Metro AG Annual Report 2019

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FY2019 Annual Report · Metro AG

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ANNUAL REPORT
2018/19

Consolidated financial statements of METRO AG

WHOLE-
SALE

360

wGESCHÄFTSBERICHT 2018/19Konzernabschluss der METRO AG360WHOLE- SALEMETRO IN FIGURES

€ million

Key financial figures for continuing operations

Sales development (like-for-like)

Sales development in local currency

Sales (net)

EBITDA excluding earnings contributions from real estate transactions

Earnings contributions from real estate transactions

EBITDA

EBIT

EBT (earnings before taxes)

Profit or loss for the period2

Earnings per share (basic = diluted)

Cash flow from operating activities

Investments

Net debt

2017/181

2018/19

Change
in %

€

1.3

2.1

2.2

26,792

27,082

1,088

128

1,216

713

576

357

0.98

766

565

3,102

1,021

338

1,359

828

709

405

1.12

796

499

2,858

–

1.1

−6.1

–

11.8

16.1

23.1

13.7

3.9

−11.7

−7.9

−3.1

Employees (annual average by headcount)

104,912

101,654

1 Previous year’s adjustment due to discontinued operations.
2 Attributable to METRO shareholders.

€ million

2017/18

2018/19

Change in %

Key financial figures for continuing operations, incl.
METRO China (outlook analysis)

Sales development (like-for-like)

Sales development in local currency

Sales (net)

EBITDA excluding earnings contributions from real estate
transactions

EBITDA excluding earnings contributions from real estate
transactions
Development1

Profit or loss for the period2

Earnings per share (basic = diluted)

Dividend per ordinary share

Dividend per preference share

1 At constant exchange rates.
2 Attributable to METRO shareholders.
3 Subject to the resolution of the Annual General Meeting.

€

1.3

1.5

2.4

2.5

29,476

29,928

–

1.5

1,242

1,173

−5.5

1.2

443

1.22

0.70

−4.2

523

1.44

0.703

–

18.0

–

In October 2019, METRO signed an agreement to sell a majority stake in METRO China to

Wumei. As a result of the sale METRO China is reported as a discontinued operation as of

30 September 2019 in accordance with IFRS 5.

Unless expressly stated otherwise, all presentations refer to continuing operations

(excluding the hypermarket business and excluding METRO China).

Only the comparison of outlook with actual business developments as well as the

dividend proposal refer to the outlook issued for 2018/19 which includes METRO China.

TO OUR SHAREHOLDERS

155

Letter to the shareholders

The Management Board

The year in review

Report of the Supervisory Board

METRO share

GOALS AND STRATEGY

COMBINED MANAGEMENT
REPORT

1 Overview of financial year 2018/19 and
outlook

2 Principles of the group

3 Economic report

103

4 Report on events after the closing date

and outlook

108

124

141

150

5 Opportunities and risk report

6 Remuneration report

7 Takeover-related disclosures

8 Supplementary notes for METRO AG
(pursuant to the German Commercial
Code)

CONSOLIDATED
FINANCIAL STATEMENTS
AND NOTES

Income statement

Reconciliation from profit or loss for the
period to total comprehensive income

Balance sheet

Statement of changes in equity

Cash flow statement

Notes

158

159

160

162

164

167

314

RESPONSIBILITY
STATEMENT OF THE LEGAL
REPRESENTATIVES

315

INDEPENDENT AUDITOR’S
REPORT

327

SERVICE

LETTER TO THE
SHAREHOLDERS

THE MANAGEMENT BOARD

THE YEAR IN REVIEW

REPORT OF THE
SUPERVISORY BOARD

METRO SHARE

TO OUR SHAREHOLDERST O O U R
S H A R E H O L D E R S

L E T T E R T O T H E S H A R E H O L D E R S

LETTER TO

THE SHAREHOLDERS

Our origin is wholesale, wholesale is our

demonstrably forged ahead with portfolio

future. We have consistently aligned our

simplification. This allowed us to reduce the

company in that direction in recent years.

company’s debt by around €5 billion. At the

Since 2012, we have focused all our efforts

same time, we have been expanding our

on wholesale while simultaneously

core business, wholesale. With a consistent

modernising and localising our business

focus on the 2 core customer groups

models. The restructuring of the group took

HoReCa (hotels, restaurants and catering

high priority. For example, with more than

companies) and Traders (independent

one major annual transaction in the area of

grocery stores) we were once again able to

mergers and acquisitions, we have

report noticeable sales growth in the past

financial year. This enabled us to create the

foundation for further growth and to

identify new business opportunities. All

things considered, we are much more vital

and agile today than at the beginning of our

transformation. This also puts us in a

position to respond much faster to an

increasingly dynamic market environment.

As a shareholder, you join us in the

implementation of our strategy. During the

group restructuring phase we were able to

distribute more than €2 billion to our

shareholders. Thank you for supporting us

on this path.

In financial year 2018/19, we made great

progress with our transformation strategy

once again:

The sale of the hypermarket business is

well advanced. We are in the final stages

of negotiations and are working with the

potential buyer on the future concept for

Real, which includes retaining part of the

core business and passing on some store

networks to competitors. Moreover, the

early involvement of the antitrust

authorities has increased transaction

CEO video in the online report:
https://reports.metroag.de

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

T O O U R
S H A R E H O L D E R S

L E T T E R T O T H E S H A R E H O L D E R S

security. Therefore, we are confident that

Supplemented by income from real

we will be able to sign off on the

estate transactions in the amount of

transaction in the very near future.

€388 million which clearly exceeded

In October 2019, we signed an

expectations, a largely stable tax rate

agreement to sell a majority stake in

and a significantly improved financial

METRO China to Wumei. As a result of

result, we considerably increased

the sale, the global share of sales of the

earnings per share from 1.22 to 1.44

core customer groups HoReCa and

(including METRO China). On this basis,

Traders will increase significantly, while

we will propose a dividend of €0.70 per

METRO’s 20% stake will open up various

share to the Annual General Meeting of

strategic partnership opportunities with

METRO AG. This dividend proposal

Wumei. We expect this transaction to

corresponds to 49% of earnings per

result in a net cash inflow of more than

share (including METRO China) and is

€1 billion, after deduction of debt, taxes

thus in line with our dividend policy.

and other transaction costs. These

proceeds will provide room and flexibility

for future growth initiatives. As a result

of the sale, METRO China is reported as a

discontinued operation as of

30 September 2019 in accordance with

IFRS 5. However, selectively it is still

included in this annual report for the

purpose of comparison with the outlook

for the past financial year and as the

basis for the dividend proposal.

With the completed reduction of the

conglomerate, the focus on the wholesale

business and the expansion of service

offerings for our customers, we will succeed

in further increasing the value of the

company. As part of the voluntary takeover

offer by EP Global Commerce (EPGC),

whom we welcome among our

shareholders, you, our current shareholders,

have held onto a majority of your shares. By

doing so, you have confirmed your

Group-wide, we achieved like-for-like

confidence in METRO’s strategy and we

sales growth of 2.4% including METRO

thank you for that.

China. This is the highest growth in the

last decade for METRO Wholesale. This

clearly shows how our strategic

approach Wholesale 360 increases

Focus on wholesale

customer relevance and consequently

Let me take this opportunity to explain in

our sales.

more detail why the wholesale business

As expected, EBITDA from operating

offers so many opportunities for us. METRO

activities of the group as a whole

declined by −4.2% due to higher

operates in attractive and constantly

growing markets. The addressable HoReCa

investments in IT and digitalisation as

and Traders markets comprise more than

well as the ongoing macroeconomic

€650 billion and more than €850 billion,

challenges in Russia. By contrast, EBITDA

respectively, for our country portfolio.

grew in the Western Europe, Germany

Growth rates in these markets continue to

and Asia segments.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

rise, driven primarily by increasing

disposable income and more people eating

out. Our clear focus on added value for

professional customers will further increase

our relevance for these target groups.

Consequently, growth rates in our core

business will also continue to develop

positively. Market consolidation offers

T O O U R
S H A R E H O L D E R S

L E T T E R T O T H E S H A R E H O L D E R S

another opportunity for growth in

In order to consistently align ourselves to

wholesale. We operate in very fragmented

the needs of our customers, we continually

markets with plenty of opportunities for

ask them for their opinion. With the Net

additional dynamic growth through

Promoter Score (NPS), we frequently

acquisitions. We intend to make greater use

collect feedback and measure customer

of this opportunity in the coming years,

satisfaction in order to identify

particularly in our European countries.

improvement potential and prioritise

We strive for long-term customer

operational projects. The Net Promoter

relationships characterised by a high level

Score has been introduced worldwide in all

of loyalty. Currently, 78% of our sales are

METRO stores and distribution centres, with

generated by customers who purchase

all countries exhibiting positive NPS ratings.

goods and services from us on a regular

So far, METRO has received feedback from

basis. Moreover, orders from HoReCa and

roundly 2.2 million customers and more

Traders customers average approximately

than 610,000 callbacks have already taken

€225, while purchases from retail

place.

consumers only come in at around one

METRO is well positioned to play a

tenth of this value.

leading role in the HoReCa and Traders

Our strong localisation efforts have made

sector and is increasingly exploiting this

us a preferred partner for professional

opportunity: once the sale of the majority

customers in many countries. This wealth of

stakes of METRO China is completed, the

data enables us to better understand the

core customer groups will account for 70%

needs of our customers and accommodate

of total sales. This is more than

them even better. At the same time, we are

10 percentage points above the level of

constantly working on improving the

about 10 years ago. Like-for-like sales

efficiency of our operations, because we

growth for these 2 target groups in financial

know that with every saving that we get, we

year 2018/19 was 4.2% for HoReCa sales

can invest into generating additional value

and 5.1% for Traders sales in the focus

for our customers. This also includes further

countries.

development of our own brands. In 2017, we

joined forces with professional chefs to

align our brand image and product range

with the wholesale sector. In 2018 we rolled

out this product mix in all countries, and

like-for-like sales of own-brands grew by 3%

in financial year 2018/19. The sales share is

now 16%. We still see a lot of potential here

beyond the current successes – especially

with HoReCa customers and in the delivery

business.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

On the way to becoming a complete
solution partner – the Wholesale
360 approach

We have laid the foundation for a successful

future, but what happens next? How can we

build on the accelerating growth to further

increase customer relevance and capture

additional market share? The answer lies at

the heart of our strategy. Since 2012, we

have been working continuously to

contribute to the success of our

professional customers. We are

accomplishing this with tailor-made product

assortments, improved sales channels and,

increasingly, also by inspiring and training

our customers. Our goal is to be the

preferred partner for our professional

customers. How can we assert this claim

T O O U R
S H A R E H O L D E R S

L E T T E R T O T H E S H A R E H O L D E R S

even more? Only by putting ourselves

solution that combines online wholesale

completely in the shoes of our customers

with delivery service.

and identifying the challenges they face.

In the Traders segment, we continued to

And there are many. Rising costs, higher

roll out and optimise our franchise system,

regulatory requirements, increasing

which is primarily represented in Eastern

competitive pressure and staff shortages

Europe under various names. We provide

are just a few examples. The reality in our

our customers with a comprehensive range

customers’ operations is often very similar:

of support services that enable them to

a great deal of passion but very little

compete with retail chains. Today we

support. We want to change that by

already have 7,460 franchisees as METRO

supporting them with digital tools, advice

partners and we are determined to provide

and services. Our goal is to offer our

additional solutions. This includes various

customers added value in as many areas as

digital tools and an online ordering system

possible. We call this Wholesale 360. Of

that already significantly simplifies the

course, we will not be able to do this on our

ordering process thus ties our customers

own. Rather, we will focus on targeted

more closely to METRO.

partnerships. We are convinced that this

approach will help us make our customers

even more successful. We are aspiring to

intensify our customer relationships and are

already seeing the fruits of our work today

as these initiatives are leading to the

acquisition of many new customers. Service

quality in the core business is and remains a

7,460

franchisees

key component. In financial year 2018/19,

For HoReCa customers, we want to

we were able to further increase these in

continuously expand our range of services.

various countries.

