METRO GROUP’s rigorous focus on creating added value for customers is also reflected in our internal management system. The primary objective is to create sustained value for the company by focusing on added value for customers. For this reason, METRO GROUP has been using value-oriented performance metrics to plan, manage and monitor business activities. The corresponding value drivers that have a direct impact on value creation form the core of our operational management system. Our focus in this process is on growth (sales), operational earnings strength (EBIT) and optimised capital deployment. The key metrics for METRO GROUP are sales growth and EBIT before special items.
The calculation of key performance metrics generally follows the approach for calculating the key figures of the consolidated financial statements prepared in accordance with the International Financial Reporting Standards (IFRS), that is sales growth, earnings per share, profit or loss for the period as well as cash flow before financing activities.
In addition, METRO GROUP is managed on the basis of alternative performance indicators such as like-for-like sales growth in local currency, EBIT before special items, EBITDA before special items, investments, net working capital, net debt, EBIT after cost of capital and return on capital employed (RoCE). METRO GROUP believes that these alternative performance indicators offer readers of the financial statements additional useful information about fundamental business developments and METRO GROUP’s current situation, providing a better foundation for an analysis of METRO GROUP’s performance strength. These alternative performance indicators are calculated regularly based on a uniform approach, which ensures that metrics from different financial years can be compared. However, as they have not been defined on the basis of IFRS, direct comparisons with the key figures of other companies are not possible. As such, they cannot replace key figures calculated in accordance with IFRS.
Please note that, in line with the formal specifications of German Accounting Standard No. 20 (GAS 20), only the most meaningful key performance indicators (sales growth as well as EBIT before special items) are part of the outlook and the comparison with actual business developments in the following year that is based on this outlook. The outlook regularly applies to the current group structure on the date the forecast is issued.
Key performance indicators: earnings position
As a key operational performance indicator, sales growth is reported both as total sales in euros and in local currency as well as like-for-like sales in local currency. Adjustments to group structures are called portfolio measures and are explained separately.
Sales growth adjusted for selling space, reflecting sales growth in local currency on a comparable area or with respect to a comparable group of locations or sales concepts such as online and delivery. The figure only includes sales of locations with a comparable history of at least one year. This means that locations affected by openings, closures or material refurbishments during the reporting period or comparable year are excluded.
To enhance its assessments of operational developments, the Management Board also regularly informs itself about the key drivers of sales development, such as the online or delivery business.
The second key performance indicator is EBIT before special items. EBITDA before special items is also used as a key performance indicator. It is calculated from EBIT plus depreciation/amortisation/impairment losses. Adjustment for special items reflects a focus on operational developments and serves to enhance comparisons between the reporting periods.
Business transactions or a number of uniform business transactions that do not recur regularly, that are reflected in the income statement and that have a significant impact on business activities are classified as special items. As a result, the presentation of special items better reflects ordinary business performance and contributes to a better understanding of the earnings position.
Earnings per share and profit or loss for the period are also included in METRO GROUP’s performance metrics. They integrate the tax and net financial result into management of the earnings position and enable shareholders to better assess the group’s earnings position.
Performance metrics: financial and asset position
METRO GROUP manages its financial and asset position to ensure the long-term liquidity of group companies and cover their funding requirements in a cost-efficient manner.
Key performance indicators include investments, which are planned and reported on aggregate group level as well as separately for the sales lines. In addition, the Management Board conducts differentiated assessments of various investments (for example, expansion, online business, modernisations and refurbishments) with a view to enhancing customer value and METRO GROUP’s company value. Investments are defined as additions to non-current assets based on the consolidated financial statements pursuant to IFRS with the exception of financial instruments and deferred tax assets.
Aside from the focus on investments, regular net working capital analyses are carried out to maintain a focus on operations and optimised capital deployment. Changes in net working capital result from changes in inventories, trade receivables and receivables due from suppliers included in the item other financial and non-financial assets, credit card receivables and prepayments made on inventories. In addition, the item includes changes in trade liabilities and liabilities to customers, deferred sales related to vouchers, customer loyalty programmes, provisions for customer loyalty programmes and rights of return as well as prepayments made on orders.
Investments and net working capital not only impact customer benefits and the company’s value creation, but also have an effect on the company’s indebtedness and financial position. In addition, cash flow before financing activities and net debt are used as key performance indicators to guarantee liquidity and optimise the capital structure.
Net debt is calculated by netting financial liabilities including finance leases against cash and cash equivalents according to the balance sheet as well as monetary investments. Monetary investments comprise bank deposits with residual terms of more than three to twelve months as well as near money market investments that are not classified as cash and cash equivalents, such as short-term, liquid debt instruments and shares in money market funds.
Value-oriented performance metrics
As METRO GROUP’s management system is strongly focused on value creation for the company, it also comprises value-oriented key performance indicators such as EBIT after cost of capital (EBITaC) and return on capital employed (RoCE), which are based on the above-mentioned operational key performance indicators.