Ceconomy AG (CEC) Earnings Call Transcript & Summary

Most warmly from Düsseldorf Congress Center to this year's Ordinary General Meeting of CECONOMY AG, which I'm here with opening. I would have liked to welcome you again as in the years of the past to welcome you at Düsseldorf in person, but the current pandemic doesn't allow us to do that. As you could gather from the invitation to the general meeting, the Executive Board decided with the approval of the Supervisory Board to hold a virtual general meeting this year. We thus use the opportunity offered by the legislator that stock companies can hold virtual meetings because this is possible under the COVID-19 Act. We are that in a position to make legally sound decisions and to protect, at the same time, the health of all the people involved. Present in person here in the transmission room, at Düsseldorf is from the Supervisory Board only Ms. Karin Dohm, who I have chosen as Chairman of the meeting to stand in for me in the event that I would no longer be able to chair the meeting during the proceedings. The other members of the Supervisory Board are not here today in person at Düsseldorf, but they are connected via video links to our meeting. And since I can see you now in the -- on the screen, I would like to welcome all of you. I hope you are all in good health and in good spirits. During the meeting, they can get in touch with me as well as with the colleagues from the Executive Board anytime. The Executive Board itself is complete here today. To my left, you can see Dr. Duttmann, separated by a plastic shield. And right next to him is Ms. Karin Sonnenmoser. I should also like to welcome our notary, [ Dr. Amin Hauselt ], who, as usual, will notarize today's general meeting. Moreover, the proxy voters appointed by the company, are present here. And later on during the Q&A session, Mr. Joswick and Mr. Leon will be the host in the transmission room and will be there in person. And finally, you'll find a few ladies and gentlemen, that you would normally not see. But they are very important to make sure that the video links and the sound links work properly. All the duly registered shareholders and authorized persons, the general meeting is streamed live on the Internet in the secure shareholder portal. The exercise of the voting rights will be by way of postal voting or by proxy granting and instructions through the authorized proxy voters of the company. Up to the end of the ballots, at least up until 11:30 you or your proxy can actually make your postal vote or grant a proxy and give instructions through the shareholder portal, or you can actually also revoke it electronically. Of course, we all know that a virtual general meeting poses a number of special challenges and restrictions to you -- for you as shareholders and also for the management of the company. Shareholders cannot, as usual, ask questions like in a general debate and get in a dialogue with the company this way. Under the legal regulations of the COVID-19 Act, all the duly registered shareholders and their proxies could instead submit questions through the shareholder portal of the company. And we will answer those questions after the speech of Dr. Duttmann today and after my explanations. Ladies and gentlemen, let me, first of all make a few comments on personnel changes on the Executive Board and in the Supervisory Board. In October 2020, the Supervisory Board appointed Dr. Duttmann for another 12 months as Chairman of the Executive Board of CECONOMY AG. With effect of this new appointment, the mandate of Dr. Duttmann that as suspended up until this point in time as a member of the Supervisory Board will end finally. The vacancy was filled by the court appointment of Ms. Sabine Eckhardt, as Supervisory Board member on the part of the shareholder representatives on the 26th of October 2020. I will make more comments on personnel decisions later on due the report of the Supervisory Board. Let me now turn to a couple of standard items. I note that the general meeting has been duly summoned in line with the law and the articles of incorporation. A print out of the invitation and the electronic federal gazette was handed over to the notary as attachment to the minutes ever since the invitation to the General Meeting on the 7th of January 2021 in the federal gazette, the agenda as well as the other documents that have to be made available or accessible through the Internet page of the company. You will have access to this Internet page also during today's general meeting. The documents to be disclosed are also available through the shareholder portal and also available for inspection here in the meeting room. Moreover, the Executive Board has made all the communications required under the relevant law in connection with the COVID-19 Act in a proper manner. Shareholders that have not submitted any motions for amendments to the agenda, countermotions and nominations that would have had to be disclosed by the company or would have been made available. Shareholders that registered properly or their authorized persons, their proxies can follow the entire general meeting live through the secure shareholder portal. Please note that recording or sound or pictures or the any other provision of sound or video recordings to third parties is not allowed. Only the company is authorized to record the meeting by sound or video and to transmit it to the shareholder portal. With the exception of the speech of the CEO, the company will not provide any recordings after the meeting. Should there be any technical problems in the transmission of sound or video, we would first ask you to check your Internet connection, and please also note any information provided on our website or in the shareholder portal. This year, again, we will keep an attendance register. The attendance register will list the proxy voters present here in the room and also the represented shareholders. The attendance register will be updated on an ongoing basis, depending on the proxies granted by -- to the proxy voters during the general meeting. You can view the attendance register through the shareholder portal. The relevant attendance register will be handed over to the notary. A copy is also available to each proxy vote of the company. I would now like to announce the current record of attendance. The attendance register includes exclusively the proxy voters and the votes represented by them due to the holding of the meeting as a virtual general meeting. In order to provide the maximum of transparency, the number of postal votes will be captured separately and will be announced together with the record of attendance. At present, the attendance from the attendance register and the number of postal votes is as follows: the share capital of the company of EUR 918,845,419 is divided in the 356,743,118 common shares and 2,677,966 preference shares. The