One of our goals is to provide the widest

The delivery business continued to grow

range of products. To this end, we created a

strongly at around 10% and thus accounted

new platform: METRO MARKETS. In

for a share of 17% of total sales. The delivery

September 2019, we launched the online

companies Classic Fine Foods in Asia, Pro à

B2B marketplace developed especially for

Pro in France and Rungis Express in

wholesale business, which builds on the

Germany and Switzerland significantly

experience of Real’s highly successful

contributed to this growth. This

marketplace. We sell our own goods via this

development was also facilitated by the roll-

platform, but at the same time also work

out of our online ordering system, which

together with strong trading partners. We

significantly simplifies and accelerates

make our brand and our reach available to

recurring ordering processes for HoReCa

HoReCa specialists from all over the world.

customers in particular. As a result, the

METRO MARKETS is clearly aimed at

average order ticket rose by up to 18%. In

HoReCa customers and offers a wide range

financial year 2018/19, we processed

of non-food products tailored to the

approximately 5.3 million orders using this

hospitality industry. After only 2 months,

tool. In March 2019, METRO also supported

the marketplace already offered around

thedelivery business by entering the

Myanmar market. In contrast to other

87,000 non-food articles for the hospitality

industry through 110 partners. In just a few

countries, METRO does not operate any

months, we will multiply the assortment

store-based wholesale stores in Myanmar,

range and depth and thus offer

but offers customers a purchasing

restaurateurs further significant added

experience with a virtual one-stop shop

value.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

T O O U R
S H A R E H O L D E R S

L E T T E R T O T H E S H A R E H O L D E R S

We have also made good progress in the

The collected data continuously open up

digitalisation of the hospitality industry. In

new possibilities. By analysing the

particular, our proprietary digital tools have

ingredients of a meal, ideas can be

received a very good response. The DISH

developed as to how work steps can be

platform connects restaurateurs online and

further optimised with modern equipment.

offers them digital tools for more efficient

Does this mean that METRO wants to fully

operation of their businesses. Today, it

dive into this sector? No, but it has inspired

already has more than 170,000 customers

us to look for ways to target this

who use digital services such as a fully

opportunity. In July 2019, we entered into a

comprehensive online presence or the

cooperation with Pentagast, Germany’s

reservation tool. Our goal is to make the

largest association of 24 hospitality and

data the best ingredient in the hospitality

canteen kitchen suppliers. The goal of this

industry. With our MenuKit, we digitalise the

partnership is to offer restaurateurs tailor-

menus of our customers. The data obtained

made solutions from a single source and to

through this method offer a variety of

merge the 2 industry competences of food

insights, which we communicate to our

and technology. For example, restaurateurs

customers through our specialist advice.

will be able to acquire tailor-made offers for

This allows us to significantly increase their

efficient and economical kitchen solutions

entrepreneurial success and in turn open up

in the future under the name SMART &

new potential for METRO. A similarly strong

EASY. Showrooms are also planned in

potential is offered by the analysis of POS

selected METRO stores in order to exhibit a

data. The specially designed cockpit

selection of the Pentagast product range in

increases the transparency of economic

the non-food assortment on an area of

relationships even more, so that

approximately 100 m². Additional

restaurateurs can use this tool as a ‘control

partnerships of this kind are in the works,

centre’ for their business decisions. All

for example to support our customers with

these examples show that the digitalisation

customised financing.

of the hospitality industry can open up

We have also made considerable

considerable economic potential. METRO is

progress this year when it comes to our

ideally positioned to drive this trend

sustainability initiatives. In addition to its

forward and further increase its relevance

renewed certification as the best in the

for professional customers.

industry in the Dow Jones Sustainability

Index Europe, METRO is also listed as a

member of the sustainability stock market

index FTSE4Good. This is an enormous sign

of appreciation of our work.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

T O O U R
S H A R E H O L D E R S

L E T T E R T O T H E S H A R E H O L D E R S

With our focus on the food sector, we

Outlook

rely on 3 main topics:

Financial year 2018/19 was a successful year

across the entire METRO organisation.

Including METRO China, METRO increased

like-for-like sales by 2.4% in financial year

2018/19 and thus significantly increased the

growth momentum. Reported sales of

€29.9 billion were €0.4 billion higher than in

the previous year’s figures. EBITDA

excluding earnings contributions from real

estate transactions amounted to

€1,173 million. Adjusted for currency effects,

EBITDA excluding earnings contributions

from real estate transactions was down

€52 million or −4.2% compared to the

previous year’s figures. METRO has thus

achieved its targets for financial year 2018/

19.

In this annual report, our hypermarket

business and METRO China are reported as

discontinued operations. We expect both

transactions to be closed shortly. Therefore,

the outlook for financial year 2019/20 only

covers our continuing operations.

For financial year 2019/20, based on the

assumption of stable exchange rates and no

further adjustments to the portfolio, we

expect total sales and like-for-like sales to

grow by 1.5% to 3%. This includes a further

trend improvement in Russia and a flat sales

development in Germany. Western Europe

(excluding Germany), Eastern Europe

(excluding Russia) and Asia are expected to

grow at the previous year’s level. Across all

segments, the Management Board sees the

FSD business in particular and the

synergetic interaction of the various

channels as well as the focus on HoReCa

and Traders customers as growth drivers.

We want to make our range of products

and services more sustainable by

positively influencing the availability,

quality and health as well as the social

and environmental safety of food.

We promote more conscious

consumption, especially through the use

of alternative proteins.

By pooling our partnership strengths, we

are fighting against food waste.

50%

reduced food waste by
2025

In financial year 2018/19, for example,

METRO was the first retail company in

Germany to have its climate targets

confirmed by the Science Based Targets

initiative (SBTi). Based on estimates of the

Science Based Target initiative, METRO is

working towards a climate target of ‘well

below 2 °C’ by 2030 by reducing the

submitted commitments in category 1 (for

example fluorinated gases from cooling in

wholesale stores) and category 2 (for

example emissions from acquired

electricity) by 60% per square metre of

selling and delivery space compared to the

base year 2011. METRO's climate targets are

thus in line with the reductions required to

keep global warming well below 2 °C.

Furthermore, as part of its commitment to

the New Plastics Economy of the Ellen

MacArthur Foundation, METRO has set the

goal of reducing another 300 tonnes of

plastic packaging by September 2023

(basis: October 2018). As a member of the

Consumer Goods Forum, METRO has also

undertaken to reduce food waste in its own

operations by 50% by 2025 compared to

2016.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

T O O U R
S H A R E H O L D E R S

L E T T E R T O T H E S H A R E H O L D E R S

An important focus of METRO is on

survey. This year we were able to record a

increasing operating efficiency and portfolio

commitment value of 74%. Thus, we are

simplification. Against this background, the

once again well above average for the retail

Management Board announced to adopt

sector, which is 65% worldwide.

efficiency measures on 19 November 2019.

Dear shareholders, I want to take this

In financial year 2019/20, the Management

opportunity to thank you very much. In

Board expects this to result in non-recurring

financial year 2018/19, you once again

transfomation costs of €60 million to

proved that you believe in METRO and our

€80 million.

future success. We find ourselves in a

Before transfomation costs for these

stronger position than a year ago. Our core

efficiency measures, the Management Board

business is getting better and better; our

expects EBITDA excluding earnings

profile as a focused wholesaler is becoming

contributions from real estate transactions

ever clearer; our opportunities to open up

to be roughly at the level of the past

new wholesale business areas are growing

financial year (2018/19: €1,021 million).

continuously; and our motivation to

Earnings in Russia are expected to decline

constantly work on new ideas in order to

by between €20 million and €30 million as

provide even better solutions for our

a result of the ongoing repositioning.

customers has never been as high. In

Earnings growth in Germany and Western

addition, the transaction in China will

Europe (excluding Germany) is expected to

significantly boost our balance sheet and

compensate for this. For the remaining

increase our strategic ability to act.

segments EBITDA is expected to remain

My colleagues and I look forward to

roughly at the previous year's level.

another exciting financial year in which we

The transformation of our company is

intend to further enhance our performance

progressing steadily. This requires the full

profile in order to firmly establish a clear

commitment of all parties involved. In the

image in the eyes of our customers: METRO

wholesale segment, the key success factor

is my partner – unmatched in quality,

is our team. Our team members are in daily

service and innovation.

contact with our customers, procure unique

Yours truly,

products, develop new concepts and ensure

high efficiency of our company. We would

therefore like to express our sincere

gratitude to all our employees for their

commitment and motivation. Their

commitment is the foundation for future

success. Therefore, we assess the

satisfaction level of our employees several

times a year by means of an employee

Olaf Koch

Chairman of the Management Board of

METRO AG

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

THE MANAGEMENT
BOARD

Philippe

Heiko

Palaz zi

H ut macher

Olaf

Koch

Andrea

Christian

Euenheim

B aier

T O O U R
S H A R E H O L D E R S

T H E M A N A G E M E N T B O A R D

OLAF
KOCH

CHRISTIAN
BAIER

ANDREA
EUENHEIM

Chairman of the
Management Board

Areas of responsibility
Corporate Communications, Corporate
Public Policy, Corporate Development
including strategy and M&A, Corporate Legal
Affairs & Compliance, Corporate Office,
Corporate Investor Relations, responsibility
for the METRO Wholesale country
organisations in: Bulgaria, Germany including
Rungis Express, Croatia, Moldova, Austria,
Serbia, Slovakia, Czech Republic, Romania,
Ukraine and Hungary, Hospitality Digital,
METRO MARKETS, METRO-NOM (since
1 October 2019), Real.

Profile
Olaf Koch was appointed Chief Executive
Officer of METRO AG on 2 March 2017 for a
term ending on 1 March 2022. From
14 September 2009 until the end of 2011 he
was a member of the Management Board
(Chief Financial Officer) of the former
METRO AG (now: CECONOMY AG), and from
1 January 2012 to 12 July 2017 he was the
Chief Executive Officer of the company. He
was previously employed at the financial
investor Permira. Following his graduation in
business administration, Mr Koch started his
career at Daimler-Benz AG in 1994. He was a
board member of Mercedes Car Group from
2002 to 2007.

Chief Financial Officer

Areas of responsibility
Corporate Accounting, Corporate Controlling
& Finance, Corporate Risk Management,
Corporate Tax, Corporate Treasury, Global
Business Services (since 1 October 2019),
Group Internal Audit (since 1 October 2019),
METRO PROPERTIES, METRO LOGISTICS,
MIAG, METRO Insurance Broker.

Profile
Christian Baier was appointed member of the
Management Board of METRO AG on
11 November 2016. His current appointment
as a member of the Management Board runs
until 30 September 2020. In addition
Mr Baier is reappointed from this date until
30 September 2025. He was the Chief
Financial Officer (CFO) of
METRO Cash & Carry (now
METRO Wholesale) from 1 July 2015 to
1 March 2017 and previously held the position
of Group Director Strategy, Business
Innovation and M&A at the former
METRO AG (now: CECONOMY AG). Mr Baier
joined METRO Cash & Carry Germany (now
METRO Germany) as a member of the
Management Board/Head of Finance and
Administration – C+C Schaper – in the year
2011. He holds a BA in business
administration and an MBA from New York
University and was previously employed at
the finance investor Permira and a number of
banks.

Chief Human Resources
Officer and
Labour Director
Since 1 November 2019

Areas of responsibility
Human Resources (Campus HR,
Compensation, Global Mobility & HR
Processes, Global Talent Management &
Recruiting, HR Operations & Leadership,
Labour Relations Germany & Labour Law),
METRO Campus Services.

Profile
Andrea Euenheim was appointed member of
the Management Board and Labour Director
of METRO AG on 1 November 2019 for a term
ending on 31 October 2022.

Prior to that, she worked at Amazon in
Seattle, USA, from October 2015, initially as
HR Director of Global Consumer Products
and since the end of 2017 as HR Director of
Global Expansion, Mergers and Acquisitions
(M&A). Before moving to the USA, Andrea
Euenheim was responsible for personnel
management at Amazon Europe since 2007,
primarily overseeing Germany, Italy, Spain
and France. From 2001 to 2007, she worked
for General Electric, where her last position
was Head of Human Resources for Germany,
Austria and Switzerland at GE Commercial
Finance, Fleet Services. Andrea Euenheim
completed her master’s degree in linguistics,
sociology, psychology and business
administration at the University of Passau.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

T O O U R
S H A R E H O L D E R S

T H E M A N A G E M E N T B O A R D

HEIKO
HUTMACHER

PHILIPPE
PALAZZI

Member of the
Management Board
Until 31 December 2019

Areas of responsibility
In the period from 1 November to
31 December 2019, Heiko Hutmacher’s HR
responsibilities will be transferred to Andrea
Euenheim.

Until 30 September 2019, Heiko Hutmacher
was also responsible for Corporate
Responsibility, Customer Experience, Global
Business Services, Group Internal Audit and
METRO-NOM.

