you and give you an idea where we stand in our transformation. Thank you from my side, thank you for your attention and back to Bernhard.

Ladies and gentlemen, there's a lot of information you have to digest this morning. And I'm sure there are plenty of questions which you have we need to answer later. But there's one thing we need to put in perspective, and that was the guidance given by Karin, because the recording had been done two weeks ago. At that point in time, we didn't know about the lockdowns we currently have. in Germany and the Netherlands. But I will come to that in a minute. First, I think you are very curious how we did so far this year, especially in the Black Friday period. And I want to give you some information how the actual development was. So all in all, we anticipated that we might get into logistical problems in Germany and also in the other countries with all these lot of online traffic going on, specifically in the high season period of October, November for Black Friday, the Black Friday weeks. For that reason, we stretched out our campaigns. We started already in October with first campaigns and continued that throughout full November. And that was really successful. It was proved to be exactly the right position. We then had the Black Friday, the Black Friday week. And again, it was a positive week for Media Markt Saturn. And I can tell you today that first in October and November, we speeded up in our sales development compared to Q4. Actually, there was a lot of speed increase we did. Our development was a lot better than in the last quarter of last year. Secondly, the Black Friday week was even more successful than the one last year. And that was complemented also by better earnings in October and November, exceeding the earnings of last year. There's also to be noted that the online traffic was high during October and November, especially during the Black Friday period. You might remember that at the time of Black Friday, we had lockdowns in Austria and Belgium. And still, we were better, had a better sales development. And the good thing is... the sales development continued until yesterday. So I can tell you until yesterday all our countries have a sales performance better than last year. And overall the level of development has continued to be on a high level for October, November up to until yesterday. The only Small backdrop we had is due to the lockdown in stores, the sales and services is not as dynamic as it could be because we have seen the frequency in the stores were lower and because on their online share, a lot higher. But overall, it was a very successful campaign. It was very successful period up to yesterday. So we go into the first quarter. Very confident that we will have a good quarter. But, and here is the but, because we don't know exactly what it means now for the lockdown. In the first we said, and we said in the guidance explicitly, the guidance has been given in the light that will be only minor limitations. And here we see now a big limitation in Germany. And actually, we don't know whether it will end of 10th of January or will be continued. We don't know yet. Politicians said that they want to meet again later and decide how they want to proceed in their decision-making process towards 10th of January or be extended or not. In Germany, luckily, we are allowed to have a pickup process. And I think that's extremely important and I think it's fair because whether you pick up your pizza or you pick up your PC, what is the difference? Unfortunately, in the Netherlands, it's different. You are allowed to pick up your pizza, but you are not allowed to pick up your PC. So this is difficult because also in the Netherlands, they will have logistical issues because at the year end, highly trafficked, all logistic capacities are being needed. And as a peak time, most likely we might get into a bottleneck. So we are a little bit cautious on this lockdown period because we don't know how long it will take, but we move in with a successful two and a half months, what we have achieved so far. With that, I would like to come to the summary. So why people should invest in the economy? I think the most important part is, before I come to the four arguments or the four theses I have, I think you have a feeling we are back. We are back in the market and we are back in execution. So what was lacking, I think we have proven. We have shown to you that execution is key force. And we will also... bring the transformation to an end. We are in the middle of the transformation, and we'll bring it to an end, and then we will open up the new potentials, the growth potentials Farhan has explained on. So why is it that this economy is interesting for investors? I think we are in an attractive market, which has a higher rate of innovation. Whenever there is an innovation, the market growth rates are disrupted and funnel higher growth rates. Secondly, MediaMarkt.one is the leading category authority. We have great assets, be it our stores or be it our online capacities, even complemented now with our marketplace in Germany. And all this, we are, I think, we have the best prerequisites to have the leading omni-channel world. Number three, we have already, but we are building upon what we already have to have the right platform to expand into the new income pools, to accelerate our growth. And lastly, which is also extremely important, We have a sizable EBIT improvement potential. And that we have over a tangible period of time. We have worked on a lot of issues to get to it. Unfortunately, Corona slowed us down a little. But I think you have learned today how we manage through this difficult period and how we manage successfully and we execute it. And I think that we will also do in the future. With that one, I think the potential is a good one that we have this catch-up potential and bring it to life. And that concludes my presentation, the summary of all of the three of us, what we have told you, and I will hand over now to Stephanie for your questions. Thank you.

