Annual Report • Apr 23, 2009
Annual Report
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Overview of the fi nancial year 2008 and forecast
Adjusted for currency effects, METRO Group sales increased by 6.1 percent. In contrast to the previous year, METRO Group recorded negative currency effects. Sales growth measured in euros was capped at 5.8 percent. As expected, METRO Group's EBIT adjusted for special items rose disproportionately to sales growth by 7.1 percent. This means that the company reached its targets for 2008.
In 2008, METRO Group raised its sales by 5.8 percent to €68.0 billion, or currency adjusted by 6.1 percent
International Group sales increased by 8.4 percent to €41.3 billion
Group EBIT adjusted for special items reached €2.2 billion, exceeding the previous year's fi gure by 7.1 percent
Net profi t for the period declined from €983 million in the previous year to €560 million and included losses from discontinued operations (€-429 million) as well as the costs of trimming Real's store network (€-165 million)
Earnings per share from continuing operations adjusted for special items rose by 9.9 percent year-to-year
Investments rose by €0.3 billion to €2.5 billion
Balance sheet net debt increased by €0.3 billion to €4.6 billion
Standard & Poor's: long-term rating was upgraded to BBB+
Moody's: short- and long-term outlook changed from "stable" to "negative"
At €2.6 billion, cash fl ow from continuing operations was €0.6 billion below the previous year's fi gure
Total assets declined slightly to €33.8 billion. Negative currency effects caused equity to decline by €0.4 billion to €6.1 billion. The equity ratio dropped to 18 percent
We continue to expect METRO Group to generate annual growth rates of more than 6 percent over the medium term. In consideration of the global economic downturn, the lower number of new store openings and negative currency effects, we expect our growth rate to fall signifi cantly short of our medium-term goal of more than 6 percent in the current fi nancial year.
Our strategy aims for long-term profi table growth, or disproportionately higher earnings than sales growth. Our goal is to achieve growth of more than 8 percent per year in EBIT before special items. Our effi ciency- and value-enhancing programme "Shape 2012" aims to protect this level of growth over the long term. "Shape 2012" will unleash its positive impact on earnings from 2010 and become fully effective from 2012.
The high level of uncertainty caused by recent difficult economic developments makes a precise profi t-and-loss forecast for the fi nancial year 2009 impossible at this point. Although we expect the anticipated weaker sales growth to also impact our earnings, the cost-cutting measures and investment cutbacks introduced so far are aimed at minimising the impact on EBIT before special items.
Detailed information on discontinued operations is provided in the notes in no. 43
Our Group of companies is headed by METRO AG, which is based in Düsseldorf and acts as a strategic management holding company. The Group's operative business is handled by four sales divisions that operate independently in the market with specifi c concepts and, in some cases, several sales brands.
The Extra sales brand was sold to the Rewe Group on 17 January 2008 with effect from 1 July 2008. By contractual agreement of 13 February 2009, the Adler fashion stores were sold to the restructuring fund BluO beta equity Limited. The agreement is subject to the approval of the cartel authorities. Extra and Adler are shown as discontinued operations in the annual report for 2008. The 2008 fi nancial results of METRO Group have been adjusted for the results of the Extra sales brand and the Adler fashion stores. The previous year's fi gures – with the exception of the balance sheet – have been adjusted for Adler. Extra was already shown as a discon tinued operation in the fi nancial year 2007.
Cross-divisional service companies support the sales divisions by providing Group-wide and crossdivisional services in areas such as procurement, logistics, information technology, real estate management and business solutions.
The effi ciency- and value-enhancing programme "Shape 2012" will simplify METRO Group's organisational structures to achieve the highest possible growth momentum and customer orientation. Additional information on "Shape 2012" can be found in the supplementary and forecast report.
Metro Cash & Carry is the global market leader in the cash & carry sector. Operating under the Metro and Makro brands, it is our biggest and most international sales division with operations in 29 countries. Its product assortment is geared exclusively towards commercial and wholesale customers.
Real is one of the leading hypermarket operators in Germany and Poland. With locations in Germany, Poland, Romania and Turkey, Real represents the large-format hypermarket concept.
Europe's No. 1 in consumer electronics retailing: the Media Markt and Saturn sales brands compel with their innovative and powerful sales and marketing concepts with large-scale consumer electronics stores. Both have been posting strong growth for many years. They are represented in 16 countries and are rigorously expanding their leading position in Europe.
Galeria Kaufhof is the concept and system leader in the German department store sector and the market leader in Belgium. The sales division's department stores help boost the appeal of shopping areas and city centres with their sophisticated, highquality assortment presented in event-orientated product worlds.
| Metro Cash & Carry |
Real | Media Markt and Saturn |
Galeria Kaufhof | Other companies |
METRO Group | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Country | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 20071 | 2008 | 2007 |
| Germany | 126 | 122 | 343 | 349 | 367 | 353 | 126 | 126 | 190 | 202 | 1,152 | 1,152 |
| Austria | 12 | 12 | 33 | 31 | 2 | 3 | 47 | 46 | ||||
| Belgium | 11 | 10 | 15 | 14 | 15 | 15 | 41 | 39 | ||||
| Denmark | 5 | 5 | 5 | 5 | ||||||||
| France | 91 | 89 | 29 | 25 | 120 | 114 | ||||||
| Italy | 48 | 48 | 92 | 88 | 140 | 136 | ||||||
| Luxembourg | 1 | 1 | ||||||||||
| Netherlands | 17 | 16 | 30 | 27 | 47 | 43 | ||||||
| Portugal | 11 | 10 | 9 | 7 | 20 | 17 | ||||||
| Sweden | 14 | 8 | 14 | 8 | ||||||||
| Switzerland | 18 | 18 | 18 | 18 | ||||||||
| Spain | 34 | 34 | 57 | 48 | 91 | 82 | ||||||
| United Kingdom | 33 | 33 | 33 | 33 | ||||||||
| Western Europe excl. Germany | 262 | 257 | 298 | 266 | 15 | 15 | 2 | 3 | 577 | 541 | ||
| Bulgaria | 11 | 8 | 11 | 8 | ||||||||
| Croatia | 6 | 6 | 6 | 6 | ||||||||
| Czech Republic | 13 | 12 | 13 | 12 | ||||||||
| Greece | 9 | 8 | 9 | 7 | 18 | 15 | ||||||
| Hungary | 13 | 13 | 22 | 20 | 35 | 33 | ||||||
| Moldova | 3 | 3 | 3 | 3 | ||||||||
| Poland | 29 | 26 | 53 | 50 | 50 | 42 | 132 | 118 | ||||
| Romania | 24 | 23 | 20 | 14 | 44 | 37 | ||||||
| Russia | 48 | 39 | 12 | 10 | 14 | 11 | 74 | 60 | ||||
| Serbia | 5 | 5 | 5 | 5 | ||||||||
| Slovakia | 5 | 5 | 5 | 5 | ||||||||
| Turkey | 13 | 11 | 11 | 11 | 8 | 3 | 32 | 25 | ||||
| Ukraine | 23 | 18 | 23 | 18 | ||||||||
| Eastern Europe | 202 | 177 | 96 | 85 | 103 | 83 | 401 | 345 | ||||
| China | 38 | 37 | 38 | 37 | ||||||||
| India | 5 | 3 | 5 | 3 | ||||||||
| Japan | 4 | 3 | 4 | 3 | ||||||||
| Morocco | 8 | 7 | 8 | 7 | ||||||||
| Pakistan | 2 | 1 | 2 | 1 | ||||||||
| Vietnam | 8 | 8 | 8 | 8 | ||||||||
| Asia/Africa | 65 | 59 | 65 | 59 | ||||||||
| International | 529 | 493 | 96 | 85 | 401 | 349 | 15 | 15 | 2 | 3 | 1,043 | 945 |
| METRO Group | 655 | 615 | 439 | 434 | 768 | 702 | 141 | 141 | 192 | 205 | 2,195 | 2,097 |
Portfolio of locations per country and sales division
Adjustment of previous year's fi gures due to discontinued operations
METRO Group Asset Management combines a high level of expertise in the real estate business with retail-specifi c know-how. The company is one of Germany's major retail real estate managers and oversees more than 750 properties totalling 8 million square metres of commercial space worldwide and operates more than 70 shopping centres. Its facility management activities for about 1,700 retail, administrative and warehousing locations currently cover 16 countries. METRO Group Asset Management focuses on the continuous development of METRO Group properties, the creation of sustained value added and active portfolio management. In the process, economic effi ciency and environmental sustainability do not contradict each
other. Architects, engineers, economists and property experts work hand in hand to fulfi l the Group's responsibility towards society and the environment. For example, METRO Group is making continual advances in increasing the energy effi ciency of its properties as well as using renewable energies around the world. In 2008, METRO Group Asset Management was awarded the highest honours in the European real estate sector for the innovative and sustainable concept for its M1 Meydan shopping centre in Istanbul. The centre operates one of Europe's largest geothermal plants and has a green roof with a space of 30,000 square metres. METRO Group Asset Management sets standards for future-orientated retail real estate.
After six months of solid growth in the 1st half of 2008, global economic momentum slowed drastically during the 2nd half of the year. The real estate and fi nancial market crisis that originated in the United States already in 2007 has hit the global economy even harder than expected and affected nearly all global economies during the course of 2008.
Around the world, energy and food prices continued to rise during the 1st half of 2008. High infl ation rates reduced purchasing power and dampened the mood among consumers. During the 2nd half of the year, retreating global demand pushed down raw material prices. As a result, consumer prices also declined markedly towards the end of the year.
Amid the deepening fi nancial crisis, banks sharply reduced granting credits to companies and consumers during the 2nd half of the year, with correspondingly negative effects on investments and consumption. The US and Western European governments, in particular, along with governments in Eastern Europe and Asia, issued massive guarantees and implemented stimulus programmes of unprecedented dimensions to help stabilise the banking system and support the economy. In some countries, IMF's (International Monetary Fund) fi nan cial aid prevented a negative impact on the respective fi nancial systems.
All in all, global economic growth in 2008 was considerably weaker than in the previous years. After growing by a real 3.7 percent in 2007, the glob al economy slowed to 2.0 percent in 2008. While growth momentum remained strong during the 1st half, particularly in the emerging markets, growth rates weakened across the globe during the 2nd half of the year.
| 2008 | 2007 | |
|---|---|---|
| Global economy | 2.0 | 3.7 |
| Western Europe | 0.8 | 2.7 |
| Eastern Europe | 4.9 | 7.0 |
| Asia | 3.2 | 5.8 |
| United States | 1.3 | 2.0 |
| Germany | 1.3 | 2.5 |
Source: FERI
The fi nancial crisis and its real economic impact accelerated the incipient economic downswing in Western Europe in 2008, with additional negative economic factors such as the real estate market crises in Spain and the United Kingdom adding to the woes. Following a generally solid start in the 1st quarter of 2008, growth weakened drastically in the Western European economies during the following quarters. By the end of 2008, several countries had slipped into a recession.
In 2008, real economic growth in Western Europe slowed to just 0.8 percent (previous year: 2.7 percent). Weakness prevailed in Denmark, Italy, Portugal, France and the United Kingdom. Spain suffered the most severe year-to-year slowdown. Full-year growth rates remained solid in the Netherlands, Austria, Belgium and Switzerland. Greece's Gross Domestic Product posted the strongest growth as the country's growth potential remains higher than that of the other Western European countries.
The Eastern European economy remained on its dynamic growth course during the 1st half of 2008. High infl ation rates, which in many Eastern European countries reached double-digit fi gures during the 1st half of the year, weighed on private consumption. Strong domestic demand, however, fuelled another strong increase in price-adjusted consumption over the year as a whole.
The shock consequences of the fi nancial crisis also reached Eastern Europe during the 2nd half of the year. Financial systems were hit by massive capital outfl ows. In the process, some of the Eastern European currencies depreciated heavily against the euro. Due partly to declining export demand in Western Europe, the economy weakened substantially during the 2nd half of the year. Nonetheless, Eastern Europe posted another strong full-year growth rate for 2008. After growing by a real 7.0 percent in 2007, the Eastern European economy expanded by 4.9 percent in 2008. Russia, Romania and Slovakia recorded the highest growth rates.
Except for Japan, economic developments in Asia were favourable during the 1st half of 2008. Growth slowed noticeably, however, during the 2nd half of the year. The Asian economies posted an overall economic growth rate of 3.2 percent for the fi nancial year 2008 (previous year: 5.8 percent). Due to its high export dependency, China's fast-growing economy felt the effect of declining global demand particularly strongly during the 2nd half of the year. For the fi rst time in fi ve years, the Chinese economy achieved only a single-digit growth rate. Japan was hit hardest among the Asian countries, with its economy being nearly stagnant in 2008.
Against a backdrop of globally rising energy and food prices, infl ation reached above-average levels in individual countries, with the rate rising as high as 20 percent in some cases. Buoyant domestic demand continued to fuel private consumption in Asia's developing nations, although real growth rates failed to reach prior-year levels.
| 2008 | 2007 | |
|---|---|---|
| China | 9.0 | 13.0 |
| Romania | 7.3 | 6.0 |
| India | 7.2 | 9.0 |
| Egypt1 | 6.8 | 7.1 |
| Slovakia | 6.7 | 10.4 |
| Vietnam | 6.2 | 8.5 |
| Russia | 6.1 | 8.1 |
| Pakistan | 6.0 | 6.0 |
| Serbia | 5.9 | 7.1 |
| Bulgaria | 5.5 | 6.2 |
| Morocco2 | 5.3 | 2.1 |
| Poland | 4.9 | 6.7 |
| Moldova2 | 4.7 | 6.9 |
| Czech Republic | 4.1 | 6.0 |
| Kazakhstan1, 2 | 3.4 | 8.5 |
| Greece | 3.0 | 4.0 |
| Croatia | 3.0 | 5.6 |
| Luxembourg2 | 2.5 | 4.5 |
| Ukraine | 2.1 | 8.0 |
| Netherlands | 2.0 | 3.5 |
| Switzerland | 1.9 | 3.3 |
| Turkey | 1.8 | 4.6 |
| Austria | 1.6 | 3.1 |
| Belgium | 1.4 | 2.6 |
| Germany | 1.3 | 2.5 |
| Spain | 1.2 | 3.7 |
| Hungary | 1.0 | 1.1 |
| Sweden | 0.8 | 2.5 |
| United Kingdom | 0.7 | 3.0 |
| France | 0.4 | 2.1 |
| Portugal | 0.3 | 1.9 |
| Denmark | (0.7) | 1.6 |
| Japan | (0.7) | 2.4 |
| Italy | (0.9) | 1.4 |
Source: FERI Market entry planned Business Monitor
Across the globe, consumer goods trade has developed very dynamically over the past few years. During the last fi ve years alone, global retail sales rose by more than 22 percent to over €9,600 billion in nominal terms (2003 about €7,850 billion). With a share of more than 40 percent of total industry sales, food retailing was the largest segment in the global retail trade.
Although there are numerous globally active retail groups, the competitive landscape in different regions and countries is characterised by varying actors and industry structures. The continued internationalisation of large, globally active retail groups impressively refl ects the growth potential still available in this industry, a potential that METRO Group utilises for its systematic expansion in the Eastern European and Asian growth regions.
Two factors were largely responsible for retail trends in 2008: the steep rise in energy and food prices and the global economic downturn. Nominal retail sales growth remained slightly below the prior-year level in Western Europe, Eastern Europe and Asia. Adjusted for infl ation, however, growth slowed substantially in most countries. The Eastern European economies continued to record the highest growth rates.
Retail sales growth weakened substantially in Western Europe. The sales increases achieved during the 1st half of the year were largely attributable to price factors. In a number of countries, the real economic weakening induced by domestic real estate market crises also caused retail sales to retreat. In most other Western European countries, however, the real economic effects of the fi nancial market crisis left the retail trade relatively unscathed compared with other sectors as another increase in employment and higher wages and salaries boosted disposable incomes. By the end of the year, however, growth rates began to slow here as well.
In nominal terms, retail sales in Germany grew faster in 2008 than a year earlier. In 2007, the increase in the country's value-added tax dampened the retail business. In 2008, the sector was able to participate in rising disposable incomes, but high inflation dampened purchasing power and the consumer mood during the 1st half of the year. All in all, the German retail trade posted another negative real growth rate in 2008.
Retail sales growth remained dynamic in Eastern Europe, although part of this growth was due to high consumer price increases during the 1st half of the year. However, in most Eastern European countries, retail sales growth was strong even in price-adjusted terms, but slowed during the 2nd half of the year. Retailers in Russia and Romania again achieved double-digit sales increases.
Retail sales developments diverged markedly in Asia. In nominal terms, retail sales rose at doubledigit rates in all METRO Group countries – except for Japan. Adjusted for price, however, only Chinese retail sales growth still exceeded 10 percent, with all other countries posting increases of less than 5 percent. In a number of countries, infl ation dampened the retail business substantially. In Japan, meanwhile, weak economic developments were also refl ected in retail sales, which shrank in both nominal and real terms in 2008.
The Metro Cash & Carry sales brand remains the global leader in the cash & carry segment. In 2008, the sales brand continued to strengthen its leading market position through targeted expansion in Eastern European and Asian growth markets, in particular.
Sales in the German and Western European cash & carry business only grew slightly compared with the previous year, with Metro Cash & Carry successfully defending its market share.
Growth momentum remained strong in all Eastern European countries, with positive sector developments continuing into the 2nd half of the year despite the distinct weakening of the overall economy. With its continued expansion, Metro Cash & Carry once again contributed markedly to the region's dynamic development in 2008.
Germany records stronger nominal retail sales growth in 2008 than a year earlier
Retail sales trends remain dynamic in Eastern Europe in 2008
Retail sales growth in Asia driven largely by price developments
Positive development of Metro Cash & Carry in Germany and Western Europe
Dynamic development in Eastern Europe in 2008
Strong growth potential for Metro Cash & Carry in Asia
Positive development in German food retailing
Continually strong sales growth in Eastern Europe
Continued sales growth in German consumer electronics retailing
The cash & carry business continued to develop dynamically in the Asian markets. From the perspective of Metro Cash & Carry, the low level of market concentration and the heterogeneous structure of the retail trade in many Asian countries harbour continually strong growth potential. In this region, too, growth of the cash & carry business is driven decisively by Metro Cash & Carry's activities.
The rigorous continuation of Real's successful repositioning process decisively contributed to the positive like-for-like and price-adjusted sales development of the Real sales brand in Germany in 2008. Real recorded particularly strong sales growth in Eastern Europe. The sales brand's selective expansion contributes decisively to the strengthening of its market position in the relevant Eastern European countries.
Food retail sales in Germany rose faster than a year earlier. Rising food prices, particularly during the 1st half of the year, played a key role in this. Like small superstores and discounters, large-format superstores with selling space of more than 2,500 square metres grew faster than the German food retail as a whole.
The modern large-format stores in Real's Eastern European countries profi ted disproportionately from the generally positive development of the food retail market. The unaltered strong demand for hypermarkets in these countries is confi rmed by their growing market share.
Building on its progressive international expansion, the Media Markt and Saturn group of companies continued to expand its market leadership in the German and European consumer electronics retail trade in 2008.
In a dynamic market environment, sales developments in the German consumer electronics retail business remained favourable. Attractive and innovative technologies as well as highly publicised sports events like the European football championships and the Olympic Games fuelled entertainment electronics sales. Sales of IT equipment also rose disproportionately. In contrast, sales declined in the telecommunications and photography segments.
In 2008, consumer electronics sales in Western Europe fell short of year-earlier developments. This was due mostly to developments in Spain where the economy slowed sharply. The group of companies continued to add market share in Western Europe as a whole.
Persistent pent-up demand for classic consumer electronics products fuelled strong sales growth in Eastern Europe, particularly in Poland and Russia. Media Markt and Saturn also expanded their market share in this region.
Building on the rigorous implementation of its trading-up strategy, the Galeria Kaufhof sales brand expanded its concept and system leadership in the German department store business in 2008.
As in past years, business developments in the German department store business lagged overall retail trade developments. Intensifi ed competition, due in particular to the declining textile market, accelerated the consolidation process taking place in the department store and clothing sector. Its distinct market positioning enabled Galeria Kaufhof to profi t from this development and gain market share.
In Belgium, Galeria Inno continued its past years' successful course.
METRO Group can look back on a positive business development in 2008. The company con tinued to strengthen its position as one of the most important and largest international retail groups in terms of sales strength. Group sales excluding sales of Adler and Extra reached €68.0 billion, with the German and international business growing by 2.0 percent and 8.4 percent, respec tively. The international share of Group sales climbed to 60.8 percent. Our continued international expansion again made the key contribution to the business success of METRO Group. At €1,988 million, Group EBIT was €90 million lower than the previous year's fi gure. Adjusted for the special effect from the streamlining of the Real store network, Group EBIT amounted to €2,225 million, an increase of €147 million or 7.1 percent compared to the previous year.
In the fi nancial year 2008, METRO Group raised Group sales by 5.8 percent to €68.0 billion (previous year: €64.2 billion). Adjusted for on balance negative currency effects, Group sales rose by 6.1 percent compared to the previous year. Adjusted for currency effects, the Group's sales growth thus met the forecast of more than 6 percent issued at the start of 2008, despite the fact that market conditions became increasingly challenging during the course of the year.
In Germany, METRO Group posted a 2.0 percent increase in sales to €26.7 billion for 2008 (previous year: €26.1 billion). Outside of Germany, Group sales rose by 8.4 percent to €41.3 billion (previous year: €38.1 billion). At 60.8 percent, the international share of sales reached a new all-time high. Negative currency effects reduced international sales growth by 0.3 percentage points. Group sales in Western Europe rose by 2.2 percent to €21.0 billion (previous year: €20.5 billion). Growth momentum remained dynamic in Eastern Europe where sales grew by 15.3 percent to €18.1 billion (previous year: €15.7 billion). METRO Group recorded 18.6 percent higher sales of €2.2 billion (previous year: €1.9 billion) in Asia/Africa.
The Extra supermarkets and the Adler fashion stores are included in these annual financial statements as discontinued operations. The business data have been adjusted accordingly and the previous year's fi gures – with the exception of the balance sheet – have been adjusted for Adler. Extra was already shown under discontinued operations in 2007.
The 245 Extra stores that were sold to the Rewe Group with effect from 1 July 2008 had generated sales of €0.7 billion up to this date. By contractual agreement of 13 February 2009, the Adler fashion stores were sold to the restructuring fund BluO beta equity Limited. The agreement is subject to the approval of cartel authorities. The 120 Adler stores accounted for sales of €0.5 billion in 2008.
| Change | ||||
|---|---|---|---|---|
| € million | 2008 | 20071 € million | % | |
| Metro Cash & Carry | 33,143 | 31,698 | 1,445 | 4.6 |
| Real | 11,636 | 11,003 | 633 | 5.8 |
| Media Markt and Saturn |
18,993 | 17,444 | 1,549 | 8.9 |
| Galeria Kaufhof | 3,516 | 3,556 | (40) | (1.1) |
| Other companies | 668 | 509 | 159 | 31.5 |
| METRO Group | 67,956 | 64,210 | 3,746 | 5.8 |
| of which Germany | 26,666 | 26,133 | 533 | 2.0 |
| of which inter national |
41,290 | 38,077 | 3,213 | 8.4 |
| Western Europe | 20,993 | 20,532 | 461 | 2.2 |
| Eastern Europe | 18,084 | 15,680 | 2,404 | 15.3 |
| Asia/Africa | 2,213 | 1,865 | 348 | 18.6 |
Adjustment of previous year's fi gures due to discontinued operations and changed disclosure regulations (see notes to the Group accounting principles and methods in the notes to the consolidated fi nancial statements)
METRO Group's EBIT declined by €90 million or 4.3 percent to €1,988 million. This amount includes negative non-recurring effects from the streamlining of Real's German store network in the amount of €237 million. EBIT before special items rose by €147 million or 7.1 percent to €2,225 million. The increase thus fell within the 6 to 8 percent range forecast at the start of 2008.
EBIT in Germany declined by €177 million to €393 million. Adjusted for the above-mentioned non-recurring effect, EBIT exceeded the previous year's fi gure by €60 million, reaching €630 million. With earnings growth of €97 million, the international business remained a key growth driver of METRO Group. The weak nonfood business in Spain and Italy dampened earnings developments in Western Europe. EBIT in this region dropped by 17.7 percent. At the same time, EBIT in Eastern Europe rose markedly by 27.7 percent to €1,028 million.
Group EBITDA fell slightly short of the previous year's fi gure in the reporting year. EBITDA before non-recurring effects rose by 6.0 percent to €3,543 million from €3,343 million. EBITDA in Germany reached €1,094 million including negative effects from the streamlining of the Real store network. Excluding non-recurring items, EBITDA in Germany amounted to €1,297 million after €1,231 million a year earlier.
| EBITDA | EBIT | |||
|---|---|---|---|---|
| € million | 2008 | 2007 | 2008 | 2007 |
| Metro Cash & Carry | 1,728 | 1,631 | 1,328 | 1,243 |
| Real | 2122 | 160 | 213 | (16) |
| Media Markt and Saturn |
839 | 8184 | 603 | 6104 |
| Galeria Kaufhof | 217 | 211 | 113 | 107 |
| Other companies/ consolidation |
5472 | 523 | 1603 | 134 |
| METRO Group | 3,5432 | 3,3434 | 2,2253 | 2,0784 |
Adjustment of previous year's fi gures due to discontinued operations
Due mostly to the determined continuation of its international expansion, Metro Cash & Carry once again generated substantial growth of sales and earnings and thus contributed strongly to METRO Group's growth: the sales division raised its sales by 4.6 percent to €33.1 billion from €31.7 billion. The increase amounted to 5.4 percent adjusted for currency effects, with a 1.6 percent increase in like-for-like sales denominated in euros.
In Germany, sales of Metro Cash & Carry rose slightly by 0.1 percent to €5.7 billion compared with the previous year; like-for-like sales in Germany fell by 1.2 percent. The sales division raised its international sales by 5.5 percent to €27.5 billion from €26.0 billion a year earlier. Adjusted for currency effects, international sales increased by 6.6 percent. In terms of sales growth, the division's Eastern European markets outperformed its Western European business (excluding Germany) for the fi rst time. Metro Cash & Carry recorded particularly strong growth in Russia, where sales were up 19.9 percent to €3.1 billion, as well as in Ukraine, where the continued extension of the store network led to sales growth of 24.3 percent to €1.0 billion. Like-for-like sales also showed strong growth of 5.4 percent in Eastern Europe. The large international portion of sales increased again from 82.1 percent to 82.9 percent.
In 2008, Metro Cash & Carry strengthened its glob al market leadership in the cash & carry segment through the continued extension of its international network of locations. During the course of the year, Metro Cash & Carry opened 40 stores, including 4 in Germany. Its international expansion efforts were focused on Eastern Europe, where 25 new locations were added. 9 stores were opened in Russia alone and 5 in Ukraine. Metro Cash & Carry added 5 and 6 locations in Western Europe and Asia, respectively. As the most international sales division within METRO Group, Metro Cash & Carry operated 655 stores in 29 countries at the end of 2008; its total selling space amounted to 5.2 million square metres.
Based on favourable like-for-like sales developments in growth markets, EBIT of Metro Cash & Carry rose by 6.8 percent to €1,328 million (previous year: €1,243 million) and thus more strongly than sales. As a result, the EBIT margin was improved again. These positive earnings trends underscore the high earnings strength of our wholesale stores.
| Change in % | ||||
|---|---|---|---|---|
| € million | 2008 | 2007 | Total | Like for-like |
| Sales | 33,143 | 31,698 | 4.6 | 1.6 |
| Germany | 5,677 | 5,671 | 0.1 | (1.2) |
| Western Europe | 12,585 | 12,682 | (0.8) | (1.4) |
| Eastern Europe | 12,968 | 11,702 | 10.8 | 5.4 |
| Asia/Africa | 1,913 | 1,643 | 16.5 | 8.3 |
| EBITDA | 1,728 | 1,631 | 6.0 | – |
| EBIT | 1,328 | 1,243 | 6.8 | – |
| EBIT margin (%) | 4.0 | 3.9 | – | – |
| Locations (number) | 655 | 615 | – | – |
| Selling space (1,000 sqm) |
5,176 | 4,875 | 6.2 | – |
Real posted 5.8 percent higher sales of €11.6 billion (previous year: €11.0 billion) in 2008. The increase resulted from positive developments in Germany as well as the division's continued expansion in Eastern Europe. Adjusted for currency effects, sales rose by 5.3 percent.
Despite the liquidation or closure of 10 stores, sales in Germany grew by 0.5 percent to €8.8 billion (previous year: €8.7 billion). Real continued the upward trend started in the fourth quarter of 2007 with likefor-like sales growth of 3.6 percent. The advertising campaign under the motto of "Einmal hin. Alles drin." (Real: one store, you won't need more!), which Real kicked off in April, and the successful introduction of a comprehensive new own-brand assortment allowed Real to also markedly increase customer numbers.
Building on double-digit growth in all regional markets, sales in Eastern Europe rose by 25.7 percent to €2.9 billion. Like-for-like sales in the region increased substantially by 9.3 percent. In addition, Real successfully continued its selective expansion with the extension of its Eastern Europe store network by 11 hypermarkets. Real's expansion efforts focused on Romania, with 6 new stores, while 3 new stores were opened in Poland and 2 in Russia.
At the end of 2008, Real's store network comprised 439 hypermarkets (previous year: 434). A total of 343 stores were operated in Germany at year's end. Aside from 3 new openings and 10 liquidations, one store from the divested Extra supermarket network was taken over at METRO AG's Düsseldorf headquarters as a "Food" supermarket. The Eastern Euro pean store network has grown to 96 stores from 85 stores in the previous year.
EBIT before special items rose by €37 million to €21 million. Special items to be adjusted concerned negative effects from the streamlining of the Real store network in Germany in the amount of €224 million. This earnings improvement refl ects the initial success of the repositioning programme in Germany. The EBIT increase results from a substantial sales-induced increase in gross profi t and cost cuts in Germany. In addition, EBIT also increased markedly in Eastern Europe, thanks mostly to positive operative developments, particularly in Poland.
| Change in % | ||||
|---|---|---|---|---|
| € million | 2008 | 2007 | Total | Like for-like |
| Sales | 11,636 | 11,003 | 5.8 | 5.0 |
| Germany | 8,751 | 8,707 | 0.5 | 3.6 |
| Eastern Europe | 2,885 | 2,296 | 25.7 | 9.3 |
| EBITDA | 2121 | 160 | 33.0 | – |
| EBIT | 212 | (16) | – | – |
| EBIT margin (%) | 0.2 | (0.2) | – | – |
| Locations (number) | 439 | 434 | – | – |
| Selling space (1,000 sqm) |
3,148 | 3,103 | 1.4 | – |
Adjusted for negative effects from the streamlining of the Real store network in the amount of €223 million
Adjusted for negative effects from the streamlining of the Real store network in the amount of €224 million
During the past fi nancial year, the consumer electronics stores of the Media Markt and Saturn group raised their sales by 8.9 percent to €19.0 billion from €17.4 billion. Media Markt and Saturn thus continued to bolster their leading position in the European consumer electronics market. Due to increasingly diffi cult economic parameters in several Western European markets during the course of the year, like-for-like sales declined by 1.7 percent.
In a relatively robust market environment, Media Markt and Saturn raised sales in Germany by 5.3 percent to €8.7 billion from €8.2 billion and gained additional market share. Despite the continued expansion of the store network, like-for-like sales grew by 1.3 percent.
Media Markt and Saturn continued their buoyant international growth momentum with another strong sales increase. Sales rose by 12.0 percent to €10.3 billion from €9.2 billion. Sales growth in Western and Eastern Europe amounted to 7.4 percent and 32.8 percent, respectively. Like-for-like sales in Western Europe shrank by 6.2 percent, due mostly to steep declines in Spain and Italy. In Eastern Europe, like-for-like sales rose by 4.0 percent. The international share of sales reached 54.3 percent after 52.8 percent a year earlier.
The sales division continued the rigorous expansion of its German and international sales network in 2008. At the end of October, the division entered the Luxembourg market with the opening of the fi rst Saturn consumer electronics store. All in all, 70 new stores were opened, including 16 in Germany and 54 outside of Germany. Media Markt and Saturn accounted for 6 and 10 of new store openings in Germany and 37 and 17 international locations, respectively. Divisional expansion efforts focused on Western Europe, where 34 new stores were opened in 2008. In the course of optimisation efforts and store relocations, 2 stores each were given up in Germany and Italy. Following its market entry in Luxembourg, the division is now represented in 16 countries with a total selling space of 2.4 million square metres. At year's end 2008, the distribution network of Media Markt and Saturn comprised 768 locations, including 367 in Germany, 298 in Western Europe and 103 in Eastern Europe.
Media Markt and Saturn posted nearly unchanged earnings in the past fi nancial year. EBIT stood at €603 million after €610 million in the previous year. High outlays for the division's expansion efforts and declining earnings in Western Europe – particularly in Spain – were all but offset by earnings improvements in Germany and Eastern Europe.
| Change in % | ||||
|---|---|---|---|---|
| € million | 2008 | 20071 | Total | Like for-like |
| Sales | 18,993 | 17,444 | 8.9 | (1.7) |
| Germany | 8,670 | 8,231 | 5.3 | 1.3 |
| Western Europe | 8,091 | 7,532 | 7.4 | (6.2) |
| Eastern Europe | 2,232 | 1,681 | 32.8 | 4.0 |
| EBITDA | 839 | 818 | 2.5 | – |
| EBIT | 603 | 610 | (1.2) | – |
| EBIT margin (%) | 3.2 | 3.5 | – | – |
| Locations (number) | 768 | 702 | – | – |
| Selling space (1,000 sqm) |
2,439 | 2,213 | 10.2 | – |
Adjustment of previous year's fi gures due to changed disclosure regulations (see notes to the Group accounting principles and methods in the notes to the consolidated fi nancial statements)
In the fi nancial year 2008, Galeria Kaufhof once again underscored its position as concept and system leader in the German department store market. In an extremely diffi cult market environment, particularly in the textiles segment, Galeria Kaufhof recorded 1.1 percent lower sales of €3.5 billion compared to the previous year. Like-for-like sales declined by 1.4 percent. However, Galeria Kaufhof outperformed the market in the strategically import ant textiles segment.
The Belgian Galeria Inno department stores raised their sales by 0.2 percent (like-for-like growth of 0.9 percent) to €316 million.
Galeria Kaufhof rigorously implemented its retail brand strategy. As a result, the focus in 2008 remained on sharpening the Galeria Kaufhof profi le as a unique and successful lifestyle brand. The assortment was developed further in response to customer expectations regarding style, modernity and quality, with further improvements in service and shopping comfort.
The department stores Frankfurt Zeil, Hamburg Mönckebergstraße and Kassel were thoroughly redesigned under the Galeria concept and developed favourably. At the end of 2008, Galeria Kaufhof operated a total of 141 department stores.
EBIT of Galeria Kaufhof rose to €113 million in the reporting year, up 5.8 percent compared with the previous year. The EBIT margin rose for the 4th consecutive year to 3.2 percent. The earnings growth was based on a sustained improvement in value added in the merchandise business and more effi cient resource management.
| Change in % | ||||
|---|---|---|---|---|
| € million | 2008 | 2007 | Total | Like for-like |
| Sales | 3,516 | 3,556 | (1.1) | (1.4) |
| Germany | 3,200 | 3,240 | (1.3) | (1.6) |
| Western Europe | 316 | 316 | 0.2 | 0.9 |
| EBITDA | 217 | 211 | 2.9 | – |
| EBIT | 113 | 107 | 5.8 | – |
| EBIT margin (%) | 3.2 | 3.0 | – | – |
| Locations (number) | 141 | 141 | – | – |
| Selling space (1,000 sqm) |
1,490 | 1,486 | 0.2 | – |
In addition to the consolidation, the segment "other companies/consolidation" comprises METRO AG, the cross-divisional service companies and our restaurant group Dinea. Sales in the reporting year amounted to €668 million, exceeding the previous year's fi gure by €159 million. This increase was due mostly to the business with Asian imports for third parties as well as temporary supplies to the divested Extra supermarkets by the logistics structures of METRO Group. At €160 million, EBIT before special items was €26 million higher than in the previous year, a result that was primarily attributable to cost reductions.
| € million | 2008 | 20071 | |
|---|---|---|---|
| Earnings before interest and taxes (EBIT) |
1,9882 | 2,078 | |
| Result from associated companies | 0 | 0 | |
| Other investment results | 14 | 11 | |
| Interest income/expenses (net result) | (486) | (491) | |
| Other fi nancial results | (101) | (37) | |
| Net fi nancial income | (573) | (517) | |
| Earnings before taxes EBT | 1,4152 | 1,561 | |
| Income taxes | (426) | (560) | |
| Income from continuing operations | 9893 | 1,0014 | |
| Income from discontinued operations after taxes |
(429) | (184 ) |
|
| Net profi t for the period | 5603 | 9834 |
Adjustment of previous year's fi gures due to discontinued operations and changed disclosure regulations (see notes to the Group accounting principles and methods in the notes to the consolidated fi nancial statements)
4 Includes special tax effects for continuing operations in the amount of €-64 million and for discontinued operations in the amount of €-4 million
65 Group Management Report 67 Overview of the fi nancial year 2008 and forecast
The fi nancial result comprises above all the net interest result of €-486 million (previous year: €-491 million) and other financial results of €-101 million (previous year: €-37 million). The decline in other fi nancial results stems primarily from €63 million lower results from hedging transactions and exchange rate effects and concerns above all the translation of monetary items in foreign currency of individual national subsidiaries in Eastern Europe. The translation of these items is effected at the respective exchange rate on the closing date; the measurement loss refl ects the depreciation of the respective local currency versus the foreign currency.
Additional information on the fi nancial results is contained in the notes to the consolidated fi nancial statements in nos 6 to 9.
| € million | 2008 | 20071 |
|---|---|---|
| Taxes paid or due | 552 | 576 |
| thereof Germany | [154] | [158] |
| thereof international | [398] | [418] |
| Deferred taxes | (126) | (16) |
| thereof Germany | [(127)] | [23] |
| thereof international | [1] | [(39)] |
| Income taxes | 426 | 560 |
Adjustment of previous year's fi gures due to discontinued operations
Deferred tax liabilities for 2007 in Germany comprised special tax items of €-64 million. Adjusted for these special effects, deferred tax assets of €41 million were recorded in Germany in 2007. The change of €86 million remaining after consideration of these eliminated special effects is based primarily on the capitalisation of deferred taxes on loss carry-forwards.
Additional information about income taxes is contained in the notes to the consolidated fi nancial statements in no. 11.
In 2008, net profi t for the period (Group net profi t) totall ed €560 million, 43.0 percent lower than the previous year. Net of minority interests, the Group's net profi t attributable to the shareholders of METRO AG amounted to €403 million.
Net profi t for the period comprises the results of the discontinued Adler and Extra operations as well as negative effects from the streamlining of the Real store network. On balance, these earnings components reduce net profi t for the period by €594 million. Net profi t for the period adjusted for these items thus amounted to €1,154 million and was 8.4 percent higher than the comparable result for 2007 adjusted for discontinued operations and special tax effects.
In the fi nancial year 2008, METRO Group generated earnings per share of €1.23. As in the previous year, the calculation was based on a weighted number of 326,787,529 shares. Group net profi t attributable to the shareholders of METRO AG of €403 million was distributed according to this number of shares. There was no dilution in the reporting year or in the previous year.
Earnings per share from continuing operations before special items, that is adjusted for expenses related to the streamlining of the Real store network, amounted to €3.05. This corresponds to an increase of 9.9 percent compared to the comparable previous year's fi gure of €2.77 adjusted for special tax effects.
| Change | ||||
|---|---|---|---|---|
| € million | 2008 | 20071 | Absolute | % |
| Income from continuing operations | 989 | 1,001 | (12) | (1.2) |
| Income from discontinued operations | (429) | (18) | (411) | - |
| Net profi t for the period2 | 560 | 983 | (423) | (43.0) |
| thereof attributable to minority interests2 | 157 | 158 | (1) | (0.4) |
| thereof attributable to shareholders of METRO AG2 | 403 | 825 | (422) | (51.2) |
| Earnings per share2, 3, 4 (€) | 1.23 | 2.52 | (1.29) | (51.2) |
| Earnings per share from continuing operations before special items4, 5 (€) | 3.05 | 2.77 | 0.28 | 9.9 |
Adjustment of previous year's fi gures due to discontinued operations
2008 includes negative effects from the streamlining of the Real store network in the amount of €165 million, 2007 including special tax
effects in the amount of €-68 million
Including discontinued operations After minority interests
In 2008 adjusted for the negative effects from the streamlining of the Real store network, 2007 adjusted for special tax effects
METRO Group's strength is refl ected in its ability to continuously increase the company's value through growth and the effi cient deployment of its capital.
Positive EVA is achieved when the Net Operating Profi t after Tax (NOPAT) exceeds the cost of capital needed to fi nance the capital employed. NOPAT is defi ned as operating profi t before fi nancing costs, but after income taxes. The cost of capital refl ects the expected remuneration to investors for the capital they provide and for their investment risk. It is calculated by multiplying the capital employed by the Weighted Average Cost of Capital (WACC). In 2008, the cost of capital rate of METRO Group remained unchanged from the previous year at 6.5 percent.
6.5% Group WACC
| Capital | RoCE | ||||
|---|---|---|---|---|---|
| € million | NOPAT | employed | EVA | % | Delta EVA |
| Metro Cash & Carry | 1,076 | 7,393 | 596 | 14.6 | 39 |
| Real | 168 | 5,916 | (217) | 2.8 | 74 |
| Media Markt and Saturn | 469 | 2,814 | 286 | 16.7 | (28) |
| Galeria Kaufhof | 80 | 1,060 | 11 | 7.5 | 5 |
| Other companies/consolidation | 254 | 4,879 | (63) | – | (15) |
| METRO Group | 2,047 | 22,062 | 613 | 9.3 | 75 |
In 2008, METRO Group once again achieved positive EVA and thus made successful use of its capital employed. METRO Group's EVA reached €613 million, compared with €538 million in the previous year. Metro Cash & Carry and Real posted a signifi cant increase in EVA compared with the previous year's total. Media Markt and Saturn suffered a decline in EVA compared to the previous year. Galeria Kaufhof again earned its cost of capital and nearly doubled its EVA compared to the previous year.
At 9.3 percent, the RoCE (Return on Capital Employed) exceeded the previous year's result.
The cost of capital rose by €41 million to €1,434 million; NOPAT increased by €116 million to €2,047 million, due mostly to the increase in divisional EBIT.
Dividend distribution is based on METRO AG's annual fi nancial statements prepared under German commercial law. The balance sheet and income statement of METRO AG prepared in accordance with the German Commercial Code (HGB) are as follows:
Balance sheet as of 31 December 2008 according to the German Commercial Code (HGB)
| ASSETS | ||
|---|---|---|
| € million | 31 Dec 2008 |
31 Dec 2007 |
| Fixed assets | ||
| Intangible assets | 1.9 | 2.5 |
| Tangible assets | 4.7 | 6.2 |
| Financial assets | 7,975.6 | 8,000.0 |
| 7,982.2 | 8,008.7 | |
| Current assets | ||
| Receivables and other assets | 2,120.4 | 3,462.2 |
| Cash on hand, bank deposits and cheques |
1,255.0 | 794.1 |
| 3,375.4 | 4,256.3 | |
| Prepaid expenses and deferred charges | 10.1 | 1.6 |
| 11,367.7 | 12,266.6 |
| € million | 31 Dec 2008 |
31 Dec 2007 |
|---|---|---|
| Equity | ||
| Share capital | 835.4 | 835.4 |
| Ordinary shares | 828.6 | 828.6 |
| Preference shares | 6.8 | 6.8 |
| [Contingent capital] | [127.8] | [142.1] |
| Capital reserve | 2,558.0 | 2,558.0 |
| Revenue reserve | 1,524.0 | 1,324.0 |
| Balance sheet profi t | 395.6 | 395.1 |
| 5,313.0 | 5,112.5 | |
| Provisions | 303.3 | 380.3 |
| Liabilities | 5,751.3 | 6,773.2 |
| Deferred income | 0.1 | 0.6 |
| 11,367.7 | 12,266.6 |
Income statement for the fi nancial year from 1 January to 31 December 2008 prepared under the German Commercial Code (HGB)
| € million | 2008 | 2007 |
|---|---|---|
| Investment income | 1,061.2 | 696.6 |
| Financial result | (409.5) | (64.4) |
| Other operating income | 137.1 | 167.5 |
| Personnel expenses | (53.9) | (82.6) |
| Depreciation/amortisation on intangible and tangible assets |
(2.6) | (3.4) |
| Other operating expenses | (157.1) | (178.5) |
| NOPAT | 575.2 | 535.2 |
| Income tax | 10.7 | 31.2 |
| Other taxes | 0.5 | (0.4) |
| Net income | 586.4 | 566.0 |
| Profi t carried forward from the previous year |
9.2 | 69.1 |
| Additions to revenue reserves | (200.0) | (240.0) |
| Balance sheet profi t | 395.6 | 395.1 |
For the fi nancial year 2008, METRO AG posted income of €1,061.2 million compared with €696.6 million in the previous year. In consideration of other income, expenses and taxes as well as the transfer of €200.0 million to revenue reserves, the company reported a balance sheet profi t of €395.6 million compared with €395.1 million in 2007.
