investor presentation - otto group · disclaimer 2 this presentation (the...

Investor PresentationFinancial Year 2017/18

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Disclaimer

2

This presentation (the "Presentation"), and the information contained therein, is not directed to, or intended for viewing, release, distribution, publication or use by (directly or

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laws prohibit its viewing, release, distribution, publication or use.

This Presentation must not be construed as an offer or invitation or recommendation to, purchase or sell or subscribe for, or any solicitation of any offer to purchase or subscribe

for any securities of Otto (GmbH & Co KG) (the "Company"), in any jurisdiction. If any such offer or invitation is made, it will be done so pursuant to separate and distinct

documentation in the form of a prospectus, offering circular or other equivalent document (a "prospectus") and any decision to purchase or subscribe for any securities pursuant

to such offer or invitation should be made solely on the basis of such prospectus and not these materials. Neither the Presentation, nor any part of it nor anything contained or

referred to in it, nor the fact of its distribution, should form the basis of or be relied on, in connection with, or act as an inducement in relation to, a decision to purchase or

subscribe for or enter into any contract or make any other commitment whatsoever in relation to any such securities.

The information contained in this Presentation has been provided by the Company and has not been verified independently. Unless otherwise stated, the Company is the source

of information.

No reliance may be placed for any purpose whatsoever on the information or opinions contained in the Presentation or on its completeness, accuracy of fairness. No

representation or warranty, express or implied, is made or given by or on behalf of the Company or any of its respective directors, officers, employees, agents or advisers as to the

accuracy, completeness or fairness of the information or opinions contained in the Presentation and no responsibility or liability is accepted by any of them for any such

information or opinions. In particular, no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on any projections,

targets, estimates or forecasts contained in this Presentation and nothing in this Presentation is or should be relied on as a promise or representation as to the future.

This Presentation contains forward-looking statements based on the currently held beliefs and assumptions of the management of the Company, which are expressed in good

faith and, in their opinion, reasonable. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, financial

condition, performance, or achievements of the Company, or industry results, to differ materially from the results, financial condition, performance or achievements expressed or

implied by such forward-looking statements. Given these risks, uncertainties and other factors, recipients of this document are cautioned not to place undue reliance on these

forward-looking statements. These factors include those discussed in the Company's public reports which are available on the website of the Company at www.ottogroup.com.

The Company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments. All features in this Presentation

are current at the time of publication but may be subject to change in the future. The Company disclaims any obligation to update or revise any statements, in particular forward-

looking statements, to reflect future events or developments.

Statements contained in this Presentation regarding past events or performance should not be taken as a guarantee of future events or performance.

Prospective recipients should not treat the contents of this Presentation as advice relating to legal, taxation or investment matters, and are to make their own assessments

concerning such matters and other consequences of a potential investment in the Company and its securities, including the merits of investing and related risks.

Agenda

1 The Otto Group at a glance

2 Financial review

3 Strategy and outlook

4 Key investment considerations

3

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

Founded as the mail-order company “Otto Versand“ in 1949, the Otto Group has been a family business since its foundation

Today, the Otto Group consists of more than 100 major companies operating in more than 30 countries in Europe, North and South America and Asia

The Otto Group is divided into three strategic segments: Multichannel Retail, Financial Services and Services

The Otto Group is one of the largest online retailers worldwide

2017/18 headline figures:Revenues: 13.7 bnEUREBITDA: 750 mEUR~ 52,000 employees

4

5

1950s and 1960s

1970s

~2000s to present

1980s and 1990s

Foundation as a mail order business

Development of the segments

Financial Services and Services

Internationalisation of the Otto

Group

Transformation and innovation in

the e-commerce age

1949

Werner Otto established the “Otto

Versand” mail-order business

1950

The first catalogue is published

1969/74

Establishment of the Financial Services

segment with the foundation of Hanseatic

Bank and EOS Group

1972

Development of the Services segment with

the foundation of Hermes Versand

Services

1974-1998

Expansion to France, UK, the Netherlands,

Japan, Spain, Austria, Italy, Hungary,

Switzerland, USA

1987

Otto is the world‘s largest mail order

business

2010/2011

Internet sales exceeded catalogue sales for

the first time

2015

Dr. Michael Otto transfers controlling stake to

Michael Otto Foundation

2016

Trend towards mobile commerce: Mobile

exceeds desktop traffic for the first time

2017

Alexander Birken takes over as 5th CEO in

the company’s history

Otto Group: A success story for more than 65 years

Werner Otto

(1949-1966)