total number of the shares, common and preference shares is, thus, 359,421,084 shares. Through the proxy voters, a total of 142,617,352 common shares with an equal number of votes and 21,796 preference shares with an equal number of votes are represented, altogether, 142,639,148 shares. This is equivalent to 39.69% of the registered share capital. Moreover, so far, 146,795,956 postal votes from an equal number of common shares and 156,518 postal votes from preference shares have been received so far. Altogether, 146,952,483 postal votes. This is equivalent to a portion of the registered share capital of 14.89% roughly. The total number of shares represented by the proxy voters and the shares for which postal votes have already been received is thus at present 289,591,631 shares. This is equivalent to 80.57% of the registered share capital. At this point, I would like to give you some information on the voting procedure and the authorization. Due to the lost dividend for the past 3 fiscal years, at this general meeting, the preference shareholders have also have the right to vote. The following explanations, therefore, apply to common shareholders and preference shareholders. Shareholders or their proxies can submit their votes in today's virtual general meeting by way of electronic postal voting through the shareholder portal or by way of authorization of the proxy voters appointed by the company. The voting or the authorization and instructions given to the proxy voters appointed by the company are possible in the shareholder portal up to the time of the ballots, at least until 11:30. Up to this point in time, you can vote or you can give your authorization and instructions also through the shareholder portal or can revoke or change them. I will announce the end of the voting procedure in advance, but I would ask you to hand in your votes in due course or to give you instructions in a timely manner. The voting will by the so-called addition process, which means that you can act or have to vote actively with yes for or actively with no against proposed resolution or nomination in order to exercise your voting right. When casting your votes, abstentions will not be captured and they are not taken into account or not reflected when counting the votes. The proxy voters appointed by the we will only exercise the voting right on the basis of your express instructions by releasing the votes deposited in the system. They are available for the voting on such resolution proposals of the Executive Board, Supervisory Board or shareholders which have been announced with the invitation to the general meeting or later on, according to Section 124 of the German Stock Corporation Act. Any more information on how to exercise the voting rights and how to give authorizations and instructions should be gathered from the invitation or the Internet page of the company to the general meeting. The voting procedure and the counting of the votes will be supervised by the notary, who has also checked the technical equipment in advance. I would also like to point out that in the shareholder portal, the results or global voting fields provided. If you'd like to agree to all the proposed resolutions and nominations at this general meeting or would like to reject it is enough to mark this field. You will find the global voting field highlighted in blue at the top left above the individual fields. Objections against resolutions of the general meeting can be made until the end of the general meeting, virtually by way of electronic communication or by giving a note to the notary to be recorded in the minutes. For this an electronic input box is provided on the Internet page in the shareholder portal. You can only raise an objection once you've exercised your voting rights yourself or by way of a proxy or the corresponding voting instructions given to the proxy voters appointed by the company. Ladies and gentlemen, this brings us to the agenda proper. The agenda with the proposed resolutions has been made available together with the annual financial statement documents for fiscal 2019, 2020, and all the mandatory papers and documents for this general meeting is available on the Internet page of the company for the general meeting and is also available here. I would like to call item 1 of the agenda. This is about the adopted annual financial statements and the approved consolidated financial statements, the combined management report for CECONOMY AG and this CECONOMY Group, the nonfinancial report for the CECONOMY Group for the past fiscal year and the report of the Supervisory Board for the past fiscal year. The said documents are available here at the general meeting and have been made available here since the day of the invitation to the general meeting, also through the page of CECONOMY. The Supervisory Board approved the annual financial statements and the consolidated financial statements prepared by the Executive Board, the annual financial statements are thus adopted in line with these regulations. No resolution has to be passed on this particular agenda item. The annual financial statements of CECONOMY AG as of the 30th of September 2020, prepared according to the relevant regulations shows a balance sheet loss. Therefore, and due to the restrictions under the syndicated credit line agreement with the involvement of KFW, no resolution has to be taken on the use of the appropriation of distributable profit. I would now like to give Dr. Duttmann, the CEO, the floor for agenda item 1. He is going to explain the past fiscal year, provide an outlook and will also report on the agreement with Convergenta on the acquisition of the shares held by Convergenta in the MediaMarktSaturn Group. Dr. Duttmann, the floor is yours, please.

Ladies and gentlemen, dear shareholders, today's general meeting is a special day. And this for several reasons. Mr. Kirsch already mentioned that this is the first time today that we do not welcome you in person at our general meeting. As you all know, the world has changed a lot since last year. I would therefore, like to welcome you most warmly today to our first virtual general meeting. This general meeting is also special because today, I can report on a historic step for our company. In December, we announced that we have reached an agreement with Convergenta. Many of you are familiar with the difficulties we've had for years and the challenges of the shareholder structure at MediaMarktSaturn. The agreement enables us now to overcome this situation and to work in the future even more effectively on a successful performance of the company. Again, in December, we provided an update to our strategy. This had to be postponed at first due to the developing pandemic in March of last year. Both are major items that I had on my list when the Supervisory Board seconded me to the Executive Board with this 2 important