The Management Board of METRO AG will propose to the Annual General Meeting that, from the reported balance sheet profi t of €395.6 million, a dividend of €385.9 million be paid and that the balance of €9.7 million be carried forward to the new account. The balance sheet profi t of €395.6 million includes retained earnings of €9.2 million. The dividend proposed by the Management Board amounts to
€1.180 per ordinary share and > €1.298 per preference share.
METRO AG is responsible for the centralised fi nancial management of METRO Group. METRO AG acts to ensure that METRO Group companies have access to the necessary fi nancing for their operating and investment activities at all times and in the most cost-effi cient manner possible. The necessary information is provided by a fi nancial budget for the Group, which covers all relevant companies and is updated monthly. In addition, METRO AG provides 14-day liquidity plans.
Loan placement and collateralisation as well as the granting of fi nancial support in the form of guarantees and letters of comfort for Group companies are also controlled centrally by METRO AG. The following principles apply to all Group-wide fi nancial activities:
By presenting one face to the fi nancial markets, the Group can optimise its fi nancial market conditions.
In its relationships with banks and other business partners in the fi nancial arena, METRO Group consistently maintains its leeway with regard to fi nancial decisions. In the context of our bank policy, limits have been defi ned to ensure that the Group can replace one fi nancing partner with another at any time.
METRO Group's fi nancial transactions either serve to cover fi nancing requirements or are concluded to hedge risks related to underlying business transactions. METRO Group's total fi nancial portfolio is controlled by METRO AG.
The potential effects of changes in fi nancial parameters for the Group, such as interest rate or exchange rate fl uctuations, are quantifi ed regularly in the context of scenario analyses. Open risk pos itions, for example the conclusion of fi nancial transactions without an underlying business activity, may be held exclusively after accordant approval by the Management Board of METRO AG.
METRO Group conducts fi nancial transactions only with contractual partners who have been authorised by METRO AG. The creditworthiness of these contractual partners is tracked regularly. The risk controlling unit of METRO AG's fi nance department monitors the relevant limits continuously.
All fi nancial transactions of METRO Group are concluded with METRO AG. In cases where this is not possible for legal reasons, these transactions are concluded directly between a Group company and a fi nancial partner after METRO AG has given its approval.
The two-signature principle applies within METRO Group. All processes and responsibilities are laid down in Group-wide guidelines. The conclusion of financial transactions is separated from sett lement and controlling in organisational terms.
Transparent and open communication with financial market participants and rating agencies is a crucial success factor for tapping the debt capital market in order to meet the Group's financial requirements. Ratings thus communicate METRO Group's credit rating to potential debt capital investors. In May of the reporting year, rating agency Standard & Poor's upgraded METRO Group's long-term credit rating to "BBB+". In November 2008, Moody's revised its outlook on METRO Group's long-term and short-term rating Planning, management and settlement handled by METRO AG
from "stable" to "negative". The following table illustrates the development of long- and short-term ratings over the past fi ve years:
The current ratings by the two international rating agencies are as follows:
| 2008 | ||
|---|---|---|
| Category | Moody's | Standard & Poor's |
| Long-term | Baa2 | BBB+ |
| Short-term | P-2 | A-2 |
| Outlook | negative | stable |
Based on its current ratings, METRO Group principally has access to all debt capital markets.
The "Debt Issuance Programme" serves as a source of long-term fi nancing. In 2008, we conducted the following transactions in the context of this programme:
In addition, METRO Group issued a 4-year promissory note bond with a variable (3-month EURI-BOR plus 0.8 percent p.a.) and fi xed (4.74 percent p.a.) interest rate to the amount of €500 million in March of the reporting period.
For short- and medium-term financing, METRO Group uses ongoing capital market issuance programmes, among others. These include the "Euro Commercial Paper Program" and another "Commercial Paper Program" geared especially to French investors. The average amount utilised from both programmes in 2008 was €2,525 million. In addition, METRO Group used bilateral bank facilities and syndicated credit lines totalling €1,533 million as per the balance sheet date.
∆ For further information on fi nancing programmes and credit lines, see the notes to the consolidated fi nancial statements in no. 37 ("Financial liabilities")
In addition to the above-mentioned capital market transactions and despite the turmoil on international fi nancial markets, METRO Group managed to refi nance a €975 million syndicated loan due in November 2008 before maturity with a 5-year term in March 2008. Aside from the established issuance programmes – which METRO Group was able to use even in diffi cult market periods – METRO Group had access to suffi cient liquidity via comprehensive, generally multi-year credit lines at all times. Increased risk premiums have led to markedly higher funding costs in a diffi cult fi nancial market environment.
| Type of trans action | Issue date | Term | Maturity | Nominal volume | Coupon |
|---|---|---|---|---|---|
| Redemption | February 2003 | 5 years | February 2008 | €1,000 million | 5.13 % |
| New issue | November 2008 | 5 years | November 2013 | €500 million | 9.375 % fi x |
| 31 Dec 2008 | 31 Dec 2007 | |||||
|---|---|---|---|---|---|---|
| € million | Total | Up to 1 year | Over 1 year | Total | Up to 1 year | Over 1 year |
| Bilateral lines of credit | 2,292 | 1,066 | 1,226 | 2,501 | 1,475 | 1,026 |
| Utilisation | (1,283) | (825) | (458) | (1,647) | (792) | (855) |
| Unutilised bilateral lines of credit | 1,009 | 241 | 768 | 854 | 683 | 171 |
| Syndicated lines of credit | 2,975 | 0 | 2,975 | 2,975 | 0 | 2,975 |
| Utilisation | (250) | 0 | (250) | 0 | 0 | 0 |
| Unutilised syndicated lines of credit | 2,725 | 0 | 2,725 | 2,975 | 0 | 2,975 |
| Total lines of credit | 5,267 | 1,066 | 4,201 | 5,476 | 1,475 | 4,001 |
| Total utilisation | (1,533) | (825) | (708) | (1,647) | (792) | (855) |
| Total unutilised lines of credit | 3,734 | 241 | 3,493 | 3,829 | 683 | 3,146 |
In the fi nancial year 2008, METRO Group invested €2.5 billion, an increase of €0.3 billion compared with the previous year's fi gure of €2.2 billion. During the reporting year, investments in the continued international expansion of the Metro Cash & Carry, Real as well as Media Markt and Saturn divisions accounted for the largest share of investments.
| Change | ||||
|---|---|---|---|---|
| € million | 2008 | 20071 Absolute | % | |
| Metro Cash & Carry | 979 | 859 | 120 | 13.9 |
| Real | 415 | 345 | 70 | 20.3 |
| Media Markt and Saturn |
411 | 463 | (52) | (11.4) |
| Galeria Kaufhof | 124 | 107 | 17 | 15.7 |
| Other companies | 551 | 380 | 171 | 45.2 |
| METRO Group | 2,480 | 2,154 | 326 | 15.1 |
Adjustment of previous year's fi gures due to discontinued operations
At €1.0 billion, investments of Metro Cash & Carry were higher in 2008 than a year earlier. All in all, Metro Cash & Carry opened 40 new locations around the world, focusing above all on the growth region of Eastern Europe. In Russia, the existing store network was expanded by 9 stores, in Ukraine by 5 and in Poland and Bulgaria by 3 each. Metro Cash & Carry also continued to densify its store networks in Western Europe and Asia/Africa and modernised several stores in Western Europe.
Investments at Real rose by €0.1 billion to €0.4 billion in the reporting year. A total of €0.3 billion was invested in the sales brand's expansion in the fi nancial year 2008. Real added 14 locations to its store network: 6 in Romania, 2 in Russia, 3 in Germany and 3 in Poland.
At €0.4 billion, investments at Media Markt and Saturn were slightly lower in 2008 than a year earlier. These funds were primarily used to open 70 new stores and fi nance market entry in Luxembourg. In addition, consumer electronics stores across Europe were remodelled and modernised, focusing primarily on Germany.
Investments at Galeria Kaufhof amounted to €0.1 billion in the fi nancial year 2008, a slight increase from the previous year's fi gure. During the reporting year, investing activities focused on numerous modernisations based on the Galeria concept in Germany and Belgium as well as the "World Class Shopping" conversions in Frankfurt and Hamburg.
The investment volume of other companies tot alled €0.6 billion in the reporting year, an increase of €0.2 billion compared to the previous year's fi gure. The investments were largely attributable to intangible assets, the modernisation of existing real estate as well as the development of new property locations that are being rented primarily to METRO Group sales divisions.
Information on investment obligations, which amounted to a total of €0.2 billion, is included in the notes to the consolidated fi nancial statements in no. 20 ("Other intangible assets"), no. 21 ("Tangible assets") and no. 22 ("Investment properties").
From divestments, METRO Group received cash and cash equivalents of €0.8 billion, which resulted primarily from the sale of Extra and real estate. Additional information on divestments is included in the consolidated fi nancial statements ("Cash fl ow statement") as well as in the notes to the consolidated fi nancial statements in no. 41 ("Notes to the consolidated cash fl ow statement").
65 Group Management Report 67 Overview of the fi nancial
The cash fl ow statement serves to identify and display the cash fl ows that METRO Group generated or employed in the fi nancial year from current operating, investing and fi nancing activities. In addition, it shows the cash positions at the beginning and at the end of the fi nancial year.
| € million | 2008 | 20072 |
|---|---|---|
| Cash fl ow from operating activities of continuing operations |
2,637 | 3,158 |
| Cash fl ow from operating activities of discontinued operations |
14 | 30 |
| Cash fl ow from operating activities (total) | 2,651 | 3,188 |
| Cash fl ow from investing activities of continuing operations |
(1,728) | (1,219) |
| Cash fl ow from investing activities of discontinued operations |
(12) | (48) |
| Cash fl ow from investing activities (total) | (1,740) | (1,267) |
| Cash fl ow from fi nancing activities of continuing operations |
(395) | (1,233) |
| Cash fl ow from fi nancing activities of discontinued operations |
(9) | 22 |
| Cash fl ow from fi nancing activities (total) | (404) | (1,211) |
| Total cash fl ows | 507 | 710 |
| Currency effects on cash and cash equivalents |
(51) | 1 |
| Change in cash and cash equivalents (total) | 456 | 711 |
Abridged version. The complete version is shown in the consolidated fi nancial statements and the notes to the consolidated fi nancial statements in no. 41 ("Notes to the consolidated cash fl ow statement")
Adjustment of previous year's fi gures due to discontinued operations
During the reporting year, total cash flow of €2,637 million (previous year: €3,158 million) was generated from current operating activities of continuing operations. Investment activities of continuing operations led to cash outfl ows of €1,728 million (previous year: €1,219 million). Cash fl ow from fi nancing activities of continuing operations showed outfl ows of €395 million (previous year: €1,233 million).
At the end of 2008, METRO Group's balance sheet showed equity of €6,074 million compared with €6,509 million in the previous year. Revenue reserves declined by €435 million. Taking the dividend payment for 2007 (€386 million) and the contribution of period income attributable to shareholders of METRO AG (€403 million) into consideration, this decline essentially derived from negative currency effects, particularly in the Eastern European countries and the United Kingdom. The equity ratio declined by 1.2 percentage points to 18.0 percent. The share of revenue reserves in equity totalled 40.2 percent compared to 44.2 percent in the previous year.
| € million | Note no. | 31 Dec 2008 | 31 Dec 2007 |
|---|---|---|---|
| Equity | 32 | 6,074 | 6,509 |
| Subscribed capital | 835 | 835 | |
| Capital reserves | 2,544 | 2,544 | |
| Reserves retained from earnings |
2,441 | 2,876 | |
| Minority interests in equity |
254 | 254 |
Net fi nancial debt after netting of cash and cash equivalents according to the balance sheet as well as monetary investments with fi nancial debts, including fi nance leases, totalled €4,600 million compared with €4,300 million in 2007. Non-current fi nancial liabilities were nearly unchanged at €5,031 million, current fi nancial liabilities increased by €740 million to €3,448 million. In the fi nancial year 2008, cash and cash equivalents rose by €441 million to €3,874 million.
| € million | 31 Dec 2008 | 31 Dec 2007 |
|---|---|---|
| Cash and cash equivalents according to the balance sheet |
3,874 | 3,433 |
| Monetary investments1 | 5 | 5 |
| Financial liabilities (incl. fi nance leases) |
8,479 | 7,738 |
| Net fi nancial debt | 4,600 | 4,300 |
Shown in the balance sheet under "other receivables and assets (current)"
The debt capital ratio rose by 1.2 percentage points to 82.0 percent. Current liabilities account for a share of 73.4 percent of total debt after 73.1 percent in the previous year. Trade liabilities declined by €249 million to €13,839 million in 2008. The decline was primarily attributable to exchange rate effects in Eastern European markets, which more than offset the expansion-related increase in the Metro Cash & Carry, Real as well as Media Markt and Saturn sales divisions. The increase in liabilities connected to non-current assets held for sale by €116 million is due mostly to the reclassifi cation of the relevant liabilities items of the Adler fashion stores resulting from their classifi cation under discontinued operations.
Information on the maturity, currency and interest rate structure of fi nancial liabilities as well as on the lines of credit is included in the notes to the consolidated fi nancial statements in no. 37 (" Financial liabilities").
| € million | Note no. | 31 Dec 2008 | 31 Dec 2007 |
|---|---|---|---|
| Non-current liabilities |
7,369 | 7,357 | |
| Provisions for pen sions and similar commitments |
33 | 964 | 973 |
| Other provisions | 34 | 533 | 524 |
| Financial liabilities | 35, 37 | 5,031 | 5,030 |
| Other liabilities | 35, 38 | 620 | 647 |
| Deferred tax liabilities | 25 | 221 | 183 |
| Current liabilities | 20,382 | 20,006 | |
| Trade payables | 35, 36 | 13,839 | 14,088 |
| Provisions | 34 | 522 | 576 |
| Financial liabilities | 35, 37 | 3,448 | 2,708 |
| Other liabilities | 35, 38 | 2,161 | 2,267 |
| Income tax liabilities | 35 | 266 | 337 |
| Liabilities connected to assets held for sale |
31, 43 | 146 | 30 |
Further information on the development of liabilities can be found in the notes to the consolidated fi nancial statements in the numbers listed in the table.
In the fi nancial year 2008, total assets declined slightly by €47 million to €33,825 million. Non-current assets decreased by €74 million to €18,808 million in the fi nancial year 2008, while current assets increased by €27 million to €15,017 million.
| € million | Note no. | 31 Dec 2008 | 31 Dec 2007 |
|---|---|---|---|
| Non-current assets | 18,808 | 18,882 | |
| Goodwill | 18, 19 | 3,960 | 4,328 |
| Other intangible assets |
18, 20 | 552 | 515 |
| Tangible assets | 18, 21 | 12,524 | 12,332 |
| Investment properties | 18, 22 | 133 | 116 |
| Financial assets | 18, 23 | 144 | 152 |
| Other receivables and assets |
24 | 450 | 490 |
| Deferred tax assets | 25 | 1,045 | 949 |
The decline in goodwill in the amount of €368 million is primarily attributable to the non-scheduled write-down on the goodwill of the Adler fashion stores (€312 million). The increase in tangible assets of €192 million is primarily expansionrelated, whereby negative currency effects in the amount of €383 million were recorded in the Eastern European countries and the United Kingdom. Deferred tax assets rose by €96 million. Before netting with deferred tax liabilities, they remained nearly constant. Adjustments between companies resulted in lower netting and thus higher deferred tax assets.
Additional information on the development of noncurrent assets is shown in the notes to the consolidated fi nancial statements in the numbers listed in the table.
| € million | Note no. | 31 Dec 2008 | 31 Dec 2007 |
|---|---|---|---|
| Current assets | 15,017 | 14,990 | |
| Inventories | 26 | 7,001 | 7,328 |
| Trade receivables | 27 | 446 | 508 |
| Financial assets | 8 | 28 | |
| Other receivables and assets |
24 | 3,132 | 3,076 |
| Income tax refund entitlements |
326 | 275 | |
| Cash and cash equivalents |
30 | 3,874 | 3,433 |
| Non-current assets held for sale |
31, 43 | 230 | 342 |
Inventories decreased by €327 million to €7,001 million. The decline was primarily attributable to currency effects in Eastern European markets as well as stock optimisation efforts at all sales divisions. The increase in cash and cash equivalents by €441 million to €3,874 million is due mostly to a €500 million bond issue launched in November 2008. In the fi nancial year 2007, the item "noncurrent assets held for sale" essentially included the assets of the Extra sales division (€322 million). The Extra sales division was sold to the Rewe Group on 17 January 2008 with effect from 1 July 2008. In 2008, €113 million in assets in connection with the classifi cation of the Adler fashion stores were shown as discontinued operations in this item. In addition, various real estate locations with a book value of €117 million were classifi ed as "Investment properties".
Additional information on the development of current assets is shown in the notes to the consolidated fi nancial statements in the numbers listed in the table.
With more than 290,000 employees worldwide, METRO Group ranks among the largest employers in the trade and retail sector
From people for people – a company's success in the trade and retail sector depends particularly on the skills and customer orientation of its employees. Around the world, committed employees stand for the success of METRO Group. In the fi nancial year 2008, the Group employed an average 290,940 employees. The total number of employees (fulltime equivalents) rose by 15,215, or 6.4 percent, to 254,457.
Our continually expanding international activities are fuelling the growth of our workforce abroad. Over the year, the number of employees outside Germany (full-time equivalents) increased by an average 15,352 to 154,637. Their share in the total group workforce climbed from 58.2 percent to 60.8 percent. About 9 out of 10 international employees worked in European countries – including 53,297 in Western Europe and 85,280 in Eastern Europe. At a growth rate of 15.2 percent, our workforce increased particularly strongly in the Eastern European growth regions.
Yearly average
Employees by region full-time equivalents, in %
Employees by sales division full-time equivalents, in %
In contrast to sector trends, the share of part-time workers declined to 31.3 percent at the Group level (previous year: 33.3 percent) and 45.9 percent in Germany (previous year: 46.8 percent). Employees' average age rose slightly from 35.5 to 35.7 years, the average tenure remained at 7.4 years.
Demographic factors such as increasing longevity and declining birth rates are changing the structure of Europe's population. In the coming years, companies will have fewer qualifi ed workers and executives at their disposal. In order to remain competitive under these altered para meters, METRO Group is working with far-sighted personnel concepts based on structural analyses and forecasting tools. Key measures include in-house training and education, active diversity management and health management. In the knowledge economy, companies will be able to operate successfully over the long term only if they can offer their employees a sound work environment. Physic al and psychological health is the foundation for the performance strength and commitment of our employees. If this foundation were undermined, the organisation's performance strength would deteriorate substantially. With its guidelines on corporate health promotion, the Management Board of METRO AG highlighted the importance of this topic as early as 2004, kicking off the health drive "GO". We currently use this strategic plat-
Adjustment of previous year's fi gures due
to discontinued operations
form, which received the 2008 German Business Prize Health, to test structures for corporate health management at select locations. Structures like the "Health Circle" are scheduled to be introduced in as many stores and companies of METRO Group as possible during the next few years. Health management comprises early diag nosis and prevention as well as rehabilitation. The services range from recommendations for a healthy diet and ergonomic workplace design to exercises designed to strengthen employees' physical and mental fi tness as well as other measures. At the start of 2007, for example, our health promotion initiatives took shape in the opening of a health centre – the socalled "Metro Activity Centre" (MAC) – for about 5,000 employees in Düssel dorf. Group-wide health promotion efforts boost our employees' vitality and create the foundation for a longer working life.
As a result of the increasing shortage of qualifi ed workers, work-life balance issues continue to gain importance. METRO Group was among the fi rst companies to pick up on this trend. Since 2007, the audit berufundfamilie® (work and family) has been conducted at the Campus Düsseldorf. The certifi cation of all companies at our administrative headquarters in 2008 testifi es to the family-friendly human resources policy of all sales divis ions and cross-divisional service companies at this location and strengthens our position as an attractive employer.
Training schemes for performance-oriented young people represent a key contribution to society and a sustainable investment in the company's longterm business success. Each year, thousands of young people learn one of around 25 professions in our sales divisions and companies – from retail merchant to information electronics specialist. Across Germany, 3,089 school-leavers began their training at METRO Group in the fi nancial year 2008 – 2.6 percent more than a year earlier. On a yearly average, the total number of apprentices in Germany increased to 8,689. At 8.7 percent, the share of apprentices places METRO Group among the major providers of vocational training in Germany. At the same time, it testifi es to our signifi cant contribution to fulfi lling Germany's training pact.
METRO Group also offers attractive training opportunities for disabled people, for example through its VAmB project ("Verzahnte Ausbildung mit Berufsbildungswerken" or "integrated training with vocational education centres"). The programme offers young people with learning disabilities practical training in the stores and locations of METRO Group in combination with theoretical training in vocational education centres.
METRO Group considers itself an "equal opportunity employer". It offers the same opportunities to all applicants and employees regardless of sex, age, race, ethnic background, sexual identity, possible disabilities, religion or faith.
A diverse workforce creates extraordinary opportunities. To tap the special expertise generated by this diversity even better, METRO Group has initiated various concepts, including an em ployee competition focusing on demographic shifts, particularly in Germany. This competition, called "Together", focused on the ageing society and was geared primarily at employees over 50. Employees were asked to work out business ideas to recruit and retain customers from the growing over 50-s age group. The best concepts, such as initiatives for barrier-free shopping or special employee training, were tested and, if found to be successful, will be rolled out further. During the phase of idea generation, the diversity of our workforce proved to be an advantage. The diverse knowledge, experience and skills of our employees were bundled and produced practicable concepts.
In the reporting year, we employed 4,349 people with recognised severe disabilities in Germany, including 48 apprentices. Added to this must be 1,069 employees who are equivalent to persons with severe disabilities. A total of 26.4 percent of our 120,989 domestic employees belong to the over 50-s age group. In 2008, 752 employees older than 50 were hired in Germany and 1,738 outside Germany.
METRO Group is one of the major providers of vocational training in Germany
Lifelong learning is a key prerequisite of sustained professional performance strength. METRO Group regularly offers its employees the opportunity to participate in training and further education measures. These offers are guided by employees' education and training needs and range from e-learning through "blended learning" – a combination of classroom teaching and e-learning – to classroom training.
At the Real sales brand alone, the new e-learning programme, "Klick Dich klug" ("Click yourself clever"), was used over 46,000 times by more than 24,000 users. During the reporting year, the Real sales brand received the European eLearning Award for this practice-oriented instrument.
In light of the rising retirement age and foreseeable reductions in retirement benefi t levels, it is becoming increasingly important to plan for retirement. Our "Future Package" helps employees to build their supplemental pension plan. The Groupwide pension programme provides additional voluntary benefi ts that go beyond the stipulations of collective-bargaining agreements and has been embraced by employees. In the reporting year, nearly 63,000 employees signed up for this programme in Germany.
METRO Group fosters the Group-wide social dialogue. It forms the basis of a trusting working relationship between management and employees. Given its strong growth momentum and intense activities in Eastern Europe and Asia, in particular, METRO Group places great emphasis on an international social exchange. METRO Group is a respected partner in dialogue worldwide and one of few retailing groups to have a European works council. The Group also regularly participates in the European social dialogue moderated by the European Commission and proactively supports technological progress in the retail trade. The International Labour Organization (ILO) frequently turns to METRO Group as a respected expert on the impact of new technologies on the working environment in the retail trade.
As a multinational company, METRO Group attaches great value to defi ning global minimum standards in dealings with its employees. This is why the Management Board has approved the guidelines on social partnership that were enacted in 2004 and revised in 2006. With these guidelines, METRO Group has adopted the fundamental principles of the ILO in all its stores. They include the acknowledgement of the freedom of association, the effective acceptance of the right to conduct collective negotiations, the abolition of all forms of forced or compulsory labour, the eliminat ion of child labour and an end to discrimination in the workplace.
It is part of the social dialogue to argue on particular factual issues with the social partner. In view of new laws on shop opening hours that have been enacted in nearly all German states, the collective bargaining agreements for the retail sector were terminated by employers. The aim of this termination was to adapt the previous regulations on late opening and Saturday supplements to the new legal situation. The Verdi union also terminated the wage and salary agreements as per their respect ive expiry date. No signifi cant progress was made in the 2007/2008 round of collective bargaining talks until after the conclusion of a pilot agreement in Baden-Württemberg in July of that fi nancial year. By the end of 2008, 14 out of a total of 16 tariff zones had reached agreements.
| Metro Cash & Carry |
Real | Media Markt and Saturn |
Galeria Kaufhof | Other companies |
METRO Group | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Country | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 20072 | 2008 | 2007 |
| Germany | 15,787 | 15,338 | 33,233 | 35,332 | 22,633 | 21,395 | 17,647 | 17,555 | 10,520 | 10,337 | 99,820 | 99,957 |
| Austria | 1,893 | 1,923 | 2,011 | 1,949 | 26 | 31 | 3,930 | 3,903 | ||||
| Belgium | 2,916 | 2,842 | 1,158 | 999 | 1,260 | 1,265 | 5,334 | 5,106 | ||||
| Denmark | 570 | 539 | 570 | 539 | ||||||||
| France | 8,383 | 8,411 | 1,725 | 1,537 | 7 | 7 | 10,115 | 9,955 | ||||
| Italy | 4,173 | 4,230 | 5,783 | 5,555 | 35 | 13 | 9,990 | 9,798 | ||||
| Luxembourg | 17 | 2 | 2 | 19 | 2 | |||||||
| Netherlands | 3,049 | 3,088 | 2,204 | 1,853 | 7 | 7 | 5,260 | 4,948 | ||||
| Portugal | 1,604 | 1,757 | 802 | 578 | 2,406 | 2,335 | ||||||
| Spain | 3,298 | 3,248 | 5,986 | 5,420 | 13 | 13 | 9,296 | 8,680 | ||||
| Sweden | 979 | 511 | 979 | 511 | ||||||||
| Switzerland | 1,086 | 1,141 | 85 | 84 | 1,171 | 1,225 | ||||||
| United Kingdom | 4,226 | 4,292 | 4,226 | 4,292 | ||||||||
| Total Western Europe excl. Germany |
30,113 | 30,330 | 21,749 | 19,542 | 1,260 | 1,265 | 175 | 157 | 53,297 | 51,293 | ||
| Bulgaria | 2,590 | 2,243 | 7 | 9 | 2,597 | 2,252 | ||||||
| Croatia | 1,463 | 1,407 | 1,463 | 1,407 | ||||||||
| Czech Republic | 3,469 | 3,371 | 3,469 | 3,371 | ||||||||
| Greece | 1,197 | 1,123 | 842 | 655 | 8 | 11 | 2,047 | 1,789 | ||||
| Hungary | 3,221 | 3,248 | 1,719 | 1,625 | 61 | 51 | 5,000 | 4,923 | ||||
| Moldova | 772 | 759 | 772 | 759 | ||||||||
| Poland | 7,165 | 6,624 | 11,055 | 10,526 | 5,301 | 4,462 | 585 | 535 | 24,105 | 22,147 | ||
| Romania | 6,390 | 6,263 | 7,568 | 4,514 | 317 | 211 | 14,276 | 10,987 | ||||
| Russia | 10,537 | 9,242 | 3,606 | 2,898 | 1,815 | 1,203 | 366 | 167 | 16,324 | 13,510 | ||
| Serbia | 1,294 | 1,223 | 1,294 | 1,223 | ||||||||
| Slovakia | 1,326 | 1,281 | 1,326 | 1,281 | ||||||||
| Turkey | 2,687 | 2,326 | 1,926 | 1,842 | 661 | 164 | 315 | 270 | 5,588 | 4,601 | ||
| Ukraine | 6,857 | 5,739 | 141 | 23 | 21 | 7 | 7,019 | 5,769 | ||||
| Total Eastern Europe | 48,967 | 44,849 | 24,297 | 19,802 | 10,336 | 8,109 | 1,680 | 1,260 | 85,280 | 74,021 | ||
| China | 8,309 | 7,816 | 659 | 573 | 8,968 | 8,389 | ||||||
| Egypt | 8 | 8 | ||||||||||
| India | 1,772 | 1,135 | 1,772 | 1,135 | ||||||||
| Japan | 437 | 373 | 437 | 373 | ||||||||
| Morocco | 1,306 | 1,140 | 1,306 | 1,140 | ||||||||
| Pakistan | 1,078 | 419 | 1,078 | 419 | ||||||||
| Vietnam | 2,493 | 2,516 | 2,493 | 2,516 | ||||||||
| Total Asia/Africa | 15,401 | 13,398 | 659 | 573 | 16,060 | 13,971 | ||||||
| International | 94,481 | 88,577 | 24,297 | 19,802 | 32,085 | 27,651 | 1,260 | 1,265 | 2,514 | 1,990 | 154,637 | 139,285 |
| METRO Group | 110,268 | 103,915 | 57,530 | 55,134 | 54,718 | 49,046 | 18,907 | 18,820 | 13,034 | 12,327 | 254,457 | 239,242 |
Including possible rounding differences
Adjustments of previous year's fi gures due to discontinued operations
International personnel development opens up promising prospectives
Our personnel development activities contribute decisively to the future shape of METRO Group: they attract, select and develop qualifi ed and highly motivated management recruits and employees, and promote individual career developments.
The progressive internationalisation of METRO Group, the resulting complexity of the fast and dynamic world of trade as well as growing demands on management in times of increasingly scarce resources make the recruitment, selection and promotion of talented management recruits and employees a key strategic success factor. Within METRO Group, the personnel development department oversees strategic management planning and development worldwide through systematic talent management based on continuous potential assessments, succession planning and the management development programmes of the Corporate University. At the same time, the internationally oriented personnel development department promotes individual career development and professional goals as well as provides executives with access to career options in all 32 countries covered by METRO Group. Personnel development at METRO Group contributes decisively to maintaining our leading position in international competition.
The annual assessments of potential ensure that all executives are systematically rated in accordance with comparable criteria and receive timely feedback. These are based on the seven Metro core competencies, with executive development focusing particularly on strategy, global leadership, change capacity and intercultural skills.
Each year, more than 300 managers and management recruits attend the Metro Corporate University, the central institution for the qualifi cation of our executives. It offers seven programmes covering such key topics as global leadership, change capacity and intercultural management. We cooperate with renowned external partners such as the Institute for Management Development (IMD) in Lausanne, St Gallen University and the Institut Européen d'Administration des Affaires (INSEAD) in Fontainebleau. All members of the METRO AG Management Board are involved as mentors and lecturers. Beyond topics of strategic importance, the Corporate University promotes the exchange of experiences and team-based cooperation.
METRO Group uses sustained personnel retention concepts to tap existing skills and investments in training and further education over the long term. Since 2003, we have been conducting annual employee surveys to gain insights into the emotional commitment of executives and employees to METRO Group. A standardised survey format ensures internal as well as external comparability and allows for the development of appropriate courses of action. Together with their teams, execu tives work out concrete measures to optimise the working relationship and individual performance.
Equal treatment and equal opportunities are key principles of METRO Group's corporate philosophy and crucial factors in our personnel strategy. We strive to strengthen the position of women – both within the Group and across the national borders and sales brands of METRO Group. A special campaign in this area is the "Women in management positions" initiative, which was launched in 2004 and acts as a growing network of female managers. The share of women in management positions currently totals 17.2 percent.
Targeted knowledge management is one of the key elements of holistic corporate management. We regard our employees' knowledge as elementary working capital that we must nurture and maintain. In view of the ever-declining longevity of knowledge, lifelong learning is just as much a crucial factor in our further education strategy as the empowerment of our employees to help to shape this process in a self-reliant manner.
Modern forms of IT-assisted learning combined with classic seminar methods: this is the strategy pursued by a business game tailored specially to the needs of METRO Group. By combining seminars with online components, the programme conveys a fundamental understanding of strategic management decisions and their impact.
For the past eight years, METRO Group has been conducting the dual training programme Metro Education with the aim of internationalising and standardising vocational training in the retail trade. Metro Education offers educational assistance at local trade schools as well as internships and apprenticeships in METRO Group sales divisions. By actively supporting vocational training in Eastern Europe – currently in Poland, Russia, Romania, the Czech Republic and Slovakia – we fulfi l our social responsibility while at the same time securing our future local personnel.
Demand for university graduates is growing continually across all sectors of industry. We have made timely preparations for times of increasingly scarce human resources. With the help of systematic college marketing and our rigorous positioning as an attractive employer, METRO Group manages to attract promising management recruits in a timely manner. Our activities focus on close cooperation with select universities and technical colleges, the cooperation with student organisations and intensive assistance to interns. Since 2002, we have talked to teachers and students in Germany at our annual Meeting Metro event. As in the previous year, more than 1,500 participants used this opportunity in 2008 to get to know METRO Group with its sales divisions and crossdivisional service companies and fi nd out about the diverse entry-level and career options. In addition, the Group successfully organised the 2nd Meeting Metro event in Moscow.
Training programme enhances the qualifi cation of young job starters
Our research and development activities are bundled in the Advanced Retailing unit. METRO Group sees itself as a driving force in the modernisation process in the international trade and retail industry. The Advanced Retailing strategy, which encompasses our most important future-oriented projects, was developed to strengthen our leading position in the market. In the context of this Groupwide initiative, we systematically tackle important strategic issues that serve to boost our earnings and enterprise value.
All Advanced Retailing initiatives are designed to make our customers' shopping experience even more pleasant, eventful and informative and to work more effi ciently with our suppliers. Aside from the development of customer-oriented service concepts, our Advanced Retailing initiatives focus on innovative technologies that are used to conserve resources, facilitate our business proce sses and, as a result, reduce our employees' workload in order to allow them to dedicate more time to their core tasks: professional service and assistance to our customers. METRO Group's Advanced Retailing initiatives systematically tap the potential for Group-wide synergies. In future oriented projects, the teams of the cross-divisional service companies (MGI METRO Group Information Technology, MGS METRO Group Solutions) work closely with the sales divisions' specialists. This allows for the needs-based development of innova tive products and solutions and helps create a critical knowledge and qualifi cation base within METRO Group.
At METRO Group, the introduction of conceptional and technological innovations builds on an open, constructive dialogue with all affected groups. We discuss the use of innovative technologies both in employee training programmes and on national and international platforms. We continued to develop our Advanced Retailing projects in 2008. Our goal remains to test new concepts in practice and to expand the use of future-oriented technologies in our stores and warehouses as well as in our cooperation with suppliers and business partners. Radio Frequency Identifi cation (RFID) technology and the new Future Store form the core of these initiatives.
Within the context of the METRO Group Future Store Initiative, the company assumes a leading role in shaping the future face of the trade and retail industry in cooperation with partners from academia as well as the consumer goods, services and IT sectors. One focus is on developing, testing and using innovative technologies that produce substantial benefi ts both for our customers and METRO Group itself. On the other hand, RFID technology, for example, enables more individualised customer assistance and more customer-oriented service offers. At the same time, our company profi ts from the use of Radio Frequency Identifi cation in its logistics and warehousing operations.
The new Real Future Store in Tönisvorst, North Rhine-Westphalia, is another key element of the METRO Group Future Store Initiative. This "hypermarket of the future" is used to test new ways of addressing the customer as well as new approaches to the design of stores and assortments. We are determined to optimally align our assortments and service to our customers' individual needs. Together with our partners, we also test the practicality of various new technologies with the aim of introducing them in more Real hypermarkets and other METRO Group stores in 2009.
RFID technology will fundamentally alter the supply chain in the consumer goods industry. The heart of this technology is the Smart Chip, a small computer chip equipped with an antenna. An Electronic Product Code (EPC) is stored on the Smart Chip and can be read without direct contact or any visual connection by an RFID reader. In the merchandise management system, such information as the best before date or the manufacturer of a product can be assigned to the EPC.
Since the end of October 2007, we have been rolling out RFID technology in the European trade and retail sector. The innovative technology now improves daily incoming goods processes at 400 locations, including the German stores of the Metro Cash & Carry and Real sales brands as well as the central warehouses of MGL METRO Group Logistics. Since autumn 2008, RFID has also been used at the French stores of Metro Cash & Carry. This benefi ts not only METRO Group, but also our suppliers and logistics partners. The fi rst countrywide use of RFID in France was achieved with the help of our logistics partner DHL. Pilot projects such as those in the Essen store of Galeria Kaufhof, in the Real Future Store and in other areas of application testify to the far-reaching benefi ts of RFID technology. They include inventory checks in the textiles area or quality controls of meat products from the company's own production.
In 2008, we took the initiative to help promote the use of the RFID technology along the entire supply chain and in warehousing management by becoming the fi rst retailing group to equip not only the incoming goods portal but also forklifts and shelves in one MGL METRO Group Logistics warehouse with RFID. This helps speed up business processes and render them more effi cient.
With the help of METRO Group Networking, the work and information platform for all employees, we develop concepts to manage and improve internal administrative processes based on innovative IT systems – and improve business processes within the Group at the same time.
Metro Link is the platform for METRO Group suppliers. The portal offers comprehensive information as well as programmes for an exchange of data. Metro Link helps to intensify the cooper ation with suppliers and optimise processes. Since 2008, suppliers who work with METRO Group in the application of RFID have been able to track the precise status of their shipments.
METRO Group is committed to the principles of sustainable management in its activities across all supply chains. This means that environmental and social requirements are factored into our business decisions and processes at an early stage. Our environmental and sustainability management comprises the protection of the environment as well as responsible and fair treatment of our employees, customers and business partners. Our overarching goal is to protect the foundations of our future business while securing potential competitive advantages. At the same time, we want to contribute to sustainable societal developments. We identify the key sustainability challenges relevant to METRO Group and develop specifi c programmes and goals that help us to exploit opportunities and minimise risks.
In the fi nancial year 2008, the prices of some raw materials increased markedly. Driven by the unrelenting demand in developed and developing nations for crude oil, electricity, gas and petrol, prices rose to all-time highs at mid-year before plummeting to record lows amidst the fi nancial crisis at the end of the year. We expect the prices for raw materials and energy to rise over the medium term. At METRO Group, rising energy prices also added to the cost of procurement, transportation and product sales in 2008. Aside from global climate change, we regard the growing shortage of non-renewable resources as one of the major challenges in the area of sustainability. In 2008, we reinforced our efforts in the area of energyand resource-effi cient business management to counter rising operating costs and product prices and guarantee consistent goods supplies to our customers.
With the publication of our carbon footprint at the beginning of June 2008, we pledged to reduce our greenhouse gas emissions per square metre of selling space by 15 percent by 2015. Professional energy management at our locations will play an important role in helping us to achieve this goal. Our motivated employees and the use of innovative technologies enable us to continually lower electricity and heat consumption in our stores. Lighting systems at nine Galeria Kaufhof department stores, including the one at Berlin's Alexanderplatz, are equipped with highly effi cient en ergysaving technology. In addition, Galeria Kaufhof has been using energy-effi cient LED lamps in a number of parking garages and warehouses since 2008. Real computers are equipped with so-called Wake-on-LAN technology that automatically shuts down computers after closing hours and keeps them switched off until the next morning.
Our efforts to ensure economical and effi cient use of energy are complemented by the use of new energy supplies. Since the end of 2007, Metro Cash & Carry has been using innovative solar thermal energy technology – so-called solar chilling – in Italy (Rome) and Turkey (Antalya). The plants heat or cool the respective stores with the help of solar collectors and absorption cooling equipment.
In the area of merchandise logistics, we continually implement new processes to improve our resource effi ciency, reduce our carbon footprint and lower our operating costs. We use sea freight transportation as a sensible alternative to conventional trucks and cargo planes for large shipments travelling over long distances. Galeria Kaufhof has successfully shipped non-perishable goods like textiles by sea for some time now. We also plan to convert our own fl eet of trucks to vehicles with Euro 5, currently the highest emission standard, until the end of 2009. We had replaced 86 ve hicles, or about 40 percent of the fl eet, by the end of 2008.
∆ You will find additional information about METRO Group's carbon footprint in our brochure "Climate Action". The brochure can be downloaded at www.metrogroup.de/sustainability.
We also communicate the advantages of environmentally and socially sustainable business management to our suppliers. In many Asian countries, Metro Cash & Carry is a local buyer of agricultural products like fruit, vegetables and poultry. The sales division promotes sustainable farming in these regions to ensure the availability and sale of these products in its wholesale stores. In Hefei, the capital of the Chinese province of Anhui, we organise proprietary training programmes to inform local producers of all key aspects of modern farming. In Sharaqpur, Pakistan, Metro Cash & Carry has installed the country's only sales platform for fruit and vegetables. In the course of our prepar ations for market entry in Pakistan, we helped local farmers to successfully organise fresh fruit and vegetable deliveries to wholesale stores. This partnership led to a signifi cant improvement in product quality.
We also promote sustainable farming through our steadily growing range of organic foods. The expansion of this product line also refl ects the growing health consciousness among consumers. In mid-2008, more than 900 articles at Real wore the "Bio" seal denoting organic products. In the stores, special booths have been set up to provide information about organic products and sharpen consumers' awareness of the benefi ts of organic farming. In the course of 2009, the new brand Real Bio will replace the old product line Grünes Land (Green Land) in the hypermarkets.
Rising energy prices are driving up the cost of usi ng electronic devices. This is why our consumer electronics stores Media Markt and Saturn have increased the share of especially energy-effi cient equipment in their assortments. In sales talks, brochures and on the Internet, we inform our customers about the long-term advantages of buying energy-effi cient and climate-friendly electronic devices.
∆ Please refer to our sustainability report for further information on our supply chain and products, customers, the enviroment, staff and corporate social responsibility, inlcuding concrete figures and examples of projects. This information is regularly updated and extended online at www.metrogroup.de/sustainability.
Aware of the importance of a balanced diet and physical exercise for a healthy lifestyle, Real does not only offer its customers health-oriented merchandise, but also sponsors numerous sports projects. For the 9th year, Real was the main sponsor of the Real Berlin Marathon in 2008. Next to New York City, London and Chicago, this highprofi le sports event is one of the world's largest marathons: in 2008, 40,827 runners from 107 nations took part in the race.
For the 5th consecutive year, METRO Group has also been the main sponsor of the METRO Group Marathon Düsseldorf – which has become the fastest marathon in the German state of North Rhine-Westphalia. Each year, more than 500 employees of METRO Group take part in this marathon. The relay team members and marathon runners go through a special training programme to optimally prepare for this major event.
METRO AG has been implementing share-based remuneration programmes since 1999. The members of the Management Board and other executives of METRO AG as well as managing directors and executives of the operative METRO Group companies are eligible.
No rights from the stock option programme were outstanding in the fi nancial year 2008.
In the fi nancial year 2004, a fi ve-year share bonus programme was introduced to replace the stock option programme. In contrast to the previous granting of subscription rights, this programme provides the entitlement to share bonuses. The size of the cash bonus depends on the performance of the Metro share price and the parallel consideration of benchmark indices.