Profile
Heiko Hutmacher assumed his position as a
member of the Management Board on
2 March 2017 and was appointed Chief
Human Resources Officer and Labour
Director of METRO AG on 31 August 2017. His
appointment as Labour Director ended on
31 October 2019; Mr Heiko Hutmacher will
leave the company at his own request on
31 December 2019. He was a member of the
Management Board of the former METRO AG
(now: CECONOMY AG) from 1 October 2011
to 12 July 2017 and held the position of Chief
Human Resources Officer and Labour
Director. From April 2012 to June 2015,
Mr Hutmacher headed the Human Resources
Department at METRO Cash & Carry (now
METRO Wholesale). Mr Hutmacher holds a
degree in business administration. His
experience in human resources spans over
30 years, including posts at IBM and Akzo
Nobel.

Chief Operating Officer

Areas of responsibility
METRO Wholesale centralised functions
(Corporate Responsibility [since 1 October
2019], Customer Experience [since
1 November 2019], Digital Transformation,
Expansion & Investment, Food Service
Distribution, Global Branding & Activation,
Global Business & Supplier Management,
Global Food Sourcing, Global Non-Food,
Global Own Brand Management,
International Expansion, Pricing, Quality
Assurance, Supply Chain Management,
Trader Franchise), responsibility for the
METRO Wholesale country organisations in:
Belgium, China, France including Pro à Pro,
India, Italy, Japan, Kazakhstan, Myanmar, the
Netherlands, Pakistan, Poland, Portugal,
Russia, Spain and Turkey, Classic Fine Foods,
METRO ADVERTISING, METRO SOURCING
International.

Profile
Philippe Palazzi was appointed member of
the Management Board of METRO AG on
7 May 2018 for a term ending on
30 September 2021. From 1 July 2015 to
6 May 2018, he held the position of
Operating Partner with responsibility for
METRO France including Pro à Pro, MAKRO
Spain and MAKRO Portugal. He previously
held the position of Chief Customer and
Marketing Officer at METRO AG and various
posts at the METRO country organisations,
most recently as Chief Executive Officer of
METRO Italy.

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T O O U R
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T H E Y E A R I N R E V I E W

THE YEAR IN REVIEW

SELECTED EVENTS IN FINANCIAL YEAR 2018/19

Q1 2018/19

Q2 2018/19

Own Business Day
9/10/2018 – For the 3rd time, METRO honours the
commitment of small and medium-sized
entrepreneurs at Own Business Day. METRO
encourages own business owners to place their offers
online free of charge on a platform and thus become
part of a major marketing campaign.

DISH – digital service connects restaurateurs
16/10/2018 – As part of the METRO digital offensive,
interested restaurateurs can receive a free website.
The new DISH online platform offers hospitality
operators additional tools for more efficient
management of their businesses. They include a free
internet presence, a free online reservation tool and
other digital solutions from third-party providers.

Sustainability: Global commitments to the New
Plastics Economy
29/10/2018 – METRO signs the Ellen MacArthur
Foundation’s global commitment to the New Plastics
Economy. Among other things, 100% of plastic
packaging is supposed to be reusable, recyclable or
compostable by 2025.

Award for F-Gas Exit Programme
22/11/2018 – METRO is honoured at the ATMOsphere
Europe conference for the F-Gas Exit Programme as
the industry’s best food retailer. The programme is
part of METRO’s commitment to reduce CO2
emissions group-wide by 50% by 2030.

E-Commerce platform for Trader customers
27/11/2018 – In addition to the digital ordering
platform M-Shop for hospitality industry customers,
METRO launches a tailor-made online shop for Traders
customers in Romania. METRO-NOM cooperates with
IT service provider Spryker to set up the e-commerce
platform.

METRO and Target announce international start-up
programme
3/12/2018 – With the ‘METRO Target Retail
Accelerator certified by Techstars’, international start-
ups are given the opportunity to be supported by
mentors in their efforts to set up a company with
access to global wholesale and retail markets. For the
first time, METRO cooperates with Target, a leading
retail chain in the USA.

9 METRO companies named ‘Top Employer 2019’
14/2/2019 – Once again, the METRO national
subsidiaries in Belgium, Bulgaria, France, Italy,
Pakistan, Poland and Turkey have received the ‘Top
Employer’ award. METRO AG and METRO-NOM are
also certified for the first time. The award recognises
the fact that METRO places its employees at the
centre of its entrepreneurial activities and offers an
outstanding work environment.

Annual General Meeting approves dividend
15/2/2019 – METRO AG’s Annual General Meeting
approves all resolutions proposed by the management
and approves a dividend of €0.70 per ordinary share
and preference share. As in the previous year, a stable
dividend was distributed despite the ongoing
transformation process.

METRO received ‘Gold Class’ award at Sustainability
Award 2019
26/2/2019 – METRO is included in the Sustainability
Yearbook for the 4th time in a row with the highest
distinction: ‘Gold Class’. The yearbook, published by
the international investment entity RobecoSAM,
presents companies that draw attention through their
outstanding sustainability performance. The positive
rating is the result of RobecoSAM’s annual Corporate
Sustainability Assessment (CSA).

Start of the purchasing cooperation Horizon
International
6/3/2019 – The purchasing cooperation Horizon
International between METRO, Auchan Retail, Dia
Group and Casino Group starts in 47 countries in
Europe, Asia and South America. The cooperation
brings together market participants who share a
common vision for new supplier relationships – from
services for international suppliers to supporting small
and medium-sized enterprises in their international
development.

METRO expands its international portfolio by adding
Myanmar
8/3/2019 – METRO announces its official market entry
in Myanmar. Supported by highly efficient digital
ordering and delivery services, METRO Myanmar
serves local commercial customers in the rapidly
growing restaurant and tourism sector. Instead of
stationary wholesale stores, METRO offers its
customers a delivery service. Customers can order via
website or mobile app.

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T H E Y E A R I N R E V I E W

Q3 2018/19

Expansion of own-brand portfolio to include organic
assortment
15/4/2019 – METRO’s own-brand portfolio is
expanded by an organic assortment with focus on
fruits and vegetables. With METRO Chef Bio the
wholesaler meets the growing demand of its
customers for organic products. The own brand
METRO Chef Bio will initially be introduced at METRO
Austria and successively rolled out.

Exclusivity agreement signed for sale of Real
8/5/2019 – METRO and a consortium led by Redos
agree on exclusive contract negotiations. The goal is
to conclude a contract based on detailed due
diligence.

METRO is committed to human rights in the supply
chain
1/6/2019 – METRO becomes a member of Sedex. The
non-profit organisation collects data on social
standards in the supply chain. METRO is thus
strengthening its own commitment to enforcing and
complying with social standards.

METRO sets science-based target for itself
14/6/2019 – METRO expanded the climate target to
the supply chain and as the first German retailer set a
recognised science-based target for itself. METRO
undertakes to reduce its Scope 1 and Scope 2 CO2
emissions by 60% per square metre of selling and
delivery space by 2030 compared to 2011.
Furthermore, METRO is committed to reducing
absolute Scope-3-CO2 emissions (supply chain) by
15% by 2030 compared to 2018.

Q4 2018/19

METRO cooperates with Pentagast
22/7/2019 – METRO Germany and Pentagast, the
largest association of catering and canteen kitchen
suppliers in Germany, will start a strategic cooperation
in September 2019, initially at 6 METRO locations/
stores in Germany.

Trader franchise continues to grow
24/7/2019 – METRO expands its Trader Franchise
concept. The number of Trader Franchise locations in
the various Eastern European countries grows by 600
to 7,100 locations within one year.

Andrea Euenheim is appointed as the new Labour
Director to the Management Board of METRO AG
2/8/2019 – As of 1 November 2019, Andrea Euenheim
will be appointed to the Management Board of
METRO AG as the new Labour Director. She is
succeeding Heiko Hutmacher, who is leaving the
company as of 31 December 2019 at his own request.

Voluntary takeover bid by EPGC falls short of
minimum acceptance threshold
9/8/2019 – EP Global Commerce VI GmbH (EPGC), an
acquisition companycontrolled by Daniel Křetínský,
has not reached the minimum acceptance threshold of
67.5% for its voluntary takeover offer published on
10 July 2019.

11 European wholesale stores sold
2/9/2019 – METRO PROPERTIES sold 11 wholesale
stores in Poland, Hungary and the Czech Republic in
August 2019. METRO continues to operate all
wholesale stores at the respective locations based on
long-term leases agreed as part of sale-and-leaseback
transactions.

METRO MARKETS online marketplace launched in
Germany
13/9/2019 – METRO is further expanding its digital
portfolio for the hospitality industry with a new online
marketplace. At the launch of the platform, more than
20,000 non-food items from approximately 40
partners are on offer. METRO MARKETS is responsible
for the development and operation of the digital B2B
platform.

New product solution Gourvenience under own-
brand METRO Chef
24/9/2019 – Using the own-brand METRO Chef,
METRO Germany introduces the Gourvenience
assortment. The 200 articles comprise high-quality
convenience products for restaurateurs.

Verification of efficiency measures
25/9/2019 – METRO AG confirms to review efficiency
measures with regard to administrative structures,
processes and business activities. The efficiency
measures to be examined would be triggered by the
intended sale of the hypermarket business and the
resulting smaller size of the company and would
predominantly depend on this transaction.

Customer focus through Net Promoter Score
30/9/2019 – Since the implementation of the Net
Promoter Score roundly 2.2 million customer
feedbacks have been collected. This enables METRO
to respond even more efficiently to customer needs
and offer customers a better shopping experience and
improved delivery.

Events after the closing date

Sale of METRO China
11/10/2019 – METRO AG signs contract to sell a
majority stake in METRO China to Wumei. After this
transaction, the core customer groups HoReCa and
Trader contribute around 70% to METRO's sales. In
addition, the transaction offers further opportunities
to accelerate growth organically and through
acquisitions.

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REPORT OF THE

SUPERVISORY BOARD

With the significant acceleration of like-for-like

direction, although METRO is still dealing with

sales growth by 2.4% (including METRO

a difficult market environment in Russia.

China) METRO reaches the outlook delivered

EBITDA (excluding earnings from real estate

for the financial year 2018/19. Thereby METRO

divestments) was also in line with the

confirms that the focus on the wholesale

forecasted corridor with around −4%

business is already moving in the right

compared to the previous year.

With regard to the voluntary takeover offer

issued by EP Global Commerce in summer

2019, Management Board and Supervisory

Board were of the opinion that the offered

price significantly undervalues the earnings’

power and value perspective of METRO. It is

now up to all of us to dedicate all our

strengths to realize the real value of METRO!

Jürgen Steinemann

Chairman of the Supervisory Board
Profile
Jürgen Steinemann was born in 1958 in Damme,
Germany. He graduated with a degree in business
administration from the European Business School in
Wiesbaden, London and Paris in 1985 and initially held
different management positions at Eridania Béghin-Say,
Unilever and Nutreco. Jürgen Steinemann was CEO of
Barry Callebaut AG from 2009 to 2015 and has been a
member of the company’s board of directors since
2014. From 2015 to the demerger of the former METRO
GROUP in July 2017, Mr Jürgen Steinemann was a
member of the Supervisory Board of the former
METRO AG (now: CECONOMY AG) and Chairman of
the Supervisory Board since February 2016. Jürgen
Steinemann has been a member and Chairman of the
Supervisory Board of the new METRO AG since 2017.

More information about the other members of
the Supervisory Board can be found at
www.metroag.de in the section company –
Supervisory Board.

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Strategic projects planned with foresight,

statutory requirements. Its reporting in

such as for example the sale of the majority

particular included information on the

stake in METRO China, affirm the clear

intended business policies and other

focus on the target of being a pure

fundamental concerns relating to corporate

wholesaler. Another major step towards

planning, as well as the ongoing business

reaching this target is the planned sale of

development and information about the

Real which is driven forward, cautiously

situation of the company and the group

keeping an eye on the prospectus for the

(including the risk position, risk

employees and the future viability of Real.

management and compliance). The

At the end of the financial year, we

Management Board provided detailed

initiated a change in the Management

explanations for any deviations from

Board. Heiko Hutmacher is leaving the

planned business performance. Based on

company at his own request at the end of

the Management Board’s reports, we

the year. We thank Heiko Hutmacher for his

discussed all transactions that were of

support in the last 8 years. Andrea

significance to the company at the

Euenheim is taking over the position as

Supervisory Board meetings and within the

Labour Director. We are convinced that she

committees. The Supervisory Board was

is an experienced and inspiring new

involved in all decisions bearing material

member of the Management Board of

significance for the company. These

METRO AG.

decisions included inter alia the joint

On behalf of the Supervisory Board, I

reasoned statement of Management Board

would like to thank the Management Board

and Supervisory Board with regard to the

and all employees for their work in financial

voluntary takeover offer of EP Global

year 2018/19, which was not only marked by

Commerce VI GmbH as well as measures

greater intensity and more focus on the

and transactions for which the Supervisory

wholesale business but also by a large

Board’s approval was prescribed by law as

number of strategic projects.

well as the Articles of Association or

The demonstrated commitment is one of

intercompany regulations, such as for

the most important prerequisites for a

example the sale of the majority stake in

further successful growth of our company.

