ANNUAL REPORT 2019/20 CECONOMY IN FIGURES1,2 Sales and earnings € million 2018/19 2019/20 Sales 21,455 20,831 Sales development adjusted for currency effects and portfolio changes 0.8% –1.8% Like-for-like sales development 0.4% –1.4% Gross margin 19.3% 18.1% EBIT 224 –80 Adjusted EBIT 4033 236 Adjusted EBIT margin 1.9% 1.1% Net financial result 12 –45 Tax rate 32.7% –74.0% Profit or loss for the period attributable to non-controlling interests 37 19 Net result 121 –237 Earnings per share (€) 0.34 –0.66 Other operating key figures € million 2018/19 2019/20 Online sales 2,935 4,203 Services & Solutions sales 1,229 1,129 Investments as per segment report 195 562 Cash flow € million 2018/19 2019/20 Cash flow from operating activities 654 1,166 Cash flow from investing activities 118 –248 Cash flow from financing activities –178 –589 Change in net working capital5 –3924 297 Free cash flow –1284 983 Statement of financial position € million 30/09/20194 30/09/2020 Net working capital –1,023 –1,256 Net liquidity (+)/Net debt (–) 882 –854 Other operating key figures (as of 30/09) 30/09/2019 30/09/2020 Number of stores 1,042 1,023 Total selling space (thousand m²) 2,746 2,661 Workforce by full-time equivalents6 50,451 46,186 1 Business figures represent the continuing operations of CECONOMY. 2 Due to the first-time application of new accounting standards (especially IFRS 16), the previous year’s figures are partly not comparable. 3 Prior-year adjustment of earnings effects from companies accounted for using the equity method and portfolio changes. 4 Adjustment due to revised disclosure and/or a change in definition. Information on this is provided under “Notes to the Group accounting principles and methods”. 5 Change in net working capital shown from the related balance sheet items, adjusted for non-cash items. 6 Senior executives have now been included, and there were minor adjustments regarding trainees. The previous year’s figures have been adjusted accordingly. 02 CONTENTSCONTENTS TO TOOUR OUR SHAREHOLDERS SHAREHOLDERS CONSOLIDATED FINANCIAL STATEMENTS Letter to the shareholders 05 TheLetter Management to the shareholders Board 97 Income statement 07 ReportThe Management of the Supervisory Board Board 98 Reconciliation from profit or loss for the period to total 08 CECONOMYReport of the at theSupervisory capital market Board comprehensive income 18 StrategyCECONOMY at the capital market 99 Statement of financial position 20 Strategy 100 Statement of changes in equity COMBINED MANAGEMENT REPORT 102 Cash flow statement Overall statement by the Management Board of CECONOMY AG on CECONOMY’s business performance and situa- tion COMBINED MANAGEMENT REPORT 103 Notes Overview of financial year 2019/20 and outlook 186 Responsibility statement of the legal representatives Basic information on the Group 23 OverallThe Group’s statement business by the model Management Board 187 Independent Auditor’s report ofManagement CECONOMY systemAG on CECONOMY’s business performanceSustainability and management situation 24 OverviewEmployees of financial year 2019/20 and outlook SEPARATE NON-FINANCIAL GROUP REPORT 26 BasicFeatures information of the accounting-rel on the Groupated internal control system Economic26 The Group’sreport business model 195 The Management Board’s commitment 28Macroeconomic Management and system sector-specific parameters 196 Sustainability strategy and material issues 31Earnings, Sustainability financial management and asset position 217 Limited assurance report 32Comparison Employees of outlook with actual business developments 35Earnings Features position of the accounting-related Financialinternal and control asset system position INFORMATION AND FINANCIAL CALENDAR 38 EconomicDiscontinued report operations Outlook38 Macroeconomic and sector-specific parameters 221 Information Opportunity40 Earnings, and financial risk report and asset position 222 Financial calendar Remuneration40 Comparison report of outlook with Disclosuresactual pursuant business to Sec. developments 315a para. 1 and Sec. 289a para. 1 of the German Commercial Code and explanatory report41 by theEarnings Management position Board Supplementary49 Financial notes and for asset CECONOMY position AG (pursuant to the German Commercial Code) 56 Discontinued operations 57 CONSOLIDATEDOutlook FINANCIAL STATEMENTS 60 IncomeOpportunity statement and risk report 69 ReconciliationRemuneration from report profit or loss for the period to total comprehensive income 82 Statement Disclosures of pursuantfinancial positionto Sec. 315a para. 1 and StatementSec. 