milestones for a path into a successful future were laid. The total team worked hard on it. I'm therefore proud to be able to present the results now today to you as shareholders. I would like to start first with the past fiscal year. The start of the Black Friday period in 2019 was very promising. After November, we saw rising sales volumes by the middle of March. But at the beginning of 2020, we noticed that the pandemic development would have an impact on us. In March, we encountered the major damper. The first lockdown with market closures, almost all across Europe. Such a situation was unprecedented up to that point in time. At the time, we quickly created the necessary financial security. A major point in this context was topping up of our credit facilities by the involvement of KFW and our partner banks in order to get safely through the crisis. We didn't use the credit at all up to the present day, but we still have it up our sleeve as reinsurance because we still are faced with the uncertainty created by the pandemic. However, we also noticed that the pandemic is a driver for our transformation. Our online business has developed as well as never before within a short period of time. The momentum is not only the result of temporary market store closures, but also evidence of our work. In the run-up to our IT platform, we improved our web shops a lot. We consolidated them, and this helped us to able to meet the rising demand. As an online player, we've been underestimated for a long time. In 2019, our webshops of MediaMarktSaturn taken together, were the third largest in -- third strongest in Germany. Now 1 year after the pandemic or here within the pandemic, we have grown even stronger. And have more online customers than ever before. In the last fiscal year, we had 6 million more, and in the first quarter, another 3 million were added. But the heart of our strategy is our omnichannel model. The basis is formed by the stores, by the business in the stores, which stand for a large number of products and services as well as for personal advice. This is complemented by the online business. And the pandemic doesn't change anything about this. Quite on the contrary, once the stores had opened again, customers returned immediately, not as many as before, but some of them are still afraid, but they came with a clear intention to buy something. The brick-and-mortar business still is accepted widely and liked by the people. The return of the customers after the first lockdown confirmed that the brick-and-mortar business with personal advice embedded into our omnichannel strategy remains the backbone of our success. Online and brick-and-mortar have grown even more closely together. And our customers have noticed that we are at their service everywhere. Important to us in this context is that in the stores, we were always able to create safety with our hygiene concept for our customers. All these developments have helped us to master the fiscal year successfully in spite of corona. This is also demonstrated in the numbers. The sales of EUR 20.8 billion was almost at the previous year's level in spite of the lockdown-related temporary market closure. The adjusted EBIT of EUR 236 million, has been much better than we actually assumed in our updated guidance. I had already reported on the dynamic development in the online segment. The numbers tell their own stories. In the last fiscal year, 20.2% of our sales were generated online. Altogether, about EUR 4.2 billion of sales were reached. The impact of the lockdown was also visible in our online growth. In April, the growth in this segment was over 200%. We could thus compensate for a good portion of the lost sales in the brick-and-mortar business. We are proud that within a short period of time, we managed to double or on particular days, even triple the volumes through our systems, in particular, in logistics. A dynamic online business was seen during the rest of the year, and this is continuing in the new fiscal year. The Services & Solutions business was much impeded by the pandemic, however, many services are offered directly in the stores and could not be used as a result of the lockdown. On a year-by-year comparison, the sales of Services & Solutions, therefore, declined by some 7.6%, altogether, about EUR 1.1 billion of sales were achieved in Services & Solutions. The business with extensions of warranties developed favorably. And at SmartBars, in spite of the market closures and lower customer frequency, 600,000 repairs were made directly in the stores in the last fiscal year. Unfortunately, the consolidated result after tax in spite of the pleasing operating adjusted EBIT of EUR 236 million was negative. This was due to the impairment of Fnac Darty in the amount of EUR 268 million, which suffered a lot from the pandemic as reflected in the share price. The net income for the period after tax was minus EUR 211 million. At CECONOMY AG, as a result of the impairment of Fnac Darty, an annual loss of minus EUR 38 million was achieved, and therefore, no dividend can be paid. The share price of Fnac Darty has recovered significantly again so that after the pandemic write-up may happen with a corresponding positive impact on the results. All in all, the experience of the pandemic left its mark on us. It has shown what we can achieve and that the right impulse was set for the continued development of our company. We believe the last fiscal year with self confidence and wind from behind. We addressed the right questions and provided the right answers. CECONOMY is no longer the company that we will be for 2019, with a relative short period of time, we made major steps forward. The pandemic does not only have an impact on our company, but also on the products and services that we are offering. Since the pandemic, we learn, work and lived at home. We see this also in the demand for consumer electronics, in particular, home office came to be reflected in our business. These developments show the potential that we still have left. The equipment of schools, for instance, but also of small and midsized companies offers many opportunities to us. Also the development and nationwide availability of 5G and the associated introduction of new devices will impact the market in the years ahead. For us, it's clear, we continue to operate in an attractive market. Let us now turn to the first quarter of this fiscal year. Our start to the current fiscal year was very promising. Through the spreading out of the intensive purchasing period before the Black Friday, we were able to generate good sales development in the weeks up to middle of December. The consolidated sales in December before the lockdown in Germany and the Netherlands was 30% up on the year before due to the lockdown, especially in the high sales Christmas days, we were able to close the month in spite of the good basis, only slightly below the year before. And the December actually showed -- or slowed us down clearly in the quarter. In the first quarter, our consolidated net sales increased by over 11% versus the year before. Adjusted EBIT in the first quarter was at EUR 346 million. And therefore, EUR 56 million higher than the good result of the previous quarter. This performance was achieved in spite of the new lockdowns actions as from November. And this makes us proud that we're very good to do this in the difficult period of time because this shows us that we are on the right path. The online momentum was very strong in this phase due to the lockdown. 