METRO China. We thoroughly reviewed the

Advice and supervision in
consultation with the Management
Board

In financial year 2018/19, the Supervisory

Board performed the duties imposed on it

by law, the Articles of Association and the

Code of Procedure. We advised the

Management Board in relation to the

management of METRO AG and the group

and supervised its activities. The

Management Board furnished us with

detailed written and verbal information on

all significant developments within METRO

at the Supervisory Board meetings (and

also in-between, if necessary) in a timely

manner and in accordance with the

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relevant matters and discussed benefits,

potential opportunities, risks and other

implications with the Management Board.

Managers from the relevant departments of

METRO attended meetings to address

particular agenda items.

Prof. Dr Edgar Ernst as the Chairman of

the Audit Committee and I as the Chairman

of the Supervisory Board continuously,

closely and regularly exchanged information

and ideas with regard to key issues and

pending decisions with the Chief Financial

Officer and/or the Chief Executive Officer

also outside of meetings. I was also in

contact with the members of the

Supervisory Board outside of meetings. In

our capacity as committee chairmen, Prof.

Dr Edgar Ernst and I also reported in detail

on the work and recommendations of the

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respective committees at the subsequent

Supervisory Board meeting. Since no

matters requiring clarification arose in

financial year 2018/19, we did not make use

of the Supervisory Board’s rights of

inspection and audit pursuant to § 111

Section 2 Sentence 1 and 2 of the German

Stock Corporation Act (AktG).

The Supervisory Board held 8 meetings

in financial year 2018/19, with 1 meeting

convened as an extraordinary meeting.

Moreover, 2 resolutions were passed in a

written procedure outside a Supervisory

Board meeting. In so-called closed sessions,

the members of the Supervisory Board

regularly exchanged views without the

participation of the members of the

Management Board. As was customary in

the past, both the shareholder and

employee representatives on the

Supervisory Board of METRO AG discussed

relevant agenda items in separate

preliminary meetings.

The members of the Supervisory Board

are required to disclose any conflicts of

interest without delay. Member of the

Supervisory Board Dr Florian Funck is also a

member of the Management Board of Franz

Haniel & Cie. GmbH, which, at the time of

the takeover offer by EPGC Global

Commerce VI GmbH, indirectly held about

15.20% of the voting rights in METRO AG as

documented in the voting rights notification

dated 5 October 2018. Due to the business

relationship of Franz Haniel & Cie. GmbH

with EP Global Commerce, Dr Florian Funck

was neither involved in the flow of

information in financial year 2018/19 nor did

he take part in deliberations and resolutions

of the Supervisory Board concerning the

voluntary takeover offer of EP Global

Commerce VI GmbH. No further conflicts of

interest involving members of the

Management Board and the Supervisory

Board arose in financial year 2018/19.

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Key issues covered by Supervisory
Board meetings

November 2018 – At this meeting, the

Management Board initially informed us

routinely about current business

developments. In this setting, the

Management Board also reported on the

status of preparations for a sales process of

Real. We then discussed the company’s

capital market outlook for 2018/19. We also

resolved on the individual performance

factors of the members of the Management

Board for determining the amount of the

short-term incentive for financial year 2017/

18 and dealt with Management Board

remuneration for 2018/19, in particular the

discussion of the individual targets for the

individual members of the Management

Board. We discussed the annual report on

governance functions in the group and, to

prepare for the annual report, dealt with the

non-financial statement to be issued for the

first time in financial year 2017/18.

Furthermore, we passed a resolution to

mandate a consultant for succession

planning in the boards and were informed

about the company’s sustainability

initiatives and changes in top management.

December 2018 – Our Supervisory Board

meeting held on 7 December 2018 focused

on the annual and consolidated financial

statements and the combined management

reports for METRO AG and for the group for

financial year 2017/18, including the non-

financial statement as well as the proposal

for the appropriation of the balance sheet

profit to the Annual General Meeting 2019.

The auditor attended this discussion and

reported on the key findings of his audits.

Other important subjects discussed at the

Supervisory Board meeting were, in

addition to the ordinary report by the

Management Board about the current

business development, the adoption of a

resolution concerning the Report of the

Supervisory Board and the Corporate

Governance Report for financial year 2017/

18, as well as the preparation of the Annual

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General Meeting 2019. We also received

May 2019 – As part of the information on

information on the development of

current business developments, the

preparations for the Real sales process and

Management Board provided detailed

the company’s communication strategy.

information on the status of the sales

February 2019 – In a meeting held

process of Real. The Supervisory Board

immediately before the Annual General

passed a resolution to mandate an

Meeting on 15 February 2019, the

independent consultant to revise the

Management Board provided information

existing remuneration system for the

about the current business development. It

members of the Management Board of

also reported on the development of the

METRO AG. After receiving information on

country organisation in China and the status

the changes in top management, the

of strategic considerations in this regard. As

Supervisory Board dealt with the subject of

a precautionary measure, the Supervisory

leadership at METRO and obtained

Board adopted a resolution granting power

information on talent management and

of attorney to a law firm, in particular in

succession planning. Another resolution of

relation to potential actions for rescission

the Supervisory Board addressed the

and/or annulment against resolutions

adjustment of Mr Heiko Hutmacher’s

adopted by the Annual General Meeting

employment contract with regard to the

2019. Subject to the appointment of the

waiver of the post-contractual restraint on

auditor by the Annual General Meeting, we

competition. In this context, a resolution

approved the audit assignments for the

was also passed to mandate a consultant

2018/19 annual and consolidated financial

(including a budget) for the succession of

statements and the review of the

the position of Labour Director.

condensed financial statements and interim

Moreover, the members of the

management report for the first half of

Supervisory Board had the opportunity to

financial year 2018/19. We also reviewed the

participate in an internal training event on

status of the public prosecution’s

the subject of ‘HoReCa customers as a

investigation of suspected insider trading

strategic basis for METRO’.

and market manipulation. Ultimately, we

June 2019 – The 2-day strategy meeting

received information on changes in top

in Moscow focused on consulting with the

management and the review of OTC

Management Board on the status quo and

derivative contracts pursuant to § 32 of the

strategy of METRO Wholesale, particularly

German Securities Trading Act (WpHG, old

in Russia and Germany, as well as the group

version).

and portfolio strategy. We dealt with the

In a written procedure immediately

initiatives to transform METRO into a pure

following the Annual General Meeting, the

wholesaler and to improve earnings. We

Supervisory Board re-elected Dr Fredy Raas

also talked about the realignment of the

as a member of the Audit Committee. This

business model towards the strategic target

re-election was necessary after his

groups HoReCa and Traders. The

membership of the Supervisory Board

Supervisory Board also discussed personnel

ended at the end of the Annual General

matters relating to the Management Board

Meeting on 15 February 2019 and he had

and passed a resolution to terminate the

been re-elected by the Annual General

appointment of Mr Heiko Hutmacher as a

Meeting on the same day.

member of the Management Board and

Labour Director by mutual consent no later

than 31 December 2019. In this regard, the

conclusion of a termination agreement with

Mr Heiko Hutmacher was also approved.

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July 2019 – On 21 June 2019, EP Global

the Management Board, a resolution was

Commerce VI GmbH, a special purpose

passed on the appointment of Ms Andrea

entity directly held by Mr Daniel Křetínský

Euenheim as a member of the Management

and Mr Patrik Tkáč, announced that it

Board and as Labour Director of METRO AG

intended to make a voluntary public

effective 1 November 2019 and on the

takeover offer to the shareholders of

corresponding revocation of Mr Heiko

METRO AG to acquire all ordinary and

Hutmacher as Labour Director. The

preference shares. Consequently, a

Supervisory Board also discussed the

resolution was passed by the Supervisory

concept prepared by the Presidential

Board outside a meeting on the

Committee with support of the

establishment of a Takeover Committee

remuneration consultant for the revision of

with equal representation for the duration

the remuneration system for the

of the takeover process. The task of this

Management Board.

committee was to deal with the takeover

September 2019 – At its September

process on an ongoing basis and to prepare

meeting, the Supervisory Board focused on

all necessary or expedient tasks and

budget and medium-term planning for

decisions of the Supervisory Board in this

financial year 2019/20 and subsequent

respect.

years. Moreover, the Supervisory Board was

In an extraordinary meeting on 23 July

updated on the sales process of Real and

2019, the Supervisory Board dealt

discussed the strategic options with regard

exclusively with the takeover process in

to METRO China. Routinely, the Supervisory

addition to the current business

Board dealt with the remuneration of the

development. The strategic and financial

Management Board and resolved on the

parameters of the takeover offer were

performance targets of the short-term

examined. The measurement and fairness

incentive for financial year 2019/20 for the

opinions of the respective investment banks

members of the Management Board. In

were explained in detail and discussed with

addition, the Supervisory Board adopted

the financial and legal consultants of the

schedules of responsibilities of the

company and the Supervisory Board. After

Management Board of METRO AG, which

preparatory work by the Takeover

are valid from 1 October 2019 and from

Committee and with the support of the

1 November 2019, when Ms Andrea

financial and legal consultants of the

Euenheim joined the Management Board.

company and the Supervisory Board, the

Furthermore, we again discussed the

Supervisory Board passed a resolution on a

concept for revising the Management Board

joint reasoned statement by the

remuneration system. We resolved on the

Management Board and the Supervisory

declaration of conformity pursuant to § 161

Board of METRO AG pursuant to § 27 of the

of the German Stock Corporation Act

German Securities Acquisition and Takeover

(AktG) and mandated the auditor to

Act (WpÜG) on the voluntary takeover

conduct a limited assurance audit of the

offer.

company’s non-financial statements. After

At the Supervisory Board meeting held

METRO Germany’s management was filled

at the end of July as scheduled, the

with a dual leadership position in July 2019,

members of the Supervisory Board were

Co-CEOs Frank Jäniche and Christof Knop

informed about the status of the takeover

introduced themselves to the Supervisory

process and the sales process of Real.

Board and explained their strategic and

Furthermore, the Supervisory Board

operational plans. The Management Board

received an investment review regarding the

also provided an overview of the

acquisition of Pro à Pro in February 2017.

development of the company’s IT strategy

With regard to personnel matters relating to

and information about the project to

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introduce a new goods management

The permanent committees of the

system.

Supervisory Board are composed as follows

(status: 4 December 2019):

Work in the committees

For the purpose of effectively performing

its duties, the Supervisory Board relies on

the work of 4 permanent committees: the

Presidential Committee, the Audit

Committee, the Nomination Committee and

the Mediation Committee pursuant to § 27

Section 3 of the German Co-determination

Act (MitbestG). Furthermore, a Takeover

Committee was set up for the duration of

the takeover process. The committees

prepare the board-level consultations and

resolutions. In addition, also decision-

making responsibilities were transferred to

the committees within the legally allowed

parameters. The respective chairmen of the

committees report to the Supervisory Board

regularly and comprehensively with regard

to the work in the committees. A detailed

description of the working methods of the

committees is contained in the corporate

governance report, which is combined with

the declaration on corporate management

pursuant to §§ 289f and 315d of the German

Commercial Code (HGB). The

corresponding versions as well as

information about the current members of

the Supervisory Board can be found on the

website www.metroag.de/en in the section

Company – Corporate Governance.

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Presidential Committee: Jürgen

Steinemann (Chairman), Werner

Klockhaus (Vice Chairman), Xaver

Schiller, Dr Liliana Solomon

Audit Committee: Prof. Dr Edgar Ernst

(Chairman), Werner Klockhaus (Vice

Chairman), Thomas Dommel, Dr Florian

Funck, Dr Fredy Raas, Xaver Schiller

Nomination Committee: Jürgen

Steinemann (Chairman), Gwyn Burr, Prof.

Dr Edgar Ernst

Mediation Committee pursuant to § 27

Section 3 of the German Co-

determination Act (MitbestG): Jürgen

Steinemann (Chairman), Werner

Klockhaus (Vice Chairman), Prof.