Günther Nawrath

(1966-1981)

Hans-Otto Schrader

(2007-2016)

Dr. Michael Otto

(1981-2007)CEO Alexander Birken

(since 2017)

http://www.hermes-logistik-gruppe.de/HLG/wg_hlg.nsf/ContentByKey/KGRE-6M9BX6-DE-p

http://www.hermes-logistik-gruppe.de/HLG/wg_hlg.nsf/ContentByKey/KGRE-6M9BX6-DE-p

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

are owned by members of the Otto family and by the

Michael Otto Foundation

Dr. Michael Otto transferred his controlling stake to the

“Michael Otto Stiftung”, a non-profit foundation, in 2015.

He continues to have influence through his position as

the chairman of the Foundation Board

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

term oriented business strategy

The Otto family pursues a conservative dividend policy

Otto (GmbH & Co KG) serves both as holding company

and as the operating entity for the core brand OTTO,

the Otto Group’s brand with the highest sales

6

Otto (GmbH & Co KG)

Otto family and Michael Otto Foundation (> 98%)

Multichannel

Retail

Financial

ServicesServices

OTTO Aktiengesellschaft

für Beteiligungen

GSV Aktiengesellschaft für

Beteiligungen

Ownership position of the Otto family

7

Sustainability is part of the Otto Group’s core values

• Sustainability has been a guiding principle for the Otto Group since the 1980s

• Our family owners are also committed to sustainability with activities outside the Otto Group,

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

Sustainability is a matter of conviction to our family owners

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

shareholders’ mandate to the Executive Board

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

Responsibility targets

Corporate Responsibility is a top-management task

8

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

• The Otto Group’s main markets are developed, stable economies with strong macroeconomic fundamentals

• No dependency on more volatile emerging markets, but well positioned for future growth in markets such as Russia

and Eastern Europe

Revenue by region 2017/18

Germany

60.5%

Europe(excl. Germany /

Russia)

21.6%

Asia / other

1.7%

Russia

2.4%

North

America

13.9%

International market presence

More than 100 major

companies, presence in

over 30 countries

Largest online shop for furniture

and living in Germany (otto.de)

More than 100 venture

capital investments

Multichannel Retail

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

Services(Logistics, procurement and other

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

9

Financial Services(Receivables management,

innovative financial services)

The Otto Group’s strategic setup makes it a unique proposition with no direct peers

Multichannel Retail

Domestic and foreign retailers with three

distribution channels: e-commerce,

catalogue and over-the-counter retail stores

Product range includes fashion, shoes and

lifestyle articles, furniture and home

accessories, toys as well as electronics,

sports and leisure goods

Broad brand portfolio with diversification

across countries, customer groups and price

ranges

E-Commerce is the main growth driver

Financial figures for the segment

10

In mEUR 2017/18 2016/17

Revenue 10,541 9,819

EBITDA 407 403

EBITDA margin 3.9% 4.1%

+7.4%*

* Growth adjusted for impact from harmonisation of financial calendars: 5.3%





E-Commerce is the main growth driver

In FY 2017/18, the Group significantly increased online revenues by 12.3%*. E-commerce

revenues now stand at 7.9 bnEUR

E-Commerce is by far the most important distribution channel of the Otto Group,

representing 75% of the Group‘s retail revenues in FY 2017/18. The operating entity OTTO

