19. Goodwill

Goodwill amounts to €3,361 million (30/9/2015: €3,301 million).

In the METRO Cash & Carry Horeca segment, the acquisition of food supplier Rungis Express resulted in goodwill of €37 million. The initial consolidation of the Spanish food service distribution company MIDBAN resulted in goodwill of €10 million. In addition, the goodwill of Classic Fine Foods was adjusted by €1 million.

In the Media-Saturn segment, the acquisition of the RTS group resulted in a goodwill increase of €12 million.

At the closing date, the breakdown of goodwill among the major cash-generating units was as shown below:

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30/9/2015

30/9/2016

 

 

 

 

 

 

WACC

WACC

 

€ million1

%1

€ million

%

1

The previous year’s figures were adjusted to improve comparability

METRO Cash & Carry Horeca

1,078

5.9

1,126

6.3

Real Germany

638

5.4

638

5.1

METRO Cash & Carry multispecialists

630

6.5

630

7.4

METRO Cash & Carry traders

332

8.3

332

9.5

Media-Saturn Germany / Redcoon group

300

6.3

300

6.4

Media-Saturn Italy

72

7.5

72

9.2

Others (each < €50 million or corporate assets)

251

 

263

 

 

3,301

 

3,361

 

In accordance with IFRS 3 in conjunction with IAS 36, goodwill is tested for impairment once a year. This is carried out at the level of a group of cash-generating units. In the case of goodwill, this group is the operating segment at METRO Cash & Carry and the organisational unit sales line per country at Real and Media-Saturn. As part of the rollout of the New Operating Model from 1 October 2015, the individual METRO Cash & Carry countries were classified into three clusters: Horeca, multispecialists and traders. The Horeca cluster includes France, Germany, Italy, Japan, Portugal, Spain, Turkey and Classic Fine Foods. Multispecialists include Austria, Belgium, Bulgaria, China, Croatia, India, Kazakhstan, the Netherlands, Pakistan, Russia, Serbia, Slovakia, the Czech Republic and Hungary. The traders cluster includes Moldova, Poland, Romania and Ukraine. As a result, goodwill monitoring is no longer conducted at the level of the organisational unit sales line per country, but at the level of the three clusters.

In the Media-Saturn segment, exceptions from the division into organisational unit per country include Media-Saturn Germany and the Redcoon group as well as Media-Saturn Netherlands and the iBOOD group. Due to their close organisational ties, these are bundled into the cash-generating units Media-Saturn Germany / Redcoon group and Media-Saturn / iBOOD group. In the impairment test, the cumulative carrying amount of the group of cash-generating units is compared with the recoverable amount. The recoverable amount is defined as the fair value less costs to sell, which is calculated from discounted future cash flows and the level 3 input parameters of the fair value hierarchy.

The description of the fair value hierarchies is included in no. 41 – carrying amounts and fair values according to measurement categories.

Expected future cash flows are based on a qualified planning process under consideration of intra-group experience as well as macroeconomic data collected by third-party sources. In principle, the detailed planning period comprises three years. In exceptional cases, it may amount to five years in the case of longer-term detailed planning. As in the previous year, the growth rates considered at the end of the detailed planning period are generally 1.0 per cent, with the exception of the group of the cash-generating unit Real Germany, for which a growth rate of 0.5 per cent is assumed, as in the previous year. The capitalisation rate as the weighted average cost of capital (WACC) is determined using the capital asset pricing model. In the process, an individual peer group is assumed for all groups of cash-generating units operating in the same business segment. In addition, the capitalisation rates are determined on the basis of an assumed basic interest rate of 0.9 per cent (30/9/2015: 1.25 per cent) and a market risk premium of 6.75 per cent (30/9/2015: 6.75 per cent) in Germany as well as a beta factor of 1.03 to 1.13 (30/9/2015: 0.94 to 1.09). Country-specific risk premiums based on the respective country rating are applied to the equity cost of capital and to the debt cost of capital. The capitalisation rates after taxes determined individually for each group of cash-generating units range from 5.1 to 9.5 per cent (30/9/2015: 5.4 to 8.3 per cent).

The mandatory annual impairment test as of 30 September 2016 resulted in the following assumptions regarding the development of sales, EBIT and the EBIT margin targeted for valuation purposes during the detailed planning period, with the EBIT margin reflecting the ratio of EBIT to net sales:

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Sales

EBIT

EBIT margin

Detailed planning period (years)

METRO Cash & Carry Horeca

Solid growth

Substantial growth

Slight growth

3

Real Germany

Slight growth

Substantial growth

Slight growth

5

METRO Cash & Carry multispecialists

Solid growth

Slight growth

Unchanged

3

METRO Cash & Carry traders

Slight growth

Slight growth

Slight growth

4

Media-Saturn Germany / Redcoon group

Solid growth

Solid growth

Unchanged

3

As of 30 September 2016, the prescribed annual impairment test confirmed the recoverability of all capitalised goodwill.

In addition to the impairment test, three sensitivity analyses were conducted for each group of cash-generating units. The first sensitivity analysis was based on the assumption of a 1 percentage point lower growth rate. In the second sensitivity analysis, the interest rate for each group of cash-generating units was raised by 10.0 per cent. In the third sensitivity analysis, a lump sum discount of 10.0 per cent was applied to assumed perpetual EBIT. With the exception of Real Germany and METRO Cash & Carry traders, these changes to the underlying assumptions would not result in impairment at any of the groups of cash-generating units.

In the goodwill impairment test at Real Germany, the fair value less costs to sell exceeded the carrying amount by €54 million. The corresponding amount for METRO Cash & Carry traders was €9 million.

Assuming a 0.3 percentage point lower growth rate or a capitalisation rate of 5.3 per cent rather than 5.1 per cent or an assumed perpetual EBIT of €130 million rather than €135 million, the fair value less costs to sell of Real Germany would correspond to the carrying amount. For METRO Cash & Carry traders, fair value less costs to sell would correspond to the carrying amount assuming a 0.2 percentage point lower growth rate or a capitalisation rate of 9.6 per cent rather than 9.5 per cent or an assumed perpetual EBIT of €80 million rather than €81 million.

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€ million

Goodwill

Acquisition or production costs

 

As of 1/10/2014

3,860

Currency translation

0

Additions to consolidation group

0

Additions

184

Disposals

0

Reclassifications under IFRS 5

−116

Transfers

0

As of 30/9 / 1/10/2015

3,928

Currency translation

0

Additions to consolidation group

0

Additions

60

Disposals

−0

Reclassifications under IFRS 5

0

Transfers

0

As of 30/9/2016

3,988

Depreciation/amortisation/impairment losses

 

As of 1/10/2014

189

Currency translation

0

Additions, scheduled

0

Additions, non-scheduled

457

Disposals

0

Reclassifications under IFRS 5

−20

Reversals of impairment losses

0

Transfers

0

As of 30/9 / 1/10/2015

627

Currency translation

0

Additions, scheduled

0

Additions, non-scheduled

0

Disposals

0

Reclassifications under IFRS 5

0

Reversals of impairment losses

0

Transfers

0

As of 30/9/2016

627

Carrying amount at 1/10/2014

3,671

Carrying amount at 30/9/2015

3,301

Carrying amount at 30/9/2016

3,361