Dr Edgar Ernst, Xaver Schiller

The Supervisory Board’s Takeover

Committee, which was set up for the

duration of the takeover process, comprised

the following members:

Jürgen Steinemann (Chairman), Thomas

Dommel, Prof. Dr Edgar Ernst, Werner

Klockhaus, Xaver Schiller, Alexandra Soto

Presidential Committee – The

Presidential Committee is mainly concerned

with the personnel issues of the members of

the Management Board and monitors

compliance with legal regulations and the

application of the German Corporate

Governance Code. In accordance with § 107

Section 3 Sentence 4 of the German Stock

Corporation Act (AktG), the Presidential

Committee passes resolutions on urgent

matters and matters submitted to it by the

Supervisory Board. The Presidential

Committee held 6 meetings in financial year

2018/19, 3 meetings were convened as an

extraordinary meeting. One of the key areas

of the committee’s work was the

preparation of the resolutions to be

adopted by the Supervisory Board with

regard to the appointment of Ms Andrea

Euenheim as a member of the Management

T O O U R
S H A R E H O L D E R S

R E P O R T O F T H E S U P E R V I S O R Y B O A R D

Board and Labour Director of METRO AG as

The Audit Committee prepared the

of 1 November 2019 and on the amicable

meeting of the Supervisory Board in

departure of Mr Heiko Hutmacher from the

December 2018 and conducted an in-depth

Management Board effective 31 December

review of the annual and consolidated

2019. Another focus was the work on a

financial statements for financial year 2017/

concept for revising the existing

18, the combined management report of

Management Board remuneration system.

METRO AG and the group for financial year

Moreover, the committee prepared the

2017/18 as well as the combined non-

individual and strategic performance

financial statement contained in the

targets for the members of the

combined management report. The results

Management Board for financial year 2018/

of the audit were discussed by the

19, as well as the short-term incentive for

Supervisory Board in the presence of the

financial year 2019/20. Further issues

auditor. This formed the basis for the Audit

addressed by the Presidential Committee

Committee to issue recommendations for

included corporate governance at METRO,

resolutions to the Supervisory Board after

especially the preparation of the declaration

detailed discussion. These included, in

of conformity in accordance with § 161 of

particular, the recommendation to approve

the German Stock Corporation Act (AktG).

the annual and consolidated financial

The committee also focused on the

statements for financial year 2017/18 and to

development of talent management and

approve the Management Board’s proposal

targeted internal succession planning at

to the Annual General Meeting 2019 on the

various organisational levels.

appropriation of the balance sheet profit.

Audit Committee – The Audit Committee

The members of the Audit Committee

is responsible for supervising the company’s

discussed the quarterly statement and the

accounting, accounting processes, the

half-year financial report for financial year

effectiveness of the internal control system,

2018/19 prior to their respective publication.

the risk management system, the internal

The Audit Committee also prepared the

audit system, compliance and the audit of

audit engagements for financial year 2018/

the annual financial statements (in

19 and considered the auditor’s planning of

particular relating to the selection and

the audit as well as the key audit areas. The

independence of the auditor and any

committee was informed about the so-

additional performances rendered by the

called non-audit services provided by the

auditor). 7 committee meetings were held in

auditors and intensively examined the

financial year 2018/19, 1 of which was

governance functions within the group

extraordinarily convened. The CFO, the CEO

(internal control systems, risk management

and I as the Chairman of the Supervisory

system, internal audit and compliance), the

Board attended all meetings. The auditor

draft budget presented by the Management

and managers of the relevant departments

Board, the group controlling plan and the

of METRO were consulted on selected

audit plan prepared by the Internal Audit

issues.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

unit. The Audit Committee further

requested information about significant

projects and legal issues. They particularly

included the legally required ongoing

development of European and international

accounting standards, accounting-related

changes and an evaluation of the ensuing

implications for METRO.

T O O U R
S H A R E H O L D E R S

R E P O R T O F T H E S U P E R V I S O R Y B O A R D

The Audit Committee also received

Individual attendance at meetings

reports on business developments between

meetings in separate telephone calls in

The individual attendance of members of

which the Chairman of the Management

the Supervisory Board at meetings of the

Board and the Chief Financial Officer took

Supervisory Board and its committees is

part as scheduled.

disclosed in the following:

Nomination Committee – The

Nomination Committee is responsible for

proposing suitable candidates for the

Supervisory Board’s election proposals to

the Annual General Meeting. In financial

year 2018/19, 2 committee meetings were

held for the purpose of preparing election

Supervisory Board

Jürgen Steinemann,
Chairman

Werner Klockhaus, Vice
Chairman

proposals to the Annual General Meeting.

Stefanie Blaser

Takeover Committee – In connection

Herbert Bolliger

with the voluntary takeover offer of EP

Gwyn Burr

Global Commerce VI GmbH, this committee

Thomas Dommel

dealt with the takeover process and

Prof. Dr Edgar Ernst

prepared all necessary or expedient tasks

and decisions of the Supervisory Board, in

particular the joint reasoned statement of

the Management Board and the Supervisory

Board pursuant to § 27 of the German

Securities Acquisition and Takeover Act

(WpÜG). Moreover, the Takeover Committee

was authorised to select and commission

external consultants, in particular financial

and legal consultants, in connection with

the takeover offer. The Takeover Committee

met 6 times. Due to the short-term nature

of the scheduled meetings, the option of

telephone participation was also granted.

Dr Florian Funck

Michael Heider

Peter Küpfer

Susanne Meister

Dr Angela Pilkmann

Dr Fredy Raas

Xaver Schiller

Eva-Lotta Sjöstedt

Dr Liliana Solomon

Alexandra Soto

Angelika Will

Manfred Wirsch

Silke Zimmer

Mediation Committee – The Mediation

Total

Meeting
attendance

Attendance
in %

8/8

7/8

8/8

7/8

8/8

7/8

6/8

7/8

5/8

8/8

100

Committee formulates proposals for the

appointment and revocation of members of

the Management Board in cases pursuant to

§ 31 of the German Co-determination Act

(MitbestG). The Mediation Committee did

not convene a meeting in financial year

2018/19.

Presidential Committee

Jürgen Steinemann,
Chairman

Werner Klockhaus, Vice
Chairman

Xaver Schiller

Dr Liliana Solomon

Total

Meeting
attendance

Attendance
in %

6/6

4/6

100

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

T O O U R
S H A R E H O L D E R S

R E P O R T O F T H E S U P E R V I S O R Y B O A R D

Meeting
attendance

Attendance
in %

on Corporate Management | Corporate

Governance Report. This document has also

Meeting
attendance

Attendance
in %

unqualified audit certificate. The auditor

also issued an unqualified certificate about

Audit Committee

Prof. Dr Edgar Ernst,
Chairman

Werner Klockhaus, Vice
Chairman

Thomas Dommel

Dr Florian Funck

Dr Fredy Raas

Xaver Schiller

Total

7/7

100

Nomination Commitee

Jürgen Steinemann,
Chairman

Gwyn Burr

Prof. Dr Edgar Ernst

Total

Meeting
attendence

Attendence
in %

2/2

100

Takeover Committee1

Jürgen Steinemann,
Chairman

Thomas Dommel

Prof. Dr Edgar Ernst

Werner Klockhaus

Xaver Schiller

Alexandra Soto

Total

6/6

100

1 Set up for the duration of the takeover process.

Corporate governance

In September 2019, the Management Board

and the Supervisory Board of METRO AG

issued their declaration of conformity with

regard to the recommendations of the

Government Commission on the German

Corporate Governance Code pursuant to

§ 161 of the German Stock Corporation Act

(AktG) and published the declaration of

conformity on the website

www.metroag.de/en in the section

Company – Corporate Governance.

Reporting on METRO’s corporate

governance is provided in the Declaration

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

been published on the website

www.metroag.de/en in the section

Company – Corporate Governance.

Annual and consolidated financial
statements

KPMG AG Wirtschaftsprüfungsgesellschaft

has reviewed the Annual Financial

Statements prepared by the Management

Board in accordance with the German

Commercial Code (HGB) and the

consolidated financial statements prepared

by METRO AG based on the International

Financial Reporting Standards (IFRS). It

also reviewed the combined management

report for METRO AG and the group for

financial year 2018/19 and issued an

the combined non-financial statement

contained in the management report as a

result of his audit to provide limited

assurance. The auditor provided a written

report on the audits.

The documents for the annual financial

statements, including the combined non-

financial statement, and the audit reports

were discussed and reviewed in great detail

during the meeting of the Audit Committee

on 3 December 2019 and in the Supervisory

Board meeting on 4 December 2019 in the

presence of the auditor. Prior to these

meetings, the required documents were

distributed to all members of the Audit

Committee as well as the Supervisory

Board, giving them sufficient time to review

them. In both meetings, the auditor

reported about the key findings of his audit

and was at the Supervisory Board’s disposal

to answer questions and provide additional

information also in the absence of the

Management Board.

The auditor also provided information on

services rendered in addition to auditing

T O O U R
S H A R E H O L D E R S

R E P O R T O F T H E S U P E R V I S O R Y B O A R D

services. No issues resulting in a

disqualification due to bias arose.

Appointments and resignations

Based on our own review of the Annual

The office terms of the members of the

Financial Statements, the consolidated

financial statements and the combined

management report as well as the

combined non-financial statement for

Supervisory Board Ms Eva-Lotta Sjöstedt,

Ms Alexandra Soto and Dr Fredy Raas

ended at the end of the METRO AG Annual

General Meeting on 15 February 2019. On

financial year 2018/19, we had no objections

the same day, they entered a new office

and the Supervisory Board approved the

term through election by the Annual

result of the audit. As recommended by the

General Meeting. In light of the change in

Audit Committee, we approved the Annual

the shareholding structure, member of the

Financial Statements and the consolidated

Supervisory Board Dr Florian Funck

financial statements submitted by the

resigned his mandate with effect from the

Management Board. The METRO AG Annual

end of 7 December 2019.

Financial Statements are thus adopted.

Effective 1 November 2019, the

Following a careful own review and

Supervisory Board appointed Ms Andrea

consideration of the interests involved, we

Euenheim as a member of the Management

approved the Management Board’s proposal

Board and Labour Director. She is

to the Annual General Meeting 2020 for the

succeeding Mr Heiko Hutmacher, who is

appropriation of the balance sheet profit.

leaving the company as of 31 December

2019.

Düsseldorf, 4 December 2019

The Supervisory Board

Jürgen Steinemann

Chairman

Information about the members of the
Supervisory Board can be found on the website
www.metroag.de/en in the section Company –
Supervisory Board.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

T O O U R
S H A R E H O L D E R S

M E T R O S H A R E

METRO SHARE

Performance of the METRO share

At the beginning of financial year 2018/19, the stock market initially developed weakly, in

particular due to the trade conflict between the USA and China as well as due to Brexit. As

2019 progressed, it recovered and the MDAX returned to the previous year’s level, reaching

25,887 points on 30 September 2019 (28/9/2018: 25,998 points). In contrast, the EURO

STOXX Retail performed very positively and gained 9% compared to 28 September 2018.

As of 30 September 2019, the METRO share finished with a closing price of €14.48 in

Xetra trading on the Frankfurt Stock Exchange. This represents an increase of 7%. On a

total return basis – and thus comparable with the MDAX – the METRO share recorded an

increase of 12% at the end of financial year 2018/19. The preference share traded at €12.90

on 30 September 2019. The METRO share’s listing in financial year 2018/19 was marked by a

number of positive developments, which were attributable to various business events such

as the sale of the hypermarket business and the search for a strategic partner for the

Chinese business. Moreover, the share price was influenced by speculation about the

voluntary takeover bid by EP Global Commerce. The temporary recovery of the Russian

business also made a positive contribution to this trend. The share price was largely stable

at the end of the financial year.

DEVELOPMENT OF THE METRO SHARE (%)

120

110

100

SXRE
(EURO STOXX
RETAIL)

B4B GY EQUITY
(METRO AG)

MDAX

2/10/2018

31/12/2018

31/3/2019

30/6/2019

30/9/2019

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

T O O U R
S H A R E H O L D E R S

M E T R O S H A R E

METRO SHARE

Closing price

High

Low

Dividends

Dividend yield
based on closing price

Market capitalisation (billion)

1 Subject to the resolution of the Annual General Meeting.

Data based on Xetra closing prices
Source: Bloomberg

Ordinary share

Preference share

Ordinary share

Preference share

Ordinary share

Preference share

Ordinary share

Preference share

Ordinary share

Preference share

€

2017/18

2018/19

13.50

12.61

18.00

17.69

10.08

9.93

0.70

5.2

5.6

4.9

14.48

12.90

16.07

14.65

11.69

10.95

0.701

4.81

5.41

5.3

Shareholder structure of METRO AG

The shareholder structure of METRO AG has changed. In preparing the Annual Financial

Statements, the largest (indirect) shareholders of METRO AG, based on the voting rights

notifications received by METRO AG in accordance with the German Securities Trading Act

(WpHG), are EP Global Commerce GmbH with 29.99% of the ordinary shares and Meridian

Stiftung and Beisheim Holding, to which a total of approximately 20.63% of the ordinary

shares are allocated on a reciprocal basis memorialised in a pooling agreement. These 3

shareholders hold a total of 50.62% of the voting rights. In addition, Franz Haniel & Cie.