The share bonus programme is divided into a tranche for each year, with the target parameters being calculated separately for each tranche. The maturity of each tranche is three years. The last tranche was granted in 2008.
The size of the bonus initially depends on the ratio of basis price and share price.
The basis price of each tranche corresponds to the arithmetic mean of the closing prices of the METRO AG ordinary share in Xetra trading of Deutsche Börse AG on the last 20 consecutive trading days before the closing date (eight weeks after the respective Annual General Meeting).
The target price, upon which the full bonus is granted, is calculated based on the basis price and assumes a share price increase of 15 percent over the course of three years. A determination about whether the target price has been reached is made by means of the arithmetic mean of the closing prices of the company's ordinary share in Xetra trading at Deutsche Börse AG on the last 20 consecutive trading days before expiration of the relevant three-year period. The bonus increases or decreases proportionately when the share price exceeds or falls below the 15 percent price target.
Also part of the Corporate Governance Report 2008
The size of the respective bonus also depends on the performance of the Metro share compared with relevant share indices. When the Metro share has outperformed these indices, the share bonus is raised to 120 percent. When it underperforms, it is reduced to 80 percent. Outperformance or underperformance applies when the average performance of the Metro share exceeds or lags the performance of the relevant share indices by more than 10 percent. Outperformance or underperformance is determined analogous to the determination of whether the target price has been reached.
The share bonus is principally granted only if the terms of employment within METRO Group have not been ended unilaterally or a contract termination has not been reached by mutual consent at the time of maturity. In addition, the payment of share bon uses can be limited to the gross amount of the annual fi xed salary. Any potential excess amounts are used to raise the share bonus during the following three years if the latter is lower than the individually agreed gross annual fi xed salary.
The conditions of the tranches granted to executives so far are shown in the following table:
| Tranche | Due date | Basis price | Target price | Total target bonus |
|---|---|---|---|---|
| 2004 | July 2007 | €37.14 | €42.71 | Paid |
| 2005 | July 2008 | €41.60 | €47.84 | Expired |
| 2006 | July 2009 | €43.15 | €49.62 | 22,745,000 |
| 2007 | July 2010 | €61.61 | €70.85 | 17,760,000 |
| 2008 | July 2011 | €41.92 | €48.21 | 19,900,000 |
The target bonus values are based on the condition that the target prices are attained. The value of the share bonus paid in 2008 was €32.2 million at the time of payment and was calculated by independent experts using recognised fi nancial-mathematical methods (Monte Carlo simulation).
Compensation for members of the Management Board is a component of an integrated compensation system for executives of METRO Group. It creates performance incentives for the long-term growth of the company's value, and contains both fi xed and variable elements. Total remuneration and the individual compensation components are geared appropriately to the responsibilities of each individual board member, his personal performance, the performance of the entire board and the economic situation of METRO AG.
The performance-based compensation for members of the Management Board is determined mainly by the development of Economic Value Added (EVA) and can also include the achievement of individually determined targets.
Positive EVA is achieved when the net operating profi t exceeds the cost of capital needed to fi nance the capital employed. NOPAT (Net Operating Profi t after Taxes) is defi ned as operating profi t before fi nanc ing costs, but after income taxes. The cost of capital represents the compensation of the investors for the capital they provide and for their investment risk. It is calculated by multiplying the capital employed by the weighted average cost of capital (WACC). In the fi nancial year 2008, the weighted average cost of capital of METRO Group remained unchanged from the previous year at 6.5 percent.
The EVA-based remuneration system is based on a comparison of delta EVA, the difference between current EVA and prior-year EVA, with defi ned targets that were set by the Supervisory Board's Personnel Committee under consideration of capital market expectations of value creation. If a target is achieved, an agreed-upon target bonus is paid in full (bonus factor 1.0).
The annual bonus entitlements from the EVA-based remuneration system are combined with a mediumterm bonus bank. Even if the calculated bonus for any one year exceeds the target, it is only paid in
full up to the target bonus. Any bonus amount in excess of the target bonus is initially credited to a bonus bank. Irrespective of the payment of the target bon us, a fi xed percentage of the bonus bank balance is paid out each year, with the remaining amount being carried forward. A negative bonus results in a reduction of the bonus bank balance. The negative bonus bank balance is capped at a value of -1.0. If a bonus factor of more than +2.0 is generated in one or both of the two fi nancial years following the capping, the remuneration share resulting from the bonus factor in excess of +2.0 is offset against the capped balance of the bonus bank.
The Personnel Committee of METRO AG's Supervisory Board sets the conditions for EVA-based Management Board remuneration, in particular the targets for the development of delta EVA, the target bonuses and the bonus bank system. The concept of value-orientated remuneration and the concrete EVA calculations were verifi ed by the consultancy Stern Stewart & Co. The Personnel Committee monitors the systematic application to Management Board remuneration.
A share bonus programme forms another variable component of Management Remuneration. It is tied to the development of the METRO AG share price and the sustained success of METRO Group, and measures up to ambitious relevant benchmarks. The actual receipt of compensation from this programme is linked to fulfi lment of all set preconditions.
The share bonus programme was introduced in the fi nancial year 2004 as a result of a decision by the Presidential Committee and the Personnel Committee of the Supervisory Board of METRO AG for members of the Management Board. It corresponds to the previously mentioned share bonus programme for executives of METRO Group. The target bonuses for members of the Management Board are set each year by the Personnel Committee. The payment of the bonus can be limited by resolution of the Personnel Committee.
The relevant individual amounts for the members
of the Management Board are as follows1
| €1,000 | Fixed salary | Performance based entitlements |
Share bonuses 2008 |
Other remuneration |
Total |
|---|---|---|---|---|---|
| Dr Eckhard Cordes | 1,000 | 1,939 | 633 | 24 | 3,596 |
| Zygmunt Mierdorf | 800 | 1,293 | 522 | 21 | 2,636 |
| Frans W. H. Muller | 800 | 1,293 | 522 | 103 | 2,718 |
| Joël Saveuse2 (since 8 April 2008) |
585 | 945 | 522 | 17 | 2,069 |
| Thomas Unger | 800 | 1,293 | 522 | 88 | 2,703 |
| Total | 3,985 | 6,763 | 2,721 | 253 | 13,722 |
The target bonuses for the share bonus tranches existing during the fi nancial year amounted to: €330,000 each from the 2005, 2006, 2007 and 2008 tranches for Mr Mierdorf and Mr Unger; €330,000 each from the 2006, 2007 and 2008 tranches for Mr Muller; €400,000 for Dr Cordes and €330,000 for Mr Saveuse from the 2008 tranche. The company's pro rata expenses (+)/income (-) from share-based remuneration with maturities in the fi nancial year 2008 or later can be shown as follows: €15,000 for Dr Cordes; €-1,300,000 for Mr Mierdorf; €-527,000 for Mr Muller; €12,000 for Mr Saveuse and €-1,300,000 for Mr Unger
Aside from his employment as a member of the Management Board of METRO AG, Mr Saveuse also received a fi xed salary of €146,000 as well as performance-based components of €468,000 from his appointment as managing director of subsidiaries
The amount of the performance-based remuneration for the fi nancial year 2008 results from EVAbased compensation entitlements and thus from the company's performance during the current fi nancial year.
Entitlements with long-term incentives (share bon uses) that were granted in the fi nancial year 2008 are posted at their fair value at the time of granting (see above table).
Due to the granting of a monetary target bonus, a number of subscription rights in accordance with §§ 285 Sentence 1 No. 9 a, 314 Section 1 No. 6 a of the German Commercial Code cannot be released.
The payment of the bonuses depends on the previously described conditions of the share bonus plan.
Other remuneration consists of non-cash benefi ts and expense allowances.
In the fi nancial year 2008, a total of €0.6 million was used for remuneration of active members of the Management Board of METRO AG for services after the end of their employment. The previously listed amount covers allocations to reserves for payments following the end of the employment contract of Mr Mierdorf. These commitments materially provide for a one-time capital amount to be granted when he leaves the company. This will be determined on the basis of the average compensation from the last two calendar years, consisting of salary and performance-based compensation. It will amount to at least the annual salary and performance-based compensation on the basis of a one-time EVA bonus.
Furthermore, this provision concerns provisions for pension commitments that will be paid out when Mr Mierdorf turns 60 or if he were to become permanently incapacitated or his employment contract were to be terminated prematurely or not renewed. In the latter two cases, other income will be deducted from the pension commitments. The pension commitment for Mr Mierdorf is adjusted annually to cover the increased cost of living. The commitment was made before his appointment to the Management Board.
Should the employment contract be cancelled prematurely as a result of changes in control and strategy, Mr Mierdorf will retain the entitlements arising from the employment contract even if he terminates the contract himself. Mr Mierdorf waived this provision upon the extension of his employment contract as per 1 January 2009.
Former members of the Management Board of METRO AG and the companies that were merged into METRO AG as well as their surviving dependents received €3.8 million. The cash value of commitments for current pensions and pension entitlements made for this group totalled €48.8 million.
Remuneration of members of the METRO AG Supervisory Board is regulated by § 13 of METRO AG's Articles of Association.
In addition to reimbursement of cash expenses, the members of the Supervisory Board of METRO AG receive a fi xed payment and a performance-based payment. Fixed compensation amounts to €35,000 per board member. The performance-related remuneration component is based on earnings before taxes and minority interests (EBT) in the METRO AG fi nancial statements. Each member of the Supervisory Board receives €600 per €25 million in EBT exceeding an EBT of €100 million for the average of the fi nancial year 2008 and the two preceding fi nancial years. The sales tax payable on the fi xed and performance-based compensation is reimbursed to the members of the Supervisory Board in accordance with § 13 Section 5 of METRO AG's Articles of Association.
The individual size of fi xed and performance-based Supervisory Board remuneration takes into account the duties and responsibilities of the individual members of the Supervisory Board by consideration of special assignments. The compensation of the chairman of the Supervisory Board is three times higher than that of an ordinary member of the Supervisory Board; that of the vice chairman and the chairmen of the Committees is twice as high; and that of the other members of the committees one and a half times higher, respectively. A member of the Supervisory Board who holds several offi ces receives compensation for only one offi ce; in the case of different levels of remuneration for the most highly paid offi ce (§ 13 Section 3 Sentence 3 of the Articles of Association).
| Chairman of the Supervisory Board | ••• |
|---|---|
| Vice-chairman of the Supervisory Board | •• |
| Committee chairmen | •• |
| Committee members | • |
| Members of the Supervisory Board | • |
The total compensation of all members of the Super visory Board amounted to €1.86 million in the fi nancial year 2008. The fi xed and performancebased component accounted for €0.95 million and €0.91 million, respectively. The performance-based compensation will be payable after METRO AG's Annual General Meeting on 13 May 2009.
105 IX. Notes pursuant to § 315 Section 4 German Commercial Code and explanatory report of the Management Board
113 X. Risk Report
117 XI. Supplementary and forecast report
The following individual totals applied in the fi nancial year 2008:
| € | Fixed com pensation |
Perform ance-based compen sation |
|---|---|---|
| Franz M. Haniel, Chairman | 105,000 | 101,461 |
| Klaus Bruns, Vice-Chairman | 70,000 | 67,641 |
| Dr Wulf H. Bernotat | 46,667 | 45,094 |
| Prof. Dr Dr h. c. Klaus Brockhoff (until May 2008) |
14,583 | 14,092 |
| Ulrich Dalibor | 42,292 | 40,866 |
| Jürgen Fitschen (since April 2008) | 26,250 | 25,365 |
| Hubert Frieling | 35,000 | 33,820 |
| Prof. Dr Dr h. c. mult. Erich Greipl | 52,500 | 50,731 |
| Jürgen Hennig (until May 2008) | 14,583 | 14,092 |
| Andreas Herwarth (since July 2008) | 17,500 | 16,910 |
| Werner Klockhaus | 52,500 | 50,731 |
| Peter Küpfer | 35,000 | 33,820 |
| Rainer Kuschewski | 35,000 | 33,820 |
| Marie-Christine Lombard (since May 2008) |
23,333 | 22,547 |
| Dr Klaus Mangold | 35,000 | 33,820 |
| Marianne Meister (until May 2008) | 14,583 | 14,092 |
| Dr rer. pol. Klaus von Menges (until May 2008) |
14,583 | 14,092 |
| Dr-Ing. e. h. Bernd Pischetsrieder | 35,000 | 33,820 |
| M. P. M. (Theo) de Raad (since May 2008) |
23,333 | 22,547 |
| Sylvia Raddatz (until June 2008) | 17,500 | 16,910 |
| Renate Rohde-Werner (until May 2008) | 14,583 | 14,092 |
| Xaver Schiller (since May 2008) | 35,000 | 33,820 |
| Dr jur. Hans-Jürgen Schinzler | 70,000 | 67,641 |
| Dr Manfred Schneider (until April 2008) | 17,500 | 16,910 |
| Peter Stieger | 52,500 | 50,731 |
| Angelika Will (since May 2008) | 23,333 | 22,547 |
| Angelika Zinner (since May 2008) | 23,333 | 22,547 |
| Total | 946,456 | 914,559 |
No remuneration applied to membership of the Supervisory Board's Nominations Committee, with one member waiving payment for the committee work. The other members of the Nominations Committee hold other Supervisory Board offi ces so that additional compensation is precluded in accordance with § 13 Section 3 Sentence 3 of the Articles of Association.
In the financial year 2008, the members of the Super visory Board of METRO AG received €0.17 million in compensation from the Group companies for Supervisory Board mandates (and in one case for an Advisory Board mandate) at Group companies. The amounts listed in the following table apply to the individual members of the METRO AG Supervisory Board. Beyond this, the members of the Supervisory Board were not granted any remuneration or benefi ts for work performed, in particular consulting and brokerage services, on behalf of companies of METRO Group in the sense of Subsection 5.4.6 of the German Corporate Governance Code.
| Klaus Bruns Ulrich Dalibor Prof. Dr Dr h. c. mult. Erich Greipl Rainer Kuschewski Marianne Meister Sylvia Raddatz Renate Rohde-Werner Xaver Schiller Peter Stieger Angelika Will Angelika Zinner Total |
|
|---|---|
| 37,350 | |
| 15,067 | |
| 49,800 | |
| 6,136 | |
| 9,000 | |
| 2,459 | |
| 24,900 | |
| 6,000 | |
| 9,203 | |
| 6,000 | |
| 7,800 | |
| 173,715 |
The above amounts do not include the remuneration entitlements of one member of the Supervisory Board from intragroup Supervisory Board mandates of which the member of the Supervisory Board waived the payment. The sales tax payable on compensation is reimbursed to the members of the Supervisory Board.
On 31 December 2008, the share capital of METRO AG totalled €835,419,052.27. It is divided into a total of 326,787,529 no-par-value bearer shares. The proportional value per share amounted to about €2.56.
The share capital is broken down into the following types of shares:
| 324,109,563 | |
|---|---|
| 828,572,941 | (yields 99.18 %) |
| 2,677,966 | |
| 6,846,111 | (yields 0.82 %) |
| 326,787,529 | |
| 835,419,052 | |
Each ordinary share of METRO AG grants an equal voting right. In addition, ordinary shares of METRO AG entitle the holder to dividends. In contrast to ordinary shares, preference shares do not carry voting rights and give a preferential entitlement to profi ts in line with § 21 of the Articles of Association of METRO AG, which state:
(2) Should the net earnings available for distribution not suffi ce in any one fi nancial year to pay the preference dividend, the arrears (excluding any interest) shall be paid from the net earnings of future fi nancial years in an order based on age, i.e. in such manner that any older arrears are paid off prior to any more recent ones and that the preferred dividends payable from the profi t of a fi nancial year are not distributed until all of any accumulated arrears have been paid.
(3) After the preferred dividend has been distributed, the holders of ordinary shares will receive a dividend of €0.17 per ordinary share. Thereafter, a non-cumulative extra dividend of €0.06 per share will be paid to the holders of non-voting preference shares. The extra dividend shall amount to 10 percent of such dividend as, in accordance with section 4 herein below, will be paid to the holders of ordinary shares inasmuch as such dividend equals or exceeds €1.02 per ordinary share.
Other rights associated with ordinary and preference shares include in particular the right to attend the Annual General Meeting (§ 118 Section 1 of the Stock Corporation Act), the right to information (§ 131 Stock Corporation Act) and the right to fi le a legal challenge or a complaint for nullity (§§ 245 No. 1–3, 246, 249 of the Stock Corporation Act). In addition to the previously mentioned right to receive dividends, shareholders have a subscription right when the share capital is increased (§ 186 Section 1 of the Stock Corporation Act), a claim to liquidation proceeds after the closure of the company (§ 271 of the Stock Corporation Act) and claims to compensation and settlements as a result of certain structural measures, particularly those pursuant to §§ 304 ff., 320b, 327b of the Stock Corporation Act.
An agreement exists among Otto Beisheim Betriebs GmbH (previously O.B. Betriebs GmbH), Otto Beisheim Holding GmbH (previously Overpart GmbH), BVG Beteiligungs- und Vermögensverwaltung GmbH, Franz Haniel & Cie. GmbH, Haniel Finance B.V., Haniel Finance Deutschland GmbH, Haniel Beteiligungsfi nanzierungs GmbH & Co. KG, Haniel Beteiligungs-GmbH, METRO Vermögensverwaltung GmbH & Co. KG, METRO Vermögensverwaltung GmbH, the 1. HSB Beteiligungsverwaltung GmbH & Co. KG and the 1. HSB Verwaltung GmbH to coordinate the exercise of voting rights associated with shares of METRO AG.
In addition, an agreement exists between BVG Beteiligungs- und Vermögensverwaltungs GmbH, Franz Haniel & Cie. GmbH, Haniel Finance Deutschland GmbH and Haniel Finance B.V. to coordinate the joint exercise of interests from the METRO AG shares economically attributable to the shareholder groups Haniel and Schmidt-Ruthenbeck. This agreement dating back to 2007 took effect on 9 October 2008.
The aforementioned agreements can be regarded as restrictions in the sense of § 315 Section 4 No. 2 of the German Commercial Code.
Notes pursuant to § 315 Section 4 No. 3 of the German Commercial Code – direct and indirect (pursuant to § 22 of the German Securities Trading Act) capital interests that exceed 10 percent of the voting rights:
| Name/company | Direct/indirect stakes exceeding 10 percent of voting rights |
|---|---|
| METRO Vermögensverwaltung GmbH & Co. KG, Düsseldorf |
Direct and indirect |
| METRO Vermögensverwaltung GmbH, Düsseldorf |
Indirect |
| 1. HSB Beteiligungsverwaltung GmbH & Co. KG, Schönefeld-Waltersdorf |
Direct and indirect |
| 1. HSB Verwaltung GmbH, Schönefeld-Waltersdorf |
Indirect |
| Haniel Finance B.V., Venlo/Netherlands | Indirect |
| Haniel Finance Deutschland GmbH, Duisburg |
Indirect |
| Haniel Beteiligungsfi nanzierungs GmbH & Co. KG, Duisburg |
Direct and indirect |
| Haniel Beteiligungs-GmbH, Duisburg | Indirect |
| Franz Haniel & Cie. GmbH, Duisburg | Indirect |
| Prof. Otto Beisheim Stiftung, Baar/Switzerland |
Indirect |
| Otto Beisheim Betriebs GmbH (previously O.B. Betriebs GmbH), München |
Indirect |
| Otto Beisheim Group GmbH Co. KG (previously O.B.V. Vermögensverwaltungs GmbH & Co. KG), Düsseldorf |
Indirect |
| Otto Beisheim Verwaltungs GmbH (previously O.B.V. Vermögensverwaltungs GmbH), Düsseldorf |
Indirect |
| Otto Beisheim Holding GmbH (previously Overpart GmbH), Baar/Switzerland |
Indirect |
| Prof. Dr Otto Beisheim, Baar/Switzerland | Indirect |
| BVG Beteiligungs- und Vermögensver waltung GmbH, Essen |
Indirect |
| Gebr. Schmidt GmbH & Co. KG, Essen | Indirect |
| Gebr. Schmidt Verwaltungsge - sellschaft mbH, Essen |
Indirect |
| Dr Michael Schmidt-Ruthenbeck, Zürich/Switzerland |
Indirect |
The above information is based, in particular, on notifi cations under § 21 of the German Securities Trading Act that METRO AG received and released in the fi nancial years 2006 and 2007.
Notifi cations of voting rights published by METRO AG can be found on the website www.metrogroup.de under Investor Relations.
The company has not issued any shares with special rights pursuant to § 315 Section 4 No. 4 German Commercial Code. No capital interests are held by employees pursuant to § 315 Section 4 No. 5 German Commercial Code.
In instances when members of the Management Board are appointed and removed, legal regulations laid down in §§ 84, 85 of the German Stock Corporation Act and §§ 30, 31, 33 of the German Co-determination Act apply. A supplementary regulation is contained in § 5 in METRO AG's Articles of Association. It states:
Changes to the Articles of Association at METRO AG are determined principally in accordance with §§ 179, 181, 133 of the German Stock Corporation Act. Numerous other sections of the Stock Corporation Act would apply to a change to the Articles of Association, and modify or supersede the previously mentioned regulations, for example §§ 182 ff. of the Stock Corporation Act during capital increases, §§ 222 ff. of the Stock Corporation Act during capital reductions or § 262 of the Stock Corporation Act during the dissolution of the AG. Pursuant to § 14 of METRO AG's Articles of Association, changes that would affect only the text of the Articles of Association may be decided by the Supervisory Board without a vote by the Annual General Meeting.
In accordance with § 202 Section 1 of the Stock Corporation Act, the Annual General Meeting can authorise the Management Board to increase the share capital through the issuance of new shares against deposit. Four such authorisations exist at present, with two authorisations each authorising the Management Board to increase the share capital by issuing new ordinary shares in exchange for cash contributions and non-cash contributions, respectively. These authorisations are designed to enable the company to tap additional equity as a longterm means of fi nance. Adequate equity capital is of critic al importance for the company's fi nancing and, in particular, its continued inter national expansion. At the moment, no concrete plans exist to make use of these authorisations. The following details apply:
On 23 May 2007, the Annual General Meeting resolved to authorise the Management Board to increase the share capital, with the approval of the Supervisory Board, by issuing new ordinary bearer shares in exchange for cash contributions in one or several tranches for a total maximum of €40,000,000 (authorised capital I) by 23 May 2012. A subscription right is to be granted to existing shareholders. However, the Management Board has been authorised to restrict this subscription right, with the approval of the Supervisory Board, to the extent required to grant the holders of option bonds and convertible bonds issued by METRO AG and its wholly owned direct or indirect subsid iaries a right to purchase the number of new ordinary shares to which they would be entitled upon exercise of their option/conversion rights and to further exclude the subscription right to compensate for fractions of shares from rounding. In addit ion, the Management Board has been authorised to restrict the shareholders' subscription rights, with the prior approval of the Supervisory Board, for one or several capital increases under the authorised capital, provided that the total par value of such capital increases does not exceed 10 percent of the share capital registered in the commercial register at the time the authorised capital is fi rst utilised, and further provided that the issue price of the new ordinary shares is not substantially below the market price of the company's listed ordinary shares of the same category at the time the initial offering price of the new issue is fi nally fi xed. The Management Board is authorised to determine all further details of the capital increases with the prior approval of the Supervisory Board. To date, authorised capital I has not been used.
On 23 May 2007, the Annual General Meeting resolved to further authorise the Management Board, with the approval of the Supervisory Board, to increase the company's share capital by issuing new ordinary bearer shares in exchange for noncash contributions in one or several issues for a maximum total of €60,000,000 by 23 May 2012 (authorised capital II). The Management Board is authorised, with the approval of the Supervisory Board, to decide on the restriction of the subscription rights and to determine all further details of the capital increases. To date, authorised capital II has not been used.
On 4 June 2004, the Annual General Meeting further authorised the Management Board, with the prior approval of the Supervisory Board, to increase the company's share capital by issuing new ordinary bearer shares in exchange for cash contributions in one or several issues for a maximum total of €100,000,000 by 3 June 2009 (authorised capital III). Existing shareholders shall be granted a subscription right. However, the Management Board has been authorised to restrict the subscription right, with the prior approval of the Supervisory Board, to the extent required to grant the holders of option bonds and convertible bonds issued by METRO AG and all direct or indirect subsidiaries in which METRO AG holds at least 90 percent of the share capital a right to purchase the number of new shares they would be entitled to upon exercise of their option/conversion rights and to further rule out subscription rights to compensate for fractions of shares from rounding. In addition, the Management Board has been authorised to restrict the shareholders' subscription rights, with the prior approval of the Supervisory Board, for one or several capital increases under the authorised capital, provided that the total par value of such capital increases does not exceed 10 percent of the share capital registered in the commercial register at the time the authorised capital is fi rst utilised, and further provided that the issue price of the new shares is not substantially below the market price of listed shares of the same category at the time the initial offering price of the new issue is fi nally fi xed. The maximum limit of 10 percent of the share capital decreases in proportion to the amount of share capital that is comprised of the company's treasury shares issued as part of the authorised capital III under exclusion of the subscription right of the shareholders pursuant to § 71 Section 1 Subsection 8 Sentence 5, § 186 Section 3 Sentence 4 of the German Stock Corporation Act. The maximum limit also falls in proportion to the amount of share capital that is comprised of those shares issued to service option bonds and/or convertible bonds
with option or conversion rights or with conversion duties if the bonds were issued during the duration of authorised capital III under the exclusion of the subscription right in the corresponding application of § 186 Section 3 Sentence 4 of the Stock Corporation Act. To date, authorised capital III has not been used.
The Annual General Meeting held on 4 June 2004 further authorised the Management Board, with the approval of the Supervisory Board, to increase the company's share capital by issuing new ordinary bearer shares in exchange for non-cash contributions in one or several issues for a maximum total of €125,000,000 by 3 June 2009 (authorised capital IV). The Management Board has been authorised, with the approval of the Supervisory Board, to decide on the restriction of the subscription right. To date, authorised capital IV has not been used.
METRO AG is authorised to buy back its own shares in accordance with § 71 of the German Stock Corporation Act.
On the basis of § 71 Section 1 No. 8 of the Stock Corporation Act, the Annual General Meeting decided on 16 May 2008:
If shares are acquired on the stock exchange, the price per share (excluding incidental transaction costs) paid by the company shall not be more than 5 percent above or below the arithmetic mean of the fi nal auction prices quoted for company shares of the same share class on the XETRA system (or a functionally comparable successor system replacing the XETRA system) of the Frankfurt Stock Exchange during the three trading days immediately preceding the date of acquisition.
If shares are acquired by way of a public tender offer made to all shareholders of the company, the offered purchase price per share shall not be more than 10 percent above or below the arithmetic mean of the fi nal auction prices quoted for company shares of the same share class on the XETRA system (or a functionally comparable successor system replacing the XETRA system) of the Frankfurt Stock Exchange during the three trading days immediately preceding the date of announcement of the offer. If the public tender offer is oversubscribed, proportional acceptance will take place. Priority may be given to small lots of up to 100 shares per shareholder.
(2) Transfer of company ordinary shares to third parties in connection with corporate mergers or in connection with the acquisition of other companies, divisions of other companies or interests in other companies;
(3) Retirement of company shares, without the need for any further resolution by the Annual General Meeting authorising such retirement and execution thereof. The retirement may be effected without a capital reduction by adjusting the prorata share of the remaining no-par-value shares in the company's share capital. In this case, the Management Board is authorised to adjust the number of no-par-value shares in the Articles of Association;
through an offer to all shareholders, may be granted to holders of warrants or convertible bonds of the company or any of its affi liates, to the same extent that holders of such warrants or convertible bonds would have subscription rights for ordinary shares of the company after exercising the warrant or conversion rights or performing the warrant or conversion obligations. The ordinary shares transferred based upon this authorisation shall collectively not exceed a pro rata amount of 10 percent of the share capital, inasmuch as such ordinary shares are used to service conversion or warrant rights or conversion obligations issued or created by analogous application of § 186 Section 3, Sentence 4 of the German Stock Corporation Act. Shares issued or sold by direct or analogous application of § 186 Section 3, Sentence 4 of the German Stock Corporation Act during the effective period of this authorisation up to the date of use shall count towards the aforementioned limit.
The authorisation for the repurchase of own shares serves the possible applications listed in paragraph c):
Among other things, the authorisation is intended to enable the company to buy back own ordinary shares for listings, by exclusion of subscription rights, at foreign exchanges where the company's ordinary shares are not yet listed. In addition, the authorisation is supposed to enable the company to use treasury ordinary shares as payment by exclusion of subscription rights in the context of business combinations or acquisitions of companies, corporate units or holdings in companies. The company is also supposed to be able to re-
tire own shares without a renewed resolution by the Annual General Meeting. In addition, the authorisation shall allow the company to sell treasury ordinary shares by exclusion of subscription rights other than via the exchange or an offer to shareholders against cash payment. This is supposed to enable the company, in particular, to issue treasury ordinary shares at short notice. The Annual General Meeting of 4 June 2004 authorised the Management Board, with the approval of the Supervisory Board, to issue option bonds and convertible bonds. Rather than implementing a capital increase, it may prove sensible to fully or partly serve the resulting subscription rights with treasury ordinary shares.
The Annual General Meeting on 4 June 2004 authorised the Management Board, with the approval of the Supervisory Board, to issue bearer and/ or registered option and/or convertible bonds by 3 June 2009, in one or several tranches totalling up to a nominal value of €1,000,000,000 with a maturity of at least 15 years, and to grant the option bond holders option rights or owners of convertible bonds conversion rights for new ordinary shares in the company in proportion to the share capital of up to €127,825,000 pursuant to option bond or convertible bond conditions.
In addition to euros, the option bonds and/or convertible bonds may be issued – limited to the equivalent euro value – in the legal currency of an OECD country. The option bonds and/or convertible bonds may also be issued by the affi liates (§ 18 of the German Stock Corporation Act) of METRO AG in which METRO AG directly or indirectly holds at least 90 percent of the share capital. In this case, the Management Board is authorised to assume the guarantee for the option bonds/convertible bonds on behalf of the company and to grant option or convertible bond rights for new ordinary shares of METRO AG to the holders of option or convertible bonds.
All shareholders are entitled to a subscription right. The option bonds or convertible bonds are to be assumed by a lending institution or a consortium under the condition that they will be offered to the shareholders. The company must also ensure the shareholders' legal subscription right when the option bonds and/or convertible bonds are issued by a 90 percent direct or indirect Group company of METRO AG. The Management Board, however, is authorised, with the approval of the Supervisory Board, to exclude odd-lot amounts resulting from subscription conditions from the subscription right of shareholders and to preclude the subscription right inasmuch as it is necessary to grant holders of previously issued option and convertible rights at the time of the new issue or holders of option or convertible bonds containing option and conversion obligations a subscription right to the extent to which they would be entitled after exercising the option or conversion rights or after fulfi lling option and conversion obligations.
The Management Board is further authorised, with the approval of the Supervisory Board, to exclude the subscription right of shareholders to option and/or convertible bonds inasmuch as that the Management Board has concluded (after a mandatory review) that the issue price of the option or convertible bonds does not signifi cantly fall below their hypothetical market value as calculated by recognised fi nancial-mathematic methods. This authorisation to issue option or convertible bonds under the exclusion of the subscription right in accordance with § 186 Section 3 Sentence 4 of the German Stock Corporation Act applies only so far as the shares being issued to satisfy conversion option rights do not collectively exceed 10 percent of the share capital that existed as of the date of the initial exercise of this authorisation. The maximum limit of 10 percent of the share capital decreases in proportion to the amount of share capital that is comprised of the company's shares issued during the authorisation period under the exclusion of the subscription right in accordance with § 186 Section 3 Sentence 4 of the Stock Corporation Act in connection with a capital increase or sold from a pool of treasury shares.
In the case of the issuance of option bonds, one or several options are added to every partial debenture that, according to the option conditions, entitle the owner to acquire the company's ordinary shares. The proportionate share of share capital that is allotted to the subscription shares for each partial debenture may not exceed the nominal value of the option bond. Under the option and bond conditions, fractional amounts of shares may be turned into complete shares, including upon the payment of an additional sum. The maximum period of the option right is 15 years.
In the case of the issuance of convertible bonds, the holders of the debentures receive the indefeasible right to transform their convertible debentures under the conditions of the convertible bonds into the company's ordinary shares. The conversion ratio results from dividing the nominal value or the issue amount of a partial debenture that is below the nominal value by the fi xed conversion price for an ordinary share of the company. The convertible bond conditions can stipulate that the conversion ratio is variable and the conversion price can be altered within a fi xed band depending on the course of the ordinary share price during the authorisation period. In any case, the conversion ratio can be rounded up or down to a whole number. In add ition, a cash payment can be set. Furthermore, it can be stipulated that non-convertible amounts will be combined and/or settled with a money payment.
The convertible bond or option conditions can constitute a convertible or option obligation at the end of the duration period or at some other point in time, or provide for the right of the company to grant, at the time of maturity of the convertible or option bonds, ordinary share in the company or in another listed business to bondholders completely or partially in the place of payment of the due amount upon maturity.
In each case, the bond conditions can stipulate that, in the case of the exercise of conversion or options (including as a result of a conversion or warrant option or as a result of the company's exercise of a stock issuance option), some treasury stock can be granted. It can further be stipulated that the company will not provide company shares to people entitled to conversions or options. Rather, the amount will be paid in cash. Under the bond conditions, this amount will correspond to the volume-weighted average of the price of METRO AG's ordinary share in XETRA trading on the Frankfurt Stock Exchange or in an equivalent successor system on at least two successive trading days during the period of 10 trading days before and 10 trading days after the announcement of the conversion or the exercise of the option.
The individually fi xed option or conversion price for an ordinary share must amount to at least 80 percent of the volume-weighted average of the price of METRO AG's ordinary share in XETRA trading on the Frankfurt Stock Exchange or an equivalent successor system on 10 trading days before the Management Board's decision about issuing option bonds or convertible bonds. Deviations may be made for cases of option and conversion obligations or the issuance of shares on the basis of the exercise of a company voting right. In this case, the bond conditions must provide for a warrant or conversion price for an ordinary share of the company that is at least 80 percent of the volume weighted average of the price of METRO AG's shares in XETRA trading on the Frankfurt Stock Exchange or in an equivalent successor system during the reference time period of 3 to 20 trading days before the maturity of the option bond or convertible bond or the start of an option obligation. For the concession of the subscription right, the individually determined option and conversion price for an ordinary share (subject to the special regulation covering cases of option or conversion obligation or the transmittal of shares on the basis of a voting right of the company) must amount to at least 80 percent of the volume-weighted average of the price of METRO AG's ordinary shares in XETRA trading on the Frankfurt Stock Exchange or in an equivalent successor system during the days on which the subscription rights to option bonds and convertible bonds were traded on the Frankfurt Stock Exchange, with the exception of both fi nal days of the subscription right trading. In each of the described cases, § 9 Section 1 of the German Stock Corporation Act shall remain unaffected.
Irrespective of § 9 Section 1 of the German Stock Corporation Act, the option and conversion price will be discounted as a result of an anti-dilution clause following a more detailed determination of the option or convertible bond conditions if the company, during the option or conversion term, increases the share capital including a subscription right to its shareholders or raises capital from the company's fi nancial resources or issues or guarantees further option bonds or convertible bonds or option rights and does not grant a subscription right to holders of option and conversion rights to the extent to which they are entitled after the exercise of the option or conversion right. In addition, the conditions could provide for, in cases of a reduction in capital or other exceptional measures or events, including unusually high dividends or a
takeover by a 3rd party, an adjustment of the option and conversion rights or option or conversion obligations or the regulations concerning the exercise of company options for a supply of shares.
The Management Board is authorised to clarify the additional details concerning the issue and conditions of option bonds and/or convertible bonds, particularly the interest rate, issue price, maturity and denominations, option or conversion price and option or conversion period, or to determine in consultation with the departments of the Group companies issuing the option bonds and/or convertible bonds.
The authorisation to issue option and/or convertible bonds is designed to expand METRO AG's fi nancing leeway and provide the company with fl exible and short-term access to fi nancing upon the emergence of favourable capital market conditions, in particular. Issues of bonds with convertible or option rights on shares of METRO AG provide a means of raising capital at attractive conditions. The convertible and option premiums attained fl ow to the company. The additionally foreseen possibility of granting not only convertible and option rights, but also introducing option and convertible duties, and allowing the company to opt for the full or partial redemption of bonds with treasury stock rather than cash, extends the company's leeway in the design of this fi nancing instrument.
As a borrower, METRO AG is a party to three syndicated loan agreements that the lender may cancel in the case of a takeover inasmuch as the credit rating of METRO AG also and as a result of the takeover drops in a way stipulated in the contract. The requirements of a takeover are, fi rst, that the shareholders who controlled METRO AG at the time when each contract was signed lose this control. The second requirement is the takeover of control of METRO AG by one or several parties. The lending banks may cancel the contract and demand the return of the loan only if the takeover and a resulting drop in the credit rating occur cumulatively. In 2008, the average amount used from the syndicated loan agreements was €301 million. The hedging of syndicated loans in the manner described above is standard market practice and serves the purpose of creditor protection.
In the event that a takeover leads to a signifi cant change in strategy, Management Board member Mr Mierdorf was until 31 December 2008 authorised to resign from his board positions at the end of the 3rd month that follows the change in control and strategy and to terminate his employment contract. In the event of such an extraordinary termination of his employment contract, Mr Mierdorf would have retained the remuneration entitlements arising from his contract. Mr Mierdorf waived this provision upon the extension of his employment contract as per 1 January 2009.
Risk management at METRO Group is an integral part of value-creating business management. It helps the company's management to exploit opportunities and limit risk, and is based on a systematic process of risk identifi cation, assessment and control for the entire Group. Unfavourable developments are recognised at an early stage, and the necessary countermeasures are put into place. Opportunities are identifi ed, assessed and seized in a systematic manner.
METRO Group's risk management offi cer continuously and promptly informs the Management Board of METRO AG of important developments in risk management. Based on an annual Groupwide risk audit, the risk management offi cer writes the risk report. The most critical responsibilities of central risk management include ensuring the Group-wide exchange of information on risk relevant issues and developing risk management in all sales divisions and Group units. This involves coordinating the Group-wide recording and systematic assessment of all essential risks according to uniform standards. The risk management offi cer compiles the results in a risk portfolio that provides the basis for determining METRO Group's total risk and opportunities situation.
Group-wide risk management tasks and responsibility for risk management are clearly regulated and mirror METRO Group's corporate structure. This combines centralised management by the management holding company METRO AG with the decentralised operative responsibility of the individual sales divisions. The sales divisions and consolidated subsidiaries are thus responsible for the risks, in particular operative risks. They oversee risk management, while METRO AG supervises its implementation. The Supervisory Board and its Accounting and Audit Committee work intensely on risk management.
The crucial Group-wide benchmark for corporate success is Economic Value Added (EVA). The degree of readiness to assume risk also focuses on this key metric and thus follows the principle of sustainably increasing enterprise value. In particular, EVA is an important criterion for investment decisions. As a matter of principle, we take entrepreneurial risks only if they are manageable and if the opportunities involved promise reasonable value added.
Risks incurred in conjunction with the core processes of wholesale and retail trading are borne by METRO Group. The core processes include the development and implementation of business models, decisions on store locations, the procurement and sale of merchandise and services, hum an resources development relating to specialists and managers, as well as liquidity protection. As a matter of principle, METRO Group does not assume risks that are not related to core or support processes.
The coordinated application of risk-management tools is assured by the compilation of all relevant facts in guidelines. These include the Articles of Association and by-laws of Group companies, intern al Group procedures and the risk management manual of METRO AG that provides information on how the risk management system works, offers a comprehensive overview of potential risk areas, assigns responsibility for monitoring and provides instructions on how to act. Risks, as well as opportunities, are identifi ed in a bottomup process that extends through all management levels. An early warning system assesses business risks in terms of scope for a planning period fi xed at three-years.
Effective risk management secures existing and future potential for success
Guidelines and early warning systems ensure the highest levels of transparency at all times
Group reporting is the central vehicle for the intern al communication of risks and opportunities. Annual risk audits, fi nancial statements and monthly forecasts as well as regular contacts among the operating units and their controlling companies ensure the continuous and timely exchange of information. Areas of risk are monitored on the basis of specifi ed indicators. Fundamental risks that suddenly appear are immediately reported to the responsible decision-making bodies. An emer gency notifi cation system has been created specifi cally for this purpose.
Within METRO Group, each manager is responsible for overseeing the implementation and effectiveness of risk management in his or her particular area. Risk management offi cers ensure that the risk management system as a whole is operational and monitor the up-to-dateness of standards and stipulations. In compliance with the provisions of KonTraG (the German Control and Transparency Law), external auditors submit our early detection system to a periodic review. The results of this review are presented to the Management Board and Supervisory Board.
The timely recognition and exploitation of opportunities is a critical entrepreneurial duty and secures long-term success. At METRO Group, we view risk and opportunity management as two distinct responsibilities. Ascertaining and communicating opportunities is an integral part of the management and controlling systems between the consolidated subsidiaries and the holding company. It is the responsibility of the management of the sales divisions, cross-divisional service companies and the central holding units to identify, analyse and exploit operative opportunities. The individual management groups examine detailed market and competition analyses, market scenarios, the relevant cost drivers and critical success factors, including those in the company's political environment.
In the supplementary and forecast report, we describe the opportunities that we expect to have in future years.
METRO Group primarily faces the internal and external risks that are described in the following section.
During the reporting period, business parameters changed as a result of the general deterioration of the economic environment in the METRO Group regions and capital market developments. The overall risks concerning short- to medium-term developments in the retail trade and thus METRO Group are therefore likely to have increased. Although the effects of the global fi nancial crisis on sales, procurement, currency and refi nancing markets are diffi cult to gauge, we are determined to continue to strengthen our position as a leading international retailing group.
The particularly intense competition in the German and Western European retail trade creates conditions that could infl uence business developments and represent natural business risks. A fundamental business risk is consumers' fl uctuating propensity to consume, a factor that depends on numerous political, social and economic parameters and represents a markedly higher risk in the current crisis environment. Consumers are likely to cut back their spending in anticipation of more diffi cult economic times. This applies both to consumer staples and to larger purchases such as household appliances and consumer electronics products. On the one hand, the international positioning of METRO Group requires it to consider possible economic, legal and political risks. On the other hand, the continuing internationalisation of METRO Group offers the opportunity to offset fl uctuating demand in individual countries.
Constantly shifting consumer behaviour and customer expectations pose a risk and an opportunity, and call for a continuous adaptation and optimisation of merchandising concepts. To recognise market trends and changing consumer expectations early on, we regularly analyse internal information and selected external sources – including Nielsen, GfK, Planet Retail and Ifo Institute. Our Group's own market research uses quantitative methods such as time series analyses and market trend forecasts based on the analysis of internal sale fi gures and market research. The time series analyses include the observation of product segments on the market over a certain period of time. Our sales brands initially examine the practicability and acceptance of innovative concept modules in test stores before introducing them systematically and swiftly in other stores. Continuous fund allocation allows for the optimisation of merchandising concepts and the modernisation of stores. These measures help all sales brands to secure and expand our competitive strength.
We consider the setting-up and expansion of our presence in the major growth regions of Eastern Europe and Asia as critical investments in the future of our business Group. By entering these markets, we are using our entrepreneurial opportunity to profi t from the rising purchasing power of millions of consumers. We identify the location risks associated with expansion into these economic regions, including changing fundamental conditions, by doing such things as conducting feasibility studies that carefully analyse the fundamentals and opportunities of an investment. Essentially, our growth aspirations remain intact in spite of current global economic developments. However, there is a risk that our growth rates will lag behind the targets included in our current planning over the next few years. This may be due to a lower number of new store openings or to weaker developments at existing locations.
In past years, the portfolio of METRO Group has continuously been optimised. All portfolio changes and the strategic and investment decisions related to them focus on value creation for our Group. As a result, risks associated with changes in the portfolio are minimised.