289a of para. changes 1 of the in equityGerman Commercial Code Cashand flowexplanatory statement report by the Management Board 90 Notes Supplementary notes for CECONOMY AG Responsibility(pursuant to the statement German ofCommercial the legal representatives Code) Independent Auditor’s report SEPARATE NON-FINANCIAL GROUP REPORT The Management Board’s commitment Sustainability strategy and material issues Limited assurance report INFORMATION AND FINANCIAL CALENDAR Information Financial calendar 03 TO OUR SHAREHOLDERS TO OUR SHAREHOLDERS Letter to the shareholders TO OUR SHAREHOLDERS The Management Board Report of the Supervisory Board 05 Letter to the shareholders CECONOMY at the capital market 07 The Management Board 08 Report of the Supervisory Board Strategy 18 CECONOMY at the capital market 20 Strategy 044 TO OUR SHAREHOLDERS LETTER TO THE SHAREHOLDERS Ladies and Gentlemen, The past year was out of the ordinary for you as well as for us. The COVID-19 pandemic turned our lives upside down overnight and confronted us with unprecedented personal, professional and societal challenges. Large parts of the economy quickly began to suffer. The good news first: Although it was not easy, we overcame these challenges very well as a Group thanks among other things to strong online activity. We have used the experience we gained to create crucial impetus for the trans- formation of our company. But first things first. When the Supervisory Board appointed me as CEO in October last year, the company was in a crucial phase of the transformation, which was just beginning. Coming out of the crisis and with the first measures implemented, my most pressing concern was to implement this long-awaited transformation to centralised business processes in a sustainable manner, to strategically enhance the business model of the CECONOMY Group and to align it much more rigorously to the needs of the customers. This remains at the heart of our work – and we already achieved the first results towards this goal at the start of the financial year. The first five months of the financial year got off to a bright start. The 2019 Black Friday period, for example, was a great success across all sales channels. We also made good operating progress in important initiatives. We made a decent start in the first three months of the financial year with a good increase in the Group’s income. We followed seamlessly on from this positive trend in January and February 2020. Our business continued to develop well, and the results were in line with original expectations. We also grew strongly in the Online and Services & Solutions seg- ments. Overall, we were on track to achieve our full-year targets. Then came coronavirus. Accelerated growth in online business driven by COVID-19 The weeks of lockdown and the initial social distancing rules not only left our customers in a state of uncertainty, but also affected us as a company. In March of this year, we found ourselves in an unprecedented situation in our com- pany’s history; up to 90 per cent of our stores were ordered to close temporarily by the authorities. It was not at all clear when and how they would reopen. This hit us hard, but we responded very quickly. We successfully confronted the pandemic very early with targeted measures. For example, our internal coronavirus task force was assembled in February already. At the end of March, we requested approval for a revolving syndicat- ed loan of over a billion euros from a consortium of CECONOMY’s partner banks with the involvement of the state- owned bank KfW. This credit facility serves as insurance in case the pandemic worsens. To date, we have not utilised it at any time. In August, we also paid back the other credit facilities from banks almost in full. A key factor for us during this unpredictable time was the resilience of our omnichannel business model. In fact, we very successfully and quickly redirected our resources and activities from the stationary business to online retail. As a result, we nearly doubled our online-only sales in March. In April, online-only sales actually increased by 300 per cent year on year. Thanks to the business recovery, figures in the second half of the financial year exceeded our expectations Our action in the COVID-19 pandemic is reflected in our figures. Our business recovered gratifyingly quickly after the lockdown phase – so quickly that we grew considerably in the second half of our financial year compared with the previous year. In addition, we are seeing persistently strong demand in various product categories, such as home office equipment and home entertainment. We therefore built on the good development that we saw in the first five months of this financial year before coronavirus, and ultimately closed the financial year better than expected. 05 TO OUR SHAREHOLDERS I owe personal thanks for the commitment and dedication of each of our employees, no matter what country they are in, or if they are in the stores, in their offices, or working from home. Without them, the swift adjustment to the altered consumer situation and the new hygiene standards simply would not have been possible. We have their work to thank for the fact that our customers have stuck by us in this difficult situation, that they continue to visit our stores and make ever greater use of our online services. Learning from exceptional circumstances: Operating Model makes us more customer-oriented and agile In handling the COVID-19 pandemic, we have demonstrated that we can react quickly to radically altered conditions.