Optimisation of the holding structure enables tax provisions of around EUR73 million to be released and recognised in income / Adjustment of 2020 forecast due to market development

Deutsche EuroShop AG reviewed its tax holding structure on the basis of the decision of the Grand Senate of the Federal Finance Court (BFH) on the extended trade tax reduction published in March 2019. Accordingly, it is possible to create a holding structure by making changes under corporate law within the Group that enable the extended reduction of trade tax to once again be used in the future in for another five subsidiaries where Deutsche EuroShop AG is not the sole shareholder.

The planned implementation of the restructuring is still partially subject to the approval of the co-shareholders and financing banks of the affected holdings. However, the Executive Board of Deutsche EuroShop AG believes the transaction can still be completed by the end of the year.

The new holding structure would allow the release of a substantial portion of the deferred tax liabilities recognised in the balance sheet. For the consolidated financial statements as at 31 December 2019, the Executive Board expects to release around EUR73 million to income, which would mean a positive impact on consolidated net income of EUR1.18 per share. For the FFO and EPRA earnings, the reversal for 2019 will not have an effect. After the restructuring, however, the current trade tax charge will be reduced as of the 2020 financial year.

The corporate forecasts were reviewed based on the available information and current market assessment. The Executive Board confirms the previous forecast for the 2019 financial year. The forecast for the 2020 financial year will be adjusted slightly.

The situation in the rental market continues to be challenging, and in some cases is accompanied by lengthy lease renewal processes and rent adjustments. At the same time, there will be additional interest savings as well as the tax relief expected as part of the tax restructuring.

Taking into account the partial offsetting effects, the Company now expects the following for the 2020 financial year:

• sales of between EUR221 and EUR225 million (previously: EUR222 to EUR226 million)
• earnings before interest and taxes (EBIT) of between EUR191 and EUR195 million (previously: EUR194 to EUR198 million)
• earnings before taxes (EBT) without valuation gains/losses of between EUR159 and EUR162 million (previously: EUR161 to EUR164 million)
• funds from operations (FFO) of between EUR150 and EUR153 million or between EUR2.43 and EUR2.47 per share (unchanged)

The planned distribution of a dividend in the amount of EUR1.60 per share in respect of financial year 2020 remains unaffected.

This notice contains complementary financial figures that are not precisely defined by the relevant accounting standards and that (may) represent alternative performance indicators. These complementary financial figures should not be considered in isolation or as an alternative to the figures presented in the consolidated financial statements and determined in accordance with the relevant accounting standards when evaluating the assets, financial position and results of operations of Deutsche EuroShop. Such alternative performance indicators may be calculated differently but labelled similarly by other companies. Explanations of the financial ratios used can be found at www.deutsche-euroshop.de/Investor-Relations/Service/Glossar

Author: Patrick Kiss, Head of Investor & Public Relations