Thank you, Mr. Dittmann. We'll now start the Q&A session. We're happy to receive your questions, and we hand over to the operator. Thank you.

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone to register for questions. If you wish to remove yourself from the question queue, you may press star followed by two. If you are following the webcast online in parallel, please don't forget to mute your PC speakers when asking a question via phone. Anyone who has a question may press star followed by one at this time. And one moment for the first question, please. And the first question is from Volker Bosse of Baader Bank. Please go ahead.

Hello, good morning. Volker Bosse from Baader Bank. Thanks for taking my question. First of all, congratulations on the deal with Convigenta. I think a great achievement long awaited. But finally, you made it perfectly. And I also would like to point out that I appreciate the new set of KPIs to be reported in the future. So with that, I would like to start the question. First of all, a clarification on the Convigenta deal. You roll up the shares from the subsidiary to the group's economy. Does it also mean that the golden share or the special rights which Convigenta has is out of the game, so to say? that would be helpful. And the second question is on the marketplace. I think an exciting project which you already started. You said 70 partners are on board. Could you give perhaps some examples of names which are already included And you also provided guidance of one billion market opportunities. This is below 5% of GMV for 2022-2023. I think this can only be a stepstone on a way forward. So as we speak about midterm targets today, could you also provide a kind of midterm guidance marketplace potential, which you see beyond 22, 23, whenever it will be then. And finally, I would like to come on your market share development in the crisis. How was your performance? Where was your market? You showed just online outperformed competitors. But how did your market share in Europe in general develop during the crisis? How did you come back versus the others? And perhaps also finally in that context, how does the crisis also provide consolidation opportunities for you going forward? How do you look at that? Thank you very much.

Volker, thank you for your question. I will start with the first question. I think it's a very fair one. As you know, in the past, for structural decisions, we needed the approval for Convergenta. Not for all decisions, but for structural ones. For example, to implement the marketplace that needed to be approved by Convergenta. And if we roll up now, this will be gone. Convergenta will just be a shareholder like everybody else. It will have a share in the beginning of 25.8, 25.9, and later 29.9%. But in general, it's just a normal shareholder. There's no special right, nothing at all. Second part, I give a short remark because I want to clearly put that into perspective. When we talk about marketplace, and if we talk any about the size, it's the GMV. So it's not our sales, it's the Basically, the gross market value out of that, we just get some commissions. I think that is important to understand. But in terms of details, I think Ferran is the best to answer that question.

Yeah, well, basically in marketplace, we are in the test phase until the end of December. And what we are doing today with these 70 sellers is, is trying to complement existing categories. Let me say the most successful ones that we tested complementing was with gaming, for example, with online players, really highly specialists in computer gaming. They are a perfect complement that help us even to boost our online sales in our own platform. So it's a perfect combination. That is as well true for accessories. a new range of accessories that in the past we didn't have in our webpage. And that helps a lot to have much more assortment than ever. So that's a clear two examples how we are onboarding now our sellers as a test phase. And obviously, once we are in control and fill in the gaps in our categories, we will move to the new categories. The next gap is in SDA that we already started some small tests. But all in all, we are pretty happy with the results.

The third question was about the market share. And we had a market share picture like a typical V-shape. So the market share overall dropped during the lockdown last year. And it dropped down a lot. Despite the fact that we had an increase of market share online. Online market share was a tremendous increase. But still, as a predominantly share of our business is still in the stores. we saw the decline in market share. But with the opening up of the stores in May, we immediately recovered back to old levels. In June, we were on previous level. In July, we were slightly exceeding already our previous market shares. And since that time, we're on a good progress. And also on the first quarter this year, we saw that we are increasing our market share. So overall, we are happy with our market share development. We see that it, I think the people see that we are back on the market and that we play the market.

There is another question.

And the next question.