As a retailing company, METRO Group depends on external providers for the supply of goods and services. In the current diffi cult economic environment, suppliers must protect their own liquidity. There is a higher risk of insolvencies among suppliers and thus of an at least temporary disruption to supplies of individual goods or groups of merchandise. To prevent disruptions in the supply of goods, we work with a variety of suppliers. We ensure that we do not become dependent on individual companies. Our suppliers are continuously monitored and have to adhere to the procurement policy standards of METRO Group. In particular, these standards include those tested by the Global Food Safety Initiative like the International Food Safety Standard and the GLOBALGAP certifi cation for agricultural products. These standards are binding for all our suppliers in every product group. They help to ensure the safety of foods on all cultivation, production and sales levels.
The highly diverse selection of goods in bricksand-mortar retailing and the high merchandise turnover rate entail fundamental organisational, IT and logistics risks. METRO Group's international focus and our concentration on national, regional and local product assortments in the respective countries add to these risks. Any disruptions in the supply chain, for example in the supply of goods, could lead to business interruptions. METRO Group minimises these risks by using internal backup systems and specifi c contingency plans. In addition, it reduces its dependency on individual suppliers and service providers by expanding the group of business partners and follows the principle of effi cient internal division of labour.
Proprietary market research for fl exible, dynamic merchandising concepts
Backup systems and contingency plans reduce the Group's dependency on individual suppliers and service providers
The expertise, dedication and motivation of our employees are key success factors that have a decisive impact on our competitive position. To achieve our strategic goals, we depend on highly qualifi ed experts and managers. It is an ongoing challenge to recruit and retain such valuable employees for the Group, in particular in the face of intense competition for the best people. The demand for good personnel is high, particularly in markets where METRO Group is expanding. To foster the requisite entrepreneurial skills among our employees, we optimise training and professional development programmes for employees on all levels. Training courses and systematic measures that help employees to grow in professional terms promote entrepreneurial thinking and actions among employees. Variable pay components linked to business performance levels serve as an incentive. Direct participation in business success increases employees' identifi cation with METRO Group and enhances their awareness of risks and opportunities in all entrepreneurial decisions.
Legal risks arise primarily from labour and civil law cases. Tax risks are mainly connected to external tax audits. To address both types of risk, we take adequate precautions by forming provisions.
The global fi nancial crisis is having an impact on corporate refi nancing. Raising new funds has become more diffi cult and entails higher spreads. Financial risks include liquidity risks, price risks, creditworthiness risks and risks arising from cash fl ow fl uctuations.
∆ These risks and their management are described in the notes to the consolidated fi nancial statements in no. 44
To evaluate the present risk situation, we have not only examined risks in isolation, but also analysed the interrelationships of risks and rated their probability. The assessment has shown that there are no potentially ruinous risks for the company and no risks can be identifi ed that could endanger the company's future existence.
On 19 January 2009, METRO Group announced a comprehensive effi ciency- and value-enhancing programme to secure the company's long-term profi table growth. In this context, the Group aspires to an earnings improvement potential of €1.5 billion through 2012 and beyond.
∆ The programme is presented under "Planned changes in business policy"
By contractual agreement of 13 February 2009, the Adler fashion stores were sold to the restructuring fund BluO beta equity Limited. The agreement is subject to the approval of the cartel authorities.
In February 2009, METRO Group issued a €1,000 million euro bond with a term of 6 years and an interest rate of 7.625 percent p. a. as well as a €156 million promissory note bond with a term of 5 years.
Further events that are of material importance to an assessment of the earnings, fi nancial and asset position of METRO AG and METRO Group did not occur by 2 March 2009 (date of release of the accounts for presentation to and approval by the Supervisory Board).
The global economy's downward trend during the 2nd half of 2008 continued in the 1st quarter of 2009. The fi nancial crisis that has spread from the United States is now having a real economic impact in all global regions. The global credit squeeze, drastically lower incoming orders and shrinking export demand are weighing heavily on the manufacturing industry. Observers are speaking of the worst economic crisis since the Great Depression of the 1930s. The International Mone tary Fund believes that 2009 will be the most challenging year for the global economy in more than 60 years. Even the growth markets of Eastern Europe and Asia have not been able to resist the steep economic downturn. The general consensus among economic institutes remains that a gradual economic recovery will not begin until the 2nd half of 2009 at the earliest and that the downturn is likely to last longer than this. Critical observers think that the real economic impact of the fi nancial crisis will continue to weigh on the global economy beyond 2010.
All in all, the likely duration and depth of the global economic downturn are diffi cult to predict. The interplay of a multitude of factors impacting economic developments far exceeds typical phenomena during a cyclical downturn. The economic downturn could deepen even more if additional banks and companies were to come under pressure and the emerging markets were hit harder than is currently expected by investment outfl ows and declining global trade.
However, there are a number of bright spots in this otherwise gloomy picture: for one thing, lower infl ation levels due above all to declining energy prices are bolstering consumers' purchasing power – and this phase of low price increases is likely to continue in 2009. In addition, governments in most European countries have issued comprehensive state guarantees to stabilise their banking systems, and nearly all economies are supported by stimulus programmes and tax relief. Finally, global central banks are providing economic investment incentives in the shape of massive interest rate cuts.
Overall, we expect, at best, stagnant global economic output in 2009 after growth of 2.0 percent last year. This would translate into a recession in most industrial nations. After several years of strong growth, most emerging markets will only achieve low real economic growth. Economic engines are unlikely to really start running again until 2010.
The economic downturn affects all Metro regions. In Western Europe, the recession that started in the 2nd half of 2008 will continue in 2009. We project negative economic performance for most Western European countries in full year 2009. The stimulus and stabilisation programmes will moderate this development at best. Global developments also will not bypass Germany. While German companies are well positioned in international markets and have continued to improve their competitiveness in the European market, global economic developments severely impact the German economy with its high export share in Gross Domestic Product. We therefore project a substantial decline in German economic output in 2009.
In Eastern Europe, economic growth will slow markedly after the past years' dynamic developments. The severe deterioration in fi nancial markets substantially heightens economic risks. These affect all Eastern European countries, although growth differences will be larger than in Western Europe, with some countries in the region posting moderate growth and others slipping into a recession.
We also expect the Asian economies to slow down in 2009. After an extended growth phase, the emerging markets of China and India, in particular, are coming under increased pressure. Just like the Western European countries, Japan will remain in recession in 2009.
Despite deteriorating prospects for 2009 and in parts 2010, Eastern Europe and the emerging markets of Asia will remain the world's key growth regions with high catch-up potential over the medium term.
Consumer goods trade will not be immune to the global economic downswing, even though declining unemployment and wage increases boosted disposable incomes in many countries in 2008, while declining infl ation rates strengthened consumers' purchasing power. Unemployment will climb again in the course of the economic downswing. For private households in many countries, the real estate and bank crisis has also made access to loans more diffi cult. Both factors have a negative impact on the retail and wholesale trade. Compared with this, the impact of global stimulus programmes, which are also designed to bolster consumers' purchasing power, is diffi cult to gauge. This is why high uncertainties are attached to all forecasts on retail trade developments in general and trends in individual market segments. However, we expect different retail segments to feel the economic downswing to different degrees.
The economic downswing will impact developments in the cash & carry segment. Compared with the traditional wholesale business, the cash & carry business model offers its key customer groups – independent retailers and restaurant operators – special advantages that become critically important in times of economic crisis. Unlike traditional wholesaling, no minimum order or purchasing volumes apply. As this allows cash & carry customers to fl exibly respond to demand fl uctuations, we expect the economic downswing to hit the cash & carry segment less hard.
Trends in the cash & carry segment should resemble those in the food retail business. In the cash & carry segment, food assortments are the key product group with a disproportionate share of sales. We expect, at best, stagnant market volumes in Western Europe and Germany in 2009. Meanwhile, market growth will continue in Eastern Europe and Asia. However, at least in 2009, but most likely also in 2010, growth rates in these regions will be lower than in recent years.
Thanks to its expansion in past years, Metro Cash & Carry can now build on a well-diversifi ed international network of locations. Eastern Europe and Asia already account for a signifi cant share of sales and will remain at the core of Metro Cash & Carry's expansive efforts over the next two years.
Despite the projected economic downturn, the food retail business is unlikely to suffer any signifi cant lull in demand over the next two years. The key reason behind this development is consumers' limited willingness to restrain their use of consumer staples, in particular food, even in times of economic crisis. Accordingly, demand in Germany is likely to roughly match the level of 2008. The Eastern European food retail business, in turn, will experience continuously rising demand in 2009 and 2010.
Consumer behaviour is likely to change with respect to the choice of products and stores. Even more than before, the decision about whether to buy food products or not is likely to be determined by the price-performance ratio. Experience shows that retailers who can offer a multifaceted assortment of private labels and regular special offers tend to profi t from this development. In Eastern Europe, attachment to brand goods will remain high.
With its successful restructuring efforts of the past few years, Real has created the necessary foundation for continued positive development in Germany and Eastern Europe even in a more challenging economic environment. Real will continue its selective expansion in Eastern Europe to tap the market's strong potential. In this region, which remains characterised by a low level of market concentration, Real competes with many independent companies that are less able to generate econ omies of scale in procurement and, therefore, suffer distinct competitive disadvantages.
Consumer electronics retailing will be characterised by diverse regional developments over the next two years. Based on current economic forecasts, we expect the largely positive market development of the past few years to subside at least in 2009. Sector developments will largely depend on the impact of the economic crisis on consumers' shopping mood.
The past years' trend towards a substitution of classic technologies by more innovative technologies will continue in Germany and Western Europe in 2009 and 2010 – a trend that will primarily affect products such as fl at-screen televisions, mobile computers and energy-effi cient electronic equipment. Modern consumer electronics and information technology continue to offer high market potential. Market penetration of fl at-screen televisions among German private households, for example, is still well below 50 percent. As before, purchases of basic electrical and electronic equipment will continue to dominate demand in Eastern Europe.
The expected decline in the price of innovative technologies will also produce positive demand momentum. Due to existing overcapacities, this will primarily affect the middle and lower price segments. Price trends are making innovative products in the areas of consumer electronics and information technology affordable for additional, broad customer groups.
The positive momentum will probably not be able to fully offset the expected decline in demand. Competition will intensify in markets characterised by adverse sector developments and be carried out increasingly over the price. Media Markt and Saturn will profi t from this development. In contrast to smaller and independent retailers, Media Markt and Saturn can build on their intensive marketing as clear price leaders in the eyes of the customer. We expect Media Markt and Saturn to continue to expand their market share over the next two years, supported by their expansion in Western and Eastern Europe.
The department store and clothing sector is likely to underperform retailing as a whole again in 2009 and 2010. Consumers remain reluctant to spend money on clothes and textiles, the core of the department store assortment.
We expect market consolidation to gain speed, and additional competitors in the department store and clothing segment to drop out of this market. This development will primarily affect retailers without a clear market position and with fl awed core process designs.
Over the past few years, Galeria Kaufhof has created the necessary conditions to successfully maintain and expand its market share in this diffi cult market environment. In the process of its trading-up strategy, the department store chain has clearly positioned itself in the market and now boasts processes that are optimally aligned with the concepts and systems of Galeria Kaufhof.
Operating in a global market environment, METRO Group cannot fully separate itself from the economic situation in its respective markets. However, we can use our strong positions to continue to expand our market share. The global economic downturn is likely to deepen in 2009. The strong linkages between different economies in the course of advancing globalisation have meant that the economic downswing has hit nearly all markets simultaneously. We have responded appropriately and have revised downward our investment budget for 2009 and introduced cost-cutting measures early on. We expect the global economy to recover from 2010.
We will continue to rigorously pursue our successful business policy. The further development and adaptation of our sales formats and our assortments to regional particularities are continuous processes. The degree of development of the countries in which we operate differs substantially. At Metro Cash & Carry, we will continue to roll out delivery services in more mature markets to tap existing potential among our core customers from the gastronomy and retail sectors even better. In the case of our consumer electronics stores Media Markt and Saturn, we are working to dovetail our bricks-and-mortar locations with an innovative Internet presentation. We will expand the service component and offer additional services aside from delivery.
In January 2009, METRO Group launched a comprehensive effi ciency- and value-enhancing programme called "Shape 2012". The aim of this programme is to secure the Group's long-term profi table growth. METRO Group's structures will be simplifi ed to provide for a maximum of growth momentum and customer orientation. At the same time, costs will be cut substantially. The planned profi t improvement potential through 2012 and beyond amounts to €1.5 billion, with cost cuts accounting for about half of the total. Productivity improvements and other profi t-enhancing measures are to contribute the other half. The resulting profi t improvement depends on macroeconomic developments in our sales markets.
The guiding principle of this change process is: as decentrally as possible, as centrally as necessary. The new structure will give employees more freedom to conduct operational business and will enable the sales divisions to address the everchanging needs of their customers in a fl exible, fast and autonomous way. At the same time, the areas that are critical to managing and controlling the Group will be increasingly centralised.
The "Shape 2012" programme has fi ve pillars:
In view of advanced internationalisation, oper ational decision-making authorities will become more decentralised. To this end, the country companies will be accorded greater responsibilities to enable them to fulfi l their respective customers' requirements even better. To enhance its closeness to the market, Metro Cash & Carry will manage its operative activities largely out of the three regions of Western Europe, Eastern Europe and Asia.
Metro Cash & Carry, Real, Media Markt and Saturn as well as Galeria Kaufhof will manage the entire supply chain from the supplier to the end customer. In the process, all sales divisions will be fully responsible for their operative business. Previously overarching functions such as procurement and logistics will be assigned to the sales divisions' sphere of responsibility.
The fi nance, controlling, audit and compliance areas will be centralised and managed directly by Group headquarters in Düsseldorf. METRO Group thus ensures a tight organisational structure that facilitates the Group's fi nancial management and makes for more effective compliance and risk management across all corporate units. Human resources on the Management Board level will be strengthened to account for the continuously growing importance of manager selection and development.
In future, the entire real estate property of METRO Group will be managed centrally as a profi t centre by METRO Group Asset Management and from 2009 will be shown separately in segment reporting. Harmonised Group-wide asset management is supposed to ensure a proprietary contribution to the company's value creation. All sales divisions rent their locations at market conditions.
The tightened new management structures allow for an even greater focus on cost management and effi ciency increases, particularly in overhead areas. Operative units that miss the return targets will be rigorously restructured or given up.
"Shape 2012" is designed to make METRO Group more transparent, even more customer-orientated, less complex and thus easier to manage effi ciently. To this end, the two optimisation programmes that the sales divisions have already launched will be integrated into "Shape 2012".
Aside from fi nancial targets, we also pursue non fi nancial, so-called "soft" targets. These include our customers' and employees' satisfaction, which we regularly measure in scientifi cally based surveys. We have defined numerous non-financial goals in the area of sustainability and published them in our sustainability report. They concern the areas of supply chain/products, environment, employees as well as society and social affairs.
METRO Group currently operates in 32 countries in Europe, Asia and Africa. We want to continue to grow through additional locations in these markets. In addition, we are conducting feasibility studies to examine entry opportunities for METRO Group sales divisions in other countries. In general, the fi rst segment in which we enter new markets is Metro Cash & Carry. Once this sales division has successfully established itself in the new market, synergies can be exploited for potential market entry by Real or Media Markt and Saturn. Whether Media Markt and Saturn will enter a new market depends on the market's maturity and potential rather than an automatic process. Metro Cash & Carry is currently preparing its market entry in Kazakhstan and Egypt.
As a retailing group, we do not engage in proprietary research and development, but work closely with leading technology companies. In the area of RFID (Radio Frequency Identifi cation), we are a development partner of industry and a key driver of the establishment of industry standards.
We offer cutting-edge technological developments and innovations in the context of our assortment. Our customers expect and reward our active and fast updating of our merchandise. Analyses of customer expectations allow us to respond to current developments in a timely manner and adapt our service offer to our customers' expectations.
METRO Group's most international sales division will continue on its profi table growth course and plans to open about 40 more stores over the medium term. In particular, the sales division plans to accelerate its expansion in Asia. In view of persistently uncertain macroeconomic parameters and the reduced investment budget, about 20 new openings are foreseen for 2009. Accordingly and due to negative exchange rate effects, the growth rate will probably be lower than the past years' average of about 6 percent. Moreover, it can be assumed that declining positive price effects will dampen growth further compared to the fi nancial year 2008.
Metro Cash & Carry operates stores on three continents under very diverse conditions. While the Western European markets are highly mature, the development cycle in Eastern Europe and Asia/ Africa, in particular, is still in its early stages. We approach the challenges in our different markets with a new organisational structure. In the context of "Shape 2012", the country operations will be accorded greater responsibility to respond even better to the respective requirements of our professional customers by offering them regionally aligned concepts. To enhance its market cen tricity, Metro Cash & Carry will manage its operating activities primarily from the three regions of Western Europe, Eastern Europe and Asia. This allows us to establish long-term partnerships that will help Metro Cash & Carry bolster its long-term growth. In addition, our comprehensive cost-cutting measures and effi ciency increases in the context of "Shape 2012" offer operational freedom at a solid profi t level.
Real made important progress in its turnaround programme in Germany in 2008. The restructuring will be continued under the "Shape 2012" initiative in the current fi nancial year. The sharpening of the Real brand is a key component of the productivity enhancement programme. By raising the share of private labels from the current 12 percent to 20 percent to 25 percent over the medium term, the brand is to be anchored even more fi rmly in customers' minds. Expenses for the planned closure or divestment of loss-making locations in Germany in 2009 have already been included in the annual accounts for 2008, which leads us to expect noticeable positive earnings effects from these measures from 2010. We expect this planned closure or disposal of stores to dampen sales growth.
The targeted expansion of the hypermarket concept in Eastern Europe will continue. About 10 stores are scheduled to be opened here in the fi nancial year 2009.
Media Markt and Saturn are striving to strengthen their leading European market position. In the process of its expansion strategy, the sales divis ion plans to open about 70 large-format stores a year. The diffi cult market environment has led us to cap the number of planned store openings in the current fi nancial year at about 50 locations. Media Markt and Saturn will expand the range of services offered to strengthen customer loyalty through such offers as delivery and installation of electronic equipment and online offers to complement the bricks-and-mortar business.
Due to the lower number of new store openings and the particularly challenging economic environment in key markets for Media Markt and Saturn such as Spain and Italy, sales growth in 2009 will fall short of the previous years' level of more than 10 percent. However, the sales division still expects to grow markedly faster than its market.
Building on a clear trading-up strategy, Galeria Kaufhof has made signifi cant strides in its operating business over the past few years. Efforts to sharpen Galeria Kaufhof's market profi le, in particular in textiles, through an expansion of its offer of internationally known brands and the promotion of proprietary, high-margin premium brands have been a key component of this strategy. In light of the deteriorating economic environment, we expect sales to decline slightly in 2009.
We maintain our medium-term forecast of over 6 percent sales growth per year at METRO Group level. Under consideration of the global economic downswing, the lower number of store openings and negative currency effects, we expect sales growth to fall signifi cantly short of the mediumterm target of more than 6 percent in the current fi nancial year.
Our strategy aims for long-term profi table growth, that is, disproportionately higher growth of earnings than sales. Our medium-term growth target for EBIT before special effects is more than 8 percent. The goal of our effi ciency- and valueenhancing programme "Shape 2012" is to protect this growth over the long term. "Shape 2012" will unleash its positive earnings impact from 2010 and become fully effective from 2012.
The high level of uncertainty caused by recent diffi cult economic developments makes a precise profi t-and-loss forecast for the fi nancial year 2009 impossible at this point. Although we expect the anticipated weaker sales growth to also impact our earnings, the cost-cutting measures and investment cutbacks introduced so far are aimed at minimising the impact on EBIT before special items.
"Shape 2012" is likely to cause non-recurring expenses in 2009, which, however, cannot be quantifi ed at this point.
The structure of the income statement in 2009 will not deviate signifi cantly from that of 2008. We expect "Shape 2012" to result in disproportionately low increases in expense items over the next few years. In addition, declining energy prices should provide substantial relief on the energy cost side in 2009. In particular, the "Shape 2012" measures will generate savings in selling expenses, general administrative expenses and other operating expenses.
Ever since its establishment, METRO AG has disbursed an annual dividend. In the context of a dynamic dividend policy, the size of dividend payouts principally depends on the development of earnings per share before special items. METRO Group intends to continue to pay a competitive and attractive dividend in future.
We have generated additional fl exibility in the currently diffi cult capital market environment by issuing a 5-year €500 million bond in November 2008, a 6-year €1,000 million bond as well as a 5-year €156 million promissory note bond in February 2009. In combination with investment cutbacks in the fi nancial year 2009, this means that, from today's vantage point, we have no long-term refi nancing requirements until 2011. The redemption of a €750 million bond maturing in October 2009 is considered in current fi nancial planning.
Our medium-term plans comprise annual investments of more than €2.2 billion for the modernisation of our network of locations and our inter national expansion. We will invest a maximum €1.6 billion in the fi nancial year 2009. The number of new store openings in 2009 will fall markedly short of our medium-term expansion targets, which foresee about 40 new locations per year at the Metro Cash & Carry sales division, about 15 new stores at Real and about 70 at Media Markt and Saturn.
Debt and liquidity developments at retailing companies are characterised by a high share of 4thquarter sales in total annual sales. At the end of the year, we have above-average liquidity as well as higher trade liabilities. During the 1st quarter, both debt and liquidity return to a more normal level. The cost-cutting measures and investment cutbacks already introduced are designed to strengthen the Group's liquidity and reduce its net debt.
Value creation through profi table growth represents a key component of our strategy. We project another positive EVA result in 2009. However, compared with previous years, we expect the current economic developments to result in a lower increase in so-called delta EVA, the change of EVA between two periods.
With an average of more than 290,000 emp loyees around the world, METRO Group is one of the world's major employers. Each year, METRO Group increases its workforce on average by 8,000 to 10,000 people. "Shape 2012" requires an adaptation of global personnel structures. In the process, METRO Group aims to realise any personnel reductions through natural turnover as far as possible.
We expect to continue to increase our workforce on balance over the next few years. METRO Group will maintain its recruitment and training approach and offer apprenticeships to more young people than we actually need.
Our sustainability report describes our objectives for improvement in the areas of supply chain/products, environment, employees as well as society and social affairs. We pursue the long-term goal of reducing our specifi c CO2 emissions by 15 percent by 2015 from 406 kilogrammes per square metre of selling space in 2006. We will also continue to forge ahead with our global energy savings measures. An interim progress report will be published in May 2009.
Even a diffi cult environment harbours opportunit ies for METRO Group. Diffi cult parameters, in particular, enable us, as in the past, to exploit competitors' weaknesses and expand our market share. In addition, we expect further competitors to drop out of the market or reduce their business volume. We will examine to what extent specifi c cases offer us an opportunity to acquire businesses or individual locations.
Our increased customer orientation – partly through our "Shape 2012" programme – offers us an opportunity to markedly improve METRO Group business developments. The aim is to achieve €1.5 billion in earnings improvements by 2012 and beyond.
Employee development produces opportun ities. It will become increasingly diffi cult over the next few years to recruit qualified employees and managers. This is why we are intensifying our dialogue with universities and are introducing internship programmes, among other things, that comprise work in operating departments as well as overarching training events. Our managers receive training and further education at the "Metro Academy". In future, we will monitor the development of our key global management recruits on a centralised basis, with the Management Board deciding on their promotion. Building on these measures, we strive to retain qualifi ed and motivated employees at METRO Group over the long term and tap the related potential.
Tax cuts have been passed in Germany and other European countries such as Spain and Italy. This trend will persist – particularly given the current economic environment – and can reduce METRO Group's tax burden.
Many governments have agreed on comprehensive stimulus programmes to revive their economies. Some of these measures aim to bolster personal
incomes and could thus have a direct positive effect on consumption. Infrastructure projects, too, will indirectly benefi t the retail trade as they improve the employment situation and thus consumers' disposable income. This means that, on the whole, the retail trade will suffer less from the recession than other sectors.
We will continue on our profi table growth course and thus continue to expand our position as one of the leading international retailing groups. The impact of the global fi nancial crisis on sales, procurement and refi nancing markets is diffi cult to gauge. However, we must reckon with lower sales and earnings growth at METRO Group in 2009. Nonetheless, we feel well prepared for a deterior ating market environment with our price-aggressive sales brands Metro Cash & Carry and Media Markt and Saturn and with our new own-brand strategy at Real, which we believe will allow us to gain additional market share and lay the foundation for future earnings potential. In addition, with "Shape 2012", we have initiated a programme that markedly expands our sales divisions' operational freedom.
| 2008 | 2009 | Medium term | |
|---|---|---|---|
| Investments (€ billion) | 2.5 | max. 1.6 | ›2.2 |
| New openings | |||
| Metro Cash & Carry | 40 | ~20 | ~40 |
| Real | 14 | ~10 | ~15 |
| Media Markt and Saturn | 70 | ~50 | ~70 |
| Sales growth (%) | 5.8 | Substantially below medium-term forecast |
›6 |
| Earnings growth (EBIT before special items) (%) |
7.1 | See statement p. 122 | ›8 |
| Employees (average annual headcount) | 290,940 | > | ≥ |
126 Income statement 127 Balance sheet
128 Statement of
changes in equity 129 Cash fl ow statement
| € million | Note no. | 2008 | 20071 |
|---|---|---|---|
| Net sales | 1 | 67,956 | 64,210 |
| Cost of sales | (53,636) | (50,810) | |
| Gross profi t on sales | 14,320 | 13,400 | |
| Other operating income | 2 | 1,518 | 1,554 |
| Selling expenses | 3 | (12,332) | (11,443) |
| General administrative expenses | 4 | (1,426) | (1,352) |
| Other operating expenses | 5 | (92) | (81) |
| Earnings before interest and taxes (EBIT) | 1,988 | 2,078 | |
| Result from associated companies | 6 | 0 | 0 |
| Other investment result | 7 | 14 | 11 |
| Interest income | 8 | 196 | 185 |
| Interest expenses | 8 | (682) | (676) |
| Other fi nancial result | 9 | (101) | (37) |
| Net fi nancial result | (573) | (517) | |
| Earnings before taxes (EBT) | 1,415 | 1,561 | |
| Income taxes | 11 | (426) | (560) |
| Income from continuing operations | 989 | 1,001 | |
| Income from discontinued operations after taxes | 43 | (429) | (18) |
| Net profi t for the period | 560 | 983 | |
| Profi t attributable to minority interests | 12 | 157 | 158 |
| from continuing operations | [157] | [158] | |
| from discontinued operations | [0] | [0] | |
| Profi t attributable to shareholders of METRO AG | 403 | 825 | |
| from continuing operations | [832] | [843] | |
| from discontinued operations | [(429)] | [(18)] | |
| Earnings per share in € | 13 | 1.23 | 2.52 |
| from continuing operations | [2.54] | [2.58] | |
| from discontinued operations | [(1.31)] | [(0.06)] |
Adjustment of previous year's fi gures due to discontinued operations as well as changed sales defi nitions
(see notes to the Group accounting principles and methods in the notes to the consolidated fi nancial statements)
| ASSETS € million |
Note no. | As of 31 Dec 2008 | As of 31 Dec 2007 |
|---|---|---|---|
| Non-current assets | 18,808 | 18,882 | |
| Goodwill | 18, 19 | 3,960 | 4,328 |
| Other intangible assets | 18, 20 | 552 | 515 |
| Tangible assets | 18, 21 | 12,524 | 12,332 |
| Investment properties | 18, 22 | 133 | 116 |
| Financial assets | 18, 23 | 144 | 152 |
| Other receivables and assets | 24 | 450 | 490 |
| Deferred tax assets | 25 | 1,045 | 949 |
| Current assets | 15,017 | 14,990 | |
| Inventories | 26 | 7,001 | 7,328 |
| Trade receivables | 27 | 446 | 508 |
| Financial assets | 8 | 28 | |
| Other receivables and assets | 24 | 3,132 | 3,076 |
| Entitlements to income tax refunds | 326 | 275 | |
| Cash and cash equivalents | 30 | 3,874 | 3,433 |
| Assets held for sale | 31, 43 | 230 | 342 |
| 33,825 | 33,872 |
| € million | Note no. | As of 31 Dec 2008 | As of 31 Dec 2007 |
|---|---|---|---|
| Equity | 32 | 6,074 | 6,509 |
| Share capital | 835 | 835 | |
| Capital reserve | 2,544 | 2,544 | |
| Reserves retained from earnings | 2,441 | 2,876 | |
| Minority interests | 254 | 254 | |
| Non-current liabilities | 7,369 | 7,357 | |
| Provisions for pensions and similar commitments | 33 | 964 | 973 |
| Other provisions | 34 | 533 | 524 |
| Financial liabilities | 35, 37 | 5,031 | 5,030 |
| Other liabilities | 35, 38 | 620 | 647 |
| Deferred tax liabilities | 25 | 221 | 183 |
| Current liabilities | 20,382 | 20,006 | |
| Trade liabilities | 35, 36 | 13,839 | 14,088 |
| Provisions | 34 | 522 | 576 |
| Financial liabilities | 35, 37 | 3,448 | 2,708 |
| Other liabilities | 35, 38 | 2,161 | 2,267 |
| Income tax liabilities | 35 | 266 | 337 |
| Liabilities related to assets held for sale | 31, 43 | 146 | 30 |
| 33,825 | 33,872 | ||
| € million | Share capital | Capital reserve |
Reserves retained from earnings |
Total | Minority interests |
Total equity |
|---|---|---|---|---|---|---|
| 1 Jan 2007 | 835 | 2,544 | 2,454 | 5,833 | 217 | 6,050 |
| Net profi t for the period | 0 | 0 | 825 | 825 | 158 | 983 |
| Profi t distribution | 0 | 0 | (366) | (366) | (128) | (494) |
| Remeasurement IAS 39 | 0 | 0 | 9 | 9 | 0 | 9 |
| Currency translation | 0 | 0 | (46) | (46) | (1) | (47) |
| Other | 0 | 0 | 0 | 0 | 8 | 8 |
| 31 Dec 2007/1 Jan 2008 | 835 | 2,544 | 2,876 | 6,255 | 254 | 6,509 |
| Net profi t for the period | 0 | 0 | 403 | 403 | 157 | 560 |
| Profi t distribution | 0 | 0 | (386) | (386) | (144) | (530) |
| Remeasurement IAS 39 | 0 | 0 | (31) | (31) | 0 | (31) |
| Currency translation | 0 | 0 | (421) | (421) | (13) | (434) |
| Other | 0 | 0 | 0 | 0 | 0 | 0 |
| 31 Dec 2008 | 835 | 2,544 | 2,441 | 5,820 | 254 | 6,074 |
125 Consolidated fi nancial statements 2008
128 Statement of
Changes in equity are explained in the notes to the consolidated fi nancial statements in no. 32
| € million | 2008 | 20072 |
|---|---|---|
| EBIT | 1,988 | 2,078 |
| Depreciation of tangible and other intangible assets | 1,352 | 1,265 |
| Change in provisions for pensions and other provisions | 87 | (157) |
| Change in net working capital | 294 | 854 |
| Income taxes paid | (640) | (523) |
| Other | (444) | (359) |
| Cash fl ow from operating activities of continuing operations | 2,637 | 3,158 |
| Cash fl ow from operating activities of discontinued operations | 14 | 30 |
| Total cash fl ow from operating activities | 2,651 | 3,188 |
| First-time consolidation of Wal-Mart | 0 | 186 |
| Company acquisitions | (7) | 0 |
| Investments in tangible assets (excl. fi nance leases) | (2,281) | (1,821) |
| Other investments | (246) | (288) |
| Divestment of Extra | 467 | 17 |
| Disposal of fi xed assets | 339 | 687 |
| Cash fl ow from investing activities of continuing operations | (1,728) | (1,219) |
| Cash fl ow from investing activities of discontinued operations | (12) | (48) |
| Total cash fl ow from investing activities | (1,740) | (1,267) |
| Profi t distribution | ||
| to METRO AG shareholders | (386) | (366) |
| to other shareholders | (144) | (128) |
| Raising of fi nancial liabilities | 2,891 | 1,482 |
| Redemption/repayment of fi nancial liabilities | (2,128) | (1,727) |
| Interest paid | (655) | (651) |
| Interest received | 207 | 175 |
| Profi t and loss transfers and other fi nancing activities | (140) | (18) |
| Cash outfl ow from fi nancing of discontinued operations | (40) | 0 |
| Cash fl ow from fi nancing activities of continuing operations | (395) | (1,233) |
| Cash fl ow from fi nancing activities of discontinued operations | (9) | 22 |
| Total cash fl ow from fi nancing activities | (404) | (1,211) |
| Total cash fl ows | 507 | 710 |
| Exchange rate effects on cash and cash equivalents | (51) | 1 |
| Total change in cash and cash equivalents | 456 | 711 |
| Total cash and cash equivalents on 1 January | 3,443 | 2,732 |
| Total cash and cash equivalents on 31 December | 3,899 | 3,443 |
| Less cash and cash equivalents from discontinued operations as at 31 December | 25 | 35 |
| Cash and cash equivalents from continuing operations as at 31 December | 3,874 | 3,408 |
1The cash fl ow statement is explained in the notes in no. 41
2Adjustment of previous year's fi gures due to discontinued operations as well as changed sales defi nitions
(see notes to the Group accounting principles and methods in the notes to the consolidated fi nancial statements)
Primary segments (divisions)
125 Consolidated fi nancial statements 2008
126 Income statement 127 Balance sheet
128 Statement of
changes in equity 129 Cash fl ow statement
| Metro Cash & Carry | Real | Media Markt and Saturn | |||||
|---|---|---|---|---|---|---|---|
| € million | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
| External sales (net) | 33,143 | 31,698 | 11,636 | 11,003 | 18,993 | 17,444 | |
| Internal sales (net) | 6 | 4 | 1 | 1 | 2 | 11 | |
| Total sales (net) | 33,149 | 31,702 | 11,637 | 11,004 | 18,995 | 17,455 | |
| EBITDA | 1,728 | 1,631 | (11) | 160 | 839 | 818 | |
| Depreciation/amortisation | 400 | 388 | 192 | 176 | 236 | 208 | |
| EBIT | 1,328 | 1,243 | (203) | (16) | 603 | 610 | |
| Investments | 979 | 859 | 415 | 345 | 411 | 463 | |
| Segment assets | 13,156 | 13,273 | 5,247 | 4,957 | 6,893 | 6,893 | |
| Segment liabilities | 6,661 | 6,809 | 2,760 | 2,301 | 6,399 | 6,262 | |
| Employees at closing date (full-time equivalents) | 113,414 | 109,437 | 58,856 | 55,509 | 57,158 | 53,928 | |
| Selling space (in 1,000 sqm) | 5,176 | 4,875 | 3,148 | 3,103 | 2,439 | 2,213 | |
| Locations (number) | 655 | 615 | 439 | 434 | 768 | 702 |
| Germany | Western Europe excl. Germany |
Eastern Europe | |||||
|---|---|---|---|---|---|---|---|
| € million | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
| External sales (net) | 26,666 | 26,133 | 20,993 | 20,532 | 18,084 | 15,680 | |
| Internal sales (net) | 15 | 9 | 4 | 2 | 1 | 0 | |
| Total sales (net) | 26,681 | 26,142 | 20,997 | 20,534 | 18,085 | 15,680 | |
| EBITDA | 1,094 | 1,231 | 912 | 1,042 | 1,345 | 1,073 | |
| Depreciation/amortisation | 701 | 661 | 304 | 303 | 317 | 268 | |
| EBIT | 393 | 570 | 608 | 739 | 1,028 | 805 | |
| Investments | 791 | 696 | 424 | 493 | 1,090 | 859 | |
| Segment assets | 13,024 | 13,099 | 11,058 | 10,653 | 8,078 | 7,932 | |
| Segment liabilities | 8,183 | 8,022 | 5,626 | 5,943 | 4,059 | 4,132 | |
| Employees at closing date (full-time equivalents) | 104,049 | 101,028 | 55,083 | 54,577 | 90,491 | 80,870 | |
| Selling space (in 1,000 sqm) | 6,093 | 6,051 | 2,914 | 2,794 | 2,876 | 2,503 | |
| Locations (number) | 1,152 | 1,152 | 577 | 541 | 401 | 345 |
The segment reporting is explained in no. 42
Adjustment of previous year's fi gures due to discontinued operations as well as changed sales defi nitions
(see notes to the Group accounting principles and methods in the notes to the consolidated fi nancial statements)
| Continuing operations | ||||||||
|---|---|---|---|---|---|---|---|---|
| Galeria Kaufhof | Other companies/ consolidation |
METRO Group | Discontinued operations |
|||||
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
| 3,516 | 3,556 | 668 | 509 | 67,956 | 64,210 | 1,196 | 2,069 | |
| 6 | 14 | (15) | (30) | 0 | 0 | 0 | 0 | |
| 3,522 | 3,570 | 653 | 479 | 67,956 | 64,210 | 1,196 | 2,069 | |
| 217 | 211 | 567 | 523 | 3,340 | 3,343 | (16) | 17 | |
| 104 | 104 | 420 | 389 | 1,352 | 1,265 | 325 | 35 | |
| 113 | 107 | 147 | 134 | 1,988 | 2,078 | (341) | (18) | |
| 124 | 107 | 551 | 380 | 2,480 | 2,154 | 15 | 40 | |
| 1,629 | 1,586 | 826 | 918 | 27,751 | 27,627 | 82 | 818 | |
| 1,283 | 1,280 | 751 | 1,475 | 17,854 | 18,127 | 80 | 97 | |
| 19,875 | 19,838 | 16,671 | 12,679 | 265,974 | 251,391 | 3,366 | 9,985 | |
| 1,490 | 1,486 | 97 | 102 | 12,350 | 11,779 | 293 | 738 | |
| 141 | 141 | 192 | 205 | 2,195 | 2,097 | 120 | 372 | |
| Continuing operations | |||||||
|---|---|---|---|---|---|---|---|
| Asia/Africa | Consolidation | METRO Group | Discontinued operations |
||||
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
| 2,213 | 1,865 | 0 | 0 | 67,956 | 64,210 | 1,196 | 2,069 |
| 774 | 728 | (794) | (739) | 0 | 0 | 0 | 0 |
| 2,987 | 2,593 | (794) | (739) | 67,956 | 64,210 | 1,196 | 2,069 |
| (3) | (5) | (8) | 2 | 3,340 | 3,343 | (16) | 17 |
| 30 | 33 | 0 | 0 | 1,352 | 1,265 | 325 | 35 |
| (33) | (38) | (8) | 2 | 1,988 | 2,078 | (341) | (18) |
| 175 | 106 | 0 | 0 | 2,480 | 2,154 | 15 | 40 |
| 1,256 | 1,009 | (5,665) | (5,066) | 27,751 | 27,627 | 82 | 818 |
| 616 | 502 | (630) | (472) | 17,854 | 18,127 | 80 | 97 |
| 16,351 | 14,916 | 0 | 0 | 265,974 | 251,391 | 3,366 | 9,985 |
| 467 | 431 | 0 | 0 | 12,350 | 11,779 | 293 | 738 |
| 65 | 59 | 0 | 0 | 2,195 | 2,097 | 120 | 372 |
METRO AG's consolidated fi nancial statements as of 31 December 2008 were prepared in accordance with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB), London. They comply with all mandatorily applicable accounting standards and interpretations adopted by the European Union as of this date. Compliance with these standards and interpretations ensures a true and fair view of the asset, fi nancial and earnings situation of METRO AG.
The consolidated financial statements in their present form comply with the stipulations of § 315a of the German Commercial Code (HGB). Together with Directive (EC) no. 1606/2002 of the European Parliament and Council of 19 July 2002 concerning the application of international accounting standards, they form the legal basis for group accounting according to international standards in Germany.
These fi nancial statements are based on the historical cost principle except for fi nancial instruments recognised at fair value and assets and liabilities that are recognised at fair value as hedged items within a fair value hedge. Furthermore, noncurrent assets held for sale and disposal groups are recognised at fair value minus disposal costs as long as this value is lower than the carrying amount. In addition, liabilities from cash-settled share-based remuneration are recognised at fair value.
The income statement has been prepared using the cost of sales method.
Certain items in the income statement and the balance sheet have been combined to increase transparency and informative value. These items are listed separately and described in detail in the notes.
The consolidated fi nancial statements have been prepared in euros. All amounts are stated in millions of euros (€ million) unless otherwise indicated. Amounts below €0.5 million are rounded and reported as 0.
The following accounting methods were used in the preparation of the consolidated fi nancial statements.
The revised and supplemented accounting standards and interpretations as well as those newly issued by the IASB, the application of which was mandatory for METRO AG in the fi nancial year 2008, were applied for the fi rst time to the present consolidated fi nancial statements:
In exceptional cases, certain non-derivative fi nancial instruments classifi ed as "held for trading" within the "fair value through profi t or loss" category may be reclassifi ed from the "fair value through profi t or loss" category to another IAS 39 measurement category. In addition, fi nancial instruments that meet the defi nition of "loans and receivables" but have been classifi ed as "held for trading" or "available for sale" may be reclassifi ed to the category "loans and receivables". The fi nancial instrument is recognised at its fair value at the time of reclassifi cation. In addition, IFRS 7 requires comprehensive information on the reasons for reclassifi cation and the fair value at the time of reclassifi cation.
The application of the revised IAS 39 and IFRS 7 had no effect on the consolidated fi nancial statements of METRO AG.
IFRIC 11 provides guidance on applying IFRS 2 (Share-based Payment) in three cases:
Share-based payments in which a company receives goods or services as consideration for its own equity instruments must be treated by the company as equity-settled share-based payment transactions. This applies regardless of whether the company chooses to or is required to settle the share-based payment obligation through purchase of its own equity instruments. The same accounting treatment applies regardless of whether the company itself or the shareholder granted the rights to the company's treasury shares, and regardless of which of the named parties meets the share-based payment obligations.
If a parent company grants rights to its own equity instruments to employees of a subsidiary, the subsidiary is required to apply the regulations of IFRS 2 governing equity-settled share-based payment
transactions assuming that these are already applied in the consolidated fi nancial statements. The subsidiary must recognise the resulting increase in equity as a contribution from the parent.
On the other hand, if a subsidiary grants rights to its parent company's own equity instruments to its employees, the subsidiary is required to recognise the transaction as a cash-settled share-based payment transaction in accordance with IFRS 2, regardless of how the equity instruments to fulfi l the subsidiary's obligations towards its employees were obtained.
The application of IFRIC 11 had no effect on the consolidated fi nancial statements of METRO AG.
IFRIC 14 provides general guidelines for determining the upper limit of the surplus amount of a pension fund which can be recognised as an asset in accordance with IAS 19 (Employee Benefi ts). The interpretation also explains how the valuation of assets or liabilities of defi ned-benefi t plans may be affected when there is a statutory or contractual minimum funding requirement.
The application of IFRIC 14 had no effect on the consolidated fi nancial statements of METRO AG.
A number of other accounting standards and interpretations were newly adopted or revised by the IASB that will be binding from 1 January 2009 at the earliest, insofar as they are approved by the EU Commission and relevant to METRO AG:
| Standard/ Interpretation |
Title | Application at METRO AG from |
Approved by EU1 |
|---|---|---|---|
| IFRS 1 | First-time Adoption of International Financial Reporting Standards (Revised) | 1 Jan 2009 | No |
| IFRS 1 | First-time Adoption of International Financial Reporting Standards (Amendments: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate) |
1 Jan 2009 | No |
| IFRS 2 | Share-based Payment (Amendment: Vesting Conditions and Cancellations) | 1 Jan 2009 | Yes |
| IFRS 3 | Business Combinations (Revised) | 1 Jan 2010 | No |
| IFRS 8 | Operating Segments | 1 Jan 2009 | Yes |
| IAS 1 | Presentation of Financial Statements (Amendments: A Revised Presentation) | 1 Jan 2009 | Yes |
| IAS 1 | Presentation of Financial Statements (Amendments: Puttable Financial Instruments and Obligations Arising on Liquidation) |
1 Jan 2009 | No |
| IAS 23 | Borrowing Costs (Amendment) | 1 Jan 2009 | Yes |
| IAS 27 | Consolidated and Separate Financial Statements (Amendments: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate) |
1 Jan 2009 | No |
| IAS 27 | Consolidated and Separate Financial Statements (Amendments) | 1 Jan 2010 | No |
| IAS 32 | Financial Instruments: Presentation (Amendments: Puttable Financial Instruments and Obligations Arising on Liquidation) |
1 Jan 2009 | No |
| IAS 39 | Financial Instruments: Recognition and Measurement (Amendment: Eligible Hedged Items) |
1 Jan 2010 | No |
| IFRIC 12 | Service Concession Arrangements | 1 Jan 20092 | No |
| IFRIC 13 | Customer Loyalty Programmes | 1 Jan 2009 | Yes |
| IFRIC 15 | Agreements for the Construction of Real Estate | 1 Jan 2009 | No |
| IFRIC 16 | Hedges of a Net Investment in a Foreign Operation | 1 Jan 2009 | No |
| IFRIC 17 | Distributions of Non-cash Assets to Owners | 1 Jan 2010 | No |
As of 31 December 2008
2 No application in 2008 as not yet endorsed by EU
At this point, the fi rst-time application of the aforementioned accounting regulations is not expected to have any material impact on the Group's asset, fi nancial and earnings position.