30% of our sales in this phase were generated online. Since the middle of December, we feel the temporary market closures a lot. It is beyond our control when the pandemic situation will change. So politicians will decide to reopen nonfood retailing. This is an unsatisfactory situation for us. We, like you, need a perspective with respect to the lockdown regulations. Therefore, I lodge an appeal to the politicians to formulate as quickly as possible a concrete and especially realistic road map for reopening. Our guidance published on the 15th of December 2020, for fiscal 2020, '21 was based on the assumption that the continued impact of the COVID-19 pandemic would not deviate a lot from the extent known at the time, sustained longer nationwide closures of a significant part of the brick-and-mortar business as has happened now in Germany, Austria, the Netherlands and Switzerland were not taken into account at that in time. With the decision of the conference of federal states in Germany of the 10th of February 2021, the uncertainty has increased further. This is the extension of the lockdown for a longer period than expected up to 7th of March. And beyond that, the introduction of the incidence of 35 as a basis for openings. This uncertainty prompted us to suspend our guidance. Under these circumstances, we cannot talk about a reliable opening perspective in Germany. And we will, of course, keep an eye and follow the current development very closely. A year ago, I said at this point that we need a strategic framework to return to a successful track. Today, I can tell you that we built this framework, and we've proven that it is stable. What helped us here is that early in 2019, we set the right course with our research in order to keep developing the company forward. For this, we had 4 operating focused topics defined with omnichannel, Services & Solutions category and supply chain management and the organizational cost structure with central working fields defined for us on which we have made good progress ever since. In our strategy, we've now formulated a clear target. We want to be Europe's biggest omnichannel platform in consumer electronics, and therefore, the preferred choice for our customers. Our various steps towards this aim were presented in detail in December at our strategy update. Three central fields characterized the strategy, and each of these fields includes a large number of initiatives, which we've already -- launched already or on which we will keep working in the months and weeks ahead first. We started in 2019 with a comprehensive efficiency program for the reorganization of the central and management units of the holding companies of CECONOMY and MediaMarktSaturn and the German country organization. The targeted savings have been realized fully in the meantime. In August, the operating model for the entire MediaMarktSaturn Group was presented. The foundation is an efficient and uniform organizational structure. More centralization and standardization contribute to making processes more effective, but they are the precondition, in particular for a uniform and convincing customer experience. At the same time, we expect clear savings, which we will leverage on a pro rated basis this year. Second, the value initiatives include the strengthening of our position as a category authority. In category management, we are working on a preselection of the assortment in order to make it easier for customers to pick the right products. Since there are new product categories, for instance, in health, fitness and wellness. New store concepts, digital tools of the same stuff and a comprehensive training will improve the consulting quality for their customers. In addition, there will be an extension of service offering online and brick-and-mortar. For the improvement of the integration of online and brick-and-mortar, we are creating a strong omnichannel platform. The extension of our centralized logistics in our countries permits us to be more efficient and environmentally sound in deliveries so that our customers get their products on time. Third, at the top of our pyramid, there are growth opportunities that we will establish. A good example is our marketplace model, where a large number of suppliers can offer complementary products. The B2B business, we are an important contact partner for small and mid-sized companies when it comes to digitalization. Marketing services offer additional potential for further growth, and we also want to infuse more customers for our membership programs. We are taking the next steps consistently, our strategic initiatives that we developed together with colleagues at Ingolstadt will be the roadmap. It's important to emphasize we have long since now -- we are no longer at the beginning of our transformation, we are right in the middle of it. I'd also like to address another important topic where a future-oriented company with unique expertise in our industry, we have a clear ambition with regard to our role. This includes the topic of sustainability because we do bear responsibility to make a difference there, too, not just vis-à-vis our clients and employees, but also vis-à-vis society and all other stakeholders. There are so many points where we're working on making a difference for our environment. And we've already had some success. Since 2015, for example, we have reduced our emissions by 70%. And in future, we're going to drive these topics even more, and we're going to report about them more. We're not just going to help our customers have a sustained lifestyle, but we would also like to be a yardstick in our industry. Just to give you a case in point, our intention is to reduce our direct emissions to 0 and to increase our influence on suppliers concerning environmental sustainability. Likewise, the decisions that we are going to take as a company should be sustained, too. And I'm very pleased to be able to introduce the next topic in this way. This will have a very positive impact on our corporate success. I'm convinced of that. Ladies and gentlemen, that takes me to the transaction about the acquisition of the minority shares in MediaMarktSaturn Holding GmbH. The agreement with the Kellerhals family is an extraordinary milestone for