Sorry, sorry, sorry. I just see there was one part and there was a side question. Is there consolidation opportunities through the crisis? I think that might very well be. And I think we will see that coming more. We see first points in some markets that people try to find solutions. And I think that could become even stronger. that we see a stronger chance on that one. But let's wait a little bit, and I think it will appear on the market.

Yeah, maybe to reinforce the answer, like Bernard was saying, we are already seeing some approach in the markets. Basically, this acceleration in online is making software a lot of traditional players, and we are convinced that in the next month we will see even more approach in this field.

And one question, one answer was still open regarding the marketplace potential GMV going forward. Marketplace share and percentage of GMV going forward beyond 22, 23.

Actually it was, I think you need to note we We were looking first now for the GMV value of 1 billion at the year of 2025. If that will exceed, we will certainly come up with new information. But for the time being, as we just had the pilot in Germany starting this year, we had just said, okay, let's be realistic for the time being and set a target which we believe we can achieve. For that reason, we have just said 1 billion for 2025.

Maybe to be... Clear. We want a marketplace where quality is very important. So our SLA is very strict. We check very in detail the customer feedback. And as well, our marketplace, what I was saying in my presentation, is different. Our marketplace needs to be linked to our stores. So in our marketplace, our sellers, we will offer them to do pickups, returns. And basically, I'm boxing and more experienced thing in the future. And that's crucial for us that we take the right steps in the next quarters.

Okay, thank you very much.

Okay, next please. The next question is from Nicholas Langlet of Exxon B&P Harbor. Please go ahead.

Hello, good morning, everyone. Thanks for the presentation. I've got three questions, please. The first one on the gross margin for full year 21. Karen, you mentioned higher gross margin, but do you expect to recover most of the 120 basis point decline booked in full year 20, or there are still some headwinds that will limit the recovery for full year 21? And then if we look at the gross margin in the midterm plan, so you mentioned the gross margin at least, do you expect already in year 22 and 23 to see improved gross margin year on year on all the initiatives you announced? That's the first question. Second question, to come back on the marketplace, I think today the test is only in Germany, right? And do you plan to launch the marketplace in other large countries like Spain or Italy in the near future, or mostly focus on Germany first? And then on the marketplace, based on the current categories you plan to address, what's the average level of commission, your ambition on the GMV, on that marketplace? And last question, on working capital, you announced a lot of new growth initiatives. Taking all them together, what's the net implication on the working capital requirement as a percentage of sales in the mid-to-long term?

Thanks. May I ask Karin to answer the first question in terms of numbers and maybe Ferran give some flavors why we think the numbers would be that way? Karin, first the answer about the numbers?

Of course.

Yes, good morning, everybody.

There she is.

Hi, Karin. Here I am. At least I can participate by video today. So good morning, Nicola. I will take your first question regarding the development of the cross-margin. Actually, for the financial year 2021, we expect an improvement of the cross-margin, mainly based on a stronger brick-and-mortar business and the recovery of the sales of the service and solution business. So these both points will support the cross-margin and this financial year. And regarding to the outlook to the financial year 2022-23, we also expect a large uplift of the cross-margin by a very strong service and solution business. I hope that answered your question.

Maybe to reinforce the message from Karin. Thank you, Karin. I mean, all of our initiative, a lot of our initiative, apart from the growth, goes to reinforce this gross margin. So the services and solution, obviously, today with such a big shift from offline to online, yeah, makes that our gross margin is suffering. But you have seen that we are working a lot in our attachment in online, and we are working a lot in our subscription model, which if we see that we want to grow 30%, sales in our services and solutions, we want to grow much more from the profit point of view, which will reinforce a lot the gross margin. We believe that our products margin still is very consistent. We have seen in the last month that this did not really go down. So it's due to the mix, but not losing margin product by product. So the rest of the initiative, like marketplace, marketing services, will help as well to support this gross margin pressure. So all in all, we go in the direction trying to recover these margin losses during this COVID period. When we go to the marketplace, of course, we would like to expand our marketplace. So next year, we will inform on a quarterly basis our step-by-steps in Germany. And in 2022, the first two countries that we want to roll out, first will be Netherlands and second will be Spain. And based on this experience, we will roll out the rest of the countries. You were asking about which, what is the question?

The question was on the commission.

