ANNUAL REPORT 2010 | 2011 HORNBACH HOLDING AG GROUP contents Company Profile 4 To Our Shareholders 8 The HORNBACH HOLDING Share 12 Financial Calendar 15 Corporate Governance 16 Group Management Report of HORNBACH HOLDING AG 26 Macroeconomic Framework 26 Sales Performance 30 Earnings Performance 34 Financial Situation 38 Asset Situation 42 Non-Financial Performance Indicators 47 Other Disclosures 55 Risk Report 56 Outlook 63 Retail and Real Estate 76 Directors and Off icers 80 Report of the Supervisory Board 81 Consolidated Financial Statements 86 Income Statement of the HORNBACH HOLDING AG Group 86 Balance Sheet of the HORNBACH HOLDING AG Group 87 Statement of Changes in Equity of the HORNBACH HOLDING AG Group 88 Cash Flow Statement of the HORNBACH HOLDING AG Group 89 Notes to the Consolidated Financial Statements 90 Segment Report 107 Responsibility Statement 155 Auditor’s Report 156 4 COMPANY PROFILE COMPANY PROFILE HORNBACH HOLDING AG is the parent company of the HORNBACH The consistent implementation of the company’s concept, coupled Group. It is not itself an operating company, but has a number of with the high expectations it places in the quality of its locations, major subsidiaries. By far the largest and most important subsidiary its stores, its product range and employees, have facilitated the is HORNBACH-Baumarkt-AG, which operates DIY megastores in dynamic growth witnessed by the company in recent years. Together, Germany and abroad. The retail activities of the Group are supple- these factors form the basis for further expansion in the DIY mega- mented by HORNBACH Baustoff Union GmbH, which is active in the store and garden center segment in Germany and Europe. construction materials and builders’ merchants business and mainly has commercial customers. The development and utilization of first- Following the company’s successful entry into the Austrian market in class retail real estate constitutes a further business activity of August 1996, it has consistently pressed ahead with its expansion HORNBACH HOLDING AG. This is undertaken in part by HORNBACH into neighboring European countries. Stores were subsequently Immobilien AG, which owns much of the extensive real estate portfo- opened in the Netherlands, Luxembourg and the Czech Republic. The lio of the HORNBACH Group. company’s international growth was maintained with its expansion to Switzerland, Sweden and Slovakia. The entry into the Romanian The HORNBACH Group is characterized by its ability to respond to the market followed in the summer of 2007. As of February 28, 2011, the challenges of trading in DIY, home improvement and garden products, company was operating a total of 41 DIY megastores with garden and to set new standards in the process. Since the company was centers in eight countries outside Germany. Since December 1, 2010, founded in 1877, five generations of the Hornbach family have been the stationary retail business has been supplemented by HORN- active in almost all areas of the construction sector – in the building BACH’s online shop, with which the Group aims to make targeted use trade, as manufacturers of prefabricated components and, for the of the opportunities presented by multichannel retailing. first time in 1900, as builders’ merchants. As one of the pioneers in Germany and Europe, HORNBACH opened its first DIY store in 1968 Both HORNBACH HOLDING AG and HORNBACH-Baumarkt-AG are and combined it with a garden center – at its time unique in Europe. publicly listed stock corporations. The share capital of HORNBACH This combination has since developed to become a European stan- HOLDING AG is divided equally between ordinary and non-voting dard in the DIY sector today. preference shares. Of the four million preference shares (ISIN DE0006083439), 82.6% are owned by independent shareholders, In the second half of the 1980s, HORNBACH added a new dimension while 17.4% are held by the British retail group and our strategic to the market with its concept of large DIY and home improvement partner Kingfisher plc. The preference shares are admitted to the megastores with garden centers. Today, an impressively presented subsection of official trading of the German Stock Exchange which range of around 50,000 top quality DIY and gardening articles is involves additional admissions obligations (Prime Standard). HORN- available to DIY customers in spacious stores and at permanently BACH HOLDING AG is a member of the SDAX index. 