our company. Jürgen Kellerhals has sent us a message for today's Annual General Meeting, which underpins that Convergenta wants to be connected with us in the long term, too. The Management Board and the Supervisory Board would like to ask the Annual General Meeting under Item 8 to agree to the transaction agreed with Convergenta Invest GmbH about the acquisition of its minority share in MediaMarktSaturn Holding. For this purpose, the draft resolution includes an increase of the capital stock by way of an increase of [indiscernible] capita that is assets in kind, with an exclusion of the legal subscription right of shareholders, the issuance of convertible bonds in exchange for a benefit for deposit and cash, with an exclusion of the legal subscription right of shareholders and the creation of new conditional capital for 2021-1 and changes in the articles of association. In addition, we have to provide a cash payment to the tune of EUR 130 million. Against this backdrop, the increase of capital stock and the issuance of convertible bonds will be done by way of a mixed cash deposit. For this purpose, under the item, we have provided a written report to you. So I would only like to summarize that. As I mentioned at the beginning, the proposed resolution to acquire the minority share in Convergenta Invest GmbH and MediaMarktSaturn Holding GmbH is to be provided for. And I would now like to speak briefly or in short of Convergenta and MSH. With the transaction agreed on the 14th of December 2020, we intend to re-sort the current number of shareholders and grouping of shareholders of MSH and to provide for a simplified corporate structure and governance in order to be able to focus more operations and to leverage more synergies. Before speaking about the transaction, I'd like to give you the current structure, some background on the current structure and the transaction. The Convergenta is a German investment and shareholding company owned by the Kellerhals family. Helga Kellerhals, and the -- her late husband, who died in 2017, Erich, were the founders of the first MediaMarkt stores. Jürgen Kellerhals is the son of Erich and Helga Kellerhals. For many years, CECONOMY Retail GmbH has been holding 78.38% in MSH. As you know, MSH is the operating leading and holding company -- management and holding company of MediaMarktSaturn Retail Group. Convergenta is holding a minority share of approximately 21.62% in MSH. Well, shareholder rise of Convergenta a specific body structure in the past between CECONOMY and Convergenta, we needed a certain kind of fine tuning, which provided for conflict. In addition, the current structure also provided for an obstacle to realize tax benefits. And this was also true for our analysts and shareholders, which -- who perceive that as a negative impact. Against this backdrop, the transaction should provide for a cleaning of the current structure in order to leverage potential for significant value creation. In addition to operating benefits and savings and administrative costs, the transaction should also make it possible to take advantage of tax losses brought forward. With this transaction, we would increase our shareholding in MSH to a total of 100%. Convergenta would exit MSH. Therefore, we would have no need to fine-tune things with Convergenta on the MSH level, and we could speed up and optimize our processes within the group. In exchange, Convergenta should become one of our main shareholders. They would be in the same position as the current shareholders and can, just like you, participate in the successful further development of our group. After the transaction, several structural activities are provided for that should unleash a potential for value. The major part of this value creation would be from tax losses brought forward on this economy level with a total volume of EUR 1.2 billion each of corporation tax and trade tax. In addition, there are further tax-related optimization potential points for the deductibility of CECONOMY holding costs and other cost savings. On this basis, we're expecting that the transaction will have a positive impact on earnings per share from year 1 on a fully diluted basis. A major contribution from that will be tax savings as we can use tax losses brought forward. The estimated tax savings of approximately EUR 50 million per year on average for the next 3 years. Depending on future earnings development, tax benefits in years to come might even rise more. All in all, value creation from losses brought forward for tax reasons will amount to a total of EUR 360 million without any discount. At this point, I would like to draw your attention to a number of reactions of analysts that are so exemplary for many responses that we have had to our agreement. We are pleased to see that the transaction has experienced a positive response immediately after the announcement on the 14th of December, and that provided for a leap of our share by approximately 25% upwards. This confirms us in our objective to not just create value for our company, but also to provide for a positive development of our share price. We're also convinced that the transaction is in the very best interest of CECONOMY, its shareholders and stakeholders, and we would be pleased if you were to agree to our proposal. I would now like to depict the planned transaction. In order to implement the transaction, we agreed on a number of agreements or contracts with Convergenta on the 14th of December 2020. All of them are available on the Internet. They provide that the held shareholding -- held by share Convergenta and MSH would be used as a mix deposit in kind for CECONOMY. In exchange, Convergenta are given a share component, a component of convertible bonds and a cash component. This means a ramp-up of the shareholding of Convergenta from the level of MSH to the level of CECONOMY. After the capital stock increase, Convergenta would have a shareholding of 26.07% in ordinary shares or 25.93% of our capital stock, which can be increased as the convertible bond can be released. Convergenta intends to become a shareholder holding up to 29.9% of ordinary shares. Let me now explain the ratio of the exchange. On the basis of a volume weighted 3-month average price of our ordinary share according to Bloomberg of approximately EUR 4.17 before the 14th of December 2020, that's before the transaction. There's a total benefit to be given to Convergenta to the tune of EUR 850 million. This has to be granted, which would be compared of the following 3 components: firstly, 125,800,000 new ordinary shares, which would be granted with an exclusion of subscription right. The total value of the shareholding component amounts to EUR 524 million on the basis of the mentioned price of EUR 4.17. Plus Convergenta would receive 1,510 convertible bonds with a total nominal value of EUR 151 million and a market value of EUR 160 