(otto.de) generates 95% of its revenues online

Revenue by distribution channel in the Multichannel Retail segment

11

E-Commerce

Catalogue

OTC retail

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

38%31%

43%35%

28%24% 20%

57%

48%53%

44%

61%65%

68%

15% 12%12% 12% 11% 11% 12%

71%

16%

13%

75%

12%

13%


Furniture

AF

FL

UE

NT

PR

ICE

-

CO

NS

CIO

US

“DIGITAL NATIVES“ “BEST AGERS“

The Otto Group‘s Multichannel Retail portfolio is highlydiversified

Different market

dynamics and

competitive environment

for each product range

and target customer group

Strong synergies

between brands with

similar product / customer

positioning (e.g. shared IT

infrastructure, centralised

purchasing)

Fashion

Specialists

Key Take-Aways

The Otto Group‘s

retailers sell a

wide range of

product groups…

... and are highly

diversified in

terms of target

customers.

12





13

Strong market positioning and differentiation fromcompetition

Clear no. 2 in German e-commerce Strong USPs for consumers & B2B partners

Strong market positioning Key differentiating factors vs. competitors

373

432

450

472

517

533

706

1.122

4.915

8.123

H&M

Alternate

Tchibo

Conrad

Cyberport

Mediamarkt

notebooksbilliger.de

zalando

Otto Group

Amazon.de

Online sales top 10 players in Germanyin mEUR (in 2016*)

Market shares**

Others 68%

Zalando 2.5%

Otto Group 11.1%

Amazon 18.4%

* Source: Study e-commerce market Germany 2017 by EHI Retail Institute, Cologne, and Statista, Hamburg; Otto

Group‘s sales equal the sum of sales of all Otto Group entities in the “Top 100 Online-Retailers 2017“ ranking.

** Market share estimate based on HDE Online-Monitor 2017. Total online sales Germany in 2016: 44.2 bn. Euro.

Product positioning Services

User experience Values

More inspiring: Emulating

the shopping experience of

brick-and-mortar stores

High degree of

personalisation through

optimal use of customer

data (e.g. ABOUT YOU)

Different product focus vs. key

competitors, e.g. no. 1 in

German e-commerce for

furniture and white goods

Highly specialised niche shops…

…and very wide product range in

generalist shops with

marketplace approach (OTTO)

More approachable: Direct

and personal customer

communication

High standards:

Sustainability

Social responsibility

Data protection

Integrated service offering with

fully-owned logistics and 2-

man-handling (Hermes Group)

“Consumption enabler“ with

wide range of payment options

incl. credit/installments

Otto Group

Financial Services

Comprises retail-related financial services with a

focus on debt collection and receivables

management

Segment mainly characterised by the EOS Group

In addition, minority shareholdings in Hanseatic

Bank and Cofidis Group, which specialise in

consumer credit

The Financial Services segment is largely

independent of the Multichannel Retail segment.

More than 95% of revenues are generated with

customers outside the Otto Group


14

In mEUR 2017/18 2016/17

External revenue 841 732

EBITDA 357 320


+14.9%*


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

EOS Group: International presence in more than 25 countries

15

Established by the Otto Group

in 1974 as Deutscher Inkasso-

Dienst (DID)

The company operates under

the EOS brand since 2000

Presence in more than 25

countries via 60 operating

companies

More than 20,000 B2B

customers worldwide trust in

the EOS Group

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

fiduciary debt collection and business process outsourcing

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

real estate, mail order and e-commerce

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

Services

Service providers specialising in logistics, mainly

operated under the Hermes brand

Focus on parcel distribution and 2-man-

handling. In addition, further services along the

value chain from procurement to fulfilment

In Germany, Hermes is the largest alternative to

Deutsche Post DHL in the field of home delivery

to private customers and has over 14,000

franchised parcel shops

Strong international market presence in UK and

France


16

In mEUR 2017/18 2016/17

External revenue 2,271 1,961

EBITDA 74 90


+15.8%*

OTTO International


Agenda


2 Financial review



17

18

Highlights of financial year 2017/18

EBT in mEUREBITDA in mEURRevenues in mEUR

12,512

2016/17

13,653

2017/18

Adj. growth:

6.7%*

+9.1%

730 750

2016/17 2017/18

+2.7%

Broad-based growth exceeding FY targets for all three segments

Successful conclusion of partnership at ABOUT YOU with strong positive EBT impact

Profitability improved across all levels of the P&L

262

2016/17

629

2017/18

+140%

* Adjusted for impact from harmonisation of financial calendars

2.724

1.512 1.475

757667

556

291135

645

1.574

2.956

1.561 1.564

818 757652

286 283

774

2.113

2016/17 2017/18

Strong performance of the Otto Group‘s majorsubsidiaries across all three segments

External revenues of largest Otto Group subsidiaries in mEUR

+8.5%

+3.2%

-1.7%

+6.0%

+8.1%

+110%

+20.0%

+34.2%

Multichannel Retail Financial

ServicesServices

2017/18 revenue targets exceeded with strong growth across all three segments

Broad-based growth across all major subsidiaries reflects healthy portfolio following disposals in recent years

Notes:

• Material positive impact on growth from harmonisation of financial calendars at Bonprix (ca. 2%), Crate & Barrel (ca. 6%), myToys (ca. 6%), EOS (ca. 6%) and

Hermes (ca. 3%).

• Material negative impact on growth from currency effects at Crate & Barrel (ca. -5%) and Hermes (ca. -3%).

• Material positive impact from change in scope of consolidation at Hermes and Baur

+13.6% +17.3%

19

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

20

2017/18 2016/17

Net financial debt* (in mEUR) 1,594 1,432

F

Net financial debt / EBITDA* 2.3x 2.0x

Net financial debt / Equity* 1.1x 1.1x

Equity / Total assets (in %)* 19.1 17.5

Continued investments across all three segments key driver behind increase in net debt

Equity ratio improved thanks to strong increase in profitability and moderate distributions

Net debt / EBITDA ratio within target “implied investment grade“ range

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

Diversified maturity profile (mEUR) Well-balanced mix of funding sources

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

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

issuance in the capital markets

Well diversified maturity profile

Financial mix: Medium and long-term loans, ABS, commercial paper as well as longer term bond issues

Strong liquidity buffer: More than 1 bnEUR in committed credit lines (large majority undrawn)

Debt Issuance Programme provides flexible access to capital markets

21

Split of financial debt as per financial statements 28 Feb 2018Maturities of long-term debt

(excl. commercial paper and short-term RCF drawings) as of 28 Feb 2018

-

100

200

300

400

500Bank and bond debt

Participation rights(Genussrecht)

Bank debt > 1 yr

Other (ABS,

leasing, etc.)

Bank debt < 1 yr Capital markets

> 1 yr

Capital markets

(incl. CPs) < 1 yr

Agenda


2 Financial review



22

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

Expect further growth at sustained operating profitability

Clear focus on e-commerce as main growth driver

23

Further cooperation with external partners

Investments across all three strategic segments

Agenda


2 Financial review



24

Summary: Key investment considerations

Commitment from

family owners

Diversification

Market leadership in

strong growth sector

Financial solidity

Long-term orientation

Family-owned company with a long tradition, a history of stable

management and family owners that are committed to the business

Diversification across countries, segments, brands, product ranges

and customer groups. Active portfolio management ensures strategic

coherence

Among the world’s largest online retailers, ideally positioned to benefit from

the growth of the e-commerce sector across all three segments

Solid financial profile, supportive bank group, ample liquidity and proven

access to the capital markets

Long-term orientation of the owners allows investments in infrastructure

and innovations, which will be the basis for future growth

25

Innovation and

transformation

Track record of anticipating trends and launching innovations. Successful

transformation from catalogue to e-commerce business

26

Petra Scharner-Wolff

Chief Financial Officer

Boris Jendruschewitz

Vice President Corporate Finance

Otto (GmbH & Co KG)

Werner-Otto-Straße 1-7

22179 Hamburg

www.ottogroup.com

E-Mail: [email protected]

Presentation team

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