As a result of the application of IFRS 8 from 1 January 2009, all real estate assets of METRO Group are reported as a separate segment. A large share of the real estate assets of METRO Group is rented out within the Group at market conditions. Real estate assets were previously reported both in the operating segments and under other companies/ consolidation. Aside from disclosure of a separate real estate segment, the fi rst-time application of IFRS 8 will have no material impact on segment reporting.
Starting in the financial year 2008, provisions and similar revenues resulting from customer transactions are recognised in sales. These revenues have been retroactively reclassifi ed and reported with no effect on net profi t. For 2007, the adjustment of the previous year's fi gures affects €331 million in Group sales, including primarily €322 million in segment sales at Media Markt and Saturn.
Furthermore, the redefi nition of functional areas in the income statement resulted in a reclassifi cation of administrative expenses as cost of sales and selling expenses. To ensure comparability, the previous year's fi gures have been adjusted. As a result, administrative expenses declined by €20 million, while the cost of sales and selling expenses rose by €9 million and €11 million respectively.
Additional reclassifi cations were undertaken within individual items on the balance sheet and the income statement. Those with a material effect are explained separately in the notes.
Besides METRO AG, the consolidated financial statements comprise all subsidiaries in which METRO AG controls the fi nancial and business policy through a majority of voting rights or according to the Articles of Association, company contract or contractual agreement. These include 669 German (previous year: 674) and 558 international (previous year: 524) subsidiaries controlled by METRO AG in accordance with IAS 27 (Consolidated and Separate Financial Statements) in conjuction with SIC 12 (Consolidation – Special Purpose Entities).
The group of consolidated companies changed as follows compared to the previous year:
| As of 1 January 2008 | 1,199 |
|---|---|
| Changes in fi nancial year 2008: | |
| Companies merged with other consolidated subsidiaries |
(38) |
| Disposal of shareholdings | (1) |
| Other disposals | (7) |
| Newly founded companies | 73 |
| Other fi rst-time consolidations | 2 |
| As of 31 December 2008 | 1,228 |
Additions from newly founded companies (73 companies) are due mainly to the expansion of Media Markt and Saturn.
Inasmuch as they are of particular signifi cance, effects from changes in the consolidation group are explained in detail in the respective balance sheet items.
3 associated companies (previous year: 3) and 4 joint ventures (previous year: 3) were valued according to the equity method. A total of 11 companies (previous year: 10) in which METRO AG holds between 20 and 50 percent of the voting rights were valued at cost because they did not qualify as associated com panies or because materiality considerations made the use of the equity method unnecessary.
A complete list of Group companies and associated companies is published in the electronic Federal Gazette. An overview of all material Group compani es is shown in no. 56.
The fi nancial statements of German and foreign subsidiaries included in the consolidated accounts are prepared using uniform accounting and valuation methods as required by IAS 27.
Consolidated companies that, unlike METRO AG, do not close their fi nancial year on 31 December prepared interim fi nancial statements for consolidation purposes.
Capital consolidation is accomplished using the purchase method. For business combinations that took place prior to 1 January 2004, pursuant to IAS 22 (Business Combinations), capital consolidation was effected by offsetting the carrying amounts of the investments against the revalued
pro rata equity of the subsidiaries as of their acquisition dates. Any positive differences remaining after the allocation of hidden reserves and charges were capitalised as goodwill and amortised to income on a straight-line basis in accordance with their useful lives. With the fi rst-time application of IFRS 3 (Business Combinations), scheduled straight-line amortisation of goodwill was discontinued from 1 January 2004. From this date, goodwill is tested for impairment regularly once a year, or more frequently if changes in circumstances indicate a possible impairment, and written down to the lower recoverable amount if applicable . For business acquisitions as of 1 January 2004, hidden reserves and charges attributable to minority interests must be disclosed and reported as "minority interests" in accordance with IFRS 3. Also in accordance with IFRS 3, any negative differences remaining after the allocation of hidden reserves and charges after another review during the period in which the business combination took place are amortised to income. As a rule, retroactive purchase price adjustments implemented after the fi rst-time consolidation are reported as equity with no effect on the net profi t.
Investments accounted for under the equity method are treated in accordance with the principl es applying to full consolidation, with existing goodwill being included in the recognition of the investment, and non-scheduled amortisation of this goodwill being included in income from associated companies in the fi nancial result. Any deviating accounting and measurement methods used in the fi nancial statements' underlying equity valuation are retained as long as they do not substantially contradict METRO Group's uniform accounting and measurement methods.
Any write-ups or write-downs to shares in consolidated subsidiaries carried in the individual fi nancial statements have been reversed.
Intragroup profi ts and losses are eliminated. Sales revenues, expenses and income as well as receivables and liabilities and/or provisions existing among consolidated subsidiaries are consolidated. Interim results in fi xed assets or inven tor ies resulting from intragroup transactions are eliminated unless they are of minor signifi cance. Third-party debt is consolidated to the extent that the prerequisites for such consolidation are met. In accordance with IAS 12 (Income Taxes), deferred taxes are recognised for consolidated transactions.
In the subsidiaries' separate fi nancial statements, transactions in foreign currency are valued at the rate prevailing on the transaction date. Exchange rate fl uctuations up to the closing date are taken into account in the valuation of receivables and payables in foreign currency. The resulting gains and losses are recognised in income. Currency translation differences from receivables and payables in foreign currency, which must be regarded as a net investment in a foreign business operation, are reported as reserves retained from earnings with no effect on net profi t.
The annual fi nancial statements of foreign subsidiaries are translated into euros according to the functional currency concept of IAS 21 (The Effects of Changes in Foreign Exchange Rates). The functional currency is defi ned as the currency of the primary economic environment of the subsidiary. Since all consolidated companies operate as fi nancially, economically and organis ationally auton omous entities, their respective local currency is the functional currency. Assets and liabilities are therefore converted at the average exchange rate prevailing on the closing date, whereas income statement items are translated at the annual aver age exchange rate. Differences from the translation of the fi nancial statements of non-German subsidiaries do not affect income and are shown as a separate item under reserves retained from earnings. Such currency differences are recorded as income in the year in which foreign subsidiaries are deconsolidated.
In the fi nancial year 2008, no functional currency of a consolidated company was classifi ed as hyperinfl ationary as defi ned by IAS 29 (Financial Reporting in Hyperinfl ationary Economies).
The following exchange rates were applied in the translation of key currencies outside the European Monetary Union that are of major signifi cance for METRO Group:
| 2007 1.95583 1.95583 10.41774 7.33773 27.75563 7.45076 7.73539 10.69197 251.31537 56.38424 |
31 Dec 2008 1.95583 1.95583 9.49560 7.35550 26.87500 7.45060 7.66556 10.78580 266.70000 |
31 Dec 2007 1.95583 1.95583 10.75240 7.33080 26.62800 7.45830 8.08020 11.48000 253.73000 |
|---|---|---|
| 57.53550 | ||
| 126.14000 | 164.93000 | |
| 167.80759 | 170.89000 | 176.26500 |
| 16.58439 | 14.74080 | 16.25590 |
| 11.22101 | 11.26080 | 11.35420 |
| 83.21676 | 111.46560 | 91.20820 |
| 3.78268 | 4.15350 | 3.59350 |
| 0.68472 | 0.95250 | 0.73335 |
| 3.33687 | 4.02250 | 3.60770 |
| 35.01712 | 41.28300 | 35.98600 |
| 79.97668 | 88.60100 | 79.23620 |
| 2.06317 | 2.00400 | 2.11630 |
| 33.77387 | 30.12600 | 33.58300 |
| 9.25072 | 10.87000 | 9.44150 |
| 1.64275 | 1.48500 | 1.65470 |
| 1.78636 | 2.14880 | 1.71700 |
| 6.91900 | 10.85546 | 7.41946 |
| 1.37065 | 1.39170 | 1.47210 |
| 22,043.14000 | 23,905.31000 | 23,142.93000 |
| 161.26271 | 67.76650 |
128 Statement of
changes in equity 129 Cash fl ow statement
In accordance with IAS 18 (Revenue), net sales and other operating income are reported immediately upon rendering of the service or delivery of the goods or merchandise and hence upon transfer of the risk to the customer. Net sales are shown after deduction of rebates and discounts.
Operating expenses are recognised as expenses upon availment or causation.
As a rule, dividends are recognised when the legal claim to payment arises.
Interest is recognised as income or expenses on an accrual basis using the effective interest method where applicable.
Income taxes concern direct taxes on income and deferred taxes.
In accordance with IFRS 3, goodwill will be capitalised and tested for impairment regularly once a year, or more frequently if changes in circumstances indicate a possible impairment. If applicable, it will be written down on an unscheduled basis. No write-up is performed if the reasons for a non-scheduled write-down in previous years have ceased to exist.
Goodwill is tested for impairment on the level of the cash-generating unit (CGU). In accordance with IAS 36 (Impairment of Assets), a CGU is defi ned as the smallest identifi able group of assets that generates cash infl ows largely independently from the cash infl ows of other assets or other groups of assets. For METRO Group, this applies to the organisation unit "sales division per country". To determine a possible impairment, the recoverable amount of a CGU is compared to the respective carrying amount of the CGU. An impairment of the goodwill allocated to a CGU applies only if the recoverable amount is lower than the carrying amount.
Purchased other intangible assets are recognised at cost of purchase. Internally generated intangible assets are capitalised at cost of manufacture for their development if the capitalisation criteria of IAS 38 (Intangible Assets) are met. The cost of manufacture includes all expenditure directly attributed to the manufacture process. These may include the following costs:
| Direct costs | Direct material costs Direct production costs Special direct production costs |
||
|---|---|---|---|
| Overhead | Material overhead | ||
| (directly attributable) | Production overhead | ||
| Depreciation of fi xed assets | |||
| Development-related administrative costs |
No external capital costs are included in the determination of manufacturing costs. Research costs are not capitalised, but immediately recognised as expenses. Capitalised internally generated software – in line with purchased software – is amortised on a straight-line basis over a period of 3 to 5 years based on its limited economically useful life; licences are amortised over the terms of the respective agreements. The above-mentioned intangible assets are examined for indications of impairment at each closing date. Irrespective of any indications of impairment, software that is not yet ready to use is tested for impairment once a year. Non-scheduled amortisation is effected if the recoverable amount is below the amortised cost. The assets are written back if the reasons for nonscheduled amortisation implemented in previous years have ceased to exist.
Tangible assets used in operations for a period of more than one year are recognised at cost less scheduled depreciation. The optional new mea surement method under IAS 16 (Property, Plant and Equipment) is not applied. The manufacturing cost of internally generated assets includes both direct costs and appropriate portions of attributable overhead. Financing costs are not capitalised as an element of purchase or manufacturing costs. Investment allowances received and non-earmarked investment grants are offset against the purchase or manufacturing cost of the corresponding asset. Reinstatement obligations are included in the cost at the discounted settlement value. The capitalised reinstatement costs are proportionately depreciated over the useful life of the asset.
Tangible assets are depreciated solely on a straightline basis. Throughout the Group, scheduled depreciation is based on the following useful lives:
| Buildings | 10 to 33 years |
|---|---|
| Leasehold improvements |
8 to 15 years or shorter rental contract duration |
| Business and offi ce equipment |
3 to 13 years |
| Machinery | 3 to 8 years |
The assets will be written down using a nonscheduled depreciation if there are any indications of impairment and if the recoverable amount is below the amortised cost. The assets are written back if the reasons for non-scheduled depreciation have ceased to exist.
In accordance with IAS 17 (Leases), economic ownership of leased assets is attributable to the lessee if all the material risks and rewards incidental to ownership of the asset are transferred to the lessee (fi nance lease). If economic ownership is attributable to METRO Group companies, the leased asset is capitalised at fair value or at the lower present value of the minimum lease payments when the lease is signed. In analogy to the comparable purchased tangible assets, leased assets are subjected to scheduled depreciation over their useful lives or the lease term if the latter is shorter. However, if it is suffi ciently certain that ownership of the leased asset will be transferred to the lessee when the term of the lease ends, the asset is depreciated over its useful life. Payment obligations resulting from the future lease payments are carried as liabilities.
In accordance with IAS 40 (Investment Property), investment properties comprise properties that are held to earn rentals and/or for capital appreciation. In analogy to tangible assets, they are recognised at cost less scheduled depreciation and potentially require non-scheduled depreciation based on the historical cost model. Measurement at fair value through profi t or loss does not apply. Scheduled depreciation of investment prop erties is effected over a useful life of 15 to 33 years. Furthermore, the fair value of these properties is stated in the notes. It is determined either on the basis of recognised measurement methods or independent expert opinions.
Financial assets that do not represent associated companies under IAS 28 (Investments in Associates) or joint ventures under IAS 31 (Interests in Joint Ventures) are recognised in accordance with IAS 39 (Financial Instruments: Recognition and Measurement). Depending on the classifi cation required under IAS 39, fi nancial assets are capitalised either at (amortised) cost or fair value, and recognised on the date of purchase.
Investments are assets to be classifi ed as "available-for-sale fi nancial assets". They are measured at their fair values including transaction costs for the fi rst reporting period. If the fair value of these fi nancial assets can be reliably determined in subsequent periods, they are recognised at fair value. If there are no active markets and if the fair values cannot be determined without undue effort, they are recognised at cost. Securities are classifi ed as "held to maturity", "available for sale" and "fair value through profi t or loss". The category "fair value through profi t or loss" comprises all fi nancial assets classifi ed as "held for trading" as the value option of IAS 39 is not applied within METRO Group. This is underscored by the fact that the entire category is described as "held for trading" in the notes to the consolidated fi nancial statements. Loans are classifi ed as "loans and receivables" and therefore recognised at amortised cost based on the effective interest method. Financial assets designated as hedged items as part of a fair value hedge are recognised at fair value through profi t or loss.
Fluctuations in the value of "available-for-sale fi nancial assets" are recognised in equity without being reported as a profi t or loss – taking account of deferred taxes where applicable. The amounts recognised without being reported as a profi t or loss are not transferred to net income for the respective period until they are disposed of or a retrospective impairment of the assets has occurred.
If there are any indications of impairment, the assets are written down accordingly by way of a non-scheduled depreciation.
Deferred taxes are determined in accordance with IAS 12, according to which future tax benefi ts and liabilities are recognised for temporary differences between the carrying amounts of assets or liabilities in the consolidated fi nancial statements and their tax base. Anticipated tax savings from the use of tax loss carry-forwards expected to be recoverable in future periods are capitalised.
Deferred tax assets in respect of deductible temporary differences and tax loss carry-forwards exceeding the deferred tax liabilities in respect of taxable temporary differences are recognised only to the extent that it is probable that taxable profi t will be available against which the deductible temporary differences can be utilised.
Deferred tax assets and deferred tax liabilities are netted if these income tax assets and liabilities concern the same tax authority and refer to the same tax subject or a group of different tax subjects that are jointly assessed for income tax purposes.
In accordance with IAS 2 (Inventories), merchandise carried as inventories is reported at cost of purchase. As a rule, the cost of purchase is determined by means of the weighted average cost method. Merchandise is valued as of the closing date at the lower of cost or net realisable value.
Merchandise is written down on a case-by-case basis if the anticipated net realisable value declines below the carrying amount of the inventories. Such net realisable value corresponds to the anticipated estimated selling price less the estimated direct costs necessary to make the sale.
When the reasons for a write-down of the merchandise have ceased to exist, the write-down is reversed.
In accordance with IAS 39, trade receivables are classifi ed as "loans and receivables" and recognised at amortised cost. Where their recoverability appears doubtful, the trade receivables are recognised at the lower recoverable amount. Aside from the required specifi c bad debt allowances, a lumpsum bad debt allowance is carried out to account for the general credit risk.
The fi nancial assets in the other receivables and assets item that are classifi ed as "loans and receivables" under IAS 39 are recognised at amortised cost.
The deferred income item comprises transitory deferrals.
Other assets include investments and derivative fi nancial assets to be classifi ed as "held for trading" in accordance with IAS 39. They are recognised at their fair value, which corresponds to the cost of purchase net of transaction costs, for the fi rst recognition period. Where the fair values of these fi nancial instruments can subsequently be reliably determined, such fair values are carried. Where no active markets exist and the fair values cannot be determined without undue effort, the assets are carried at cost. All other receivables and assets are also recognised at amortised cost.
If there are any indications of impairment, the assets are written down by way of a non-scheduled depreciation.
The disclosed deferred income tax assets and liabilities concern domestic and foreign income taxes for the reporting year as well as prior years. They are determined in compliance with the tax laws of the respective business country.
Cash and cash equivalents comprise cheques, cash on hand as well as bank deposits with a term of up to 3 months and are recognised at their respective nominal values.
The actuarial measurement of pension provisions for company pension plans is effected in accor dance with the projected unit credit method stipulated by IAS 19 (Employee Benefi ts). This method takes account of pensions and pension entitlements known at the closing date as well as of future pay and pension increases using bio metric data. Any differences arising at year-end (so-called actuarial gains or losses) between pension obligations determined and the actual net present value are, based on the exercise of a measurement option, recognised only if they fall outside of a range of 10 percent of the obligation ( corridor method). In that case, they are spread over the average residual service life of the employees with pension entitlements as of the subsequent year and recognised as income or expenses. The corridor method accounts for the fact that actuarial gains and losses may offset each other over the long term. As an alternative to the described corridor method, IAS 19 permits any systematic method that results in faster amortisation of actuarial gains and losses. It is also possible to opt for immediate disclosure with or without reporting as a profi t or loss. As a result, actuarial gains and losses would fully impact provisions and the income statement as well as equity and thus entail a high degree of volatility. The interest element of the transfer to the provision contained in the expenditure for pensions is shown as interest paid under the fi nancial result. Provisions for pensions and similar commitments are formed on the basis of actuarial valuations under IAS 19.
(Other) provisions are formed if de jure or de facto obligations to third parties exist that are based on past business transactions or events and will probably result in an outfl ow of fi nancial funds that can be reliably determined. The probability of occurrence must exceed 50 percent. The provisions are stated at the anticipated settlement amount with due regard to all identifi able risks attached, and are not offset against any claims to recourse. The settlement amount with the highest possible probability of occurrence is used.
Provisions for defi cient rental cover in the case of location risks related to leased objects are based on a consideration of individual locations. The same applies to continued locations in so far as a defi cient cover for the respective location arises from current corporate planning. The provision maximally amounts to the size of the defi cient cover resulting from a possible subleasing.
Provisions for restructuring measures related to the closure of locations are recognised in so far as the factual restructuring commitment was formalised by means of the adoption of a detailed restructuring plan and its communication vis-à-vis those affected as of the closing date. Restructuring provisions comprise only obligatory restructuring expenses that are not related to the company's current activities.
Provisions for guarantees are formed based on past capitalised guarantees and sales during the fi nancial year.
Long-term provisions, for example for defi cient rental cover or reinstatement obligations, are recognised at their settlement amounts discounted to the balance sheet date.
Trade liabilities are recognised at amortised cost.
In principle, all fi nancial liabilities are recognised at amortised cost using the effective interest method in accordance with IAS 39 as the fair value option is not applied within METRO Group. Financial liabilities designated as the hedged item in a fair value hedge are carried as liabilities at their fair value. The fair values indicated for the fi nancial liabilities have been determined on the basis of the interest rates prevailing on the closing date for the remaining terms and redemption structures.
In principle, fi nancial liabilities from fi nance leases are carried as liabilities at the present value of future minimum lease payments.
Other liabilities are carried at their settlement amounts unless they represent derivative fi nancial instruments or commitments to stock tender rights, which are recognised at fair value under IAS 39. Deferred income comprises transitory deferrals.
Contingent liabilities are, on the one hand, potential obligations arising from past events whose existence is confi rmed only by the occurrence or non-occurrence of uncertain future events that are not entirely under the company's control. On the other hand, contingent liabilities represent current obligations arising from past events for which, however, an outfl ow of resources is not considered probable or whose size cannot be determined with suffi cient certainty. According to IAS 37 (Provisions, Contingent Liabilities and Contingent Assets), such liabilities should not be recognised in the balance sheet but disclosed in the notes.
Derivative fi nancial instruments are exclusively used to reduce risks, in accordance with the respective Group guideline.
In accordance with IAS 39, all derivative fi nancial instruments are recognised at fair value and shown under "other receivables and assets" or "other liabilities".
Derivative fi nancial instruments are measured on the basis of inter-bank terms and conditions, possibly including the credit margin or stock exchange price applicable to METRO Group. The bid and ask prices at the balance sheet date are applied. Where no stock exchange prices are used, the fair value is determined by means of acknowledged measurement methods. The recognised fair values correspond to the amounts for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's-length agreement.
Gains and losses from derivative financial instruments designated as qualifi ed hedges in the framework of a fair value hedge or for which a qualifi ed hedge relationship could not be established in accordance with the provisions of IAS 39 and which, accordingly, did not qualify for hedge accounting are recognised in income. Results from derivative fi nancial instruments for which a cash fl ow hedge has been formed and whose effectiveness has been established are carried in equity without being reported as a profi t or loss up to the date of realisation of the hedge transaction. Any potential changes in results due to the ineffectiveness of these fi nancial instruments are recognised in the income statement and immediately reported as a profi t or loss.
The share bonuses granted under the share-based remuneration system are classifi ed as cash-settled share-based remuneration. Proportionate provisions measured at the fair value of the obligations entered are formed for these payments. The proportionate formation of the provisions is prorated over the underlying blocking period and recognised in income as personnel expenses. To the extent that the granted share-based payments are hedged, the corresponding hedging transactions are recognised at fair value and included under other assets. The portion of the hedges' value fl uctuation that corresponds to the value fl uctuation of the share-based payments is recognised in personnel expenses. The surplus amount of value fl uctuations is recognised in equity without being reported as a profi t or loss.
In accordance with IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations), a noncurrent asset is classifi ed as "held for sale" if the respective carrying amount is to be realised above all through a sale rather than through continued utilisation. A sale must be planned and realisable within the subsequent 12 months. The asset is measured at the lower of carrying amount and fair value less costs to sell and presented separately in the balance sheet.
Also in accordance with IFRS 5, a component of an entity is classifi ed as a discontinued operation if it is held for sale or has already been disposed of. The discontinued operation is measured at the lower of carrying amount and fair value less costs to sell. Discontinued operations must be presented separately in the income statement, the balance sheet, the cash fl ow statement and the segment reporting, and explained in the notes. With the exception of the balance sheet, prior-year amounts are restated accordingly.
| Item | Measurement method |
|---|---|
| ASSETS | |
| Goodwill | At cost (subsequent measurement: impairment test) |
| Other intangible assets | |
| Acquired other intangible assets | At (amortised) cost |
| Internally generated intangible assets | At cost of development (direct costs and overheads) |
| Tangible assets | At (amortised) cost |
| Investment properties | At (amortised) cost |
| Financial assets | |
| "Loans and receivables" | At (amortised) cost |
| "held to maturity" | At (amortised) cost |
| "held for trading" | At fair value through profi t or loss |
| "available for sale" | At fair value without being reported as a profi t or loss |
| Inventories | Lower of cost and net realisable value |
| Trade receivables | At (amortised) cost |
| Cash and cash equivalents | At nominal value |
| Assets held for sale | Lower of carrying amount and fair value less cost to sell |
| LIABILITIES | |
| Provisions | |
| Pension provisions | Projected unit credit method |
| Other provisions | At settlement value (highest probability of occurrence) |
| Financial liabilities | At (amortised) cost |
| Other liabilities | At settlement value |
| Trade liabilities | At (amortised) cost |
The preparation of the consolidated fi nancial statements was based on a number of assumptions and estimates that had an effect on the value and presentation of the reported assets, liabilities, income and expenses as well as contingent li abilities. These assumptions and estimates mainly relate to the assessment of the recoverability of goodwill, the Group-wide establishment of useful lives, the measurement of provisions (for example, for restructurings, pensions or location risks) and the feasibility of future tax savings, in particular from loss carry-forwards. In addition, assumptions and estimates concern above all the determination of fair values and the cost of purchase in the context of fi rst-time consolidations. The actual values may deviate from the assumptions and estimates in individual cases. Changes are taken into account at the time new information becomes available.
The aim of the capital management strategy of METRO Group is to secure the company's con tinued business operations, to enhance its enter prise value, to create solid capital resources to fi nance its profi table growth and to provide for attractive dividend payments and capital service.
The capital management strategy of METRO Group has remained unchanged compared to the previous year.
METRO Group is committed to value-focused company management based on Economic Value Added (EVA). The key focus is on the successful deployment of the company's working capital and the generation of value gains for METRO Group that exceed the cost of capital.
Further information on the development of Economic Value Added is included in the group management report in the section "Development of Economic Value Added".
METRO Group's ratings by two international agencies communicate the company's creditworthiness to potential debt capital investors. Based on its current ratings, METRO Group has access to all debt capital markets.
Detailed information on the METRO Group rating can be found in the Group management report in the "Financial management" section.
Equity amounted to €6,074 million (previous year: €6,509 million), while debt capital reached €27,751 million (previous year: €27,363 million). Net balance sheet debt rose to €4,600 million from €4,300 million a year earlier.
| € million | 31 Dec 2008 | 31 Dec 2007 |
|---|---|---|
| Equity | 6,074 | 6,509 |
| Debt capital | 27,751 | 27,363 |
| Net debt | 4,600 | 4,300 |
| Financial liabilities (incl. fi nance leases) |
8,479 | 7,738 |
| Cash and cash equivalents | 3,874 | 3,433 |
| Term deposits › 3 months ‹ 1 year | 5 | 5 |
The capital management strategy of METRO Group consistently aims to ensure that the Group compan ies' capital resources comply with local requirements. During the reporting year, all external capit al requirements were fulfi lled. This includes, for example, adherence to a maximum level of indebtedness and a fi xed equity ratio.
No material business combinations requiring disclosure in the meaning of IFRS 3.66 et seqq. were implemented during the past fi nancial year. Additional details on the development of METRO Group's consolidation group are included in the explanations on accounting principles and methods.
Breakdown of (net) sales:
| € million | 2008 | 2007 |
|---|---|---|
| Metro Cash & Carry | 33,143 | 31,698 |
| Real | 11,636 | 11,003 |
| Media Markt and Saturn | 18,993 | 17,444 |
| Galeria Kaufhof | 3,516 | 3,556 |
| Other companies1 | 668 | 509 |
| 67,956 | 64,210 |
The sales listed under other companies were mainly generated by the Dinea group at €203 million (previous year: €212 million), MGB METRO Group Buying at €299 million (previous year: €222 million) and MGL METRO Group Logistics Warehousing at €158 million (previous year: €65 million including METRO Fruit & Vegetable)
A total of €41.3 billion (previous year: €38.1 billion) in sales was generated by Group companies based outside of Germany.
For a breakdown of sales by divisions and regions, see the segment reporting.
| € million | 2008 | 2007 |
|---|---|---|
| Rents | 513 | 504 |
| Services/cost refunds | 344 | 337 |
| Services rendered to suppliers | 225 | 177 |
| Gains from the disposal of fi xed assets and from write-ups |
117 | 241 |
| Central A/P clearing for sales divisions |
61 | 60 |
| Income from construction services | 37 | 18 |
| Income from damages and indemnities |
15 | 19 |
| Income from sale-and-lease-back transactions |
9 | 5 |
| Commissions | 4 | 5 |
| Other | 193 | 188 |
| 1,518 | 1,554 |
The decrease in other operating income is primarily attributable to signifi cantly lower income from the disposal of fi xed assets, which was not fully offset by higher income from rents, services/cost refunds, services and construction services.
As a large share of the Wal-Mart properties was used to fi nance the restructuring of the Wal-Mart Germany group, which had been acquired in 2006, the previous year's gains from the disposal of fi xed assets were disproportionately high.
Other operating income comprises, among other items, income from canteen revenues, income from the derecognition of statute-barred liabilities, revenues from recycling, public aid, other reimbursements and a multitude of additional items.
| € million | 2008 | 2007 |
|---|---|---|
| Personnel expenses | 5,819 | 5,440 |
| Cost of materials | 6,513 | 6,003 |
| 12,332 | 11,443 |
The increase in selling expenses mainly results from the expansion of the Metro Cash & Carry and Media Markt and Saturn sales divisions.
In addition, the increases in selling expenses result from one-time effects related to the streamlining of the Real store network as agreed in 2008.
The cost of materials primarily consists of expense for advertising, rent, depreciation and building costs (energy, maintenance, etc.).
| € million | 2008 | 2007 |
|---|---|---|
| Personnel expenses | 733 | 741 |
| Cost of materials | 693 | 611 |
| 1,426 | 1,352 |
The reduction in personnel expenses results mostly from the decline in bonus payments compared to a year earlier.
Aside from higher depreciation due to investments made, the increase in the cost of materials is attributable to higher IT, licence, leasing, consulting, insurance and other tax expenses, among other things.
| € million | 2008 | 2007 |
|---|---|---|
| Expenses for construction activities | 33 | 15 |
| Losses from the disposal of fi xed assets |
26 | 25 |
| Other | 33 | 41 |
| 92 | 81 |
Higher expenses for construction services are offset by higher income from construction services (€37 million, previous year: €18 million).
Losses from the disposal of fi xed assets apply to the Metro Cash & Carry, Media Markt and Saturn, Real and real estate areas.
The other operating expenses comprise €12 million for the transfer of freight rates and advertising services to former subsidiaries and a multitude of individual circumstances.
As in the previous year, the result from associated companies amounts to €0 million.
Profi t distribution accounts for the main portion of other investment result in the amount of €14 million (previous year: €11 million).
Net interest income can be broken down as follows:
| € million | 2008 | 2007 |
|---|---|---|
| Interest income | 196 | 185 |
| thereof fi nance leases | [2] | [0] |
| thereof pension provisions | [46] | [52] |
| thereof fi nancial instruments of the IAS 39 measurement categories: |
||
| loans and receivables including cash and cash equivalents |
116 | 102 |
| held to maturity | [0] | [0] |
| held for trading incl. derivatives within hedges in |
||
| accordance with IAS 39 | [9] | [0] |
| available for sale | [0] | [0] |
| Interest expenses | (682) | (676) |
| thereof fi nance leases | [(108)] | [(125)] |
| thereof pension provisions | [(97)] | [(96)] |
| thereof fi nancial instruments of the IAS 39 measurement categories: |
||
| held for trading incl. derivatives within hedges in accordance with IAS 39 |
[(17)] | [(10)] |
| other fi nancial liabilities | [(399)] | [(384)] |
| (486) | (491) |
The interest earnings and interest expenses from financial instruments are assigned to IAS 39 measure ment categories on the basis of the under lying transactions.
| € million | 2008 | 2007 |
|---|---|---|
| Other fi nancial income | 656 | 186 |
| thereof currency effects | [445] | [163] |
| thereof hedging transactions | [202] | [20] |
| Other fi nancial expenses | (757) | (223) |
| thereof currency effects | [(619)] | [(170)] |
| thereof hedging transactions | [(113)] | [(35)] |
| Other fi nancial result | (101) | (37) |
| thereof fi nancial instruments of IAS 39 measurement categories: |
||
| loans and receivables including cash and cash equivalents |
[(89)] | [(19)] |
| held to maturity | [0] | [0] |
| held for trading | [88] | [(14)] |
| available for sale | [0] | [0] |
| other fi nancial liabilities | [(89)] | [(2)] |
| thereof fair value hedges: | ||
| underlying transactions | [(19)] | [(6)] |
| hedging transactions | [19] | [6] |
| thereof cash fl ow hedges: | ||
| ineffectiveness | [2] | [(1)] |
The other fi nancial income and expenses from fi nancial instruments are assigned to measurement categories on the basis of the underlying transactions pursuant to IAS 39. Besides income and expenses from the measurement of fi nancial instruments according to IAS 39, this also includes the measurement of foreign currency positions according to IAS 21.
The overall result from currency effects and measurement results from hedging transactions and hedging relationships totals €-85 million (previous year: €-22 million) and stems mostly from foreign currency fi nancing in Poland, Romania, Ukraine and Russia. Because of weaker currencies, this was reassessed at the end of the year. In case of unchanged exchange rates, the resulting expense will be recognised in cash when the fi nancings are released. For possible effects from currency risks, see no. 44.
The key effects on earnings from fi nancial instruments are as follows:
| 2008 | Fair value | |||||||
|---|---|---|---|---|---|---|---|---|
| € million | Invest ments |
Interest | measure ments |
Currency translation |
Disposals | Impair ment |
Other | Net result 2008 |
| Loans and receivables includ ing cash and cash equivalents |
0 | 116 | 0 | (91) | 6 | (63) | 1 | (31) |
| Held to maturity | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Held for trading including derivatives within hedges in accordance with IAS 39 |
0 | (8) | 90 | 0 | 0 | 0 | 0 | 82 |
| Available for sale | 14 | 0 | 0 | 0 | 0 | 0 | 0 | 14 |
| Other fi nancial liabilities | 0 | (399) | 0 | (83) | 6 | 0 | (5) | (481) |
| 14 | (291) | 90 | (174) | 12 | (63) | (4) | (416) |
| 2007 | Fair value | |||||||
|---|---|---|---|---|---|---|---|---|
| € million | Invest ments |
Interest | measure ments |
Currency translation |
Disposals | Impair ment |
Other | Net result 2007 |
| Loans and receivables in clud ing cash and cash equivalents |
0 | 102 | 0 | (18) | (1) | (58) | 0 | 25 |
| Held to maturity | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Held for trading including derivatives within hedges in accordance with IAS 39 |
0 | (10) | (15) | 0 | 0 | 0 | 0 | (25) |
| Available for sale | 11 | 0 | 0 | 0 | 0 | 0 | 0 | 11 |
| Other fi nancial liabilities | 0 | (384) | 0 | 11 | 5 | 0 | (14) | (382) |
| 11 | (292) | (15) | (7) | 4 | (58) | (14) | (371) |
Earnings and expenses from fi nancial instruments are assigned to measurement categories on the basis of the underlying transactions pursuant to IAS 39.
Investment income is included in other investment income. Interest earnings and expenses are part of investment income. Fair value measurements and effects from currency translations are included in other fi nancial income. Expenses from write-downs comprise a major component of operating earnings (EBIT) and are detailed in the section on "Impairments of capitalised fi nancial instruments". Remaining fi nancial earnings and expenses primarily relate to effects from expired liabilities as well as bank commissions and similar expenses that are incurred within the context of assets and liabilities.
Income taxes include taxes on income paid or due in the individual countries as well as deferred tax liabilities. As a result of the reform of corporate taxation in Germany, the German companies of METRO Group have since 2008 been subject to an average tax rate of 14.70 percent of business income. The corporate income tax amounts to 15.00 percent, plus a 5.50 percent solidarity surcharge on corporate income tax. The aggregate tax rate is 30.53 percent (previous year: 39.15 percent).
Deferred taxes are determined on the basis of the tax rates expected in each country upon realisation. In principle, the rates applied are those contained in valid laws or legislation that has been passed at the time of the closing date.
Non-German income tax is calculated on the basis of the respective laws and regulations applying in the individual countries. The income tax rates applied to foreign companies vary in a range from 0.00 percent (tax holidays) to 40.69 percent.
| € million | 2008 | 2007 |
|---|---|---|
| Taxes paid or due | 552 | 576 |
| thereof in Germany | [154] | [158] |
| thereof international | [398] | [418] |
| Deferred taxes | (126) | (16) |
| thereof in Germany | [(127)] | [23] |
| thereof international | [1] | [(39)] |
| 426 | 560 |
Deferred taxes in Germany are impacted by def erred tax assets resulting from the fi rst-time capitalisation of loss carry-forwards at METRO AG (€66 million) and the capitalisation of deferred taxes on temporary differences in the measurement of fi nancial instruments (€38 million). Due partly to restructuring measures at Real and planned cost-cutting programmes, positive earnings developments are projected for the future. As a result, deferred tax assets on loss carry-forwards within the METRO AG group of companies for 2008 are partially considered recoverable.
Included in paid or due taxes is €20 million in tax income (previous year: €8 million) that is attributable to earlier periods.
Deferred tax assets with an effect on income from the creation and dissolution of temporary differences amount to €53 million (previous year: €112 million without effects from changes in tax rates).
Deferred tax assets for the fi nancial year include €12 million in tax expenses from changes in tax rates. In the previous year, expenses from tax rate changes amounted to €123 million, including €121 million from the reduction of tax rates under the German corporate tax reform.
Income taxes in the amount of €24 million raised equity without an effect on income (previous year: lowering of equity by €4 million). The increase in the reporting year is largely attributable to deferred tax assets on currency translation differences from net investment in an international entity.
In 2008, deferred tax liabilities in the amount of €92 million were reclassifi ed to discontinued activities.
Tax expenses are fully allocated to the result from ordinary operations.
At €426 million (previous year: €560 million), income tax expenses are €6 million lower (previous year: €51 million) than the expected tax expenses of €432 million (previous year: €611 million) that would have resulted if the German corporate income tax rate had been applied to the Group's taxable income for the year.
Reconciliation of estimated to actual income tax expenses:
| € million | 2008 | 2007 |
|---|---|---|
| Group earnings before taxes | 1,415 | 1,561 |
| Expected income tax expenses (30.53%; previous year: 39.15%) |
432 | 611 |
| Effects of differing national tax rates | (93) | (48) |
| Tax expenses and income relating to other periods |
(20) | (8) |
| Non-deductible business expenses | 105 | 71 |
| Other deviations | 2 | (66) |
| 426 | 560 |
The decrease in the item "effects of differing national tax rates" is largely attributable to the previous year's high one-time effect from the restatement of deferred tax assets and liabilities.
Of profi t attributable to minority interests, profi t shares accounted for €195 million (previous year: €187 million) and loss shares for €38 million (previous year: €29 million). This mainly concerns profi t/loss shares of minority interests in the Metro Cash & Carry and Media Markt and Saturn sales divisions.
METRO AG defi nes earnings per share as earnings per ordinary share. In 2007, holders of preference shares of METRO AG were entitled to a dividend of €1.298 that was €0.118 higher than that paid to holders of ordinary shares. In the calculation of earnings per share, this additional dividend is deducted from profi ts attributable to METRO AG shareholders.
Earnings per share are determined by dividing earnings attributable to METRO AG shareholders by a weighted number of issued shares.
There was no dilution in the fi nancial year 2008 or the year before from so-called potential shares.
| 2008 | 2007 | |
|---|---|---|
| Weighted number of no-par-value shares outstanding |
326,787,529 | 326,787,529 |
| Income attributable to METRO AG shareholders (€ million) |
403 | 825 |
| Earnings per share (€) | 1.23 | 2.52 |
Earnings per share of preference shares amount to €1.35 (previous year: €2.64) in the fi nancial year 2008 and thus exceed earnings per share by the amount of the additional dividend of €0.118.
Earnings per share from continuing operations total €2.54 (previous year: €2.58).
| € million | 2008 | 2007 |
|---|---|---|
| Scheduled depreciation on tangible and intangible assets and investment properties |
1,302 | 1,227 |
| Non-scheduled write-downs on tangible assets, intangible assets (including goodwill) and investment properties |
50 | 38 |
| Non-scheduled write-downs on non-current fi nancial assets |
0 | 0 |
| 1,352 | 1,265 |
Non-scheduled write-downs were fully included in selling expenses (previous year: €38 million), with real estate accounting for €45 million (previous year: €26 million) of non-scheduled write-downs.
No non-scheduled write-downs on investment properties (previous year: €6 million) and no writedowns on investments (previous year: €0 million) were carried out in the fi nancial year 2008.
Real accounts for €3 million (previous year: €5 million) of non-scheduled write-downs; other companies account for €47 million (previous year: €33 million).
In accordance with IFRS 5, depreciation/amortisation of the Adler fashion stores in the amount of €325 million (previous year: €18 million), including €312 million on goodwill, is recognised in current income from continuing operations. In the previous year, depreciation/amortisation of the Extra supermarkets in the amount of €18 million was reclassifi ed to current income from continuing operations.
The cost of sales includes the following cost of materials:
| 2008 | 2007 |
|---|---|
| 53,548 | 50,677 |
| 71 | 54 |
| 53,619 | 50,731 |
Personnel expenses can be broken down as follows:
| € million | 2008 | 2007 |
|---|---|---|
| Wages and salaries | 5,857 | 5,564 |
| Social security payments, expenses for pensions and related employee benefi ts |
1,218 | 1,146 |
| thereof pension expenses | [66] | [67] |
| 7,075 | 6,710 |
Personnel expenses also include prorated expenses for share-based payments totalling €9 million (previous year: €24 million).
Annual average number of Group employees:
| Number of employees | 2008 | 2007 |
|---|---|---|
| Blue collar/white collar | 290,940 | 275,520 |
| Apprentices/trainees | 10,522 | 10,133 |
| 301,462 | 285,653 |
The above fi gure includes an absolute number of 91,008 (previous year: 91,802) part-time employees. The percentage of employees working outside Germany (full-time equivalents) rose to 60.8 percent from 58.2 percent the year before.
Other taxes (for example, tax on land and buildings, motor vehicle tax, excise tax and transaction tax) of €134 million (previous year: €117 million) are included in the cost of sales and the selling and administrative expenses.
| € million | Goodwill | Other intangible assets |
Tangible assets |
Investment properties |
Financial assets |
Total fi xed assets |
|---|---|---|---|---|---|---|
| Acquisition or production costs | ||||||
| At 1 Jan 2007 | 4,395 | 995 | 19,403 | 296 | 163 | 25,252 |
| Currency translation | 13 | (1) | (89) | 0 | 0 | (77) |
| Additions to consolidation group | 0 | 0 | 5 | 0 | 0 | 5 |
| Additions | 29 | 203 | 1,903 | 1 | 53 | 2,189 |
| Disposals | (109) | (47) | (1,106) | (23) | (62) | (1,347) |
| Transfers | 0 | 3 | (56) | 18 | 24 | (11) |
| At 31 Dec 2007/1 Jan 2008 | 4,328 | 1,153 | 20,060 | 292 | 178 | 26,011 |
| Currency translation | (32) | (10) | (594) | 0 | 1 | (635) |
| Additions to consolidation group | 0 | 0 | 12 | 0 | 0 | 12 |
| Additions | 1 | 213 | 2,230 | 0 | 24 | 2,468 |
| Disposals | (337) | (27) | (920) | (57) | (33) | (1,374) |
| Transfers | 0 | 0 | (91) | 91 | 0 | 0 |
| At 31 Dec 2008 | 3,960 | 1,329 | 20,697 | 326 | 170 | 26,482 |
| Depreciation/amortisation | ||||||
| At 1 Jan 2007 | 0 | 522 | 7,308 | 160 | 24 | 8,014 |
| Currency translation | 0 | 0 | (25) | 0 | 1 | (24) |
| Additions, scheduled | 0 | 139 | 1,116 | 6 | 0 | 1,261 |
| Additions, non-scheduled | 0 | 12 | 21 | 6 | 1 | 40 |
| Disposals | 0 | (35) | (646) | (9) | (10) | (700) |
| Write-ups | 0 | 0 | (13) | 0 | 0 | (13) |
| Transfers | 0 | 0 | (33) | 13 | 10 | (10) |
| At 31 Dec 2007/1 Jan 2008 | 0 | 638 | 7,728 | 176 | 26 | 8,568 |
| Currency translation | 0 | (8) | (211) | 0 | 0 | (219) |
| Additions, scheduled | 0 | 158 | 1,149 | 8 | 0 | 1,315 |
| Additions, non-scheduled | 312 | 4 | 46 | 0 | 0 | 362 |
| Disposals | (312) | (15) | (498) | (30) | 0 | (855) |
| Write-ups | 0 | 0 | (3) | 0 | 0 | (3) |
| Transfers | 0 | 0 | (38) | 39 | 0 | 1 |
| At 31 Dec 2008 | 0 | 777 | 8,173 | 193 | 26 | 9,169 |
| Book value at 1 Jan 2007 | 4,395 | 473 | 12,095 | 136 | 139 | 17,238 |
| Book value at 31 Dec 2007 | 4,328 | 515 | 12,332 | 116 | 152 | 17,443 |
| Book value at 31 Dec 2008 | 3,960 | 552 | 12,524 | 133 | 144 | 17,313 |
Assets of the discontinued Adler fashion stores activities, with a book value totalling €90 million, are included in disposals for the current fi nancial year.