million, which would also be issued with an exclusion of subscription right, plus a cash component will be granted in 2 tranches, EUR 130 million in total. The provided exchange ratio is the result of our intensive negotiations with Convergenta. The total performance in exchange is to be based on the valuation of the shareholding that we have agreed on with Convergenta in the basic agreement. We also commissioned Societe Generale to provide a fairness opinion, which was actually given on the 11th of December, that is the last trading day before the transaction agreements were concluded. So Societe Generale has arrived at the conclusion that the total performance in exchange, subject to the assumptions therein and restrictions is suitable, is appropriate from a financial point of view for CECONOMY. In addition, in order to confirm the appropriateness of the amount of issuance and the exchange ratio with regard to the capital stock increase, we commissioned PricewaterhouseCoopers GmbH as an independent expert to provide a fundamental company valuation under the usual standard, IDW as one of the institute of auditors, the German Institute of Auditors. PwC, for example, checked if the agreed exchange ratio between the value of the benefits in kind that is the shareholding Convergenta in MSH is appropriate. And PwC provided an expert opinion on the 23rd of December 2020. This was made available to you in the run-up to this meeting on our Internet pages. As mentioned before, our operations of CECONOMY have been shaped more and more by new and extended local lockdowns since mid-December, particularly in Germany and the Netherlands. Due to the continued lockdown activities and the unclear opening strategy for brick-and-mortar, we believe it is necessary to suspend our outlook for fiscal 2020, '21 on Thursday last. In addition, because of the uncertainty of current developments, it's not possible for us to provide for new forecast or guidance or plan for fiscal 2020, '21. Against this backdrop, we commissioned PwC to take into account the change estimate in connection with a post script to the expert opinion of the 23rd of December. They provided such a report on 13th of February and it was made available to you on our Internet on the pages on the same day. As we lack a current plan or budget for fiscal 2020, '21 to reflect the current situation, especially in Germany, we asked PwC to consider the earnings before interest, tax and restructuring expenses as a best estimate for 2020, '21, using the figures for 2019, '20. On the basis of current insights and the estimates, we have also adjusted the expected restructuring efforts and holding costs. All in all, with all the adjustments for fiscal '20, 2021, there is a valuation effect of EUR 6.9 million on CECONOMY level and minus EUR 7.3 million on the MSH level. Since the relevant cutoff date for valuation is today, the 17th of February 2021 and PwC today provided for what is called a cutoff date declaration. Within this statement, PwC describes that a new valuation in connection with a post scriptum does not necessitate any revaluation. This cutoff date declaration has also been made available today on our Internet pages for you. We have scrutinized the expert opinion, the post scriptum and the cutoff declaration, and we've come to the conclusion that the exchange ratio and the issuance amount of the new shares of the convertible bonds are appropriate. And this connection will expressly point to the fact that due to the adjustments caused by the post scriptum, no change is to be made to the overall statement from the expert opinion of the 23rd of December about PwC. Both companies, that is CECONOMY and MSH, are only slightly touched upon by the changes. The exchange ratio will only change by 0.2 percentage points compared to the calculations and the expert opinion dated 23rd of December 2020. The advantage of the transaction does not suffer due to the extended lockdown either because tax savings aren't lost, but they might only accrue sometime later. According to the Management Board's analysis, we still have to assume that MSH and CECONOMY will rise to the challenge of the crisis and that will emerge more successful than some of its competitors. After all, the local court of Düsseldorf appointed Mazars GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft as an auditor for the benefit in kind is with regard to the capital stock increase and the convertible bonds. Mazars told us today that according to their current auditing, they believe that the value of the minority shareholding of Convergenta reaches at least the lowest issuance amount of EUR 125.8 million of new shares from the capital stock increase and 35 million of new shares from the new conditional capital that is -- it's an amount of at least EUR 411.1 million. In addition, Mazars has also been able to understand the sustained earnings and the identification of minimal synergies from the transaction. They believe it's plausible. As a summary, we introduce the valuation methodology and the key results of the expert opinion. Firstly, on the methodology for valuation. As described, we have proposed to the Annual General Meeting to increase the capital stock in exchange for a benefit in kind and to issue convertible bonds. In this context, Section 255 of the German Stock Corporation Act has to be borne in mind, which means that the issuance amount of new shares must not be inappropriately low. For a benefit in kind, depositing kind, this means that the value of a deposit in kind has to achieve the value of the shares to be issued. And those -- and that of the convertible bonds. In the present case, in the case at hand, the value must at least amount to the value of the shares, the convertible bonds and the cash component. Its appropriateness has to be identified and given as to the cutoff date. In identifying the value, the basic principles of objective company value according to IDW S1 and valuation principles were considered as they are provided by the law. In this case, the DCF process was used. This is the discounted cash flow. In this process, step 1 is to calculate the total market value as a total of cash values of future financial free cash flows. In order to obtain a market value, a fair value of equity in stage 2, the market value of third-party capital is deducted from total market value. In identifying the appropriateness of the exchange ratio, the synergies have to be taken into account too. They provide for a value increase of CECONOMY. Despite the dilution and subscription right exclusion, you will participate synergies on the transaction, too, because -- and it's beneficial for you as shareholders because even if there is a dilution due to lower quota, the value of your shares will rise because of synergy effects. I'm now showing you a table to illustrate the reconciliation of market value of the