75% of the four low prices. Well-trained, service-oriented employees make project million unlisted ordinary shares are owned by the Hornbach family. customers and DIY enthusiasts, especially those on the lookout for Kingfisher holds 25% plus one share of the voting capital. solutions for extensive renovation and construction projects, the focus of their activities. At the balance sheet date on February 28, The shares in HORNBACH-Baumarkt-AG are also listed in the Prime 2011, the HORNBACH-Baumarkt-AG subgroup was operating 133 Standard of the German Stock Exchange. Of around 15.9 million DIY megastores with garden centers across Europe (92 of which in ordinary shares in the company, 76.4% are held by HORNBACH Germany). HORNBACH HOLDING AG generated (net) consolidated HOLDING AG, and 18.4% are owned by independent shareholders. sales of € 3,017 million in the 2010/2011 financial year. Kingfisher plc held a stake of around 5.2% at the balance sheet date. Great projects. When the professionals get down to work, machines and equipment of all sizes come into operation. If we ignore the deadlines and professional routine for a moment, and take a closer look, we can see that even in the largest projects the smallest parts have a major role to play. ANNUAL REPORT 2010 | 2011 HORNBACH HOLDING AG GROUP 6 KONZERNLAGEBERICHT (EBENE 0) Gesamtwirtschaftliche Rahmenbedingungen (Ebene 1) Partners along the way. Always good to set new goals. Even better to reach them together. KONZERNLAGEBERICHT (EBENE 0) Gesamtwirtschaftliche Rahmenbedingungen (Ebene 1) 7 TO OUR SHAREHOLDERS 88 TO OUR SHAREHOLDERS TO OUR SHAREHOLDERS We also met our earnings target. Operating earnings (EBIT) at the overall Group rose by 5.0% to just over € 159 million. Our capital resources remain excellent: the equity ratio increased from 42.4% to 43.1% at the balance sheet date on February 28, 2011. What’s more, in the past year we also broadened the foun- dation for our future success with innovative projects, such as the launch of online retail activities. Our pleasing results for the 2010/2011 financial year did not arise by chance. Our success is based on a system of values that is conservative in the best sense of the word and has a long-term focus. We think not in quarterly rhythms, but rather in periods of generations. This approach, which has proven itself in the past, is part of our sustainable corporate policy. I am aware that the term “sustainability” is sadly overused and not infrequently downgraded to mere lip service. We Albrecht Hornbach entrepreneurs should therefore credibly spell out in detail what “sustainable” actually means for us. Any such definition must focus not just economic aspects, but just as much on Dear Shareholders, the social and ecological dimensions. We are proud of our results for the past 2010/2011 financial So what does the social dimension mean for us? At HORNBACH, year, about which you can find further details in the coming we work together with our employee representatives and trade pages. I would nevertheless like to single out the following unions on a basis of partnership. We offer our employees de- highlights here already: cent pay, sometimes above the general pay scale, in line with their skills, qualifications and responsibilities. Inordinate pay Consolidated sales at the HORNBACH Group passed the packages for managers are unthinkable at our company. Our three billion euro mark for the first time in our company’s employees can select from a varied range of company-wide history. Year-on-year, sales grew by 5.7% to their current training measures. We offer an above average number of total of € 3,017 million. Our sales were thus at the upper training positions, are permanently on the lookout for quali- end of the forecast range. fied staff, voluntarily pay performance bonuses to employees, The largest contribution came from our DIY megastores offer working time accounts, employee shares, a management with garden centers in Germany and abroad, which im- development program, and value older, more experienced proved their sales by 2.6% on a like-for-like basis. In Ger- members of staff. We also take on new staff aged above 50 many in particular, where we grew by 3.8%, we managed for our sales activities. Not only that, we accord high priority to expand our market share from 8.7% to 8.9%. to maintaining an atmosphere within the company that is Additional growth momentum was contributed by our characterized by our claim to uphold mutual respect, friendli- builders’ merchant business, which increased its sales ness and assistance. The women and men at our stores, year-on-year by 8.4%. logistics centers and administration departments live this principle in their daily work. After all, we are also a service TO OUR SHAREHOLDERS 99 company – such principles of conduct are therefore a basic Not only that, in the past financial year FSC International requirement. awarded Hornbach the first FSC Global Partner Award – pre- cisely in recognition of the aforementioned pioneering act and We aim to enable society to participate in our economic suc- our ongoing role as pioneers. Today, we sell more than 4,500 cess. That is why we are committed to numerous social projects. FSC-certified products and promote several forestry projects, When, for example, we make a million euros available to the for example a reforestation project on Borneo, and the conver- Cancer Research Center in Heidelberg for a research project sion of a major timber supplier in Malaysia to FSC-certified lasting several years, when we support welfare projects and try products.