Assets of the discontinued Extra activities, with a book value of €175 million, are included in disposals for the previous year.
Of goodwill in the amount of €3,960 million (previous year: €4,328 million) as of 31 December 2008, €3,640 million (previous year: €3,979 million) concerns differences resulting from the capital consolidation, and €320 million (previous year: €349 million) concerns goodwill taken from individual fi nancial statements.
As a result of the recognition of put options, the resulting goodwill of Media Markt and Saturn declined by €23 million in 2008 (previous year: increase of €29 million).
125 Consolidated fi nancial statements 2008 126 Income statement 127 Balance sheet 128 Statement of changes in equity 129 Cash fl ow statement 130 Notes to the consolidated fi nancial statements 130 Segment reporting 194 Statement of the legal representatives 195 Auditor's report
As of the closing date, the breakdown of goodwill among the major cash-generating units was as shown below:
| € million | 31 Dec 2008 | 31 Dec 2007 | |
|---|---|---|---|
| Real Germany | 1,083 | 1,083 | |
| Metro Cash & Carry France | 398 | 398 | |
| Metro Cash & Carry Netherlands | 351 | 351 | |
| Metro Cash & Carry Poland | 258 | 265 | |
| Metro Cash & Carry Hungary | 239 | 239 | |
| Metro Cash & Carry Germany | 223 | 223 | |
| Media Markt and Saturn Germany | 216 | 227 | |
| Metro Cash & Carry Italy | 171 | 171 | |
| Metro Cash & Carry Belgium | 145 | 145 | |
| Real Poland | 142 | 164 | |
| Metro Cash & Carry Portugal | 91 | 91 | |
| Media Markt and Saturn Italy | 77 | 79 | |
| Kaufhof department stores Belgium | 57 | 57 | |
| Media Markt and Saturn Spain | 52 | 54 | |
| Metro Cash & Carry Spain | 51 | 51 | |
| Metro Cash & Carry Greece | 45 | 45 | |
| Metro Cash & Carry United Kingdom |
37 | 37 | |
| Metro Cash & Carry Austria | 27 | 27 | |
| Media Markt and Saturn Netherlands | 22 | 24 | |
| Real Russia | 17 | 21 | |
| Media Markt and Saturn Poland | 17 | 20 | |
| Media Markt and Saturn Austria | 17 | 19 | |
| Media Markt and Saturn Switzerland | 17 | 18 | |
| Metro Cash & Carry China | 17 | 17 | |
| Metro Cash & Carry Denmark | 16 | 16 | |
| Adler fashion stores Germany | 0 | 218 | |
| Adler fashion stores Austria | 0 | 78 | |
| Adler fashion stores Luxembourg | 0 | 16 | |
| Other companies | 174 | 174 | |
| 3,960 | 4,328 |
In accordance with IFRS 3 in combination with IAS 36, goodwill is tested for impairment once a year. The book value of the cash-generating unit is compared with the recoverable amount. The determination of the recoverable amount is based on whichever is the higher value: value in use or fair value less cost to sell, which is determined as the cash value of future cash fl ows. Expected future cash fl ows are based on a competent planning process under consideration of the company's experience as well as on macroeconomic data collected by third-party sources. As a rule, the detailed planning period comprises three years. As in the previous year, the growth rates considered at the end of the detailed planning period are generally 1.0 percent. The capitalisation rate as the weighted average cost of capital was determined using the capital asset pricing model. The individually determined capitalisation rates amount to between 8.0 and 10.9 percent.
In a generally diffi cult textile market environment, performance of the Adler fashion stores was weak during the 1st half of 2008. As of 30 June 2008, this development was regarded as an indicator of an impairment of the goodwill of the Adler fashion stores, which meant that an impairment test was carried out during the period. Due to the changed planning, the impairment test during the period resulted in a €312 million goodwill write-down for the Adler fashion stores, which is included in income from discontinued operations. The recoverable amount was determined on the basis of the fair value net of divestment expenses. No impairment test for the goodwill of the Adler fashion stores was required as of 31 Dec 2008 as no goodwill was capitalised by this date. A reversion of goodwill write-downs is not permitted under IAS 36.
In addition, the prescribed annual impairment test confi rmed the recoverability of all capitalised goodwill. Additional non-scheduled write-downs were therefore not required.
| Acquisition or production costs At 1 Jan 2007 995 [435] 0 995 Currency translation (1) [0] 0 (1) Additions to consolidation group 0 [0] 0 Additions 203 [130] 0 203 Disposals (47) [(23)] 0 (47) Transfers 3 [2] 0 At 31 Dec 2007/1 Jan 2008 1,153 [544] 0 1,153 Currency translation (10) [(3)] 0 (10) Additions to consolidation group 0 [0] 0 Additions 213 [134] 0 213 Disposals (27) [(7)] 0 (27) Transfers 0 [(3)] 0 At 31 Dec 2008 1,329 [665] 0 1,329 Depreciation/amortisation At 1 Jan 2007 522 [192] 0 522 Currency translation 0 [0] 0 Additions, scheduled 139 [99] 0 139 Additions, non-scheduled 12 [0] 0 12 Disposals (35) [(13)] 0 (35) Write-ups 0 [0] 0 Transfers 0 [0] 0 0 At 31 Dec 2007/1 Jan 2008 638 [278] 0 638 Currency translation (8) [(1)] 0 (8) Additions, scheduled 158 [95] 0 158 Additions, non-scheduled 4 [0] 0 4 Disposals (15) [(1)] 0 (15) Write-ups 0 [0] 0 0 Transfers 0 [(1)] 0 0 At 31 Dec 2008 777 [370] 0 777 Book value on 1 Jan 2007 473 [243] 0 473 Book value on 31 Dec 2007 515 [266] 0 515 Book value on 31 Dec 2008 552 [295] 0 552 |
€ million | Concession franchises, trademark and similar rights, licences and other such rights |
[thereof internally generated intangible assets] |
Prepayments | Total |
|---|---|---|---|---|---|
| 0 | |||||
| 3 | |||||
| 0 | |||||
| 0 | |||||
| 0 | |||||
| 0 | |||||
The other intangible assets have a fi nite useful life and are therefore amortised as scheduled. The non-scheduled write-downs concern lease rights and licences at €2 million (previous year: €12 million) as well as concessions/rights/licences at €2 million (previous year: €0 million).
The additions to amortisations on other intangible assets are shown in cost of sales at an amount of €0 million (previous year: €4 million), in selling expenses at an amount of €66 million (previous year: €76 million) and in administrative expenses at an amount of €95 million (previous year: €68 million). An additional €1 million (previous year: €3 million) is attributable to income from discontinued operations.
As in the previous year, there are no material limits to the title of or right to dispose of intangible assets. Purchasing obligations amounting to €4 million (previous year: €4 million) for intangible assets were made.
| € million | Land and buildings | Plant and machinery |
Other plant, business and offi ce equipment |
Assets under construction |
Total |
|---|---|---|---|---|---|
| Acquisition or production costs | |||||
| At 1 Jan 2007 | 13,538 | 13 | 5,526 | 326 | 19,403 |
| Currency translation | (56) | 0 | (26) | (7) | (89) |
| Additions to consolidation group | 5 | 0 | 0 | 0 | 5 |
| Additions | 492 | 1 | 686 | 724 | 1,903 |
| Disposals | (619) | 0 | (479) | (8) | (1,106) |
| Transfers | 517 | 0 | 171 | (744) | (56) |
| At 31 Dec 2007/1 Jan 2008 | 13,877 | 14 | 5,878 | 291 | 20,060 |
| Currency translation | (364) | (1) | (207) | (22) | (594) |
| Additions to consolidation group | 12 | 0 | 0 | 0 | 12 |
| Additions | 617 | 2 | 654 | 957 | 2,230 |
| Disposals | (474) | 0 | (429) | (17) | (920) |
| Transfers | 540 | 0 | 209 | (840) | (91) |
| At 31 Dec 2008 | 14,208 | 15 | 6,105 | 369 | 20,697 |
| Depreciation/amortisation | |||||
| At 1 Jan 2007 | 3,731 | 10 | 3,562 | 5 | 7,308 |
| Currency translation | (8) | 0 | (17) | 0 | (25) |
| Additions, scheduled | 588 | 1 | 527 | 0 | 1,116 |
| Additions, non-scheduled | 20 | 0 | 1 | 0 | 21 |
| Disposals | (262) | 0 | (384) | 0 | (646) |
| Write-ups | (5) | 0 | (8) | 0 | (13) |
| Transfers | (41) | 0 | 8 | 0 | (33) |
| At 31 Dec 2007/1 Jan 2008 | 4,023 | 11 | 3,689 | 5 | 7,728 |
| Currency translation | (72) | (1) | (138) | 0 | (211) |
| Additions, scheduled | 599 | 1 | 549 | 0 | 1,149 |
| Additions, non-scheduled | 45 | 0 | 1 | 0 | 46 |
| Disposals | (158) | 0 | (340) | 0 | (498) |
| Write-ups | (3) | 0 | 0 | 0 | (3) |
| Transfers | (37) | 0 | (1) | 0 | (38) |
| At 31 Dec 2008 | 4,397 | 11 | 3,760 | 5 | 8,173 |
| Book value on 1 Jan 2007 | 9,807 | 3 | 1,964 | 321 | 12,095 |
| Book value on 31 Dec 2007 | 9,854 | 3 | 2,189 | 286 | 12,332 |
| Book value on 31 Dec 2008 | 9,811 | 4 | 2,345 | 364 | 12,524 |
125 Consolidated fi nancial statements 2008 126 Income statement
127 Balance sheet
128 Statement of
changes in equity 129 Cash fl ow statement
representatives
| 195 Auditor's report | ||||
|---|---|---|---|---|
| ---------------------- | -- | -- | -- | -- |
Additions to tangible assets resulted mainly from the opening of new stores at Metro Cash & Carry, Real and Media Markt and Saturn.
While the increase in tangible assets at Metro Cash & Carry and Real was largely due to expansion in Eastern Europe, the increase at Media Markt and Saturn primarily resulted from new openings in Germany and Western Europe.
Effects of currency translation reduced tangible assets by €383 million (previous year: €64 million). These stemmed largely from exchange rate developments in Russia, Poland, Ukraine, the United Kingdom and Romania.
Disposals from tangible assets resulted from the sale of real estate in the amount of €126 million and, with €178 million, the reclassification of assets to "assets held for sale", including €85 million from the discontinued Adler fashion stores activities.
Limitations to the disposal of assets in the form of liens and encumbrances amounted to €552 million (previous year: €646 million).
Purchasing obligations for tangible assets in the amount of €231 million (previous year: €260 million) were made.
Assets used by the Group under the terms of finance lease agreements were valued at €1,257 million (previous year: €1,415 million). The assets involved are mainly leased buildings.
Finance leases generally have initial terms of 15 and 25 years with options upon expiration to extend them at least once for fi ve years. The interest rates in the leases vary by market and date of signing between 3.0 percent and 18.0 percent.
In addition to fi nance leases, METRO Group has also signed other types of leases classifi ed as operating leases based on their economic value. Operating leases generally have an initial term of up to 15 years. The interest rates in the leases are based partly on variable and partly on fi xed rents.
Payments due under fi nance and operating leases in the indicated periods are shown below:
| € million | Up to 1 year |
1 to 5 years |
Over 5 years |
|---|---|---|---|
| Finance leases | |||
| Future lease payments due (nominal) |
243 | 863 | 1,608 |
| Discounts | (19) | (173) | (652) |
| Present value | 224 | 690 | 956 |
| Operating leases | |||
| Future lease payments due (nominal) |
1,341 | 4,257 | 4,091 |
The cash values of obligations from fi nance leases comprise future payments from the rental of Adler properties in the amount of €51 million.
The nominal values of obligations from operating leases include future payments from the rental of Adler properties in the amount of €247 million.
Payments due on finance leases contain payments amounting to €137 million (previous year: €160 million) for options to purchase assets at favourable prices.
The nominal value of future lease payments to METRO Group coming from the subleasing of assets held under finance leases amounts to €451 million (previous year: €401 million).
The nominal value of future lease payments to METRO Group resulting from the subleasing of assets held under operating leases amounts to €1,082 million (previous year: €1,125 million).
The consolidated net profi t for the period contains payments made under leasing agreements amounting to €1,396 million (previous year: €1,311 million) and payments received under subleasing agreements amounting to €431 million (previous year: €426 million).
Contingent lease payments from fi nance leases recognised as expenses during the period amount to €12 million (previous year: €10 million).
Lease payments due in the indicated periods from entities outside METRO Group ( METRO Group as lessor) are shown below:
| € million | Up to 1 year |
1 to 5 years |
Over 5 years |
|---|---|---|---|
| Finance leases | |||
| Future lease payments due (nominal) |
4 | 16 | 12 |
| Discounts | 0 | (3) | (7) |
| Present value | 4 | 13 | 5 |
| Operating leases | |||
| Future lease payments due (nominal) |
25 | 71 | 103 |
From the perspective of the lessor, the nonguaranteed residual value must be added to the nominal minimum lease payments of €32 million (previous year: €20 million) in existing finance leases. The non-guaranteed residual value amounts to €7 million for the fi nancial year (previous year: €8 million). The resulting gross investment amount is thus €39 million (previous year: €28 million). In addition, there is an unrealised amount from fi nance leases of €10 million (previous year: €5 million).
Real estate held as investment properties is recognised at amortised cost. As of 31 December 2008, this amounted to €133 million (previous year: €116 million). The fair value of these properties is determined by means of a proprietary evaluation using recognised measurement methods. It totals €194 million (previous year: €150 million). Rental income from the properties amounts to €15 million (previous year: €9 million). The related expenses amount to €11 million (previous year: €7 million). Expenses of €1 million (previous year: €1 million) resulted from properties without rental income.
Limitations to the disposal of assets in the form of liens and encumbrances amounted to €66 million (previous year: €17 million). Purchasing obligations for "investment properties" in the amount of €1 million (previous year: €1 million) were made.
125 Consolidated fi nancial statements 2008 126 Income statement 127 Balance sheet 128 Statement of changes in equity 129 Cash fl ow statement 130 Notes to the consolidated fi nancial statements 130 Segment reporting 194 Statement of the legal representatives 195 Auditor's report
| € million | Shares in Group companies |
Loans | Investments | Securities | Total |
|---|---|---|---|---|---|
| Acquisition or production costs | |||||
| At 1 Jan 2007 | 0 | 123 | 38 | 2 | 163 |
| Currency translation | 0 | 0 | 0 | 0 | 0 |
| Additions to consolidation group | 0 | 0 | 0 | 0 | 0 |
| Additions | 0 | 53 | 0 | 0 | 53 |
| Disposals | 0 | (62) | 0 | 0 | (62) |
| Transfers | 0 | 22 | 2 | 0 | 24 |
| At 31 Dec 2007/1 Jan 2008 | 0 | 136 | 40 | 2 | 178 |
| Currency translation | 0 | 1 | 0 | 0 | 1 |
| Additions to consolidation group | 0 | 0 | 0 | 0 | 0 |
| Additions | 0 | 23 | 0 | 1 | 24 |
| Disposals | 0 | (30) | (1) | (2) | (33) |
| Transfers | 0 | 0 | 0 | 0 | 0 |
| At 31 Dec 2008 | 0 | 130 | 39 | 1 | 170 |
| Depreciation/amortisation | |||||
| At 1 Jan 2007 | 0 | 11 | 13 | 0 | 24 |
| Currency translation | 0 | 0 | 1 | 0 | 1 |
| Additions, scheduled | 0 | 0 | 0 | 0 | 0 |
| Additions, non-scheduled | 0 | 1 | 0 | 0 | 1 |
| Disposals | 0 | (10) | 0 | 0 | (10) |
| Write-ups | 0 | 0 | 0 | 0 | 0 |
| Transfers | 0 | 8 | 2 | 0 | 10 |
| At 31 Dec 2007/1 Jan 2008 | 0 | 10 | 16 | 0 | 26 |
| Currency translation | 0 | 0 | 0 | 0 | 0 |
| Additions, scheduled | 0 | 0 | 0 | 0 | 0 |
| Additions, non-scheduled | 0 | 0 | 0 | 0 | 0 |
| Disposals | 0 | 0 | 0 | 0 | 0 |
| Write-ups | 0 | 0 | 0 | 0 | 0 |
| Transfers | 0 | 0 | 0 | 0 | 0 |
| At 31 Dec 2008 | 0 | 10 | 16 | 0 | 26 |
| Book value on 1 Jan 2007 | 0 | 112 | 25 | 2 | 139 |
| Book value on 31 Dec 2007 | 0 | 126 | 24 | 2 | 152 |
| Book value on 31 Dec 2008 | 0 | 120 | 23 | 1 | 144 |
The carrying amounts of investments contain €1 million (previous year: €2 million) in investments in 3 associated companies (previous year: 3 associated companies), which are recognised at equity.
| 31 Dec 2008 | 31 Dec 2007 | ||||||
|---|---|---|---|---|---|---|---|
| Remaining term | Remaining term | ||||||
| € million | Total | Up to 1 year | Over 1 year | Total | Up to 1 year | Over 1 year | |
| Due from suppliers | 1,780 | 1,780 | 0 | 1,759 | 1,759 | 0 | |
| Other tax receivables | 417 | 417 | 0 | 402 | 402 | 0 | |
| Prepaid expenses and deferred charges | 347 | 99 | 248 | 323 | 76 | 247 | |
| Other assets | 1,038 | 836 | 202 | 1,082 | 839 | 243 | |
| 3,582 | 3,132 | 450 | 3,566 | 3,076 | 490 |
Receivables due from suppliers comprise future compensation for suppliers (for example, bonuses, advertising). The expansion-related increase at the Media Markt and Saturn as well as Metro Cash & Carry sales divisions, in particular, was largely offset by countervailing currency effects, particularly in the Eastern European countries.
The item of prepaid expenses and deferred charges includes prorated rental, leasing and interest prepayments as well as other deferments.
The other assets item comprises primarily receivables/other assets in the real estate area, receivables from credit card transactions and receivables from other fi nancial transactions.
Deferred tax assets on loss carry-forwards and temporary differences amount to €1,045 million, an increase of €96 million compared with the previous year. The carrying amount of deferred tax liabilities increased to €221 million, €38 million higher than the previous year's level.
The amount of deferred taxes on temporary differences prior to offset has remained almost constant. The dissolution of deferred taxes on temporary differences was offset by the formation of deferred taxes on loss carry-forwards in Germany and internationally. The capitalisation of deferred taxes on loss carry-forwards primarily concerns the expansion countries of the Media Markt and Saturn sales division.
Deferred taxes recognised concern the following balance sheet items:
| 31 Dec 2008 | 31 Dec 2007 | ||||
|---|---|---|---|---|---|
| € million | Asset | Liability | Asset | Liability | |
| Goodwill | 328 | 158 | 431 | 148 | |
| Other intangible assets | 179 | 39 | 221 | 42 | |
| Tangible assets and investment properties |
128 | 677 | 113 | 747 | |
| Financial assets | 10 | 4 | 19 | 9 | |
| Inventories | 91 | 29 | 70 | 21 | |
| Other receivables and assets |
115 | 73 | 79 | 99 | |
| Provisions for pensions and similar commitments |
107 | 10 | 108 | 8 | |
| Other provisions | 104 | 36 | 103 | 31 | |
| Financial liabilities | 510 | 3 | 585 | 3 | |
| Other liabilities | 111 | 40 | 103 | 56 | |
| Outside basis differences |
0 | 6 | 0 | 13 | |
| Loss carry-forwards | 216 | 0 | 111 | 0 | |
| Total | 1,899 | 1,075 | 1,943 | 1,177 | |
| Offset | (854) | (854) | (994) | (994) | |
| Book value of deferred taxes |
1,045 | 221 | 949 | 183 |
In accordance with IAS 12, deferred taxes relating to differences between the carrying amount of a subsidiary's pro rata assets and liabilities in the balance sheet and the investment book value for this subsidiary in the parent company's tax statement must be created (so-called outside basis differences) if the tax benefi t is likely to be realised in the future. No deferred taxes were recognised for retained earnings of subsidiaries as these earnings will be reinvested over an indefi nite period of time or are not subject to relevant taxation.
No deferred tax assets were created from corporate income tax losses of €6,310 million (previous year: €6,465 million), business tax losses of €6,901 million (previous year: €7,320 million) and temporary differences of €73 million (previous year: €50 million) as a short-term utilisation of these losses is not expected. The losses are largely in Germany and can be carried forward indefi nitely.
| € million | 31 Dec 2008 | 31 Dec 2007 |
|---|---|---|
| Food merchandise | 2,026 | 2,009 |
| Nonfood merchandise | 4,975 | 5,319 |
| 7,001 | 7,328 |
Inventories can be broken down by sales division as follows:
| € million | 31 Dec 2008 | 31 Dec 2007 |
|---|---|---|
| Metro Cash & Carry | 2,477 | 2,523 |
| Real | 960 | 993 |
| Media Markt and Saturn | 2,724 | 2,900 |
| Galeria Kaufhof | 533 | 545 |
| Other companies | 307 | 367 |
| 7,001 | 7,328 |
The decrease in inventories is largely attributable to exchange rate effects in the Eastern European markets and stock optimisation measures in all sales divisions.
Adjusted for these effects, inventories would have increased as a result of – above all international – business expansion at the Metro Cash & Carry, Media Markt and Saturn and Real sales divisions.
At €65 million, the decrease in other companies is largely due to the reclassifi cation of the Adler fashion stores to the item "assets held for sale".
During the reporting year, write-downs of €353 million were carried out (previous year: €343 million).
Trade receivables amounted to €446 million (previous year: €508 million). Of that total, €4 million (previous year: €6 million) is due in over one year.
Despite an expansion-induced increase in receivables, improved receivables management as well as altered average payment terms at year-end caused trade receivables to decline by €62 million.
Impairments of capitalised fi nancial instruments that are measured at amortised cost are as follows:
| € million | Category "loans and receivables" |
Category "held to maturity" |
|---|---|---|
| At 1 Jan 2007 | 143 | 0 |
| Currency translation | 0 | 0 |
| Change in consolidation group |
0 | 0 |
| Additions | 85 | 0 |
| Disposals | (26) | 0 |
| Utilisation | (35) | 0 |
| Transfer | 1 | 0 |
| At 31 Dec 2007/ 1 Jan 2008 |
168 | 0 |
| Currency translation | (4) | 0 |
| Change in consolidation group |
0 | 0 |
| Additions | 105 | 0 |
| Disposals | (40) | 0 |
| Utilisation | (31) | 0 |
| Transfer | 12 | 0 |
| At 31 Dec 2008 | 210 | 0 |
Negative earnings effects from impairment in the amount of €63 million (previous year: €58 million) existed in the "loans and receivables" category. This also includes earnings from the receipt of cash and cash equivalents from receivables of €2 million (previous year: €1 million) released due to expected irrecoverability. As in the previous year, no earnings effects existed in the category "held to maturity".
128 Statement of
changes in equity 129 Cash fl ow statement
The following capitalised fi nancial instruments were overdue as of the closing date and were not adjusted for bad debt:
| thereof not adjusted for bad debt and overdue as of the closing date | |||||||
|---|---|---|---|---|---|---|---|
| € million | Total book value 31 Dec 2008 |
Within the last 90 days |
For 91 to 180 days |
For 181 to 270 days |
For 271 to 360 days |
For over 360 days |
|
| ASSETS | |||||||
| in the category "loans and receivables" | 3,023 | 377 | 52 | 8 | 3 | 15 | |
| in the category "held to maturity" | 0 | 0 | 0 | 0 | 0 | 0 | |
| in the category "held for trading" | 79 | 0 | 0 | 0 | 0 | 0 | |
| in the category "available for sale" | 24 | 0 | 0 | 0 | 0 | 0 | |
| 3,126 | 377 | 52 | 8 | 3 | 15 | ||
thereof not adjusted for bad debt and overdue as of the closing date
| € million | Total book value 31 Dec 2007 |
Within the last 90 days |
For 91 to 180 days |
For 181 to 270 days |
For 271 to 360 days |
For over 360 days |
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| in the category "loans and receivables" | 3,084 | 514 | 29 | 11 | 8 | 34 |
| in the category "held to maturity" | 0 | 0 | 0 | 0 | 0 | 0 |
| in the category "held for trading" | 7 | 0 | 0 | 0 | 0 | 0 |
| in the category "available for sale" | 35 | 0 | 0 | 0 | 0 | 0 |
| 3,126 | 514 | 29 | 11 | 8 | 34 |
Loans and receivables due within the last 90 days largely result from standard business payment transactions without or with short-term payment targets. For non-adjusted loans and receivables over 90 days overdue, there is no indication as of the closing date that debtors will not fulfi l their payment obligations. This is also the case for all capitalised fi nancial instruments that are not overdue and not adjusted for bad debt.
| € million | 31 Dec 2008 | 31 Dec 2007 |
|---|---|---|
| Cheques and cash on hand | 153 | 114 |
| Bank balances | 3,721 | 3,319 |
| 3,874 | 3,433 |
The increase in cash and cash equivalents resulted primarily from the issue of a bond in the amount of €500 million in November 2008.
In 2007, METRO Group decided to divest of the Extra supermarkets. All assets and liabilities held for sale of these Extra supermarkets were treated as assets held for disposal according to IFRS 5 and accounted for in the balance sheet item " assets held for sale" or "liabilities related to assets held for sale".
By contractual agreement of 17 January 2008, the Extra supermarkets were sold to the Rewe Group. The disposal was shown in the consolidated fi nancial statements of METRO Group with effect from 1 July 2008.
125 Consolidated fi nancial statements 2008 126 Income statement
On 31 December 2007, METRO Group purchased a property that was scheduled to be resold over the short term. With a book value of about €20 million, this property was likewise reported under the item "assets held for sale" in accordance with IFRS 5. Since it was determined during the course of the fi nancial year that it would be more advantageous to retain ownership of this property over the me dium term, it was reclassifi ed to non-current assets in December 2008. The scheduled depreciation that had been omitted to meet the requirements of IFRS 5 was retroactively effected for the fi nancial year.
In mid-September 2008, METRO Group decided to accelerate the process of divesting the Adler fashion stores. As a result, all assets (€113 million) and liabilities (€146 million) related to the Adler fashion stores were treated as operations held for disposal in accordance with IFRS 5 and thus included in the item "assets held for sale" or "liabilities related to assets held for sale" (see no. 43 "Discontinued operations"). Non-scheduled depreciation totalling €83 million was carried out to adjust the assets and liabilities held for sale of the Adler fashion stores to the fair value less costs to sell.
By contractual agreement dated 13 February 2009, METRO Group sold the Adler fashion stores to the restructuring fund BluO beta equity Limited. The purchase agreement is still subject to approval by the cartel authorities.
During the course of 2008, several real estate locations with a combined book value of €117 million were also included in the item "assets held for sale". METRO Group assumes that these properties will be sold during the course of 2009. Nonscheduled depreciation of these properties to their fair value less costs to sell was not required. They are shown in the segment reporting item "segment assets" in the amount of €20 million in the Real segment and in the amount of €97 million in the segment "other companies/consolidation".
In terms of amount and composition, i.e. the ratio of ordinary to preference shares, subscribed capital has not changed compared with 31 December 2007 and totals €835,419,052.27. It is divided as follows:
| approx. €2.56 | 31 Dec 2008 | 31 Dec 2007 | |
|---|---|---|---|
| Ordinary shares | Shares | 324,109,563 | 324,109,563 |
| € | 828,572,941 | 828,572,941 | |
| Preference shares | Shares | 2,677,966 | 2,677,966 |
| € | 6,846,111 | 6,846,111 | |
| Total share capital | Shares | 326,787,529 | 326,787,529 |
| € | 835,419,052 | 835,419,052 |
Each ordinary share of METRO AG grants one voting right. In addition, ordinary shares of METRO AG entitle the holder to dividends. In contrast to or dinary shares, preference shares do not carry voting rights and give a preferential entitlement to profi ts in line with § 21 of the Articles of Association of METRO AG, which state:
(4) The holders of non-voting preference shares and of ordinary shares will equally share in any additional profi t distribution in the proportion of their shares in the share capital."
On 4 June 2004, a contingent increase in share capital of €127,825,000 was resolved (contingent capital I).This contingent capital increase is related to the authorisation given to the Management Board to issue by 3 June 2009, with the approval of the Supervisory Board, option bonds and/or convertible bonds for a total par value of €1,000,000,000 and to grant the bond holders option or conversion rights for up to 50,000,000 new ordinary shares in the company, to establish the corresponding option or conversion duties or provide for the right of the company to repay the bond either in whole or in part with ordinary shares in the company rather than in cash. To date, no option bonds and/or convertible bonds have been issued under the aforementioned authorisation of the Management Board.
The Annual General Meeting on 16 May 2008 resolved to annul the contingent capital increase by up to €14,316,173 through issuance of up to 5,600,000 ordinary shares (contingent capital II) resolved by the Annual General Meeting of 6 July 1999.
On 23 May 2007, the Annual General Meeting resolved to authorise the Management Board to increase the share capital, with the approval of the Supervisory Board, by issuing new ordinary bearer shares in exchange for cash contributions in one or several tranches for a total maximum of €40,000,000 (authorised capital I) by 23 May 2012.
A subscription right is to be granted to existing shareholders. However, the Management Board has been authorised to restrict this subscription right, with the approval of the Supervisory Board, to the extent required to grant the holders of option bonds and convertible bonds issued by METRO AG and its wholly owned direct or indirect subsidiaries a right to purchase the number of new ordinary shares to which they would be entitled upon exercise of their option/conversion rights and to further exclude the subscription right to compensate for fractions of shares from rounding.
In addition, the Management Board has been authorised to restrict the shareholders' subscription rights, with the approval of the Supervisory Board, for one or several capital increases under the authorised capital, provided that the total par value of such capital increases does not exceed 10 percent of the share capital registered in the commercial register at the time the authorised capital is fi rst utilised, and further provided that the issue price of the new ordinary shares is not substantially below the market price of the com pany's listed ordinary shares of the same category at the time the initial offering price of the new issue is fi nally fi xed. The Management Board is authorised to determine all further details of the capital increases with the approval of the Supervisory Board. To date, authorised capital I has not been used.
On 23 May 2007, the Annual General Meeting resolved to further authorise the Management Board, with the approval of the Supervisory Board, to increase the company's share capital by issuing new ordinary bearer shares in exchange for noncash contributions in one or several issues for a maximum total of €60,000,000 by 23 May 2012 (authorised capital II). The Management Board is authorised, with the approval of the Supervisory Board, to decide on the restriction of the subscription rights and to determine all further details of the capital increases. To date, authorised capital II has not been used.
On 4 June 2004, the Annual General Meeting further authorised the Management Board, with the approval of the Supervisory Board, to increase the company's share capital by issuing new ordinary bearer shares in exchange for cash contributions in one or several issues for a maximum total of €100,000,000 by 3 June 2009 (authorised capital III). Existing shareholders shall be granted a subscription right.
However, the Management Board has been authorised to restrict the subscription right, with the approval of the Supervisory Board, to the extent required to grant the holders of option bonds and convertible bonds issued by METRO AG and all dir ect or indirect subsidiaries in which METRO AG holds at least 90 percent of the share capital a right to purchase the number of new shares they would be entitled to upon exercise of their option/ conversion rights and to further rule out subscription rights to compensate for fractions of shares from rounding.
In addition, the Management Board has been authorised to restrict the shareholders' subscription rights, with the approval of the Supervisory Board, for one or several capital increases under the authorised capital, provided that the total par value of such capital increases does not exceed 10 percent of the share capital registered in the commercial register at the time the authorised capital is fi rst utilised, and further provided that the issue price of the new shares is not substantially below the market price of listed shares of the same category at the time the initial offering price of the new issue is fi nally fi xed. The maximum limit of 10 percent of the share capital decreases in proportion to the amount of share capital that is comprised of the company's treasury shares issued as part of the authorised capital III under exclusion of the subscription right of the shareholders pursuant to § 71 Section 1 Subsection 8 Sentence 5, § 186 Section 3 Sentence 4 of the German Stock Corporation Act. The maximum limit also falls in proportion to the amount of share capital that is comprised of those shares issued to service option bonds and/or convertible bonds with option or conversion rights or with conversion duties if the bonds were issued during the duration of autho rised capital III under the exclusion of the subscription right in the corresponding application of § 186 Section 3 Sentence 4 of the Stock Corporation Act. To date, authorised capital III has not been used.
The Annual General Meeting held on 4 June 2004, further authorised the Management Board, with the approval of the Supervisory Board, to increase the company's share capital by issuing new ordinary bearer shares in exchange for non-cash contributions in one or several issues for a maximum total of €125,000,000 by 3 June 2009 (authorised capital IV). The Management Board has been authorised, with the approval of the Supervisory Board, to decide on the restriction of the subscription right. To date, authorised capital IV has not been used.
Pursuant to § 71 Section 1 Subsection. 8 of the German Stock Corporation Act, the Annual General Meeting on 16 May 2008 authorised the company to acquire treasury stock up to the equivalent of 10 percent of the share capital on or before 15 November 2009.
To date, neither the company nor any company controlled or majority-owned by METRO AG or any other company acting on behalf of METRO AG or of any company controlled or majority-owned by METRO AG has exercised this authorisation.
Capital reserve amounts to €2,544 million (previous year: €2,544 million).
| € million | 31 Dec 2008 | 31 Dec 2007 |
|---|---|---|
| Valuation reserve pursuant to IAS 39 (incl. deferred taxes) |
28 | 59 |
| Reserve for currency translation | (335) | 86 |
| Other reserves | 2,748 | 2,731 |
| 2,441 | 2,876 |
Reserves retained from earnings include, among other things, measurement effects with no effect on net income pursuant to IAS 39 plus deferred taxes thereon. In the fi nancial year under review, a total of €-31 million (previous year: €9 million) was reported in equity in relation to derivative fi nancial instruments within cash fl ow hedges. This change includes the write-off of €10 million (previous year: €6 million) as well as the initial and subsequent measurement of €-14 million (previous year: €3 million). Of the total, €12 million (previous year: €7 million) is allotted to inventories and €-2 million (previous year: €-1 million) to the fi nancial result. As in the previous year, in the category of assets classifi ed as "available for sale", no income or expenses were recognised in income. The share of fair value changes in hedges for share-based remuneration that is not reported as a profi t or loss resulted in a decrease of equity by €-34 million (previous year: increase in equity of €4 million).
These measurement effects create an overall offset against an opposite tax effect of €7 million (previous year: €-4 million).
In addition, a reduction in equity due to currency translation differences of €421 million (previous year: €46 million) is primarily attributable to Russia, Ukraine, Poland, the United Kingdom and Romania, while increases in equity due to currency translation differences stem mostly from Slovakia, Japan and Switzerland.
Under consideration of the dividend payout for 2007 (€386 million), the remaining increase in revenue reserves to €2,748 million resulted mainly from the transfer of the period income due to shareholders of METRO AG for 2008 (€403 million).
Minority interests are the shares held by third part ies in the share capital of the consolidated subsidiaries. At year-end, minority interests amounted to €254 million (previous year: €254 million). Signifi cant minority interests exist in Media-Saturn-Holding GmbH.
Dividend distribution by METRO AG is based on METRO AG's annual financial statements prepared under German commercial law.
As resolved by the Annual General Meeting on 16 May 2008, a dividend of €1.180 per ordinary share and €1.298 per preference share, for a total of €385.9 million, was paid in the fi nancial year 2008 from the reported net income of €395.1 million for 2007. The remaining amount of €9.2 million was carried forward to the new account.
The Management Board of METRO AG will propose to the Annual General Meeting to pay from the reported net income of €395.6 million for 2008 a dividend of €1.180 per ordinary share and €1.298 per preference share, for a total of €385.9 million, and to carry the remaining amount of €9.7 million forward to the new account. The net income of €395.6 million for 2008 includes profi t carried forward of €9.2 million.
| € million | 31 Dec 2008 | 31 Dec 2007 |
|---|---|---|
| Pension provisions (employer's commitments) |
579 | 584 |
| Provisions for indirect commitments | 222 | 205 |
| Provisions for severance benefi ts | 86 | 89 |
| Provisions for company pension upgrades |
4 | 5 |
| Provisions for company pension plans |
891 | 883 |
| Other provisions for commitments similar to pensions |
73 | 90 |
| 964 | 973 | |
Pension commitments consist, for the most part, of benefi ts arising under the company pension plan. There are defi ned benefi t plans directly from the employer (employer's commitments) and defi ned benefi t plans from external providers (be nevolent funds in Germany and international pension funds) that are fi nanced partly or wholly by funds in accordance with IAS 19 (as post-employment benefi ts). The benefi ts under the different plans are based on performance and length of service. Furthermore, the length of service benefi ts are guaranteed certain fi xed amounts. In Germany, new employees have principally not been eligible for company pension benefi ts since 31 December 1997.
The most important pension plans are described in the following.
The essential plans generally foresee monthly pension benefi ts. The amounts are either fi xed or depend on the length of service. In individual cases, state pension insurance entitlements are to be charged against these entitlements. Entitlements to widow's and widower's pensions also apply.
There is a performance-oriented benefi t plan with commitments to retirement benefi ts, early retirement benefi ts, disability benefi ts and surviving dependents' benefi ts. The amount of the benefi ts depends on the length of service and the fi nal income subject to pension.
In Italy, employees receive payments upon termination of their employment relationship, irrespective of the reason for termination. A pension reform law that took effect on 1 January 2007 is designed to promote company and individual retirement provisions. Companies with more than 50 employees are required to transfer employee entitlements incurred after the enforcement date to the newly established state fund.
There are both retirement pensions as well as capital commitments whose size depends on the length of service and income. In addition, benefi ts are paid to employees aged 58 and older who become unemployed.
The above pension commitments are valued on the basis of actuarial calculations using the legal, economic and tax circumstances of each country. The commitments exist almost exclusively in the European area. They are calculated on the basis of an assumed rate of interest of 5.85 percent (previous year: 5.60 percent), average wage and salary increases of 2.25 percent in Germany (previous year: 2.00 percent) and 2.69 percent abroad (previous year: 2.50 percent) as well as average pension increases of 1.94 percent (previous year: 1.68 percent). The anticipated average return from plan assets amounts to 5.05 percent (previous year: 5.11 percent). The employee turnover rate is determined separately for each business, taking age/length of service into account. The average employee turn over rate in Germany is 3.00 percent (previous year: 6.90 percent). The actuarial calculations are based on country-specifi c mortality tables. Calculations for the German Group companies are based on the 2005 G tables from Prof. Dr Klaus Heubeck.
Breakdown of plan assets by asset category:
| % | 31 Dec 2008 | 31 Dec 2007 |
|---|---|---|
| Fixed-interest securities | 39 | 32 |
| Shares, funds | 15 | 20 |
| Real estate | 14 | 12 |
| Money market investments and cash | 26 | 30 |
| Other assets | 6 | 6 |
| 100 | 100 |
The expected average rate of interest is 4.6 percent (previous year: 4.5 percent), 7.9 percent for shares and funds (previous year: 7.9 percent), 5.9 percent for real estate (previous year: 6.2 percent) and 2.6 percent for money market investments and cash (previous year: 4.2 percent). The respective rate of interest takes into account country-specifi c factors and is based on factors such as the expected long-term interest rates and dividend payouts as well as the expected capital growth of the investment portfolio.
The actual loss from plan assets amounted to €35 million in 2008 (previous year: income of €44 million).
The fi nancing status that results from the balance of the plan assets' net present value and fair value developed as follows over the past fi ve years:
| € million | 31 Dec 2008 | 31 Dec 2007 | 31 Dec 2006 | 31 Dec 2005 | 31 Dec 2004 |
|---|---|---|---|---|---|
| Net present value | 1,827 | 1,861 | 2,034 | 2,199 | 1,928 |
| Plan assets | (845) | (936) | (907) | (844) | (744) |
| Financing status | 982 | 925 | 1,127 | 1,355 | 1,184 |
In the fi nancial year 2009, payments to external pension providers are expected to amount to €41 million.
Changes in the net present value of defi ned benefi t obligations (DBO) and plan assets of external pension providers are shown in the chart below:
| € million | 2008 | 2007 |
|---|---|---|
| Net present value (DBO) | ||
| At 1 Jan | 1,861 | 2,034 |
| Interest expenses | 100 | 91 |
| Service cost | 31 | 43 |
| Transfer of assets | (1) | 4 |
| Past service cost | 1 | 2 |
| Curtailment/compensation | 0 | (6) |
| Plan costs | (1) | (1) |
| Pension payments | (125) | (131) |
| Actuarial gains (-)/losses (+) | (12) | (162) |
| Change in consolidation group | 4 | 0 |
| Currency translation | (26) | (13) |
| Reclassifi cation of Adler to "assets held for sale" |
(5) | 0 |
| At 31 Dec | 1,827 | 1,861 |
| Changes in plan assets | ||
| At 1 Jan | 936 | 907 |
| Expected income on plan assets | 47 | 54 |
| Plan costs | (1) | (1) |
| Transfers | 0 | 3 |
| Pension payments | (76) | (69) |
| Employer contributions | 34 | 57 |
| Contributions from plan participants | 7 | 7 |
| Actuarial gains (+)/losses (-) | (82) | (10) |
| Currency translation | (19) | (12) |
| Reclassifi cation of Adler to "assets held for sale" |
(1) | 0 |
| At 31 Dec | 845 | 936 |
| Financing status | ||
| Net present value (DBO), not fund-fi nanced |
694 | 690 |
| Net present value (DBO), wholly or partly fund-fi nanced |
1,133 | 1,171 |
| Subtotal | 1,827 | 1,861 |
| Market value of plan assets | (845) | (936) |
| At 31 Dec | 982 | 925 |
| Actuarial gains (+)/losses (-) not yet considered |
(156) | (91) |
| Past service cost | (9) | (10) |
| Amount not shown as an asset due to defi nition of IAS 19.58 (b) |
3 | 1 |
| Net liabilities on 31 Dec | 820 | 825 |
In addition, liabilities of €2 million (previous year: €5 million) were measured in line with local criteria.
Provisions for company pension plans in the amount of €891 million (previous year: €883 million) are netted against assets for indirect pension plans, particularly in the United Kingdom and the Netherlands, of €69 million (previous year: €53 million). That leaves a net liability of €822 million (previous year: €830 million).
The increase in actuarial losses essentially results from the difference between the expected return on plan assets of €47 million and actual expenses on plan assets of €35 million.
Plan assets include real estate utilised by METRO Group in the amount of €100 million (previous year: €103 million).