GmbH holds 2.71% and CECONOMY AG holds 0.99% of the ordinary shares of METRO AG.

In addition, all ordinary shares held by Franz Haniel & Cie. GmbH are subject to a call

option of EP Global Commerce GmbH. Under the terms of the demerger agreement, the

ordinary shares of CECONOMY AG cannot be sold until 1 October 2023.

For more information about details of the pooling agreement between Meridian Stiftung and Beisheim
page 141
Holding, see chapter 7 takeover-relevant disclosures in the combined management report.

49.38% of METRO AG shares are free-floating and held by a number of national and

international investors. The shareholder structure reflects the international distribution of

the share capital: approximately 15% of ordinary shares are held by investors from the USA,

followed by investors from the United Kingdom with approximately 11%, Germany with

approximately 13% and Europe (excluding Germany and the United Kingdom) with

approximately 7%. The remaining countries account for around 3%.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

T O O U R
S H A R E H O L D E R S

M E T R O S H A R E

SHAREHOLDER STRUCTURE1

as of 6/11/2019

MS/BH²

20.63%

Meridian Stiftung/Beisheim Holding

FFS

29.99%

EP Global Commerce

49.38%

Free-floating shares

100.00%

FFS

1 The information above is in particular based on notifications of voting rights pursuant to the German Securities Trading Act that were received and
published by METRO AG.
2 Vote on exercising voting rights under the pooling agreement.

Market capitalisation and index inclusion

The market capitalisation of METRO AG was €5.3 billion at the end of September 2019. In

the time between the initial stock exchange listing and the end of the financial year, a

typical trading day at the Frankfurt Stock Exchange in financial year 2018/19 saw an

average of around 900,000 of METRO’s ordinary shares traded. Around 4,000 of the

significantly fewer liquid preference shares were exchanged on each trading day.

The METRO AG ordinary share is included in a number of indices, most noteworthy the

MDAX. The MDAX comprises the 60 largest German corporations with the highest trading

volumes below the DAX 30. The composition is based on fixed inclusion criteria. In addition

to being listed in the Prime Standard and a free float of more than 10%, inclusion in the

index depends on the free-float market capitalisation and the stock exchange turnover. As

of 30 September 2019, METRO was ranked number 38 in the MDAX in terms of market

capitalisation and number 33 in terms of stock exchange turnover.

The METRO share is also included in the global MSCI index and the relevant industry

sector indices EURO STOXX Retail and STOXX 600 Retail.

Many investors place high priority on the issue of sustainability. METRO is fostering the

continuous dialogue with sustainability-oriented investors, analysts and rating agencies. In

2019, METRO AG was again confirmed as the best company in the industry in the European

sustainability ranking of the Dow Jones Sustainability Index. Rating agency Oekom

Research issued a prime recommendation for METRO AG in the wholesale category

(Trading Companies & Distributors). METRO is also listed in the FTSE4Good index. METRO

has been issuing public statements on climate protection and water for many years through

CDP. METRO achieved a rating of A- or B- (on a scale from F to A) for both subject areas.

Since 2019, METRO has also reported via the CDP on deforestation, which is associated

with sensitive raw materials such as soya, palm oil, meat and wood/paper. The results for

2019 were not yet available on the publication date. METRO shares are also included in the

MSCI World ESG Leaders Index and its European counterparts.

METRO has set the future course with its initiation and implementation of sustainable

business practices.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

T O O U R
S H A R E H O L D E R S

M E T R O S H A R E

Dividend and dividend policy

The Management Board and Supervisory Board of METRO AG will propose a dividend of

€0.70 per share to the Annual General Meeting on 14 February 2020. This dividend

proposal corresponds to 49% of earnings per share of €1.44 for continuing operations

including METRO China (outlook view) and is thus within the payout ratio of 45% to 55% as

envisaged by METRO’s dividend policy. The dividend yield on the basis of the closing price

on 30 September 2019 is 4.8% for the METRO ordinary share and 5.4% for the preference

share.

Analysts’ recommendations

20 analysts have regularly published analyses and studies about the METRO share over the

course of financial year 2018/19. 16 analysts rated the METRO share neutrally in the medium

to long term; 2 analysts recommended selling the share and 2 analysts were ‘restricted’ at

the end of the financial year, that is, the analyst firm had internally blocked the submission

of recommendations. The median value of share price targets was €14.60 at the end of

September 2019 (€12.50 at the end of September 2018).

Grade

Hold

Sell

Restricted

Bank

Baader Bank

Barclays

Berenberg

Bernstein Research

Commerzbank

DZ Bank

HSBC

Independent Research

Invest Securities

Jefferies

Kepler Cheuvreux

LBBW

M.M.Warburg

MainFirst

Oddo BHF

Société Générale

Deutsche Bank

Exane

BAML

J.P. Morgan

Head office

Share
price
target (€)

Munich

London

Frankfurt

London

Frankfurt

Paris

London

Frankfurt

Stuttgart

Hamburg

London

Paris

London

14.00

14.40

13.00

15.00

14.00

16.00

14.80

16.00

14.70

14.30

14.80

15.30

15.00

14.50

16.00

13.00

10.80

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

T O O U R
S H A R E H O L D E R S

M E T R O S H A R E

Investor Relations

The METRO Investor Relations team is in continuous dialogue with analysts, institutional

investors and retail investors. The team is guided by the principles of customer-focused

capital market support:

Topicality: assurance of information leadership

Continuity: consistency in external communications

Credibility: disclosure of accurate information

Equal treatment: same information in terms of time and content for all recipients

In addition to the regular quarterly and yearly reporting, the Investor Relations team is also

available for personal meetings at roadshows and conferences. It also conducted numerous

individual and group discussions, store inspections and telephone conferences.

All information about the METRO share is available in German and English from the

Investor Relations section of the website. Among other things, the website also offers

additional information about METRO’s corporate strategy and business development, all

current publications, the schedule of events and the annual report. A webcast is available

for all METRO events. The Investor Relations team can also be contacted directly. The

Annual General Meeting of METRO AG provides all shareholders with the opportunity to

learn about the current developments at METRO.

Its active membership in the German Equity Institute (Deutsches Aktieninstitut e. V.,

DAI) in Frankfurt allows METRO to actively promote an investment culture with an affinity

for equities in Germany. METRO is also committed to the principles of open and continuous

communications, which is expressed in the company’s membership in the German Investor

Relations Association (Deutscher Investor Relations Verband e. V., DIRK).

Contact Investor Relations
METRO AG

Investor Relations

Schlüterstraße 1

40235 Düsseldorf, Germany

T +49 211 6886-1280

F +49 211 6886-73-3759

investorrelations@metro.de

www.metroag.de/en/investors

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

METRO/METRO
WHOLESALE

BACKSIDE CHAPTER GOALSAND STRATEGYG O A L S A N D S T R A T E G Y

M E T R O / M E T R O W H O L E S A L E

GOALS AND STRATEGY

METRO/METRO WHOLESALE

As a leading international food wholesaler, METRO continues its transformation into a

wholesale specialist in financial year 2018/19.

Disposal of a majority stake in METRO China immediately after the end of the reporting

period supports the focus on the core customer groups HoReCa and Trader.

With the 'Wholesale 360' approach, METRO positions itself as the partner of choice for

thewholesale customers through a comprehensive range of products, consulting, digital

tools, marketplace, services and equipment.

METRO is a leading international food wholesaler and global market leader in the cash-and-

carry format. METRO is managed by METRO AG as the central strategic management

holding company, which also assumes central management and administrative functions for

the METRO Wholesale sales line.

METRO Wholesale is active in 34 countries worldwide, including 24 countries with 678

wholesale stores under the METRO and MAKRO brands. The delivery business (Food

Service Distribution, FSD) is also part of METRO Wholesale, including the METRO delivery

service and the companies specialised in delivery: Classic Fine Foods, Pro à Pro and Rungis

Express.

The Others segment includes the digitalisation activities of METRO. They mainly

comprise the activities of the Hospitality Digital business unit. The segment also includes

the real estate company METRO PROPERTIES as well as various service companies that

provide internal services for METRO in the areas of logistics, information technology,

advertising and procurement.

METRO’s focus on food wholesale follows a long-term strategy that has been

continuously and successfully implemented in recent years. METRO already initiated the

transformation from a conglomerate to a wholesale specialist in 2012. Following the

disposals of the international Real business and Galeria Kaufhof as well as the spin-off of

Media-Saturn, a contract was signed on 11 October 2019 for the sale of a majority stake in

METRO China to Wumei. Thus, the core customer groups HoReCa and Traders will account

for around 70% of METRO's worldwide sales. Moreover, the transaction offers further

opportunities to accelerate growth organically and through acquisitions.

At the same time, METRO AG’s 20% investments in the joint venture opens up various

strategic partnership opportunities with Wumei and its technology partner Dmall,

particularly with regard to the international procurement of goods. METRO will continue to

participate in the growth of its business in China in a dynamic market environment with

improved conditions. The advanced sale of Real marks the conclusion of the transformation

process towards an exclusive focus on the wholesale business.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

G O A L S A N D S T R A T E G Y

M E T R O / M E T R O W H O L E S A L E

The sale of the hypermarket business is well advanced. We are in the final stages of

negotiations and are working with the potential buyer on the future concept for Real,

which includes retaining part of the core business and passing on some store networks to

competitors. Moreover, the early involvement of the antitrust authorities has increased

transaction security. Therefore, we are confident that we will be able to sign off on the

transaction in the very near future.

The strategy of focusing on METRO Wholesale is aimed at long-term, consistent growth

of (like-for-like) sales and earnings. The like-for-like sales development of

METRO Wholesale has been positive for 6 years based on year-on-year growth rates. The

wholesale business targets a very attractive industry sector that is characterised by

(compared to food retail) very strong customer relationships, high shopping frequency,

large shopping baskets and high productivity at significantly lower cost to serve.

HoReCa and Traders Focus

The 2 core customer groups of METRO Wholesale are HoReCa and Traders. The HoReCa

section includes hotels, restaurants, bars and cafés as well as catering companies and

canteen operators. The Traders section includes, for example, small grocery stores, kiosks,

street food vendors as well as petrol stations and other wholesalers. Both core customer

groups have very large market potentials. Service Companies and Offices (SCO) are

another customer group.

The HoReCa customer group in particular is showing very high growth momentum.

Above all, the reason for this is the continuously increasing in out-of-home food

consumption. The change in consumer behaviour is leading to an increase in out of home

consumption and to a trend towards convenience solutions, from which the Traders

customer group also benefits.

Portfolio and market consolidation

In the core customer groups HoReCa and Traders, METRO Wholesale aims to play a leading

role as a product and service provider, depending on local market conditions.

METRO Wholesale combines an extensive network of modern wholesale stores with

delivery sales and digital services such as an online ordering system. The country portfolio

of METRO Wholesale is divided into core customer groups and regions, and is regularly

reviewed with regard to the feasibility of local market leadership and the attractiveness of

the respective markets. Accordingly, possible portfolio adjustments of METRO Wholesale

adhere to strict implementation of the strategy to achieve a leading role in the respective

market. On the one hand, this can be done through acquisitions for further market

consolidation, but on the other hand it does not rule out market exits for portfolio

simplification.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

G O A L S A N D S T R A T E G Y

M E T R O / M E T R O W H O L E S A L E

Localisation via country-specific value creation plans

METRO Wholesale consistently aligns its business model to customer value and

strengthens its local organisations to establish a closer relationship with B2B customers.

Depending on the main customer focus in the respective countries, METRO offers a tailored

product range that matches the specific preferences and requirements of its customers. By

tailoring METRO products, services and sales channels to local needs, we can exploit local

market opportunities to their full potential.

Based on the business model, the national subsidiaries develop and implement their

local strategies, which are then translated into individual value creation plans that enable

transformation and growth according to local conditions. The central holding functions

support local value creation, in particular by relieving administrative tasks. Based on the

country-specific and locally generated value creation plans, METRO Wholesale has

identified 5 major strategic value enhancers for its wholesale business:

We want to leverage the full potential of the markets we serve across all customer

groups. This is accomplished by differentiating the wholesale stores, for example by

designing stores that are specifically tailored to the different customer groups and their

respective needs.

We intend to further expand the delivery sales because it is attractive and complements

the core business of the wholesale stores. Delivery is the most important procurement

channel for HoReCa customers in most countries.

We intend to further roll out the Trader Franchising Model in countries such as Poland,

Romania and Russia. METRO Wholesale operates in a similar way as a franchisor with its

own brand identity. It provides products and offers additional services to the

participating independent grocery stores, such as training courses and assortment

consultancy. The expansion of the model helps open up new growth opportunities in

relevant markets.