Ah, the commission, yeah. The commission, based on our categories today, it's a high single-digit number. Percentage. Yeah, percentage-wise, yeah.

Karin, do you want to comment, please, on the working capital net implications?

Yes, I will. Well, for the financial year 2022-2023, we expect a slight decrease of a slightly negative change of the net working capital based on a bigger share of service and solution business.

When you said slightly negative change, you mean slight improvement of the working capital requirement.

Well, actually, you know, we have seen a pretty good net working capital in this financial year, and therefore this slight negative change is not seen as an improvement.

Okay.

You're welcome.

Okay. Okay, perfect. Thanks a lot.

You're welcome. The next question is from Karen O'Kepler. Please go ahead.

Good morning, everyone. Three questions from my side. The first one, if I take a step back and look at your midterm targets, a bit of 2.7, 2.9%. Looking at the past and looking at the economy as a whole, you're the biggest consumer of electronics in Europe, but you're less profitable than your peers. And one of the expectations was clearly your setup. which was not efficient with the decentralization. But looking ahead, it looks as if you're addressing most of these points. You're addressing as well the product needs, the services and solutions. That's why I'm just wondering why shouldn't you be as profitable as some of your peers like FNAC? What are the things that would prevent you to close these gaps? This would be the first question. The second question on service and solution, if my math is right, by 20 to 23, it should represent between 6.5% and 7% of group sales. Could you give us an idea on the profitability on service and solution at the EBIT level? Because I know, Ferran, that you always say sales doesn't matter as much as the EBIT for this. And the last question on the dilution on online, if I look at your graph, it seems to be more backwards-looking because, as you were explaining, the logistic is not in place. You don't have omni-channel DC yet, and I suspect transport costs have a high impact on the profitability. So by 2022-2023, if you had to give an estimate, what do you think could be the profitability of online or the difference compared to in stores? Thank you.

Fabian, thank you for your questions. I will try to answer them. And my colleagues may compliment if they feel there is more to say. Number one about the midterm target. You say, yeah, we are making progress and going for the target as presented. And why is that still lacking behind peers? Number one, I don't know whether FNAC is the right peer because FNAC has a big book business in there with protected margins. But even then, I feel when we set targets, we want to set realistic targets. And we know the transformation is still in the making. We are in the midst of the transformation. And a lot of issues depend on category management, systems, and logistics. On every call, we tell you that today our logistic structure is not what we want to have. And that's, for example, it's a typical point why our online channel is less profitable because we have still higher logistic costs because we don't have a central logistic concept ready at this point in time. The concept is ready, but the execution takes longest when you go into hardware. So as you know that we are building our central warehouse close to Göttingen, that is still not ready, this warehouse, and that will take some time. And for that reason, we are cautious on our margin picture 22, 23, because we don't want to just explain something and not deliver. I think we made clear, whatever we say, we also are committed to deliver these numbers. Service and solutions. You were asking the ratio, 6% to 7%. I think that's exactly right. The ratio what we want to have in service and solutions, that fits quite well. So the question is, what is the margin on service and solutions? In general, service and solutions tend to have a high fixed cost basis of people in the stores, for example, for smart bars or for other things. where the people who give the services are already born in our fixed costs. So whatever we sell is cream in the coffee, let's say, is high margin business. That's the reason why we intend also to increase our level of service and solutions. And the second one is naturally a guarantee and insurance policies, which are also where we get commissions on these insurances, which is also a good one. And therefore, the margin is also a positive on services and solutions, definitely higher than the margins that we get from the sales of our products. Can you add something or give some flavor on this one?

Yeah, well, we know that the commissions, that the margins are pretty high. And in the smart bars, it probably is half of this commission's margin. So but all in all are highly profitable for us. And due to the subscription model, it will become even more profitable. And that's the crucial point here. So we have room still to improve in attachment because we started one year and a half. So a lot of countries were pushing there a lot, but they are not on the level that we would like to be. So still potential in the operational excellence. And for us, what is really crucial is moving to the subscription model that today is a Just a single digit and we want to move higher double digit.