cash deposit, that is the shareholder of Convergenta and MSH. This is EUR 1.3471 billion. They -- a total of EUR 903.1 million, plus minimum synergies from the transaction to the tune of EUR 444 million. You can see that we are expecting earnings to rise up to '22, '23, that's our budgeting period for the moment. In addition, with an assumed free cash flow of EUR 35.2 million in the current fiscal year, there are rising free cash flows of up to EUR 284.5 million in fiscal 2022, '23. For the sustained EBIT from 2023, '24, that is the period of perpetual rent, the approaches of the last -- the amounts recognized in the past fiscal year and the past budgeting year were modified by a sustained growth rate of 0.5%. On the basis of such discounted free cash flow, there's a total corporate value of MSH as of the 30th of September 2020 before special items to the tune of EUR 6,294.6 million. There's an equity value of EUR 4,022 million as of the 30th of September 2020. And with the mark up to today, this is EUR 4.177 billion, and there's a market value of the 21.62% shareholding of Convergenta in the amount of EUR 903.1 million. As I was saying at the beginning, we're expecting major synergies from this transaction. They have to be considered in valuation. Besides holding cost savings that amount to EUR 63 million discounted low net, we believe that the cash value of tax synergies is at least EUR 381 million, which totals a minimum synergy effect of EUR 444 million at the end of the day. Concerning such minimum energies, the market value of the shareholder of Convergenta and MSH is, EUR 1.3471 billion. The explained valuation of MSH was done with multiples on the basis of capital market data of listed comparable companies, that is straight trading multiples. This was made to plausiblize everything. So there's a range of the market value of MSH after special items as of 30th of September 2020 to the tune of the EUR 2.9479 billion, up to EUR 4.604 billion on the basis of EBIT multiples. The identified market value of equity is at the upper end of that range. But in our view, with the market position of MSH, this is justified vis-à-vis our peers and shows the above-average growth prospects that are the result of such positioning. Let me now speak of the company valuation of CECONOMY. The tables you see here show the consolidation of the value of the CECONOMY and the market value of equity of CECONOMY as of today, which can be calculated for your purposes. The basis for the consolidation of free cash flow CECONOMY is the budgeting of MSH, of which the holding cost of CECONOMY and the CECONOMY retail were deducted in consolidating an expected EBIT. Well, an assumed free cash flow of 0 in the current fiscal year and with rising free cash flows of EUR 235.6 million in fiscal 2021, '22 and EUR 255.3 million in fiscal 2022, '23, and free cash flow in the terminal value amounts to EUR 411.9 million. Discounting these free cash flows of CECONOMY before special items provides for a total company value the CECONOMY as the 30th of September 2020, before special items of EUR 5.842 billion or EUR 2.7066 billion after deducting the net financial liabilities of the group. This was also supplemented by special items. Considering such special items, the market value of the equity of the CECONOMY as of 30th of September 2020 emerged to EUR 3.3398, or after a markup with equity cost to EUR 3.4686 billion as of today, the cutoff day. Since MSH is a fully consolidated subsidiary already, the identified shareholding value of Convergenta and MSH had to be deducted, which provides for a market value to be ascribed to -- attributed it to the shareholders of CECONOMY of equity of CECONOMY amounts to EUR 2.5655 billion. This value was used and plausiblized with multiples on the base of capital market data of our peers that are listed on the stock exchange, that is by way of trading multiples. On the grounds of such data, that were also used in order to plausiblized the corporate value of MSH. The range of the market value of equities of CECONOMY after special items and minority shareholders as at 30th of September amounted to EUR 1.4873 billion to up to EUR 2.5344 billion on the basis of EBIT multiples. On the basis of cutoff date prices over ordinary and preferred shares as of the December 11, 2020, that is the last trading day, before the agreements were entered into, the capitalization of CECONOMY amounted to EUR 1.4354 billion. If you consider the volume weighted 3-month average price of our shares between the 14th of September and 11th of December 2020, there's a slightly higher capitalization to the tune of EUR 1.4988 billion. Both of these are substantially below the $2.5655 billion that was identified. The market value of equity of CECONOMY just like MSH, is at the upper end of the range due to the strong market position of MSH compared to our peers. With the sustained upward strength of the share after the promulgation of the transaction, the capitalization has neared substantially the market value of equity. On the basis of yesterday's price, market capitalization is at approximately EUR 1.850 billion. I would now describe the valuation of the convertible bonds. We evaluated these convertible bonds with a market value of EUR 160 million on the last trading day before the transaction was announced, that is on the 11th of December. Naturally, the reference point for the value must be before the transaction was promulgated. The value of a convertible bond is basically in addition of the value of the convertible bond component and the value of the conversion option. The value of the conversion bond component is the cash value of the agreed interest rate and redemption payments discounted by a risk adequate interest rate. This discount rate is the -- is tantamount to the third-party cost approach of CECONOMY with the same period of contract. Due to the derivative character, the value of the included option in shares has to be identified. Since the contained option is provided with a dividend protection mechanism, its value can be identified with the Black/Scholes formula. On the grounds of the valuation of MSH, CECONOMY and the convertible bonds that I've just described, I'd now like to give you some information on the appropriateness of the issuance amount on the exchange ratio. In order to identify the appropriateness of the issuance amount and the exchange ratio, we have put the corporate value of MSH and CECONOMY in relation to the number of shares before and after the transaction. The starting point for valuation was the value of our shares before the transaction, which on the grounds of a corporate value of CECONOMY of EUR 2.5655 billion and approximately 359.4 million shares at EUR 7.14 per share. And substantially below that was our volume weighted 3-month average price of our share as of the 11th of December, namely EUR 4.17. This value