Value-based management

METRO GROUP’s strength is reflected, among other things, in its ability to continuously increase the company’s value through growth and operational efficiency as well as optimal capital deployment. METRO GROUP has also been using value-oriented performance metrics which draw on operational key performance indicators since 2000 to ensure the company’s sustained value creation. Since 2009, we have measured the value contribution in terms of EBITaC (EBIT after cost of capital). Under the EBITaC concept, a positive value contribution is achieved when earnings before interest and taxes exceed the cost of capital needed to finance the average capital employed.


= EBIT1 – cost of capital
= EBIT1 – (capital employed x WACC2)

Special items generally periodised over four years
WACC = weighted average cost of capital

The use of the performance metric EBITaC generally enables METRO GROUP to focus on the key drivers of the operating business that management can influence: value-adding growth, increases in operational efficiency and optimisation of capital employed. Value-adding growth is achieved through our strategy of focusing on like-for-like sales growth in the company’s existing markets, complementing the stationary business through targeted new sales channels such as online retail and delivery services as well as accelerating its expansion in select countries. In each case, our customers are at the core of our thinking and acting. As part of the expansion strategy, we have now added India to the list of key expansion countries for our wholesale business. The other countries are Russia, China and Turkey. In addition, we continue to implement measures to ensure operational and administrative efficiency and are forging ahead with the optimisation of capital deployment. We are achieving this latter goal by taking such steps as offering tailored solutions for individual customer target groups. In this work, customer-focused product group management based on specific needs in terms of product range, price groups, packaging and marketing plays a key role.

The cost of capital reflects the expected remuneration of investors for the capital they provide and for their investment risk before taxes. It is calculated by multiplying the average capital employed by the weighted average cost of capital before taxes (WACC).

The cost of capital before taxes is calculated on the basis of capital market models. It corresponds to the minimum return on capital demanded by capital providers. As such, it reflects the total cost of capital employed and thus consists of equity and debt capital costs. In financial year 2013/14, METRO GROUP’s cost of capital before taxes amounted to 9.0 per cent. This is calculated on the basis of an aggregation of segment-specific cost of capital.

Capital employed represents interest-carrying assets. It comprises segment assets plus cash and cash equivalents less trade liabilities as well as other operational liabilities and deferred income. We use an average capital employed calculated from quarterly financial statements in order to also consider developments in capital employed that occur during the relevant period.

In the calculation of EBITaC, special items are generally distributed over four years on a straight-line basis and considered in EBIT. As the respective positive EBIT effects largely arise with a time lag to expenses, the distribution of these special items over several years provides for an improved presentation of operating performance. As a result, short-term special effects do not fully impact earnings during the period in which they occur.

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€ million





Previous year adjusted for comparability reasons


The effect of the special items is spread over four years

EBIT before special items




EBIT after periodisation of special items2




Capital employed




WACC before taxes




Cost of capital








In 2013/14, EBIT after periodisation of special items from previous years (2010/11: €177 million, 2011/12: €463 million, 2012/13: €313 million) and periodised one-time expenses from 2013/14 totalling €454 million amounted to €1,376 million. Given an average capital employed of €13,579 million, the cost of capital amounted to €1,222 million. Despite the slow pace of the economy, METRO GROUP successfully deployed its capital in 2013/14 and achieved a positive EBITaC of €153 million. The decrease was due in particular to the decline of income from real estate transactions as part of the transformation of the real estate strategy, the loss of earnings contributions resulting from the disposal of Real’s business in Eastern Europe and negative currency effects.

Alongside EBITaC, the metric return on capital employed (RoCE) is used for the purpose of better comparability of the individual segments. RoCE measures the return on business assets deployed during the review period. For the purpose of this segment comparison, business assets also include cash rental values to account for the different ownership structures of real estate assets. METRO GROUP bases its calculation of RoCE on EBIT before special items because it adequately reflects the units’ operational earnings strength independent of special effects.

RoCE = EBIT1 / business assets including cash rental values

1 EBIT before special items

RoCE is contrasted with the segment-specific capital cost rate before taxes as the latter represents a market-oriented minimum rate of interest on capital employed based on capital market models.

The results of the EBITaC and RoCE analysis are used, among other things, for the management of METRO GROUP’s portfolio as well as for the allocation of investment funds. Medium-to-long-term effects on value creation are the key factors determining the allocation of investment funds. As a result, the present value of future value added represents the key criterion for all investments within METRO GROUP. In order to also consider tax aspects in decisions on future expansion, value added after taxes is calculated. Additional criteria used to assess investment projects include in particular discounted cash flow and the cash recovery period as liquidity-based key performance metrics. As part of the continuously strong prioritisation during the allocation process of investment funds, profitability metrics relating to the funds deployed are used in addition to strategic relevance to assess alternative investment projects.