I think we said it in the last quarterly call also. We need to have the online sales with higher attachments and higher service and solutions. And that's where we have to improve the customer journey, the online customer journey that the people are understanding our offerings and are taking advantage of it. And here we are. continuously progressing, upgrading our tools to get that into realization. And as you rightly pointed out, transport cost is a dilutional issue in our online business. It's true. For that reason, we focus very much on pickup. And we said we want to make the pickup as most convenient as possible. So in the future, we aim for 29 minute pickup process so whenever you buy something online that you are able to pick it up within 29 minutes or after 30 minutes in the store to make this very, very much convenient.

As a reminder, if you wish to ask a question, please press start and 1 on your telephone keypad.

And That's one thing, actually, which we need to have in mind. Overall, due to the channel shift, the online margins are always slightly lower than the store margins. Part of it comes from the point that we have less attachments, less services attached to it in the online business. And for that reason, we expect... as we see the online business growing over the year and as a trend towards a 30% limit that we expect also some kind of headwind from this general shift.

I think our online P&L is improving month by month. We have seen from the margin point of view, thanks to our pricing tool, but as well from the attachment that not only by usability as well by our reliability personalization and recommendation, which is extremely important and that we are putting in place in every country now. So all in all, together with these new income pools, we want to increase to support and to overcompensate the gap that we have today with our offline business.

And the next question is from Jenny Locke-Clement of Brian Garnier & Co. Please go ahead.

Good morning to all of you. I've got three questions from my side, if I may. The first one is on online. With 30% of sales coming from online by 2023 versus 20% in 2020, you seem to have in mind that COVID-19 actually boosted online, right? And then to What extent do you think this rise in online will help you gaining market shares over a chance of independence, let's say, such as Euronics or Experts in Germany? My second question is, again, on the level of services. In my view, your guidance looks quite... Oh, gracious, with only extra 7% of sales. Is it because COVID is a structural barrier? And my last question is on the Ava Alliance. Given your ambitions in private labels and your unsuccessful event of application, When do you intend to resume the talks we've snagged up here and the video? Thanks a lot.

Clement, thank you for your question. To the first question of the online business, whether we gain share against the independent chains like the Euronics experts or as we name them, yes, we do. We do. We see it happening in the market share development that these chains are losing and we are gaining. So there is a big difference. I think the corona crisis has accelerated this trend. So we see us in a much stronger development than they are. Number one, because we are back, as I said, in the stores as well as in online. So on both elements, And online, I think, is even proven here more superior against these independent partners. Second one on the guy, you want to comment on that one?

Well, basically, I wanted to say that, yeah, we are always saying that omni-channel is the winning model. But this omni-channel is based in online growth today for all of the traditional brick and mortars. And this is where we are. So we are back in the game because our company understood definitely that online business is profitable and we need to go for online growth. And this is why it's forcing our competitors in omnichannel and brick and mortars to move forward. And this is why we see the consolidation basically is on this point. Maybe I answered the second one. I think this 10%, it's related to an accounting effect, related to IFRS 15. So we are saying that we go more into the 7%. So we are going to grow in services above 30%. But I think this 10% is more related to that.

Yeah, that's just an accounting issue. It's definite. Because the effect of IFRS 15... It's 300 million on sales, which is to be allocated to product sales, moving away from service and solutions. And for that reason, we had to correct this target into the right direction after the IFRS change. The third question was on, what was the third question? I lost track a little bit here.

Alliance.

about our yeah as you know we have two shareholdings one in FNAC around 25% and we have the shareholding in MVideo from our Russian transaction up to September we had a lock up with the MVideo transaction so we were not able to move now we can and we are looking into Whatever, is there a solution in the future? But for the time being, we are quite content with what we have. So if there's some movement, we could act. But for the time being, it's okay. We collected over the last two years 20 million on dividends. So the operation of the group is running fine. Secondly, on FNAC, and here I reiterate what I've stated already in the past, that the main focus is today on our transformation. to get from a decentralized model to a centralized model, because only then we can benefit from our participation in FNAC and have a much stronger cooperation. Today, it would be still limited by our unfinished transformation. So for that reason, I always say, let's do our homework first, and that is finish the transformation towards centralization. Next question, or did we answer your questions?

Yes. Thanks a lot.

And the next question is from Lorenzo Maggi-Otto of Bank of America Securities. Please go ahead.