We aim to increase our operating efficiency in order to reduce our cost base. To this

end, on the one hand, the group-wide synergy potential is to be exploited. On the other

hand, cost advantages are to be realised through strategic cooperation projects with

international retail and wholesale companies, for example by reducing procurement

costs through international purchasing alliances.

METRO Wholesale provides its customers with the opportunity to benefit from its know-

how by offering them training courses, tutorials and professional advice.

Wholesale 360

Building on its successful core business, METRO Wholesale is expanding its offering and

business model as part of its strategic approach Wholesale 360. Across all customer

groups, the majority of METRO Wholesale customers are small and medium-sized

companies as well as sole traders. One objective of Wholesale 360 approach is to

strengthen the competitiveness of its customers – not only to make them and their

business model more successful, but also with the aim of increasing customer retention

over the long term and to become the preferred partner for HoReCa and Traders

customers. Consequently, METRO wants to assist its customers in helping with their

business challenges by providing them with sustainable solutions with superior added

economic value, which we have combined under the Wholesale 360 approach.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

G O A L S A N D S T R A T E G Y

M E T R O / M E T R O W H O L E S A L E

To achieve this, METRO leverages its experience, knowledge, resources and global

presence, which it has gained and perfected in the 55 years since the first METRO

wholesale store was opened in Germany. In addition, in a constantly changing environment,

the current and future challenges of the customers are identified at an early stage and

addressed by offering professional services and digital solutions. It pursues the goal of

expanding the customer relationship from a transactional merchandise trade to a

sustainable and holistic partnership. This allows METRO to clearly differentiate itself from

other wholesalers.

The Wholesale 360 approach is made up of 6 subject areas: Products, consulting, digital

tools, marketplace, services and equipment.

METRO’s core competence is to offer ultra-fresh, high-quality food at attractive prices,

tailored to local needs. To this end, METRO Wholesale’s national companies continuously

develop their product ranges in order to increase customer satisfaction, shopping cart

size and repurchase rates. This also includes the introduction of METRO Chef

Gourvenience, an assortment of convenience products at the highest level for

professionals.

Our customers are faced with a multitude of complex challenges, such as lack of

personnel and time, efficient operational management, offer design or financing gaps.

We offer individual top consulting, based on the know-how and experience of METRO.

For this purpose METRO invests in the consulting competence of the customer

managers and uses the possibilities of data analysis. In the future market India, METRO

and the Fintech company ePayLater developed the app ‘Digital Shop’ for Kirana dealers

to help them efficiently track sales, manage inventories or process free digital payments.

Access to digital solutions and innovative applications is a key topic of our Wholesale

360 approach. The Hospitality Digital business unit offers customers from the hospitality

industry convenient access to digital applications, such as free services for creating a

website, online reservation systems or efficient staff management systems. Moreover,

applications are available for optimising the respective operation, such as the MenuKit

for automatic calculation of the cost of goods sold. These applications provide

commercial added value for hospitality customers and will be used in a targeted manner

in the future to expand existing customer relationships and to achieve an increase in

new customers. Digitalisation represents an important strategic growth area and an

investment into METRO’s future, and is consistently being implemented, in particular, by

METRO-NOM, the group’s own IT subsidiary. METRO-NOM assists in the digital

transformation of METRO and develops IT solutions for METRO Wholesale and customer

contact points. It includes, for example, the M-Shop customer platform and the METRO

Companion shopping app.

The online marketplace METRO MARKETS, which represents another topic area in our

Wholesale 360 approach and is aimed in particular at HoReCa customers, was launched

in Germany in September 2019 and is supposed to be expanded to other countries after

a pilot phase.

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G O A L S A N D S T R A T E G Y

M E T R O / M E T R O W H O L E S A L E

The range of services within the scope of the Wholesale 360 approach is being

intensively worked on, as we expect it to provide noticeable growth impulses in the

future. First, we are offering additional services such as financial services in selected

countries.

Modern equipment in modern hospitality industry helps increase productivity and cut

costs, while at the same time offering a high level of service quality. Strategic

cooperations enable integrated solutions, for example professional equipment at

advantageous conditions. In cooperation with Pentagast, the largest association of

gastronomy and kitchen equipment suppliers, we provide trend-setting food and kitchen

solutions. METRO is thus expanding its product range and reaching further potential

customers.

Real estate

METRO has extensive real estate assets and manages a portfolio of more than 670

operating locations. The real estate sector makes a significant and long-term contribution

to the corporate success of the wholesale and food specialist.

METRO PROPERTIES concentrates the real estate know-how of METRO and has

established itself on the market as a reputable real estate company.

The company operates, develops and markets an international portfolio of properties. Its

activities cover the entire life cycle of METRO’s real estate assets: from future-oriented

investments, economic property operation/maintenance to sustainable and creative

development of real estate assets as well as the realisation of capital gains during disposal

at the right point in time. For example, in the reporting period, METRO PROPERTIES sold

the EDU retail park in Bremen after extensive project development. With its attractive mix

of tenants and industries, the EDU now represents a highly frequented retail location of
around 50,000 m2. Other examples of successful development projects and sale-and-
leaseback transactions are portfolios in Western Europe and Spain as well as in other

Central and Eastern European countries. In addition, METRO PROPERTIES developed

mixed-use concepts for Asian locations in Shanghai, India, China and Bangalore and has

lined up additional projects for the coming years in Germany, Europe and Asia.

Sustainability

METRO is strongly committed to promoting the success and satisfaction of its more than

16 million customers worldwide, in a responsible manner. For more than 20 years, METRO

has pursued to orientate all corporate processes towards sustainability in its own business

operations as well as in the supply chain. In addition to reducing food waste and promoting

conscious consumption, the company continues to pursue a clear commitment to cut its
CO2 emissions in half by 2030 when compared to 2011. In 2019, METRO was ranked for the
5th time in a row as the European industry leader in the Food & Staples Retailing group in
the Dow Jones Sustainability Index. Sustainability is not only an established part of

METRO’s business model, but also an indispensable part of the wholesale specialist’s future

strategy in terms of resource availability, talent acquisition and retention as well as

customer demand and regulation.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

1 OVERVIEW OF
FINANCIAL YEAR 2018/19
AND OUTLOOK

2 PRINCIPLES OF THE

GROUP

2.1 Group business model

2.2 Management system

2.3 Innovation management

2.4 Combined non-financial statement of

METRO AG

2.5 Employees

2.6 Characteristics of the accounting-related
internal control and risk management
system and explanatory report of the
Management Board

3 ECONOMIC REPORT

3.1 Macroeconomic and sector-specific

parameters

3.2 Asset, financial and earnings position

Financial and asset position

Earnings position

103

4 REPORT ON EVENTS
AFTER THE CLOSING
DATE AND OUTLOOK

103

Events after the closing date

Outlook

108

5 OPPORTUNITIES AND

RISK REPORT

108

111

112

114

123

Opportunity and risk management
system

Strict principles for dealing with risks

Risk management details clearly defined

Description of the opportunity and risk
situation

Management’s overall assessment of the
opportunity and risk situation

124

6 REMUNERATION

REPORT

124

138

The remuneration system for members of
the Management Board

Remuneration of members of the
Supervisory Board

141

7 TAKEOVER-RELATED

DISCLOSURES

150

8 SUPPLEMENTARY NOTES

FOR METRO AG
(PURSUANT TO THE
GERMAN COMMERCIAL
CODE)

CONTENTSC O M B I N E D
M A N A G E M E N T R E P O R T

1 O V E R V I E W O F F I N A N C I A L Y E A R 2 0 1 8 / 1 9
A N D O U T L O O K

COMBINED MANAGEMENT
REPORT

1 OVERVIEW OF FINANCIAL YEAR 2018/19
AND OUTLOOK

As a result of the sale of the majority interest in METRO China (signed on 11 October 2019),

METRO China will be reported as a discontinued operation in accordance with IFRS 5 as of

30 September 2019; previous year’s income statement, cash flow statement and segment

reporting figures have been adjusted accordingly.

Unless expressly stated otherwise, all presentations in the combined management report

refer to continuing operations (excluding the hypermarket business and excluding METRO

China).

Only the comparison of outlook with actual business developments as well as the

dividend proposal refer to the outlook issued for 2018/19 which includes METRO China.

Furthermore, the results for the financial year are reported before IFRS 16 adjustments.

A first indication will be published in the consolidated financial statements – notes to the

group accounting principles and methods of this Annual Report 2018/19, while a complete

adjustment will be made available in January 2020.

Earnings position

Financial and asset position

Like-for-like sales increased by 2.1%;

Net debt decreased to €2.9 billion in

reported sales rose by 1.1% to €27.1 billion

adjusted year-on-year comparison (30/9/

(in local currency: +2.2%)

2018: €3.1 billion)

EBITDA excluding earnings contributions

Investments totalled €0.5 billion (2017/18:

from real estate transactions was at

€0.6 billion)

€1,021 million (2017/18: €1,088 million);

Cash flow from operating activities

reported EBITDA reached €1,359 million

reached €0.8 billion (2017/18: €0.8 billion)

(2017/18: €1,216 million)

Total assets (continuing and discontinued

Profit or loss for the period (from

operations) amounted to €14.5 billion

continuing operations) amounted to

(30/9/2018: €15.2 billion)

€411 million (2017/18: €359 million)

Equity (continuing and discontinued

Earnings per share (continuing

operations): €2.7 billion (30/9/2018:

operations): 1.12 € (2017/18: 0.98 €)

€3.1 billion)

For continuing and discontinued

Long-term rating: BBB- (Standard &

operations, profit or loss for the period

Poor’s)

amounted to €−115 million (2017/18:

€337 million) and earnings per share to

€−0.35 (2017/18: €0.92)

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1 O V E R V I E W O F F I N A N C I A L Y E A R 2 0 1 8 / 1 9
A N D O U T L O O K

Future development of METRO

METRO continues its long-term strategy of focusing on wholesale and, in particular, on

HoReCa and Traders customers. Against this background, we will continue to put emphasis

on simplifying and streamlining our portfolio in the coming year. This includes in particular

the closing of the sale of a majority stake in METRO China and the sale of our Real

hypermarket business. METRO expects to generate a net cash inflow of more than €1 billion

upon completion of the sale of METRO China (expected in the first half of 2020, subject to

regulatory approvals). The remaining minority stake in METRO China will be reported as at-

equity investment in the Asia segment. For the hypermarket business, METRO expects a

successful closing of the transaction shortly. Neither METRO China nor the hypermarket

business is included in the outlook either before or after completion of the transactions.

As announced in November 2019, we are also planning to implement a number of

efficiency measures in the coming financial year 2019/20. These measures concern in

particular the simplification of administrative structures, processes and business activities.

The measures will be associated with estimated one-time costs of €60 million to

€80 million in 2019/20 and estimated sustainable savings in the mid-double-digit million

euro range through an increase in operating performance. The associated costs from

efficiency measures will be reported separately as transformation costs. The outlook is

made before such transformation costs. Expected pro rata savings in 2019/20 in the low-

double-digit million euro range are reflected in the outlook.

METRO’s strategy further includes strengthening and expanding its core business,

wholesale, in become a ‘360-degree supplier’ – the Wholesale 360 approach. This includes

further localisation of the business, expansion of our delivery business, development of new

channels and customers (for example via the online marketplace METRO MARKETS) as well

as an increase in customer loyalty and an associated enhanced exploitation of customer

potential, for example through digital solutions. In addition, we plan to selectively expand

our business activities through acquisitions. The mergers and acquisitions activities should

thereby focus on companies that increase our presence in a market (densification) and thus

contribute to market consolidation. The outlook does not include such potential mergers

and acquisitions transactions.

We also continue to implement our sustainability goals defined on the basis of the UN

Sustainable Development Goals. The focus is on reducing food waste, making our range of

products and services more sustainable and promoting more conscious consumption.

The outlook is based on the current segment structure. Unlike in the previous year,

METRO China has been reported as a discontinued operation since 30 September 2019, so

that the composition of the Asia segment has changed in this respect. In addition, changes

in key figures resulting from the first-time application of IFRS 16 (see also the respective

specifications in the notes to the group accounting principles and methods

page 170 )

are initially not taken into account in the outlook. METRO will finalise the retrospective

adjustments as planned in the first quarter of 2019/20. Based on that, METRO will publish a

reconciliation of the relevant key figures, which shows both the old and the new standard,

prior to our next quarterly statement and update the outlook accordingly.