The pension expenses of the direct and indirect company pension plans can be broken down as follows:
| € million | 2008 | 2007 |
|---|---|---|
| Interest expense on net present value (DBO) |
100 | 91 |
| Expected return on plan assets | (47) | (54) |
| Recognised actuarial gains (-)/losses (+) |
(2) | 7 |
| = effective interest rate expense | 51 | 44 |
| Service cost1 | 24 | 36 |
| Curtailment | 0 | (6) |
| Asset limitation | 1 | 1 |
| Past service cost | 2 | 1 |
| 78 | 76 |
Netted against employees' contributions
Service costs were considered in sales expenses in the amount of €2 million (previous year: €3 million), in selling expenses in the amount of €14 million (previous year: €17 million) and in administrative expenses in the amount of €10 million (previous year: €12 million). In addition, expenses of €1 million (previous year: €1 million) were incurred in connection with locally measured commitments.
The item concerning other provisions for commitments similar to pensions mainly includes commitments from early retirement/pre-retirement part-time plans, employment anniversary allowances and death benefi ts. The commitments are valued on the basis of actuarial calculations. As a matter of principle, the parameters used are identical to those employed in the company pension plan.
In the year under review, other provisions (noncurrent)/provisions (current) changed as follows:
| € million | Real-estate related obligations |
Obliga tions from merchandise trading |
Restruc turing |
Taxes | Other | Total |
|---|---|---|---|---|---|---|
| At 1 Jan 2008 | 283 | 161 | 139 | 184 | 333 | 1,100 |
| Currency translation | (2) | (1) | 0 | 0 | (9) | (12) |
| Addition | 70 | 109 | 282 | 41 | 95 | 597 |
| Disposal | (84) | (5) | (27) | (22) | (160) | (298) |
| Utilisation | (56) | (92) | (67) | (46) | (48) | (309) |
| Change in consolidation group | 4 | 0 | 0 | 0 | 0 | 4 |
| Interest portion in addition/ change in interest rate |
6 | 2 | 4 | 0 | 0 | 12 |
| Transfers | (3) | (13) | (15) | 0 | (8) | (39) |
| At 31 Dec 2008 | 218 | 161 | 316 | 157 | 203 | 1,055 |
| Non-current | 158 | 34 | 143 | 133 | 65 | 533 |
| Current | 60 | 127 | 173 | 24 | 138 | 522 |
| At 31 Dec 2008 | 218 | 161 | 316 | 157 | 203 | 1,055 |
125 Consolidated fi nancial statements 2008 126 Income statement
127 Balance sheet
128 Statement of changes in equity
129 Cash fl ow statement 130 Notes to the consolidated
fi nancial statements
130 Segment reporting 194 Statement of the legal
representatives 195 Auditor's report
Provisions for real-estate-related obligations essentially concern uncovered rental commitments in the amount of €62 million (previous year: €67 million), location risks in the amount of €56 million (previous year: €100 million), rental commitments in the amount of €30 million (previous year: €29 million) as well as reinstatement obligations in the amount of €24 million (previous year: €28 million). Other real estate obligations of €43 million (previous year: €55 million) stem essentially from maintenance obligations.
Signifi cant components of the obligations from merchandise trading are provisions for rebates from the Payback programme in the amount of €86 million (previous year: €82 million) as well as provisions for guarantee services in the amount of €49 million (previous year: €48 million).
The measures agreed in 2008 to streamline the Real store network were responsible for the major part of the addition to restructuring provisions.
The other provisions item contains mainly litigation costs/risks in the amount of €35 million (previous year: €77 million), gratuity commitments of €14 million (previous year: €11 million) as well as surety and guarantee risks of €5 million (previous year: €6 million). Provisions for share-based remuneration amount to €1 million (previous year: €90 million). Supplementary explanations on share-based remuneration are provided in no. 51.
In the context of reclassifications required by IFRS 5, provisions of the Adler fashion stores in the amount of €29 million were reclassifi ed to the item "liabilities related to assets held for sale". The reclassifi cation is shown as a transfer.
| Remaining term | |||||
|---|---|---|---|---|---|
| € million | 31 Dec 2008 total |
Up to 1 year | 1 to 5 years | Over 5 years | 31 Dec 2007 total |
| Trade payables | 13,839 | 13,839 | 0 | 0 | 14,088 |
| Bonds | 3,836 | 1,892 | 1,944 | 0 | 3,315 |
| Due to banks | 1,533 | 825 | 288 | 420 | 1,647 |
| Promissory note loans | 707 | 9 | 698 | 0 | 204 |
| Bills of exchange | 584 | 584 | 0 | 0 | 572 |
| Liabilities from fi nance leases | 1,819 | 138 | 526 | 1,155 | 2,000 |
| Financial liabilities | 8,479 | 3,448 | 3,456 | 1,575 | 7,738 |
| Other tax liabilities | 585 | 585 | 0 | 0 | 628 |
| Prepayments received on orders | 32 | 32 | 0 | 0 | 31 |
| Payroll | 862 | 832 | 30 | 0 | 907 |
| Liabilities from other fi nancial transactions | 38 | 38 | 0 | 0 | 71 |
| Deferred liabilities | 311 | 80 | 155 | 76 | 296 |
| Miscellaneous liabilities | 953 | 594 | 349 | 10 | 981 |
| Other liabilities | 2,781 | 2,161 | 534 | 86 | 2,914 |
| Income tax liabilities | 266 | 266 | 0 | 0 | 337 |
| 25,365 | 19,714 | 3,990 | 1,661 | 25,077 | |
The expansion-induced increase in trade pa yables at the Metro Cash & Carry, Real as well as Media Markt and Saturn sales divisions was more than offset by exchange rate effects – in particular in the Eastern European markets.
A "Debt Issuance Programme" provides long-term fi nancing. The following transactions were carried out under this programme in 2008:
| Type of trans action |
Date of issue |
Maturity | Maturity date |
Nominal volume |
Coupon |
|---|---|---|---|---|---|
| Re | February | 5 years | February | €1,000 | 5.13 % |
| demption | 2003 | 2008 | million | fi xed | |
| New | Novem | 5 years | Novem | €500 | 9.375 % |
| issue | ber 2008 | ber 2013 | million | fi xed |
In addition, a 4-year promissory note loan in the amount of €500 million was issued during the reporting period, including a €387 million variableinterest tranche (3-month EURIBOR plus 0.8 percent p.a.) and a €113 million fi xed-interest tranche with a coupon of 4.74 percent p.a.
For short- and medium-term financing, METRO Group uses ongoing capital market issuance programmes such as a "Euro Commercial Paper Program" with an authorised volume of up to €2.0 billion. Another Commercial Paper Program with a volume of €3.0 billion is aimed, in particular, at investor groups on the French capital market. The average amount utilised by the two programmes was €2.5 billion in 2008 (previous year: €1.7 billion).
In addition, METRO Group has access to syndicated lines of credit totalling €2,975 million (previous year: €2,975 million) with terms ending between December 2010 and March 2013. If the credit lines are used, the interest rates range between EURIBOR +20.0 basis points (bps) and EURIBOR +30.0 bps. The average amount drawn on the credit lines in 2008 was €301 million (previous year: €125 million), the average amount drawn as of the closing date was €250 million (previous year: €0 million).
The contract terms for the syndicated lines of credit provide for a decrease of 2.5 bps in the spread if METRO Group's credit rating is raised one step. If the rating is lowered by one step, the spread would increase by 5 bps to 7.5 bps.
Additional bilateral bank lines of credit totalling €2,292 million (previous year: €2,501 million) were available to METRO Group as of 31 December 2008. Of this amount, €1,066 million (previous year: €1,475 million) had a remaining term of up to one year. On the closing date, €1,283 million (previous year: €1,647 million) of the bilateral lines of credit had been utilised. Of this amount, €825 million (previous year: €792 million) has a remaining term of up to one year.
Unutilised lines of credit of METRO Group:
| 31 Dec 2008 | 31 Dec 2007 | ||||||
|---|---|---|---|---|---|---|---|
| € million | Total | Up to 1 year | Over 1 year | Total | Up to 1 year | Over 1 year | |
| Bilateral lines of credit | 2,292 | 1,066 | 1,226 | 2,501 | 1,475 | 1,026 | |
| Utilisation | (1,283) | (825) | (458) | (1,647) | (792) | (855) | |
| Unutilised bilateral lines of credit | 1,009 | 241 | 768 | 854 | 683 | 171 | |
| Syndicated lines of credit | 2,975 | 0 | 2,975 | 2,975 | 0 | 2,975 | |
| Utilisation | (250) | 0 | (250) | 0 | 0 | 0 | |
| Unutilised syndicated lines of credit | 2,725 | 0 | 2,725 | 2,975 | 0 | 2,975 | |
| Total lines of credit | 5,267 | 1,066 | 4,201 | 5,476 | 1,475 | 4,001 | |
| Total utilisation | (1,533) | (825) | (708) | (1,647) | (792) | (855) | |
| Total unutilised lines of credit | 3,734 | 241 | 3,493 | 3,829 | 683 | 3,146 | |
125 Consolidated fi nancial statements 2008
In addition, bills of exchange in the amount of €584 million (previous year: €572 million) were used for short-term fi nancing.
The defaulting of a lender can be covered at any time by the existing unutilised credit facilities or the available money and capital market programmes. METRO Group therefore does not bear a signifi cant credit default risk.
METRO Group principally does not provide collateral for financial liabilities. One exception concerns the fi rst-time consolidation of Asset Immobilienbeteiligungen GmbH & Co. KG and its subsidiaries in 2003. Collateral in the amount of €609 million (previous year: €630 million) was provided for the fi nancial liabilities of these companies as of 31 December 2008.
The following table shows the maturity structure of the fi nancial liabilities. The book and fair values (market values) indicated include the interest accrued when the maturity is less than one year.
| Funding | Curreny | Total amount issued in million currency |
Remaining term |
Par values 31 Dec 2008 in € million |
Book values 31 Dec 2008 in € million |
Fair values 31 Dec 2008 in € million |
|---|---|---|---|---|---|---|
| Bonds | EUR | 1,850 | up to 1 year | 1,850 | 1,892 | 1,897 |
| 1,950 | 1 to 5 years | 1,950 | 1,944 | 2,149 | ||
| 0 | over 5 years | 0 | 0 | 0 | ||
| Liabilities to banks (excl. open account) | EUR | 517 | up to 1 year | 517 | 517 | 557 |
| 172 | 1 to 5 years | 172 | 172 | 173 | ||
| 408 | over 5 years | 408 | 408 | 409 | ||
| CNY | 888 | up to 1 year | 94 | 94 | 94 | |
| 546 | 1 to 5 years | 58 | 58 | 58 | ||
| 0 | over 5 years | 0 | 0 | 0 | ||
| JPY | 3,300 | up to 1 year | 27 | 27 | 27 | |
| 3,828 | 1 to 5 years | 30 | 30 | 38 | ||
| 0 | over 5 years | 0 | 0 | 0 | ||
| Other | 0 | up to 1 year | 113 | 111 | 111 | |
| 0 | 1 to 5 years | 28 | 28 | 28 | ||
| 0 | over 5 years | 12 | 12 | 12 | ||
| Promissory note loans | EUR | 0 | up to 1 year | 0 | 9 | 9 |
| 700 | 1 to 5 years | 700 | 698 | 720 | ||
| 0 | over 5 years | 0 | 0 | 0 | ||
Redeemable loans that are shown under liabilities to banks are listed with the remaining terms corresponding to their redemption dates. For remaining terms of over one year, the indicated fair value of these loans generally includes the book value. The difference between the book value and the fair value of the entire loan is shown in maturities under year.
The following table depicts the interest rate structure of the fi nancial liabilities:
| Funding | Interest terms | Currency | Remaining term | Weighted effective rate of interest when issued (%) |
Total amount issued in € million |
|---|---|---|---|---|---|
| Bonds | Fixed interest | EUR | up to 1 year | 4.04 | 1,100 |
| 1 to 5 years | 6.02 | 1,750 | |||
| over 5 years | – | 0 | |||
| Variable interest | EUR | up to 1 year | 5.73 | 750 | |
| 1 to 5 years | 3.93 | 200 | |||
| – | – | 0 | |||
| Liabilities to banks (excl. open account) | Fixed interest | EUR | up to 1 year | 5.89 | 267 |
| 1 to 5 years | 5.48 | 165 | |||
| over 5 years | 5.35 | 405 | |||
| CNY | up to 1 year | 5.64 | 94 | ||
| 1 to 5 years | 6.69 | 58 | |||
| over 5 years | – | 0 | |||
| Other | up to 1 year | 9.08 | 113 | ||
| 1 to 5 years | – | 0 | |||
| over 5 years | – | 0 | |||
| Variable interest | EUR | up to 1 year | 3.71 | 250 | |
| 1 to 5 years | 4.39 | 7 | |||
| over 5 years | 4.39 | 3 | |||
| JPY | up to 1 year | 1.25 | 27 | ||
| 1 to 5 years | 7.88 | 30 | |||
| over 5 years | – | 0 | |||
| Other | up to 1 year | – | 0 | ||
| 1 to 5 years | 7.09 | 28 | |||
| over 5 years | 4.47 | 12 | |||
| Promissory note loans | Fixed interest | EUR | up to 1 year | – | 0 |
| 1 to 5 years | 4.32 | 213 | |||
| over 5 years | – | 0 | |||
| Variable interest | EUR | up to 1 year | – | 0 | |
| 1 to 5 years | 4.40 | 487 | |||
| over 5 years | – | 0 |
The fi xed interest rate for short- and medium-term fi nancial liabilities and the repricing dates of all fi xed-interest liabilities essentially correspond to the displayed remaining terms. The repricing dates for variable interest rates are less than one year.
The effects that changes in interest rates concerning the variable portion of fi nancial liabilities have on the net profi t for the period and the equity of METRO Group are described in detail in the chapter "Management of fi nancial risks" (see no. 44).
| 31 Dec 2008 | 31 Dec 2007 | |||||
|---|---|---|---|---|---|---|
| Remaining term | Remaining term | |||||
| € million | Total | Up to 1 year | Over 1 year | Total | Up to 1 year | Over 1 year |
| Other tax liabilities | 585 | 585 | 0 | 628 | 628 | 0 |
| Payroll | 862 | 832 | 30 | 907 | 878 | 29 |
| Deferred income | 311 | 80 | 231 | 296 | 65 | 231 |
| Miscellaneous liabilities | 1,023 | 664 | 359 | 1,083 | 696 | 387 |
| 2,781 | 2,161 | 620 | 2,914 | 2,267 | 647 |
125 Consolidated fi nancial statements 2008
126 Income statement 127 Balance sheet
128 Statement of
changes in equity 129 Cash fl ow statement 130 Notes to the consolidated
fi nancial statements
130 Segment reporting 194 Statement of the legal
representatives 195 Auditor's report The decline in other tax liabilities is mainly attributable to lower sales tax liabilities in Germany.
Miscellaneous liabilities listed among other liabilities include numerous individual items such as liabilities to non-Group companies, liabilities from other fi nancial business, liabilities from real estate and liabilities from costs for the annual accounts.
In addition, this item includes commitments from put options.
The undiscounted cash fl ows of fi nancial liabilities, trade payables and derivatives carried as liabilities are as follows:
| Cash fl ows 2009 | Cash fl ows 2010–2013 | Cash fl ows after 2013 | |||||
|---|---|---|---|---|---|---|---|
| € million | Book value 31 Dec 2008 |
Interest | Redemption | Interest | Redemption | Interest | Redemption |
| Financial liabilities | |||||||
| Bonds | 3,836 | 143 | 1,892 | 334 | 1,944 | 0 | 0 |
| Liabilities to banks | 1,533 | 62 | 825 | 111 | 288 | 19 | 420 |
| Promissory note loans | 707 | 29 | 9 | 75 | 698 | 0 | 0 |
| Bills of exchange | 584 | 0 | 584 | 0 | 0 | 0 | 0 |
| Liabilities from fi nance leases | 1,819 | 18 | 214 | 165 | 659 | 645 | 946 |
| Trade payables | 13,839 | 0 | 13,839 | 0 | 0 | 0 | 0 |
| Fixed-interest derivatives carried as liabilities |
8 | 8 | 0 | 0 | 0 | 0 | 0 |
| Currency derivatives carried as liabilities |
27 | 0 | 27 | 0 | 0 | 0 | 0 |
| Cash fl ows 2008 | Cash fl ows 2009–2012 | Cash fl ows after 2012 | |||||
|---|---|---|---|---|---|---|---|
| € million | Book value 31 Dec 2007 |
Interest | Redemption | Interest | Redemption | Interest | Redemption |
| Financial liabilities | |||||||
| Bonds | 3,315 | 133 | 1,120 | 251 | 2,195 | 0 | 0 |
| Liabilities to banks | 1,647 | 53 | 792 | 127 | 370 | 33 | 485 |
| Promissory note loans | 204 | 9 | 4 | 33 | 50 | 5 | 150 |
| Bills of exchange | 572 | 0 | 572 | 0 | 0 | 0 | 0 |
| Liabilities from fi nance leases | 2,000 | 13 | 220 | 174 | 774 | 813 | 1,006 |
| Trade payables | 14,088 | 0 | 14,088 | 0 | 0 | 0 | 0 |
| Fixed-interest derivatives carried as liabilities |
0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Currency derivatives carried as liabilities |
65 | 0 | 50 | 0 | 15 | 0 | 0 |
The book values and fair values of fi nancial instruments shown in the balance sheet are as follows:
| 31 Dec 2008 | |||||
|---|---|---|---|---|---|
| Balance sheet valuation | |||||
| € million | Book value | (Amortised) cost |
Fair value affecting income |
Fair value not affecting income |
Fair value |
| ASSETS | 33,825 | n/a | n/a | n/a | n/a |
| Loans and receivables | 3,023 | 3,023 | 0 | 0 | 3,011 |
| Loans and advance credit granted | 128 | 128 | 0 | 0 | 120 |
| Receivables due from suppliers | 1,780 | 1,780 | 0 | 0 | 1,780 |
| Trade receivables | 446 | 446 | 0 | 0 | 446 |
| Other fi nancial assets | 669 | 669 | 0 | 0 | 665 |
| Held to maturity | 0 | 0 | 0 | 0 | 0 |
| Held for trading | 79 | 0 | 79 | 0 | 79 |
| Derivative fi nancial instruments not part of a hedge under IAS 39 |
76 | 0 | 76 | 0 | 76 |
| Securities | 3 | 0 | 3 | 0 | 3 |
| Available for sale | 24 | 0 | 0 | 24 | 24 |
| Investments | 22 | 0 | 0 | 22 | 22 |
| Securities | 2 | 0 | 0 | 2 | 2 |
| Derivative fi nancial instruments within hedges under IAS 39 |
25 | 0 | 0 | 25 | 25 |
| Cash and cash equivalents | 3,874 | 3,874 | 0 | 0 | 3,874 |
| Assets not classifi ed under IFRS 7 | 26,800 | n/a | n/a | n/a | n/a |
| LIABILITIES | 33,825 | n/a | n/a | n/a | n/a |
| Held for trading | 46 | 0 | 46 | 0 | 46 |
| Derivative fi nancial instruments not part of a hedge under IAS 39 |
28 | 0 | 28 | 0 | 28 |
| Other fi nancial liabilities | 18 | 0 | 18 | 0 | 18 |
| Miscellaneous fi nancial liabilities | 22,268 | 22,268 | 0 | 0 | 22,549 |
| Financial liabilities excl. fi nance leases ( including underlying hedging transactions under IAS 39) |
6,660 | 6,660 | 0 | 0 | 6,942 |
| Trade payables | 13,839 | 13,839 | 0 | 0 | 13,839 |
| Other fi nancial liabilities | 1,769 | 1,769 | 0 | 0 | 1,768 |
| Derivative fi nancial instruments within hedges under IAS 39 |
7 | 0 | 0 | 7 | 7 |
| Liabilities not classifi ed under IFRS 7 | 11,504 | n/a | n/a | n/a | n/a |
| Unrealised profi t (+)/loss (-) from total difference between fair value and book value |
(293) |
125 Consolidated fi nancial statements 2008 126 Income statement
127 Balance sheet 128 Statement of
changes in equity
129 Cash fl ow statement 130 Notes to the consolidated
fi nancial statements 130 Segment reporting
194 Statement of the legal representatives
195 Auditor's report
| 31 Dec 2007 | ||||||
|---|---|---|---|---|---|---|
| € million | Book value | (Amortised) cost |
Fair value affecting income |
Fair value not affecting income |
Fair value | |
| ASSETS | 33,872 | n/a | n/a | n/a | n/a | |
| Loans and receivables | 3,084 | 3,084 | 0 | 0 | 3,090 | |
| Loans and advance credit granted | 154 | 154 | 0 | 0 | 153 | |
| Receivables due from suppliers | 1,759 | 1,759 | 0 | 0 | 1,759 | |
| Trade receivables | 508 | 508 | 0 | 0 | 508 | |
| Other fi nancial assets | 663 | 663 | 0 | 0 | 670 | |
| Held to maturity | 0 | 0 | 0 | 0 | 0 | |
| Securities | 0 | 0 | 0 | 0 | 0 | |
| Other fi nancial assets | 0 | 0 | 0 | 0 | 0 | |
| Held for trading | 7 | 0 | 7 | 0 | 7 | |
| Derivative fi nancial instruments not part of a hedge under IAS 39 |
4 | 0 | 4 | 0 | 4 | |
| Securities | 3 | 0 | 3 | 0 | 3 | |
| Available for sale | 35 | 0 | 0 | 35 | 35 | |
| Investments | 22 | 0 | 0 | 22 | 22 | |
| Securities | 13 | 0 | 0 | 13 | 13 | |
| Derivative fi nancial instruments within hedges under IAS 39 |
140 | 0 | 16 | 124 | 140 | |
| Cash and cash equivalents | 3,433 | 3,433 | 0 | 0 | 3,433 | |
| Assets not classifi ed under IFRS 7 | 27,173 | n/a | n/a | n/a | n/a | |
| LIABILITIES | 33,872 | n/a | n/a | n/a | n/a | |
| Held for trading | 39 | 0 | 39 | 0 | 39 | |
| Derivative fi nancial instruments not part of a hedge under IAS 39 |
32 | 0 | 32 | 0 | 32 | |
| Other fi nancial liabilities | 7 | 0 | 7 | 0 | 7 | |
| Miscellaneous fi nancial liabilities | 21,644 | 20,726 | 918 | 0 | 21,685 | |
| Financial liabilities excl. fi nance leases ( including underlying hedging transactions under IAS 39) |
5,738 | 4,820 | 918 | 0 | 5,782 | |
| Trade payables | 14,088 | 14,088 | 0 | 0 | 14,088 | |
| Other fi nancial liabilities | 1,818 | 1,818 | 0 | 0 | 1,815 | |
| Derivative fi nancial instruments within hedges under IAS 39 |
33 | 0 | 18 | 15 | 33 | |
| Liabilities not classifi ed under IFRS 7 | 12,156 | n/a | n/a | n/a | n/a | |
| Unrealised profi t (+)/loss (-) from total difference between fair value and book value |
(35) |
Due to their mostly short terms, the fair values of receivables due from suppliers, trade receivables and cash and cash equivalents essentially correspond to their book values.
The measurement of the fair value of bonds, promissory note loans and bank loans is based on the market interest rate curve following the zero coupon method without consideration of credit spreads. The amounts comprise the interest prorated to the closing date. The forward rate agreements are valued by banks, options are valued based on the Black & Scholes model.
The fair values of all other fi nancial assets and liabilities that are not listed on an exchange correspond to the present value of payments underlying these balance sheet items. The calculation was based on the applicable country-specifi c yield curves as of the closing date.
In accordance with IAS 7 (Cash Flow Statements), the consolidated statement of cash fl ows describes changes in the Group's liquid funds through cash infl ows and outfl ows during the year under review.
The cash fl ow statement distinguishes between changes in cash levels from operating, investing and fi nancing activities. Following the divestment of the Extra supermarkets (see no. 31) and the planned divestment of the Adler fashion stores, the cash fl ows of these discontinued operations will be listed separately.
The item cash and cash equivalents includes cheques and cash on hand as well as bank deposits with a remaining term of up to three months.
During the reporting year, net cash provided by operating activities of continuing operations amounted to €2,637 million (previous year: €3,158 million).
In the fi nancial year 2008, the Group recorded cash outfl ows of €1,728 million (previous year: outfl ows of €1,219 million) from investment activities of continued operations. The divestment of Extra resulted in cash infl ows of €467 million (prev ious year: €17 million) during the reporting year. The acquisition of the Wal-Mart Germany group had generated cash inflows of €186 million in the fi nancial year 2007.
The amount of investments in tangible assets stated as cash outfl ows differs from the add ition reported in the analysis of fixed assets by the amount of non-cash additions, which essentially concern currency effects as well as additions from fi nance leases.
Financing activities of continuing operations generated cash outfl ows of €395 million (previous year: cash outfl ows of €1,233 million) during the year under review.
Segment reporting has been carried out in accordance with IAS 14 (Segment Reporting). The segmentation corresponds to the Group's internal controlling and reporting structures. Details on the segments are included in the management report.
Primary reporting is carried out by each division. Secondary reporting distinguishes between the regions Germany, Western Europe excluding Germany, Eastern Europe and Asia/Africa.
External sales represent sales of the divisions to third parties outside the Group.
Internal sales represent sales between the Group's divisions.
Segment EBITDA comprises EBIT before depreciation on tangible and intangible assets.
EBIT as the key ratio for segment reporting des cribes operating earnings for the period before net fi nancial income and income taxes.
Aside from all historic costs resulting from the purchase or production of segment assets during the reporting period, segment investments also include investments in non-current fi nancial assets.
Segment assets include that portion of noncurrent and current assets that is used for the segment's operating activities. This includes, in particular, intangible assets (including goodwill acquired), tangible assets, inventories, trade receivables as well as the portion of other receivables and assets that originates in the segment's operating activities.
Segment liabilities include that portion of noncurrent and current liabilities that results from the segment's operating activities. This includes, in particular, provisions for pensions and similar commitments, trade payables as well as the portion of other provisions and liabilities that originates in the segment's operating activities.
Transfers between segments are made at arm's length.
Discontinued operations include the values of the operational Extra supermarkets as well as the Adler fashion stores. In the fi nancial year 2007, the latter were included in the segment "other companies/consolidation".
125 Consolidated fi nancial statements 2008 126 Income statement
In December 2007, METRO Group decided to discontinue the supermarket sales format. As a result of this decision, all assets and liabilities held for sale of the Extra supermarkets were accounted for as operations held for disposal in accordance with IFRS 5. By contractual agreement of 17 January 2008, the Extra supermarkets were sold to the Rewe Group. The sale became effective on 1 July 2008. As a result, the current income of the Extra supermarkets until 30 June 2008 was included in the consolidated income statement as current income from discontinued operations. The divestment proceeds of €47 million were reported under gains on the disposal of discontinued operations after taxes.
In September 2008, METRO Group decided to accelerate the process of divesting of the Adler fashion stores. As a result, all assets and liabilities of the Adler fashion stores were classifi ed as operations held for disposal in accordance with IFRS 5 and therefore reported in the balance sheet items "assets held for sale" and "liabilities related to assets held for sale". Accordingly, current income of the Adler fashion stores was transferred to current income from discontinued operations in the consolidated income statement. The measurement adjustments to align the net assets of the Adler fashion stores to the agreed sale price as well as the costs incurred in connection with the divestment process are reported in the measurement/ divestment result from discontinued operations.
The results of discontinued operations comprise the following components:
| € million | 2008 | 20071 |
|---|---|---|
| Income Extra | 766 | 1,611 |
| Income Adler | 484 | 546 |
| Total income | 1,250 | 2,157 |
| Expenses Extra | (774) | (1,639) |
| Expenses Adler | (844) | (528) |
| Total expenses | (1,618) | (2,167) |
| Current income from discontinued operations after taxes |
(368) | (10) |
| Income tax on current income of Extra |
0 | 0 |
| Income tax on current income of Adler |
(10) | (8) |
| Total income tax on current income | (10) | (8) |
| Current income from discontinued operations after taxes |
(378) | (18) |
| Profi t/loss from measurement/ divestment of Extra |
123 | 0 |
| Profi t/loss from measurement/ divestment of Adler |
(98) | 0 |
| Measurement/divestment income from discontinued operations before taxes |
25 | 0 |
| Taxes on measurement/divestment income from Extra |
(76) | 0 |
| Taxes on measurement/divestment income from Adler |
0 | 0 |
| Total income tax from measurement/ divestment income |
(76) | 0 |
| Measurement/divestment income from discontinued operations after taxes |
(51) | 0 |
| Profi t/loss from discontinued operations |
(429) | (18) |
Adjustment of previous year's fi gures due to discontinued operations
The balance of assets and liabilities held for sale of the Adler fashion stores as an operation held for disposal includes the following individual balance sheet items:
| € million | 31 Dec 2008 |
|---|---|
| Current assets | 113 |
| Inventories | 65 |
| Other receivables and assets | 23 |
| Cash and cash equivalents | 25 |
| Non-current liabilities | (74) |
| Provisions for pensions and similar commitments | (5) |
| Financial liabilities | (44) |
| Other liabilities | (25) |
| Current liabilities | (72) |
| Provisions | (29) |
| Financial liabilities | (7) |
| Other liabilities | (36) |
| Balance of assets and liabilities held for sale of the Adler fashion stores |
(33) |
By contractual agreement of 13 February 2009, the Adler fashion stores were sold to the restructuring fund BluO beta equity Limited. The sales contract is still subject to approval by the cartel authorities.
The fi nance department of METRO AG manages the fi nancial risks of METRO Group. These include, in particular,
price risks,
liquidity risks,
creditworthiness risks and
cash fl ow risks.
For METRO Group, price risks result from the impact of changes in market interest rates, foreign currency exchange rates or share price fl uctuations on the fair value of a fi nancial instrument.
Interest rate risks are caused by deteriorating cash fl ows from interest and potential changes in the fair value of a fi nancial instrument due to changes in market interest rates. Interest rate swaps and interest limitation agreements are used to cap these interest rate rises.
METRO Group's remaining interest rate risk is assessed in accordance with IFRS 7 using a sensiti vity analysis. In the process, the following assumptions are applied in the consideration of changes in interest rates:
The total impact determined by the sensitivity analysis relates to the actual balance as of the closing date and refl ects the impact for one year.
Original floating-rate financial instruments whose interest payments are not designated as the under lying transaction in a cash fl ow hedge against changes in interest rates are recognised in interest income in the sensitivity analysis.
Original fi xed-interest fi nancial instruments generally are not recognised in interest income. They are only recognised in other fi nancial results if they are designated as the underlying transaction within a fair value hedge and measured at their fair value. In this case, however, the interest-related change in the value of the underlying transaction is offset by the change in the value of the hedging transaction upon full effectiveness of the hedging transaction. The variable interest fl ows within the Group that result from a fair value hedge are recognised in interest income.
Financial instruments designated as the hedging transaction within a cash fl ow hedge to hedge against variable interest fl ows will only be recognised in interest income when the payment fl ows have actually been initiated. However, the measurement of the hedging transaction at fair value is recognised in reserves retained from earnings without being reported as a profi t or loss.
Interest rate derivatives that are not part of a qualifi ed hedging transaction under IAS 39 are recognised at fair value in other fi nancial results and, through resulting interest fl ows, in interest income.
At the closing date, the remaining interest rate risk of METRO Group results essentially from variable interest receivables and liabilities to banks with a total investment balance after consideration of hedging transactions in the amount of €1,852 million (previous year: €1,726 million).
Given this total balance, a higher interest rate of 100 basis points would result in €19 million (previous year: €17 million) higher earnings in interest income per year. A lower interest rate of 100 basis points would have a corresponding opposite effect in the amount of €-19 million (previous year: €-10 million).
In the event of a higher interest rate of 100 basis points, the measurement of fi nancial instruments that are part of a cash fl ow hedge would result in
an increase in equity in the amount of €2 million (previous year: €29 million) as well as an increase in other fi nancial results of €7 million (previous year: €3 million). A correspondingly lower interest rate would have a corresponding opposite effect.
METRO Group faces currency risks in its international procurement of merchandise and because of costs and fi nancings that are incurred in a currency other than the relevant local currency or are pegged to the price of another currency. The resulting currency risk exposure must be hedged at the time it is incurred. Forex futures and options as well as interest rate swaps and currency swaps are used in these cases to limit currency risk. Exceptions from this hedging requirement exist only in the case of liabilities from fi nance leases as well as foreign currency transactions that cannot be hedged for legal or market-specifi c reasons.
In line with IFRS 7, the presentation of the currency risk resulting from the exceptions is also based on a sensitivity analysis. In the process, the following assumptions are made in the consideration of a devaluation or revaluation of the euro vis-à-vis other currencies:
In terms of its amount and result charac teristic, the total effect presented by the sensitivity analysis relates to the amounts of foreign currency held within the consolidated subsidiaries of METRO Group and states the effect of a devaluation or revaluation of the euro.
In the sensitivity analysis, the effects of the mea surement of non-equity foreign currency positions that are calculated based on the closing date price in line with IAS 21 are recognised in income in the income statement. In the case of net investments in foreign currency, the effects of the closing date measurement are recognised in equity without being reported as a profi t or loss.
Foreign currency futures/options and interest rate and currency swaps that are not part of a qualifi ed hedge under IAS 39 are recognised in income through the fair value measurement in the income statement. In fully effective hedging transactions, this effect is offset by the effect from the measurement of the underlying foreign currency transaction.
Foreign currency futures/options and interest rate and currency swaps that are designated as the hedging transaction within a cash fl ow hedge to hedge against payment fl ows in foreign currency will only be recognised in the income statement when the payment fl ows are actually initiated. The measurement of the hedging transaction at its fair value, however, is recognised in reserves retained from earnings without being reported as a profi t or loss.
Effects from the currency translation of fi nancial statements whose functional currency is not the reporting currency of METRO Group do not affect cash fl ows in local currency and are therefore no part of the sensitivity analysis.
As of the closing date, the remaining currency risk of METRO Group was as follows:
| Impact of the appreciation/de valuation of the euro by 10% |
||||
|---|---|---|---|---|
| € million Currency pair |
31 Dec 2008 | 31 Dec 2007 | ||
| Net profi t for the period | ||||
| CHF / EUR | -/+0 | -/+1 | ||
| CNY / EUR | +/-1 | +/-0 | ||
| CZK / EUR | +/-1 | +/-0 | ||
| GBP / EUR | -/+1 | -/+0 | ||
| HRK / EUR | -/+1 | -/+0 | ||
| HUF / EUR | +/-1 | +/-0 | ||
| MDL / EUR | +/-5 | +/-5 | ||
| PLN / EUR | +/-6 | +/-8 | ||
| RON / EUR | +/-20 | +/-9 | ||
| RSD / EUR | +/-1 | +/-0 | ||
| RUB / EUR | +/-2 | +/-39 | ||
| SEK / EUR | +/-5 | +/-0 | ||
| SKK / EUR | +/-2 | +/-0 | ||
| TRY / EUR | +/-7 | +/-1 | ||
| VND / EUR | +/-1 | +/-2 | ||
| UAH / EUR | +/-4 | +/-0 | ||
| USD / EUR | +/-0 | +/-2 | ||
| +/-54 | +/-65 | |||
| Equity | ||||
| GBP / EUR | -/+1 | -/+2 | ||
| JPY / EUR | +/-7 | +/-0 | ||
| PLN / EUR | +/-9 | +/-0 | ||
| RUB / EUR | +/- 40 | +/-0 | ||
| UAH / EUR | +/-16 | +/-9 | ||
| USD / EUR | +/-30 | +/-31 | ||
| +/-101 | +/-38 | |||
| +/-155 | +/-103 |
Share price risks result from share-based compensation of METRO Group executives. The remuneration (monetary bonus) is essentially based on the price development of the Metro ordinary share. Share options on METRO AG ordinary shares are used to cap this risk.
Interest rate and currency risks are substantially reduced and limited by the principles laid down in the internal treasury guidelines of METRO Group. These include, for example, a regulation that is applicable throughout the Group whereby all hedging operations must adhere to predefi ned limits and may by no means lead to increased risk exposure. METRO Group is aware that this severely limits the opportunities to exploit current or expected interest rate and exchange rate movements to optimise results.
Hedging may be carried out only with standard fi nancial derivatives whose correct actuarial and accounting mapping and valuation in the treasury system are guaranteed.
As of the closing date, the following fi nancial instruments were being used for risk reduction:
| 31 Dec 2008, fair values | 31 Dec 2007, fair values | |||||
|---|---|---|---|---|---|---|
| € million | Nominal volume/ number (millions) |
Financial assets |
Financial liabilities |
Nominal volume/ number (millions) |
Financial assets |
Financial liabilities |
| Interest rate transactions | ||||||
| Interest rate swaps | 0 | 0 | 0 | 1,350 | 31 | 0 |
| within fair value hedges | [0] | [0] | [0] | [850] | [16] | [0] |
| within cash fl ow hedges | [0] | [0] | [0] | [500] | [15] | [0] |
| not part of a hedge | [0] | [0] | [0] | [0] | [0] | [0] |
| Forward rate agreements | 3,000 | 0 | 8 | 0 | 0 | 0 |
| within fair value hedges | [0] | [0] | [0] | [0] | [0] | [0] |
| within cash fl ow hedges | [0] | [0] | [0] | [0] | [0] | [0] |
| not part of a hedge | [3,000] | [0] | [8] | [0] | [0] | [0] |
| Interest limitation agreements | 750 | 6 | 0 | 750 | 11 | 0 |
| within fair value hedges | [0] | [0] | [0] | [0] | [0] | [0] |
| within cash fl ow hedges | [750] | [6] | [0] | [750] | [11] | [0] |
| not part of a hedge | [0] | [0] | [0] | [0] | [0] | [0] |
| 3,750 | 6 | 8 | 2,100 | 42 | 0 | |
| Currency transactions | ||||||
| Forex futures/options | 466 | 70 | 18 | 830 | 5 | 23 |
| within fair value hedges | [0] | [0] | [0] | [0] | [0] | [0] |
| within cash fl ow hedges | [335] | [12] | [7] | [256] | [1] | [15] |
| not part of a hedge | [131] | [58] | [11] | [574] | [4] | [8] |
| Interest rate/currency swaps | 173 | 18 | 9 | 334 | 0 | 42 |
| within fair value hedges | [0] | [0] | [0] | [30] | [0] | [18] |
| within cash fl ow hedges | [0] | [0] | [0] | [8] | [0] | [0] |
| not part of a hedge | [173] | [18] | [9] | [296] | [0] | [24] |
| 639 | 88 | 27 | 1,164 | 5 | 65 | |
| Share price related transactions | ||||||
| Hedging of share bonus programmes | 8 | 7 | 0 | 5 | 97 | 0 |
| within fair value hedges | [0] | [0] | [0] | [0] | [0] | [0] |
| within cash fl ow hedges | [8] | [7] | [0] | [5] | [97] | [0] |
| not part of a hedge | [0] | [0] | [0] | [0] | [0] | [0] |
| 8 | 7 | 0 | 5 | 97 | 0 | |
| n/a | 101 | 35 | n/a | 144 | 65 |
The nominal volume of forex futures/options and interest limitation agreements results from the net position of the buying and selling values in foreign currency underlying the individual transactions translated at the relevant exchange rate on the closing date. The gross nominal volume of interest rate swaps or interest rate/currency swaps and interest rate hedging agreements is shown. The stated amount for hedges related to share bonus programmes includes the number of share options with a subscription ratio of 1:1.
All fair values represent the theoretical value of these instruments upon dissolution of the transactions at the end of the period. Under the premise that instruments are held until the end of their term, these are unrealised gains and losses that, by the end of the term, will be fully set off by gains and losses from the underlying transactions in the case of fully effective hedging transactions.
For the purpose of showing this reconciliation appropriately for the period, relationships are created between hedging transactions and underlying transactions and recognised as follows:
Within a fair value hedge, both the hedging transaction and the hedged risk of the underlying transaction are recognised at their fair value (market value). The value fl uctuations of both trades are shown in the income statement, where they will be fully set off against each other in the case of full effectiveness.
Within a cash fl ow hedge, the hedging transactions are also principally recognised at their fair value (market value). In the case of full effectiveness of the hedging transaction, the value changes will be recognised in equity until the hedged payment fl ows or expected transactions impact the result. Only then will they be recognised in income.
Hedging transactions that, according to IAS 39, are not part of a hedge, are recognised at their fair value (market value). Value changes are recognised directly in income. Even if no formal hedging relationship was created, these are hedging transactions that are closely connected to the underlying business and whose impact on earnings will be netted by the underlying transaction (natural hedge).
The currency derivatives are used primarily for pound sterling, Danish krone, Slovak and Czech koruna, Polish złoty, Japanese yen, Swiss franc, Hungarian forint, Russian rouble, new Romanian leu, Turkish lira as well as US dollar.
The derivative fi nancial instruments have the following maturities:
| Fair values Maturities |
||||
|---|---|---|---|---|
| € million | Up to 1 year |
1 to 5 years |
Over 5 years |
|
| Interest rate transactions | ||||
| Forward rate agreements | (8) | 0 | 0 | |
| within fair value hedges | [0] | [0] | [0] | |
| within cash fl ow hedges | [0] | [0] | [0] | |
| not part of a hedge | [(8)] | [0] | [0] | |
| Interest limitation agreements | 6 | 0 | 0 | |
| within fair value hedges | [0] | [0] | [0] | |
| within cash fl ow hedges | [6] | [0] | [0] | |
| not part of a hedge | [0] | [0] | [0] | |
| Currency transactions | ||||
| Forex futures/options | 52 | 0 | 0 | |
| within fair value hedges | [0] | [0] | [0] | |
| within cash fl ow hedges | [5] | [0] | [0] | |
| not part of a hedge | [47] | [0] | [0] | |
| Interest rate/currency swaps | 0 | 9 | 0 | |
| within fair value hedges | [0] | [0] | [0] | |
| within cash fl ow hedges | [0] | [0] | [0] | |
| not part of a hedge | [0] | [9] | [0] | |
| Share price related transactions |
||||
| Hedging of share bonus programmes |
1 | 6 | 0 | |
| within fair value hedges | [0] | [0] | [0] | |
| within cash fl ow hedges | [1] | [6] | [0] | |
| not part of a hedge | [0] | [0] | [0] | |
| 51 | 15 | 0 |
Listed below the maturities are the fair values of the fi nancial assets and liabilities that fall due during these periods.
Variable interest rates are adjusted at intervals of less than one year.
To quantify the potential market value losses of all financial instruments, METRO Group uses Value-at-Risk (VaR) calculations in addition to the sensitivity analyses required by IFRS 7. A variance-covariance approach is used to determine potential changes in the value of fi nancial positions triggered by changes in interest rates and exchange rates within probable fl uctuation bands. In accordance with the treasury guidelines, the observation period used to calculate a potential loss is 10 days and is subject to the assumption that because of the extent of the positions not all positions can be liquidated within a short period of time. Other para meters include the historical market data for the past 100 days and a 99 percent confi dence level.
METRO AG acts as financial coordinator for METRO Group companies to ensure that they are provided with the necessary fi nancing to fund their operating and investing activities at all times and in the most cost-effi cient manner possible. The necessary information is provided by means of a rolling Group fi nancial forecast, updated quarterly, and checked monthly for deviations. This fi nancial forecast with a planning horizon of 12 months is complemented by a short-term, weekly rolling 14-day liquidity plan.
Financial instruments utilised include money and capital market products (time deposits, call money, commercial papers, promissory note loans and bonds sold as part of ongoing issue programmes) as well as bilateral and syndicated loans. METRO Group has access to suffi cient liquidity at all times so that there is no danger of liquidity risks even if an unexpected event has a negative fi nancial impact on the company's liquidity situation.
Further details on fi nancial instruments and credit lines are provided by the explanatory notes under the respective balance sheet items.
Intragroup cash pooling reduces the amount of debt and optimises the money market and capital market investments of METRO Group, which has a positive effect on net interest income. Cash pooling allows the surplus liquidity of individual Group companies to be used to fund other Group companies internally.