Hi, guys. Thanks for taking the question. Congrats on some good results and some good news. I'm just wondering, The 815 million consideration, could you just give me an idea of how you thought about that and why that's the right number? And then maybe a sort of tag on how you thought about that in terms of your share price as it stood today. So in absolute terms and then relative to the share price.

Thanks. Yeah, the 815 million is the consideration amount. And we looked at it always... When you negotiate a deal, it's difficult to fix a certain price when the prices are always moving. So for that reason, we agreed on an average price of the share price. And by that, we came to the €4.17 with consideration just on shares for €5.25 million. And when you look carefully, you can see that the €5.25 million for the share price value corresponds to the calculated value of Convegenta's shares in Mediamarkt Zaton. So it's about exactly the same value what we have. So that means whatever we paid in premium was coming from the convertible and the cash proceeds. And here we said, why paying a premium? And here the argument is quite easy because we were unlocking value potentials we do not have otherwise. And the value potential, as I said, which amount to about 50 million annually of increase in earnings from just the tax losses, total tax losses 360, additionally 10 million for the yearly expenses of the holding can be tax deductible. No, no, sorry. The 30 million will be tax deductible, 10 million savings on taxes annually, and the holding costs. All that together leads to a value of of I would say 400 or even significantly above 400 million in synergies if you just put everything into one amount. And then you can understand why there is certainly some kind of premium to be paid for this transaction. Most important for me was in our whole negotiations that we do not mix any premium with the future transformation of the company. Because the transformation of the company is something we have to deliver going forward. And we want to deliver the results. And that should not be paid out in advance in that deal. So we just looked that we only pay on whatever part of a premium. We only pay for the part of some Savings we can generate in the situation as it is today, not taking into account the future of the company. And I think that is incredibly important that we keep that in mind. So the Conveganter share transaction is basically just based on tax savings and the few holding cost savings which come out of this transaction and nothing more. And here we have scale. split it in a certain way that all shareholders will participate, will benefit from this transaction as it is laid out today.

That's very clear. Thank you.

A final reminder, if you wish to ask a question, please press star and one on your telephone keypad. And we have a follow-up question from Karen of Kepler. Please go ahead.

Yes, so good morning. I take the opportunity to ask another question. Ferran, when you talked about the three pillars, centralization, global IT, and global logistics, could you give a percentage of what has been done today and how will it increase until 2022-23? Thank you.

Percent. The percentage of centralization, you mean?

Completion, yes, the percentage of completion in Capman Logistics and Systems.

Okay, yeah. Yeah, the percentage of centralization related to procurement, it is very clear. We know that it's 95%. Related to pricing, we will be as well in the same numbers. When it goes to logistics... We want to achieve to be already in 50%. You need to know that in some countries that they already have the DC, like in Turkey or in Italy or even in Netherlands, the two-man handling, you have already achieving numbers of 80%. But all in all, we need still two years to have all of the countries in this 50% in logistics.

So I don't know if I missed... So you're telling me 50% is in two years, so how much is it today? So that I get a feeling of the speed.

Well, if you look at Germany, we are not centralized for the logistic point of view. We will open Göttingen, we will centralize. Now we have our online... you know, our online warehouses, but we don't have our central warehouse, for example, in Germany. If you look at, and this is why we are just doing by country, because it's percentage-wise, it's too small. If you look at Netherlands and Italy, they are much more advantage. Yes, you have numbers on 80% into main handling and depends low digit numbers in parcels that we will accelerate next year. And it's the same for Germany, once we open the warehouse. So this is why I say in 2022-2023, we would like to have, in average, all of the countries in 50%.

Okay, and for what you call the global IT platform?

Yeah, the global IT platform, when we talk about the rollout of the web, the app, and the marketing platforms, that should be all of them rollout until 2022-2023.

Okay, thank you very much.

And there are no more questions at this time. I hand back to Stephanie Ritschel for closing comments.

Well, thank you, everyone. Thank you for joining today's results call. In case you have any follow-up questions, please feel free to contact us at Investor Relations. We're happy to take your calls. We wish you a Merry Christmas. Take care, stay healthy, and bye-bye.