of EUR 7.14 per share has to be countered by the value of the share after the transaction. And also to identify the corporate value of CECONOMY out of the transaction, the value of the cash component -- sorry, of the depositing kind that is the minority shareholding in MSH, including minimum synergies have to be added to the corporate value of the CECONOMY. And the cash component has to be deducted on that basis. There's a corporate value of CECONOMY after the transaction of EUR 3.7826 billion and a value of EUR 7.37 per share on the grounds of approximately 513.1 million shares after the issuance of the new shares and conversion shares. The value of our shares with the transaction increases by EUR 0.23. The different appraisal analyzes the value inflow from the contribution in kind by deducting from the value of the contribution in kind, including minimum synergies, EUR 1.347 billion, the cash component of EUR 130 million. According to this, the contribution kind leads to a value inflow of EUR 1.27 billion. This contracts with a value of EUR 125,809,000, that is EUR 897.9 million and the market value of the convertible bonds of EUR 160 million. Altogether, a value of EUR 1.57 billion or EUR 1.58 billion. This, as a result, the value of the contribution in kinds, including the minimum synergies exceeds clearly the total of the values from the new shares and the convertible bond significantly. This is also true if the value of the convertible bonds is calculated on the DCF value basis. Since the value inflow through the contribution in kind is EUR 1.217 billion, the lowest issue price of the new shares from the contribution in kind and the conversion shares of EUR 393 million is clearly reached. Finally, I would like to turn to the considerations on the subscription right exclusion. As part of the proposed transaction, your subscription right is to be excluded. And we check the preconditions where they significantly described this is the written report, which was made available to you in the run-up to the general meeting. We would like to briefly summarize our considerations here as described at the beginning through the acquisition of the market share for CECONOMY and for you as existing shareholders, you will benefit from significant advantages. We are, therefore, convinced that the contribution in kind, the issue of the convertible bonds with subscription rights excluded, will benefit CECONOMY and all the shareholders. The acquisition of the minority are holding against the issue of new shares and the convertible bonds requires a subscription right exclusion. If the new shares in the convertible bonds would be offered to the shareholders, they would not be available for the issue to Convergenta. We check the options and alternatives, but had to discount them. Finally, a total weighing of the interest of the company and the shareholders was made. In this weighing of interest, we looked at the impact on the shareholder structure of the CECONOMY and the adequacy of the exchange ratio. The contribution in kind increased and the conversion of the convertible bonds lead to significant change in the shareholder structure. Through the execution of the transaction, Convergenta, will be the largest single shareholder. With a view to the individual shareholders, at present, there's no shareholder with a relevant influence at general meeting. The dilution, therefore, does not eat for any shareholder to the loss of the relevant influence at the general meeting. Therefore, the dilution is less drastic or relevant for you as shareholders. Therefore, our current key shareholders were individually and independently of each other informed. On a bilateral basis, each of the shareholders signaled to us to support the transactions and to exercise at today's general meeting, the voting rights accordingly. As described before, the transaction will not lead to an economic dilution at the expense of the existing shareholders. In the overall assessment, therefore, the interest of the CECONOMY prevails the interest of the existing shareholders in terms of avoiding a dilution. This brings me to the end of my detailed explanations of the proposed transaction. Dear shareholders, please support the agreement reached with the Kellerhals family by voting for the proposed resolution of the Executive Board and Supervisory Board under Item 8. Dear shareholders, today, you'll see a CECONOMY that is self confident knows its strength and has a clear plan for the years ahead. With a healthy portion of self criticism, after our reset in 2019, we set the right course. We ask the right questions and kept working on ourselves. Today, we are in a much better position. We operate in an attractive market. And we mastered the historic challenges of the last fiscal year. And we are not done yet. The changes will be with us for the years ahead. As I said at the outset, today's a special day and all of you, our shareholders, can participate in making sure that we will have many more successful days in the future. Our major progress is mainly due to the commitment of our employees. The pandemic impacted us in all the countries and everywhere our employee shows that they are motivated and that they want to work quickly on solutions in order to be at the service of our customers, not only in the stores, but also the other areas, our employees have excelled and performed well beyond the call of duty. I would like to thank them for this very much. And would also like to thank you, dear shareholders, for your trust, also in this very difficult year. At the end of my talk, I would like to make a few personal remarks. Next to me up here on the stage sits Jürgen Fitschen for the last time. His supervisory board mandate will expire today, and we will decide on his succession. Ever since -- or during my time, in the Supervisory Board, I have come to know Jürgen Fitschen intensively and appreciate him. We went through different phases of cooperation from the joint work in the Supervisory Board right down to the current constellations. CECONOMY was and is definitely not the easiest mandate for him. The last years were anything but boring for us. But today's meeting shows that we have tackled the right issues. Mr. Fitschen helped us a lot through his commitment that we are a more agile company today than at the time of the demerger. Mr. Fitschen after the demerger from METRO, introduced a new governance on the Supervisory Board of CECONOMY. After the delegation, after the [indiscernible] from the Supervisory Board to the Executive Board, he supported me very much. I would like to thank Jürgen Fitschen on behalf of the Supervisory Board and the entire company. And also very personally, it is very -- it is a great pity that we cannot bid fair well to him together today. This brings me to the end of my comments. And I would like to present a bouquet of flowers to Jürgen Fitschen.