In addition, METRO AG draws on all the fi nancial expertise pooled in its fi nance department to advise the Group companies in all relevant fi nancial matters and provide support. This ranges from the elaboration of investment fi nancing concepts to supporting the responsible fi nancial offi cers of the individual Group companies in their negoti ations with local banks and fi nancial service providers. This ensures, on the one hand, that fi nancial resources of METRO Group are optimally employed in Germany and internationally, and, on the other hand, that all Group companies benefi t from the strength and credit standing of METRO Group in negotiating their fi nancing terms.
Creditworthiness risks arise from the total or partial loss of a counterparty, for example through bankruptcy, in connection with monetary investments and derivative fi nancial instruments with positive market values. METRO Group's maximum default exposure as of the closing date is refl ected by the book values of fi nancial assets totalling €7,025 million (previous year: €6,699 million). Further details on the size of the respective book values are listed in the notes to the consolidated fi nancial statements in no. 40 ("Book values and fair values according to measurement category"). Cash in hand considered in cash and totalling €149 million (previous year: €109 million) is not susceptible to any default risk.
In the course of the risk management of monetary investments and fi nancial derivatives, minimum creditworthiness requirements and maximum exposure limits have been defi ned for all business partners of METRO Group. This is based on a system of limits laid down in the treasury guidelines which are based mainly on the ratings of international rating agencies or internal credit assessments. An individual limit is allocated to every counterparty of METRO Group; compliance is constantly monitored by the treasury systems.
The following table shows a breakdown of counterparties by credit ratings:
| Rating classes | Volume in % | |||||||
|---|---|---|---|---|---|---|---|---|
| Monetary investments | ||||||||
| Grade Moody's |
Standard & Poor's |
Western Europe excl. Germany Germany |
Eastern Asia and Europe others |
Derivatives with posi tive market values |
Total | |||
| Investment grade | Aaa | AAA | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Aa1 to Aa3 | AA+ to AA- | 21.8 | 16.2 | 3.1 | 0.5 | 0.9 | ||
| A1 to A3 | A+ to A- | 26.8 | 16.6 | 8.1 | 1.0 | 1.2 | ||
| Baa1 to Baa3 |
BBB+ to BBB- |
0.0 | 0.0 | 0.5 | 0.0 | 0.0 | 96.7 | |
| Non-investment grade |
Ba1 to Ba3 | BB+ to BB- | 0.0 | 0.0 | 0.1 | 0.2 | 0.0 | |
| B1 to B3 | B+ to B- | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||
| C | C | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.3 | |
| No rating | 1.4 | 1.3 | 0.3 | 0.0 | 0.0 | 3.0 | ||
| Total | 50.0 | 34.1 | 12.1 | 1.7 | 2.1 | 100.0 |
The table shows that as of the closing date about 97 percent of the capital investment volume, including the positive market value of derivatives, had been placed with investment-grade counterparties, in other words, those with good or very good credit ratings. Most of the counterparties that do not yet have an internationally accepted rating are respected fi nancial institutions whose creditworthiness can be considered fl awless based on our own analyses. METRO Group also operates in countries where local fi nancial institutions do not have investment-grade ratings due to the rating of their country. For country-specifi c reasons as well as cost and effi ciency considerations, cooperation with these institutions is unavoidable. These institutions account for about 0.3 percent of the total volume.
METRO Group's level of exposure to creditworthiness risks is thus very low.
A future change in interest rates may cause cash fl ow from variable interest rate asset and debt items to fl uctuate. Part of the variable interest rate debt has been hedged with derivative fi nancial instruments. The Treasury Committee, which includes the CFO of METRO AG, determines the extent of these hedging measures on a regular basis. In addition, stress tests are used to determine what impact interest rate changes may have on cash fl ow.
The fi nance department of METRO AG also accounts for these risks by defi ning a benchmark for the relationship between variable and fi xed interest debt. The target structure for the debt portfolio foresees 55 percent variable and 45 percent fi xed interest. However, this surplus does not result in a noteworthy interest rate risk for METRO Group. The use of appropriate financing instruments makes it possible for the interest profi le to adjust to the underlying original fi nancial transactions in order to reach the above-mentioned benchmark.
| € million | 2008 | 2007 |
|---|---|---|
| Liabilities from suretyships and guarantees |
73 | 21 |
| Liabilities from guarantee and warranty contracts |
298 | 96 |
| 371 | 117 |
The increase in liabilities from guarantee and warranty contracts results mainly from the reduction of guarantees from the disposal of Extra stores in 2008.
| € million | 2008 | 2007 |
|---|---|---|
| Purchasing/sourcing commitments | 458 | 241 |
| Other | 19 | 17 |
| 477 | 258 |
The increase in purchasing/sourcing commitments mainly concerns the conclusion of new energy supply and advertising services contracts.
Please see notes nos. 20, 21 and 22 for information on purchasing commitments for other intangible and tangible assets, obligations from fi nance and operating leases as well as investment properties.
The share exchange ratio set for the incorpor ation of Asko Deutsche Kaufhaus AG and Deutsche SB-Kauf AG into METRO AG in 1996 is under going judicial review in appraisal processes initiated by former shareholders. The former shareholders maintain that the exchange ratio was set too low, putting them at a disadvantage.
These two legal challenges are pending in district courts located in Saarbrücken and Frankfurt/ Main.
The list of shareholdings of METRO AG pursuant to § 313 of the German Commercial Code is included in a separate list. In accordance with § 313 Section 4 Sentence 2 of the German Commercial Code, this list is part of the notes.
On 20 January 2009, METRO Group announced a comprehensive value and effi ciency enhancement programme to secure the company's sustained profi table growth. The programme foresees an earnings improvement by €1.5 billion until 2012 and beyond.
By contractual agreement of 13 February 2009, the Adler-Modemärkte were sold to the restructuring fund BluO beta equity Limited. The contract is subject to the approval of the cartel authorities.
In February 2009, METRO Group issued a €1,000 million euro bond with a maturity of 6 years and an interest rate of 7.625 percent p. a. as well as a €156 million promissory note loan with a maturity of 5 years.
No other events that are of material importance to an assessment of the earnings, fi nancial and asset position of METRO AG and METRO Group occurred by 2 March 2009 (date of release of the accounts for presentation to the Supervisory Board).
In 2008 and 2007, METRO Group maintained the following business relations to related com pan ies:
| Goods/services received |
Goods/services provided |
|||
|---|---|---|---|---|
| € million | 2008 | 2007 | 2008 | 2007 |
| Supplies and other services | 116 | 146 | 2 | 0 |
The goods/services received consist primarily of property leases by METRO Group companies. These properties are owned by companies that are included in the circle of related companies.
The goods/services provided result primarily from the granting of lease rights.
Business relations with related companies are based on contractual agreements providing for arm's length prices. As in 2007, METRO Group had no business relations with related natural persons in the fi nancial year.
METRO AG has been implementing share-based remuneration programmes since 1999. The members of the Management Board and other executives of METRO AG as well as managing directors and executives of the operative METRO Group companies are eligible.
No rights from the stock option programme were outstanding in the fi nancial year 2008.
In the fi nancial year 2004, a 5-year share bonus programme was introduced to replace the stock option programme. In contrast to the previous granting of subscription rights, this programme provides the entitlement to share bonuses. The size of the cash bonus depends on the performance of the Metro share price and the parallel consideration of benchmark indices.
The share bonus programme is divided into a tranche for each year, with the target parameters being calculated separately for each tranche. The maturity of each tranche is three years. The last tranche was granted in 2008.
The size of the bonus initially depends on the ratio of basis price and share price.
The basis price of each tranche corresponds to the arithmetic mean of the closing prices of the METRO AG ordinary share in Xetra trading of Deutsche Börse AG on the last 20 consecutive trading days before the closing date (eight weeks after the respective Annual General Meeting).
The target price, upon which the full bonus is granted, is calculated based on the basis price and assumes a share price increase of 15 percent over the course of three years. A determination about whether the target price has been reached is made by means of the arithmetic mean of the closing prices of the company's ordinary share in Xetra trading at Deutsche Börse AG on the last 20 consecutive trading days before expiration of the relevant three-year period. The bonus increases or decreases proportionately when the share price exceeds or falls below the 15 percent price target.
The size of the respective bonus also depends on the performance of the Metro share compared with relevant share indices. When the Metro share has outperformed these indices, the share bonus is raised to 120 percent. When it underperforms, it is reduced to 80 percent. Outperformance or underperformance applies when the average performance of the Metro share exceeds or lags the performance of the relevant share indices by more than 10 percent. Outperformance or underperformance is determined analogous to the determination of whether the target price has been reached.
The share bonus is principally granted only if the terms of employment within METRO Group have not been ended unilaterally or a contract termination has not been reached by mutual consent at the time of maturity. In addition, the payment of share bonuses can be limited to the gross amount of the annual fi xed salary. Any potential excess amounts are used to raise the share bonus during the following three years if the latter is lower than the individually agreed gross annual fi xed salary.
The conditions of the tranches granted to executives so far are shown in the following table:
| Total target bonus € |
Target price € |
Basis price € |
Due | Tranche |
|---|---|---|---|---|
| Paid out | 42.71 | 37.14 | July 2007 | 2004 |
| Expired | 47.84 | 41.60 | July 2008 | 2005 |
| 22,745,000 | 49.62 | 43.15 | July 2009 | 2006 |
| 17,760,000 | 70.85 | 61.61 | July 2010 | 2007 |
| 19,900,000 | 48.21 | 41.92 | July 2011 | 2008 |
The target bonus values are based on the condition that the target prices are attained. The value of the share bonus paid in 2008 was €32.2 million at the time of payment and was calculated by independent experts using recognised fi nancial-mathematical methods (Monte Carlo simulation).
Total expenses on share-based compensation programmes after the cost of hedging transactions amount to €6 million in the fi nancial year 2008 (previous year: €24 million).
The related provisions as of 31 December 2008 amount to €1 million (previous year: €90 million), including €0 million (previous year: €51 million) with a remaining term of up to one year.
Remuneration of the active members of the Management Board essentially consists of a fi xed salary and performance-based entitlements as well as the share bonuses granted in the fi nancial year 2008.
The amount of the performance-based remuneration for the fi nancial year 2008 results from EVA-based compensation entitlements and thus from the company's performance during the current fi nancial year. As a result of the bonus bank system, their complete payment is dependent on EVA factors and thus on the company's performance in the next few years.
Remuneration of the active members of the Management Board in the financial year 2008 amounts to €14.3 million (previous year: €13.0 million). This includes €4.1 million (previous year: €3.4 million) in fi xed salaries, €7.2 million (previous year: €7.3 million) in performance-based entitlements, €2.7 million (previous year: €2.1 million) in variable entitlements with long-term incentives and €0.3 million (previous year: €0.2 million) in other remuneration.
Entitlements with long-term incentives (share bon uses) granted in the fi nancial year 2008 are posted at their fair value at the time of granting. The dissolution of provisions for share-based remuneration with expiration dates in the fi nancial year 2008 or later resulted in income of €3.1 million (previous year expenses of €5.8 million).
Due to the granting of a monetary target bonus, a number of subscription rights pursuant to §§ 285 Sentence 1 No. 9a, 314 Section 1 No. 6a of the German Commercial Code cannot be released. The payment of the bonuses depends on the previously described conditions of the share bonus plan.
Other remuneration consists of non-cash benefi ts and expense allowances.
Former members of the Management Boards of METRO AG and the companies that were merged into METRO AG as well as their surviving dependents received €3.8 million (previous year: €22.9 million). The cash value of provisions for current pensions and pension entitlements made for this group amounts to €48.8 million (previous year: €48.4 million).
The information released pursuant to § 314 Section 1 No. 6a Sentence 5 to 9 of the German Commercial Code can be found in the extensive remuneration report in chapter VIII of the Group management report.
The total remuneration of all members of the Supervisory Board in the fi nancial year 2008 amounts to €1.9 million (previous year: €1.8 million).
Additional information on the remuneration of Supervisory Board members can be found in the extensive remuneration report in chapter VIII of the Group management report.
The following fees related to the services rendered by auditor KPMG AG Wirtschaftsprüfungsgesell schaft and its associated companies were recorded as expenses. Since the integration of KPMG Switzerland and KPMG Spain into KPMG Europe LLP as of 1 October 2008, these national KPMG subsidiaries have also been associated companies of KPMG AG Wirtschaftsprüfungsgesellschaft in the meaning of § 271 Section 2 of the German Commercial Code. The disclosure requirement of KPMG Spain and KPMG Switzerland relates to services rendered after 30 September 2008.
| € million | 31 Dec 2008 | 31 Dec 2007 |
|---|---|---|
| Audit | 8 | 6 |
| Other certifi cation or evaluation services |
1 | 1 |
| Tax consultation services | 3 | 1 |
| Other services | 3 | 1 |
| 15 | 9 |
Only services that are consistent with the task of the auditor of the annual fi nancial statements and consolidated fi nancial statements of METRO AG were provided.
The Management and Supervisory Boards of METRO AG at year's end 2008 made the annual declaration of compliance with the recommendations of the government commission German Corporate Governance Code pursuant to § 161 of the German Stock Corporation Act which can be accessed on the METRO AG website (www.metrogroup.de).
The following domestic subsidiaries in the legal form of stock corporations or partnerships will use the exemption requirements according to § 264 Section 3 and § 264 b of the German Commercial Code, and will thus refrain from disclosing their annual fi nancial statements for 2008 as well as mostly from disclosing their notes and management report (according to the German Commercial Code).
| "Buch und Zeit" Verlagsgesellschaft mit beschränkter Haftung | Köln |
|---|---|
| "GOLDBLUME-O'LACY'S" Handels GmbH | Düsseldorf |
| 1. Schaper Objekt GmbH & Co. Wächtersbach KG | Düsseldorf |
| 2. Schaper Objekt GmbH & Co. Memmingen KG | Düsseldorf |
| 3. Classic Objekt GmbH & Co. München-Pasing KG | Düsseldorf |
| 3. Schaper Objekt GmbH & Co. Erlangen KG | Düsseldorf |
| 4. Classic Objekt GmbH & Co. Hamburg-Altona KG | Düsseldorf |
| 5. Classic Objekt GmbH & Co. Schwelm KG | Düsseldorf |
| A.L.C. Warenvertriebsgesellschaft mbH | Düsseldorf |
| AXXE Reisegastronomie GmbH | Köln |
| C + C Schaper GmbH | Hannover |
| Campus Store GmbH | Alzey |
| CH-Vermögensverwaltung GmbH | Düsseldorf |
| Dinea Gastronomie GmbH | Köln |
| Dritte real,- Holding GmbH | Alzey |
| Dritte real,- SB-Warenhaus GmbH | Alzey |
| emotions GmbH | Köln |
| Galeria Kaufhof GmbH | Köln |
| GEMINI Personalservice GmbH | Köln |
| Goldhand Lebensmittel- u. Verbrauchsgüter-Vertriebsgesellschaft mit beschränkter Haftung | Düsseldorf |
| Grillpfanne GmbH | Köln |
| Hans Köfer GmbH, Weinkellerei | Düsseldorf |
| Johannes Berg GmbH, Weinkellerei | Düsseldorf |
| LSZ Betriebsführungsgesellschaft mbH & Co. KG | Alzey |
| LSZ Service GmbH & Co. KG | Alzey |
| Lust for Life Gastronomie GmbH | Köln |
| MDH Secundus Vermögensverwaltung GmbH | Düsseldorf |
| Meister feines Fleisch – feine Wurst GmbH | Gäufelden |
| METRO Beteiligungsmanagement Düsseldorf GmbH & Co. KG | Düsseldorf |
| Metro Cash & Carry Brunnthal GmbH & Co. KG | Brunnthal |
| METRO Cash & Carry Deutschland GmbH | Düsseldorf |
| Metro Cash & Carry Grundstücksverwaltungsgesellschaft mbH | Düsseldorf |
| METRO Cash & Carry International GmbH | Düsseldorf |
| METRO Groß- und Lebensmitteleinzelhandel Holding GmbH | Düsseldorf |
| METRO Großhandelsgesellschaft mbH | Düsseldorf |
| METRO International Beteiligungs GmbH | Düsseldorf |
| METRO Kaufhaus und Fachmarkt Holding GmbH | Düsseldorf |
| METRO Neunte Gesellschaft für Vermögensverwaltung mbH | Düsseldorf |
| METRO Online GmbH | Düsseldorf |
| Metro SB-Großmärkte GmbH & Co. Kommanditgesellschaft | Esslingen am Neckar |
| Metro SB-Großmärkte GmbH & Co. Kommanditgesellschaft | Linden |
| Metro SB-Großmärkte Verwaltungsgesellschaft mit beschränkter Haftung | Mülheim an der Ruhr |
| METRO Sechste Gesellschaft für Vermögensverwaltung mbH | Düsseldorf |
| METRO Siebte Gesellschaft für Vermögensverwaltung mbH | Düsseldorf |
|---|---|
| METRO Zehnte Gesellschaft für Vermögensverwaltung mbH | Düsseldorf |
| METRO Zehnte GmbH & Co. KG | Düsseldorf |
| MFM METRO Group Facility Management GmbH | Düsseldorf |
| MGA METRO Group Advertising GmbH | Düsseldorf |
| MGB METRO Group Buying GmbH | Düsseldorf |
| MGB METRO Group Buying International GmbH | Düsseldorf |
| MGB METRO Group Buying West GmbH | Düsseldorf |
| MGC METRO Group Clearing GmbH | Düsseldorf |
| MGE Warenhandelsgesellschaft mbH | Düsseldorf |
| MGI METRO Group Information Technology GmbH | Düsseldorf |
| MGL METRO Group Logistics GmbH | Düsseldorf |
| MGL METRO Group Logistics Warehousing GmbH & Co. KG | Sarstedt |
| MGL METRO Group Logistics Warehousing Management GmbH | Sarstedt |
| MGP METRO Group Account Processing GmbH | Kehl |
| MGS METRO Group Solutions GmbH | Düsseldorf |
| MGT METRO Group Travel Services GmbH | Düsseldorf |
| MIB METRO Group Insurance Broker GmbH | Düsseldorf |
| MIP METRO Group Intellectual Property GmbH & Co. KG | Düsseldorf |
| MIP METRO Group Intellectual Property Management GmbH | Düsseldorf |
| MTT METRO Group Textiles Transport GmbH | Düsseldorf |
| Multi-Center Warenvertriebs GmbH | Hannover |
| real,- Group Holding GmbH | Düsseldorf |
| real,- Handels GmbH | Düsseldorf |
| real,- Holding GmbH | Alzey |
| real,- Multi-Markt Warenvertriebs-GmbH & Co. KG | Alzey |
| real,- SB-Warenhaus GmbH | Alzey |
| SB-Leasing GmbH & Co. KG | Grünwald |
| SIG Import GmbH | Düsseldorf |
| SIL Verwaltung GmbH & Co. Objekt Haidach KG | Schwabhausen |
| SPORTARENA GmbH | Köln |
| Vierte real,- Holding GmbH | Alzey |
| Vierte real,- SB-Warenhaus GmbH | Alzey |
| Weinkellerei Thomas Rath GmbH | Düsseldorf |
| Zweite real,- Multi-Markt Vermietungs- und Verpachtungs-GmbH & Co. KG | Alzey |
| Zweite real,- Multi-Markt Verwaltungsgesellschaft mbH | Alzey |
| Zweite real,- Multi-Markt Warenvertriebs-GmbH & Co. KG | Alzey |
| Zweite real,- SB-Warenhaus GmbH | Alzey |
| Zweite real,- Vermietungs- und Verpachtungs-GmbH & Co. KG | Alzey |
| ADAGIO 2. Grundstücksverwaltungsgesellschaft mbH | Saarbrücken |
|---|---|
| ADAGIO 3. Grundstücksverwaltungsgesellschaft mbH | Saarbrücken |
| ADAGIO Grundstücksverwaltungsgesellschaft mbH | Saarbrücken |
| Adolf Schaper GmbH & Co. Grundbesitz-KG | Saarbrücken |
| AIB Verwaltungs GmbH | Düsseldorf |
| ARKON Grundbesitzverwaltung GmbH | Saarbrücken |
| ASH Grundstücksverwaltung XXX GmbH | Saarbrücken |
| ASSET Grundbesitz GmbH | Köln |
| ASSET Immobilienbeteiligungen GmbH | Saarbrücken |
| ASSET Verwaltungs-GmbH | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Aachen II KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Aachen, Adalbertstraße 20-30 KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Aschaffenburg KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Bergen-Enkheim KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Bonn, Acherstraße KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Darmstadt KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Dortmund KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Düsseldorf, Königsallee 1 KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Frankfurt Hauptwache KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Freiburg im Breisgau KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Gelsenkirchen KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Hamburg-Poppenbüttel, Kritenbarg 10 KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Hanau KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Hannover KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Kassel KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Kassel, Obere Königstraße KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Köln, Minoritenstraße KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Köln-Kalk, Kalker Hauptstraße 118-122 KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Leipzig KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Mainz KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Mönchengladbach KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt München Pelkovenstraße 155 KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Nürnberg, Königstraße 42-52 KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Oberhausen Centroallee KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Offenbach KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Saarbrücken, Bahnhofstraße 82-92, 98-100 KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Siegburg KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Stuttgart, Königstraße 6 KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Stuttgart-Bad Cannstadt Badstraße, Marktstraße 3 KG | Saarbrücken |
| ASSET Verwaltungs-GmbH & Co. Objekt Würzburg KG | Saarbrücken |
| ASSET Zweite Immobilienbeteiligungen GmbH | Düsseldorf |
| Bassa Grundstücksverwaltungsgesellschaft mbH | Saarbrücken |
| Batra Grundstücksverwaltungsgesellschaft mbH | Saarbrücken |
| BAUGRU Immobilien-Beteiligungsgesellschaft mbH & Co. Grundstücksverwaltung KG | Saarbrücken |
| Blabert Grundstücksverwaltungsgesellschaft mbH | Saarbrücken |
| BLK Grundstücksverwaltung GmbH | Saarbrücken |
| Deutsche SB-Kauf GmbH & Co. KG | Saarbrücken |
| DFI Verwaltungs GmbH | Saarbrücken |
| DORINA Immobilien-Vermietungsgesellschaft mbH | Düsseldorf |
| FZB Fachmarktzentrum Bous Verwaltungsgesellschaft mbH & Co. KG | Saarbrücken |
| FZG Fachmarktzentrum Guben Verwaltungsgesellschaft mbH | Saarbrücken |
| FZG Fachmarktzentrum Guben Verwaltungsgesellschaft mbH & Co. Vermietungs-KG | Saarbrücken |
| GBS Gesellschaft für Unternehmensbeteiligungen mbH | Saarbrücken |
| Gewerbebau Flensburg GmbH & Co. Objekt Fachmarktzentrum KG | Saarbrücken |
| GKF Saar-Grund GbR | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. 10. Objekt-KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. 22. Objekt-KG | Saarbrücken |
|---|---|
| GKF Vermögensverwaltungsgesellschaft mbH & Co. 25. Objekt-KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. 3. Objekt-KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. 6. Objekt-KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. 8. Objekt-KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Arrondierungsgrundstücke KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Entwicklungsgrundstücke KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Gewerbegrundstücke KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Grundstücksverwaltung KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Bielefeld KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Bochum Otto Straße KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Brühl KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Edingen-Neckarhausen KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Emden KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Espelkamp KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Finowfurt KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Frankenthal KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Frankenthal-Studernheim KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Freiburg KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Gäufelden KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Haibach KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Hamburg-Neuwiedenthal KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Hannover/Davenstedter Straße KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Hannover Fössestraße KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Hannover-Linden KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Hannover-Misburg KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Hannover-Südstadt KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Herne KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Herten KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Hildesheim-Senking KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Hillesheim KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Hörselgau KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Mönchengladbach-Rheydt KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Oldenburg KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Paderborn "Südring Center" KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Prüm KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Rastatt KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Ratingen KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Rinteln KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Rüsselsheim KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Saarbrücken Saarbasar KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Wesel KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Objekt Wiesbaden-Nordenstadt KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mbH & Co. Vermietungs- und Handels-KG | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft mit beschränkter Haftung | Saarbrücken |
| GKF Vermögensverwaltungsgesellschaft Objekt Nienburg mbH | Saarbrücken |
| Horten GmbH | Düsseldorf |
| Horten Verwaltungs GmbH | Saarbrücken |
| Horten Verwaltungs GmbH & Co. Objekt Braunschweig KG | Saarbrücken |
| Horten Verwaltungs-GmbH & Co. Objekt Duisburg KG | Saarbrücken |
| Horten Verwaltungs-GmbH & Co. Objekt Düsseldorf Berliner Allee KG | Saarbrücken |
| Horten Verwaltungs-GmbH & Co. Objekt Düsseldorf Carschhaus KG | Saarbrücken |
|---|---|
| Horten Verwaltungs GmbH & Co. Objekt Erlangen KG | Saarbrücken |
| Horten Verwaltungs GmbH & Co. Objekt Gießen KG | Saarbrücken |
| Horten Verwaltungs-GmbH & Co. Objekt Hannover KG | Saarbrücken |
| Horten Verwaltungs-GmbH & Co. Objekt Heidelberg KG | Saarbrücken |
| Horten Verwaltungs GmbH & Co. Objekt Heilbronn KG | Saarbrücken |
| Horten Verwaltungs-GmbH & Co. Objekt Hildesheim KG | Saarbrücken |
| Horten Verwaltungs GmbH & Co. Objekt Ingolstadt KG | Saarbrücken |
| Horten Verwaltungs GmbH & Co. Objekt Kempten KG | Saarbrücken |
| Horten Verwaltungs-GmbH & Co. Objekt Münster KG | Saarbrücken |
| Horten Verwaltungs GmbH & Co. Objekt Nürnberg KG | Saarbrücken |
| Horten Verwaltungs GmbH & Co. Objekt Oldenburg KG | Saarbrücken |
| Horten Verwaltungs GmbH & Co. Objekt Pforzheim KG | Saarbrücken |
| Horten Verwaltungs GmbH & Co. Objekt Regensburg KG | Saarbrücken |
| Horten Verwaltungs GmbH & Co. Objekt Reutlingen KG | Saarbrücken |
| Horten Verwaltungs GmbH & Co. Objekt Schweinfurt KG | Saarbrücken |
| Horten Verwaltungs-GmbH & Co. Objekt Stuttgart KG | Saarbrücken |
| Horten Verwaltungs-GmbH & Co. Objekt Trier KG | Saarbrücken |
| Horten Verwaltungs-GmbH & Co. Objekt Ulm KG | Saarbrücken |
| Horten Verwaltungs-GmbH & Co. Objekt Wiesbaden KG | Saarbrücken |
| Kaufhalle GmbH | Saarbrücken |
| Kaufhalle GmbH & Co. Objekt Hamburg Mönckebergstraße KG | Saarbrücken |
| Kaufhof Warenhaus AG & Co. KG i. L. | Köln |
| Kaufhof Warenhaus am Alex GmbH | Berlin |
| Kaufhof Warenhaus Neubrandenburg GmbH | Saarbrücken |
| Kaufhof Warenhaus Rostock GmbH | Düsseldorf |
| MDH Secundus GmbH & Co. KG | Düsseldorf |
| MEM METRO Group Energy Production & Management GmbH1 | Düsseldorf |
| MES METRO Group Energy Solutions GmbH1 | Böblingen |
| METRO Group Asset Management GmbH & Co. KG | Saarbrücken |
| METRO Group Asset Management GmbH1 | Saarbrücken |
| METRO Group Asset Management Services GmbH | Saarbrücken |
| METRO Leasing GmbH | Saarbrücken |
| PIL Grundstücksverwaltung GmbH | Saarbrücken |
| Renate Grundstücksverwaltungsgesellschaft mbH | Saarbrücken |
| RUDU Verwaltungsgesellschaft mbH | Düsseldorf |
| Saalbau-Verein Ulm GmbH | Saarbrücken |
| Schaper Grundbesitz-Verwaltungsgesellschaft mbH | Saarbrücken |
| Secundus Grundstücksverwertungs-GmbH & Co. Objekt Stuttgart-Königstraße KG | Saarbrücken |
| STW Grundstücksverwaltung GmbH | Saarbrücken |
| TANDOS Grundstücks-Verwaltungsgesellschaft mbH | Saarbrücken |
| TKC Objekt Cottbus GmbH & Co. KG | Saarbrücken |
| Wirichs Immobilien GmbH | Saarbrücken |
| Wirichs Verwaltungsgesellschaft mbH & Co. Objekt Schwelm KG | Saarbrücken |
| Wirichs Verwaltungsgesellschaft mbH & Co. Objekt Voerde und Kamen KG | Saarbrücken |
| Wolfgang Wirichs GmbH | Saarbrücken |
| Zentra Beteiligungsgesellschaft mit beschränkter Haftung | Saarbrücken |
The company utilises the exemptive option pursuant to § 264 Section 3 of the German Commercial Code only for the management report
125 Consolidated fi nancial statements 2008 126 Income statement 127 Balance sheet 128 Statement of changes in equity 129 Cash fl ow statement 130 Notes to the consolidated fi nancial statements 130 Segment reporting 194 Statement of the legal representatives 195 Auditor's report
| Name | Head offi ce | Stake in % | Sales1 in € million |
|---|---|---|---|
| Holding companies | |||
| METRO AG | Düsseldorf, Germany | 0 | |
| METRO Kaufhaus und Fachmarkt Holding GmbH | Düsseldorf, Germany | 100.00 | 0 |
| METRO Groß- und Lebensmitteleinzelhandel Holding GmbH | Düsseldorf, Germany | 100.00 | 0 |
| Cash & carry | |||
| METRO Cash & Carry International GmbH | Düsseldorf, Germany | 100.00 | 0 |
| METRO Cash & Carry International Holding GmbH | Vösendorf, Austria | 100.00 | 0 |
| METRO Großhandelsgesellschaft mbH | Düsseldorf, Germany | 100.00 | 4,890 |
| METRO Cash & Carry France S.A.S. | Nanterre, France | 100.00 | 3,977 |
| METRO Cash & Carry OOO | Moscow, Russia | 100.00 | 3,055 |
| Makro Cash and Carry Polska S.A. | Warsaw, Poland | 100.00 | 2,213 |
| METRO Italia Cash and Carry S. p. A. | San Donato Milanese, Italy | 100.00 | 1,902 |
| METRO CASH & CARRY ROMANIA SRL | Bucharest, Romania | 85.00 | 1,490 |
| MAKRO Cash & Carry CR s.r.o. | Prague, Czech Republic | 100.00 | 1,401 |
| Makro Autoservicio Mayorista S. A. | Madrid, Spain | 100.00 | 1,392 |
| METRO Distributie Nederland B. V. | Diemen, Netherlands | 100.00 | 1,345 |
| MAKRO Cash & Carry Belgium NV | Antwerp, Belgium | 100.00 | 1,305 |
| Makro Cash & Carry UK Holding Limited | Manchester, United Kingdom | 100.00 | 1,129 |
| METRO Jinjiang Cash & Carry Co., Ltd. | Shanghai, China | 90.00 | 1,051 |
| METRO Cash & Carry Ukraine Ltd. | Kiev, Ukraine | 100.00 | 1,016 |
| Metro Grosmarket Bakirköy Alisveris Hizmetleri Ticaret Ltd. Sirketi | Istanbul, Turkey | 100.00 | 896 |
| METRO Kereskedelmi Kft. | Budaörs, Hungary | 100.00 | 816 |
| Hypermarkets | |||
| real,- SB-Warenhaus GmbH | Alzey, Germany | 100.00 | 6,827 |
| Zweite real,- SB-Warenhaus GmbH | Alzey, Germany | 100.00 | 1,675 |
| real,- Sp. z o.o.i Spólka spólka komandytowa | Warsaw, Poland | 100.00 | 1,554 |
| Consumer electronics stores | |||
| Media-Saturn-Holding GmbH | Ingolstadt, Germany | 75.41 | 8,681 |
| Mediamarket S. p. A. | Curno, Italy | 75.41 | 2,096 |
| MEDIA MARKT SATURN, S.A. UNIPERSONAL | El Prat de Llobregat, Spain | 75.41 | 1,809 |
| Media Saturn Holding Polska Sp. z o.o. | Warsaw, Poland | 75.41 | 1,222 |
| Media Markt Saturn Holding Nederland B. V. | Rotterdam, Netherlands | 75.41 | 1,152 |
| Media - Saturn Beteiligungsges. m.b.H. | Vösendorf, Austria | 75.41 | 926 |
| Media Markt Management und Service AG | Geroldswil, Switzerland | 75.41 | 580 |
| MEDIA SATURN FRANCE SCS | Ris Orangis, France | 75.41 | 568 |
| MEDIA MARKT-SATURN BELGIUM N.V. | Asse-Zellik, Belgium | 75.41 | 492 |
| Department stores | |||
| GALERIA Kaufhof GmbH | Köln, Germany | 100.00 | 3,120 |
| INNOVATION S.A. | Brussels, Belgium | 100.00 | 316 |
| Other companies | |||
| MGB METRO Group Buying HK Limited | Hong Kong, China | 100.00 | 1,080 |
| DINEA Gastronomie GmbH | Köln, Germany | 100.00 | 203 |
| MGL METRO Group Logistics Warehousing GmbH & Co. KG | Sarstedt, Germany | 100.00 | 158 |
| MGS METRO Group Solutions GmbH | Düsseldorf, Germany | 100.00 | 0 |
| METRO Group Asset Management GmbH & Co. KG | Saarbrücken, Germany | 98.04 | 0 |
| MGB METRO Group Buying GmbH | Düsseldorf, Germany | 100.00 | 0 |
| MIAG Commanditaire Vennootschap | Diemen, Netherlands | 100.00 | 0 |
| MGI METRO Group Information Technology GmbH | Düsseldorf, Germany | 100.00 | 0 |
Including consolidated national subsidiaries
Chairman of the Supervisory Board of Franz Haniel & Cie. GmbH a) BMW AG Delton AG (Vice-Chairman) Franz Haniel & Cie. GmbH (Chairman) Heraeus Holding GmbH secunet Security Networks AG b) None
Chairman of the Management Board of E.ON AG a) Allianz SE Bertelsmann AG E.ON Energie AG (Chairman) E.ON Ruhrgas AG (Chairman) b) E.ON Nordic AB, Malmö, Sweden – Board of Directors (Chairman) E.ON Sverige AB, Malmö, Sweden – Board of Directors (Chairman)
E.ON US Investments Corp., Delaware (OH), USA – Board of Directors (Chairman)
Until 16 May 2008
Honorary professor for business affairs at the Management University "Wissenschaftliche Hochschule für Unternehmensführung – Otto-Beisheim-Hochschule"
a) Steuler Industriewerke GmbH (Chairman)
b) Bucerius/WHU MLB gGmbH – Supervisory Board (Vice-Chairman) Norddeutsche Private Equity GmbH – Advisory Board
Chairman of the Group Works Council of METRO AG
National Chairman of the Retail Section of the ver.di union
Since 4 April 2008 Member of the Executive Committee of Deutsche Bank AG a) Schott AG Deutsche Bank Privat- und Geschäftskunden AG Schiffshypothekenbank zu Lübeck AG ( Chairman), until 15 May 2008
b) Deutsche Bank A.S, ., Istanbul, Turkey – Yönetim Kurulu Bas, kanı (Chairman) Deutsche Bank S.A./N.V., Brussels, Belgium – Conseil d'Administration/Raad van Bestuur (Chairman) Deutsche Bank S.p.A., Milan, Italy – Consiglio di Sorveglianza Kühne + Nagel International AG, Schindellegi, Switzerland – Board of Directors
Section Head of Payroll Accounting at Real SB-Warenhaus GmbH a) None b) None
Managing Director of Otto Beisheim Group GmbH & Co. KG a) Galeria Kaufhof GmbH Metro Großhandelsgesellschaft mbH Real Holding GmbH Zweite Real SB-Warenhaus GmbH, since 26 May 2008
b) Bürgschaftsbank Bayern GmbH – Board of Directors (fi rst Vice-Chairman) BHS Verwaltungs AG, Baar, Switzerland – Board of Directors (President)
Until 16 May 2008 Department Head at Metro Großhandelsgesellschaft mbH a) None b) None
As at 31 December 2008 or the respective date of resignation from the Supervisory Board of METRO AG a) Member of other statutory supervisory boards of German companies b) Member of comparable German and international boards of business enterprises
Andreas Herwarth Since 4 July 2008 Commercial Clerk, METRO AG Chairman of the Works Council of METRO AG a) None b) Grundstücksgesellschaft Willich mbH –
Supervisory Board (Chairman) Wasserwerk Willich GmbH – Supervisory Board Versorgungsnetz Willich GmbH – Supervisory Board
Vice-Chairman of the Group Works Council of METRO AG Vice-Chairman of the General Works Council of Real SB-Warenhaus GmbH a) None b) None
Business Consultant a) None b) Gebr. Schmidt GmbH & Co. KG – Advisory Board ARH Resort Holding AG, Zurich, Switzerland – Board of Directors (President, since 28 May 2008) Bank Julius Bär & Co. AG, Zurich, Switzerland – Board of Directors Breda Consulting AG, Zurich, Switzerland – Board of Directors, since 26 June 2008 Brändle, Missura & Partner Informatik AG, Zurich, Switzerland – Board of Directors Holcim Ltd., Jona, Switzerland – Board of Directors Julius Bär Holding AG, Zurich, Switzerland – Board of Directors Karl Steiner AG, Zurich, Switzerland – Board of Directors Karl Steiner Holding AG, Zurich, Switzerland – Board of Directors (Vice-President) LB (Swiss) Privatbank AG, Zurich, Switzerland – Board of Directors, until 1 October 2008 Peter Steiner Holding AG, Zurich, Switzerland – Board of Directors Supra Holding AG, Baar, Switzerland – Board of Directors Travel Charme Hotels & Resorts Holding AG, Zurich, Switzerland – Board of Directors ( President), since 17 January 2008
Secretary of the National Executive Board of the Ver.di union a) Real Holding GmbH b) None
Since 16 May 2008 Member of the Management Board of TNT N.V. Group Managing Director TNT Express a) None b) Royal Wessanen N.V., Utrecht, Netherlands – Raad van Commissarissen Dr Klaus Mangold Chairman of the German Committee on Eastern European Economic Relations Chairman of the Supervisory Board of Rothschild GmbH
Until 16 May 2008 Chairwoman of the General Works Council of Metro Großhandelsgesellschaft mbH a) Metro Großhandelsgesellschaft mbH (Vice-Chairwoman) b) None
Dr rer. pol. Klaus von Menges Until 16 May 2008 Businessman and Agronomist a) MAN Ferrostaal AG b) None
Until 30 June 2008 Commercial Clerk, Extra Verbrauchermärkte Deutschland GmbH
Until 16 May 2008 Trained Retail Sales Manager, Galeria Kaufhof GmbH a) Galeria Kaufhof GmbH, since 16 April 2008 b) None
Since 16 May 2008 Vice-Chairman of the Group Works Council of Metro Cash & Carry Deutschland GmbH a) Metro Großhandelsgesellschaft mbH b) None
Chairman of the Supervisory Board of Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft a) Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft (Chairman) b) UniCredit S.p.A., Genova, Italy – Consiglio di Amministrazione
Until 3 April 2008 Chairman of the Supervisory Board of Bayer AG a) Bayer AG (Chairman) Daimler AG Linde AG (Chairman) RWE AG TUI AG b) None
Chairman of the General Works Council of Real SB-Warenhaus GmbH a) Real Holding GmbH (Vice-Chairman) b) None
Until 16 May 2008 Chairwoman of the Works Council of the Metro Cash & Carry store Düsseldorf a) Metro Großhandelsgesellschaft mbH b) None
Since 16 May 2008 Chairwoman of the General Works Council of Adler Modemärkte GmbH a) Adler Modemärkte GmbH (Vice-Chairwoman) b) None
Franz M. Haniel (Chairman) Klaus Bruns (Vice-Chairman) Dr Wulf H. Bernotat, since 16 May 2008 Werner Klockhaus Dr Manfred Schneider, until 3 April 2008
Dr jur. Hans-Jürgen Schinzler (Chairman) Klaus Bruns (Vice-Chairman) Ulrich Dalibor, until 16 May 2008 Prof. Dr Dr h. c. mult. Erich Greipl Franz M. Haniel Xaver Schiller, since 16 May 2008 Peter Stieger
Franz M. Haniel (Chairman) Dr-Ing. e. h. Bernd Pischetsrieder Dr jur. Hans-Jürgen Schinzler
§ 27 Section 3 Co-determination Act Franz M. Haniel Klaus Bruns Prof. Dr Dr h. c. mult. Erich Greipl Werner Klockhaus
a) Adler Modemärkte GmbH (Chairman) Praktiker Bau- und Heimwerkermärkte AG Praktiker Bau- und Heimwerkermärkte Holding AG Real Holding GmbH (Chairman until 26 May 2008) TÜV SÜD AG b) Extra Verbrauchermärkte Management GmbH – Advisory Board (Chairman), until 9 April 2008 LP Holding GmbH – Supervisory Board,
since 1 January 2008 METRO Group Asset Management GmbH & Co. KG – Shareholders' Committee ( Chairman), until 4 April 2008 Tertia Handelsbeteiligungsgesellschaft mbH – Supervisory Board (Chairman), until 26 April 2008 Wagner International AG, Altstätten, Switzerland – Board of Directors
a) Dinea Gastronomie GmbH (Chairman) Metro Großhandelsgesellschaft mbH ( Chairman), since 8 February 2008, Chairman since 6 March 2008 Real Holding GmbH, until 26 May 2008
b) Makro Cash and Carry Polska SA, Warsaw, Poland – Rada Nadzorcza, since 1 April 2008 Metro Cash & Carry International Holding GmbH, Vösendorf, Austria – Supervisory Board (Chairman), since 18 March 2008, Chairman since 31 March 2008 Metro Distributie Nederland B.V., Diemen, Netherlands – Raad van Commissarissen Metro International AG, Baar, Switzerland – Board of Directors MGP METRO Group Account Processing
International AG, Baar, Switzerland – Board of Directors, since 22 May 2008
Since 8 April 2008 a) None b) HF Company S.A., Tauxigny, France – Conseil d'Administration
2 March 2009
THE MANAGEMENT BOARD
Dr Cordes D C d
Mierdorf Muller Saveuse Unger Mierdorf
To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated fi nancial statements give a true and fair view of the assets, liabilities, fi nancial position and profi t or loss of the Group, and the Group management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group.
2 March 2009
Mierdorf Muller Saveuse Unger
Dr Cordes Dr
We have audited the consolidated fi nancial statements prepared by METRO AG comprising the balance sheet, the income statement, statement of changes in equity, cash fl ow statement and the notes to the consolidated fi nancial statements, together with the Group management report for the business year from 1 January to 31 December 2008. The preparation of the consolidated fi nancial statements and the Group management report in accordance with IFRS, as adopted by the EU, and the additional requirements of German commercial law pursuant to § 315a Section 1 of the German Commercial Code and supplementary provisions of the shareholder agreement are the responsibility of the company's management. Our responsibility is to express an opinion on the consolidated fi nancial statements and on the Group management report based on our audit.
We conducted our audit of the consolidated fi nancial statements in accordance with § 317 of the German Commercial Code and generally accepted German standards for the audit of fi nancial statements promulgated by the Institut der Wirtschaftsprüfer (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated fi nancial statements in accordance with the applicable fi nancial reporting framework and in the Group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated fi nancial statements and the Group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual fi nancial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and signifi cant estimates made by management, as well as evaluating the overall presentation of the consolidated fi nancial statements and Group management report. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the fi ndings of our audit, the consolidated fi nancial statements comply with IFRS, as adopted by the EU, the additional requirements of German commercial law pursuant to § 315a Section 1 of the German Commercial Code and supplementary provisions of the shareholder agreement and give a true and fair view of the net assets, fi nancial position and results of operations of the Group in accordance with these requirements. The Group management report is consistent with the consolidated fi nancial statements and as a whole provides a suitable view of the Group's position and suitably presents the opportunities and risks of future development.
Köln, 2 March 2009
Wirtschaftsprüfungsgesellschaft (formerly KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft)
Prof. Dr Nonnenmacher Dr Böttcher Auditor Auditor
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