M E T R O A N N U A L R E P O R T 2 0 1 8 / 1 9

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M A N A G E M E N T R E P O R T

1 O V E R V I E W O F F I N A N C I A L Y E A R 2 0 1 8 / 1 9
A N D O U T L O O K

Outlook of METRO

The outlook is based on the assumption of stable exchange rates and no further

adjustments to the portfolio and only covers METRO's continuing operations. The main

opportunities and risks that could influence our outlook are explained in the opportunity

and risk report. The achievement of our sales and earnings outlook is further based on our

assumptions for 2019/20 regarding macroeconomic developments.

Sales
Due to the advancing and successful focus on the HoReCa and Traders customer groups,

the Management Board expects total sales and like-for-like sales to grow by 1.5% to 3% in

financial year 2019/20 (2018/19: 2.2% growth to total sales and 2.1% growth of like-for-like

sales). As a consequence of this focus, a further trend improvement is expected in Russia.

Germany is expected to show a flat sales development, while the Western Europe

(excluding Germany), Eastern Europe (excluding Russia) and Asia segments are expected

to grow at the previous year's level. Across all segments, the Management Board sees the

delivery business in particular and the synergetic interaction of the various channels as well

as the focus on HoReCa and Traders customers as growth drivers.

Earnings
An important focus of METRO is on increasing operating performance and portfolio

simplification. Against this background, the Management Board announced to adopt

efficiency measures on 19 November 2019. In financial year 2019/20, the Management

Board expects this to result in one-time transformation costs of €60 million to €80 million.

Before transformation costs for these efficiency measures, the Management Board expects

EBITDA excluding earnings contributions from real estate transactions to be roughly at the

level of the past financial year (2018/19: € 1,021 million). Earnings in Russia are expected to

decline by between €20 million and €30 million as a result of the ongoing repositioning.

Earnings growth in Germany and Western Europe (excluding Germany) is expected to

compensate for this. For the remaining segments, EBITDA is expected to remain roughly at

the previous years level.

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A N D O U T L O O K

Sales trend (like-for-like)

METRO Germany

METRO Western Europe (excl. Germany)

METRO Russia

METRO Eastern Europe (excl. Russia)

METRO Asia

Sales trend in local currency

METRO Germany

METRO Western Europe (excl. Germany)

METRO Russia

METRO Eastern Europe (excl. Russia)

METRO Asia

EBITDA excluding earnings contributions from real estate
transactions in € million

METRO Germany

METRO Western Europe (excl. Germany)

METRO Russia

METRO Eastern Europe (excl. Russia)

METRO Asia

Others

1 At constant exchange rates, excluding further portfolio adjustments and transformation costs.

2018/19

2.1%

0.3%

1.3%

−4.3%

6.3%

5.3%

2.2%

−0.6%

1.3%

−3.3%

6.4%

7.3%

1,021

499

220

344

−148

Outlook 2019/201

1.5%−3% growth

Stable sales development

Previous year’s level

Trend improvement

Previous year’s level

1.5%−3% growth

Stable sales development

Previous year’s level

Trend improvement

Previous year’s level

Earnings growth

Decline between €20 million and
€30 million

Previous year’s level

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C O M B I N E D
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2 P R I N C I P L E S O F T H E G R O U P

2 PRINCIPLES OF THE GROUP

2.1 Group business model

METRO is a leading international specialist in food wholesale. The group is headed by

METRO AG, which acts as the central management holding company. It performs group

management functions, particularly in the areas of finance, controlling, legal and

compliance. Central management and administrative functions for METRO Wholesale are

anchored within METRO AG.

In its core wholesale business, METRO Wholesale is globally represented with 678 stores

in 24 countries. In addition, METRO Wholesale is active with the delivery business (Food

Service Distribution, FSD) in another 10 countries. The delivery business includes the

METRO delivery service as well as the delivery specialists Classic Fine Foods, Pro à Pro and
Rungis Express. So far, the retail company Real constituted the 2nd sales line of the group
with 276 hypermarkets across Germany. Real forms the principal element of the

discontinued business segment due to the decision of the Management Board of

METRO AG to dispose of the hypermarket business.

The group’s digitalisation activities are bundled under Others. These initiatives primarily

refer to the activities of the Hospitality Digital business unit, which was established in 2015.

The unit develops digital solutions for customers from the hospitality industry and creates

interfaces for the digital products conventionally used by wholesale traders.

The Others segment also includes the service companies METRO PROPERTIES, METRO

LOGISTICS, METRO-NOM, METRO ADVERTISING and METRO SOURCING. These companies

provide real estate, logistics, IT, advertising and procurement services within the group.

OVERVIEW OF METRO

METRO

METRO Wholesale

Others

METRO
Germany

METRO
Western
Europe
(excl.
Germany)

METRO
Russia

METRO
Eastern
Europe
(excl. Russia)

METRO
Asia

– Hospitality Digital

– METRO PROPERTIES

– Other service companies

Discontinued operations: hypermarket business, METRO China

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2 P R I N C I P L E S O F T H E G R O U P

METRO Wholesale

As an omnichannel operator, METRO Wholesale combines a

wide network of modern wholesale stores with a wide-

ranging delivery service (FSD). It is an internationally

leading player in this field. With its segments

METRO Wholesale Germany, METRO Western Europe

(excluding Germany), METRO Russia, METRO Eastern

Europe (excluding Russia) and METRO Asia, METRO is

active in 34 countries. The sales line METRO Wholesale

operates 678 wholesale stores in Europe and Asia under its

brands METRO and MAKRO. Its more than 16 million

commercial customers worldwide are mainly hotels,

restaurants, catering companies, independent retailers, as

well as service providers and authorities, to which

METRO Wholesale offers a portfolio of products and

solutions that has been tailored to their specific

requirements. In the area of Food Service Distribution

(FSD), METRO Wholesale maintains a strong presence with

its METRO Delivery Service and the delivery companies

Classic Fine Foods, Pro à Pro and Rungis Express. Classic

Fine Foods is an Asian delivery company for a wide range of

deli food. The company’s customers include premium

customers such as 5-star hotels and upmarket restaurants in

Asia and the Middle East. Pro à Pro delivers products to

commercial customers across France, in particular in the

fields of corporate catering, canteens and system catering.

Rungis Express is an important upmarket food delivery

company in Germany that mainly caters to HoReCa

customers.

Others

The Others segment includes the Hospitality Digital

business unit and the METRO PROPERTIES service

company among others. Hospitality Digital pools the

group’s digitalisation activities for customers from the

hospitality sector. These activities include the development

of digital solutions, which are created to meet the needs of

the HoReCa customers, and the promotion of innovative,

progressive food solutions. With its real estate expertise,

METRO PROPERTIES has established itself on the market as

a reputable real estate company. It develops, operates and

markets an international portfolio. METRO benefits from

opportunities for adjacent businesses, such as sub-licensing

of its comprehensive market expertise and the reputation of

METRO PROPERTIES. The real estate segment makes a

long-term and significant contribution to the overall

business success of METRO.

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M A N A G E M E N T R E P O R T

2 P R I N C I P L E S O F T H E G R O U P

STORE NETWORK BY COUNTRY AND SEGMENTS

as of the closing date of 30/9

METRO Germany

Austria

Belgium

France

Italy

Netherlands

Portugal

Spain

METRO Western Europe
(excl. Germany)

METRO Russia

Bulgaria

Croatia

Czech Republic

Hungary

Kazakhstan

Moldova

Poland

Romania

Serbia

Slovakia

Turkey

Ukraine

METRO Eastern Europe
(excl. Russia)

India

Japan

Pakistan

METRO Asia

Total

METRO1

2018

103

240

193

675

New store
openings

Closures

METRO

2019

103

240

195

678

1 The locations and countries of Classic Fine Foods and those of Pro à Pro and Rungis Express are not shown in the table as they relate to distribution centres and

warehouses whereas this table only covers sales locations.

2.2 Management system

METRO’s strategic focus on creating additional customer value for the wholesale business

and the objective of sustainably increasing the value of our company are also reflected in

our internal management system. We use the key performance indicators described in the

following for the planning, management and control of our business activities. Selected key

performance indicators of our management system (like-for-like sales growth, EBITDA and

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Return on Capital Employed) form the basis for the Management Board’s variable

remuneration component.

The focus of the group’s operational management is on those value drivers that have a

direct effect on the medium- and long-term corporate objectives and are directly related to

the strategy.

The first important key performance indicators for METRO are exchange rate-adjusted

sales growth (as a total figure and a like-for-like figure) and the EBITDA excluding earnings

contributions from real estate transactions. Our management system also makes use of

other significant performance indicators, which are explained in the following.

MANAGEMENT SYSTEM

Like-for-like sales
Total sales

Growth

EBITDA
EBIT
Profit or loss for the period
Earnings per share

Investments
Net working capital
Net debt
Free cash flow conversion
Return on Capital Employed

Operational earnings power

Company value

Capital deployment

Key performance indicators describing the earnings position
The first of our most important key performance indicators for our operational business is

the exchange rate-adjusted sales growth (respectively as a total figure and a like-for-like

figure). The like-for-like sales growth represents the sales growth measured in local

currency generated on a comparable selling space or in relation to a comparable panel of

locations or merchandising concepts, such as online shopping and delivery. The figure only

includes sales of locations with a comparable history of at least 1 year. It follows that

revenues generated by locations that were affected by openings, closures, significant

redevelopment works or other conceptual changes in the reporting year or the comparison

year are excluded from the analysis.

The second of our most important key performance indicators, in addition to sales

growth was introduced in financial year 2017/18 and is the EBITDA excluding earnings

contributions from real estate transactions. This key performance indicator gives

transparent account of METRO’s operational performance. The development of real estate

assets and the proceeds from divestments nevertheless remain core components of the

group’s real estate strategy.

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2 P R I N C I P L E S O F T H E G R O U P

In light of the strategic portfolio streamlining and the corresponding focus on the

wholesale business, METRO is implementing the following changes: starting with financial

year 2019/20, METRO will present the business result and the situation of the group

without accounting for transformation costs that will result from certain one-time expenses

in connection with the efficiency measures.

Other important key performance indicators of METRO are the profit or loss for the

period and the earnings per share. These key performance indicators ensure that the tax

and net financial result are given consideration in addition to the operational result and

thereby allow for a holistic assessment of METRO’s earnings position from the perspective

of the shareholders.

For more information about these key performance indicators, see chapter 3 economic report − 3.2 asset,
financial and earnings position – earnings position

page 93 .

Key performance indicators relating to the financial and asset position
The management of METRO’s financial and asset position aims at sustainably assuring

liquidity and arranging cost-effective sources for the financing requirements of our

subsidiaries.

For more information about the financial and asset position, see chapter 3 economic report − 3.2 asset,
financial and earnings position – financial and asset position

page 87 .

The key performance indicators used in this area also include the investments, which are

planned, reported and audited both in aggregate for the group as well as separately for the

segments. Investments are defined as additions to non-current assets (excluding financial

instruments and deferred tax assets).

Another focal point in the area of the financial and asset position are regular analyses of

the net working capital, which are carried out for the purpose of managing the operational

business and capital deployment. Developments in net working capital over time result

from changes in stock inventories, trade receivables and trade liabilities. Receivables due

from suppliers are recognised in the items other miscellaneous financial assets and non-

financial assets.

The net debt and the cash flow before financing activities are also used as key

performance indicators to manage METRO’s liquidity and capital structure. The net debt

results from the balance of financial liabilities (including finance leases), cash or cash

equivalents and short-term financial investments.

METRO also analyses the free cash flow conversion to measure the group’s success in

transforming the generated income into cash inflows. The free cash flow conversion results

from the ratio between the simplified free cash flow and the reported EBITDA. To

determine the free cash flow conversion, the free cash flow results from the reported

EBITDA less cash-effective investments (excluding finance leases and mergers and

acquisitions) +/- changes in net working capital.

Value-oriented key performance indicators
The key performance indicator Return on Capital Employed (RoCE) is still used to assess

the operational business. This key figure measures the Return on Capital Employed (RoCE =

EBIT / average capital employed) in a certain period under review and also allows for an

assessment of the performance of the group’s individual segments.

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The resulting RoCE is then benchmarked against the respective segment-specific cost of

capital before taxes, which represents a minimum yield on the employed capital at market

rates and is based on capital market models.

METRO also frequently uses value-oriented key performance indicators to assess both

prospective and past investments. METRO uses the discounted cash flow method, the key

figure economic value added (EVA) and other liquidity-oriented key performance

indicators such as the amortisation period to form its investment-related decisions.

As of financial year 2019/20, METRO AG will apply the accounting standard IFRS 16

(Leases), which will be introduced retrospective in its entirety.

In the future, this accounting standard will affect various key performance indicators,

such as ‘earnings before deduction of interest, taxes, depreciation and amortisation

(EBITDA)’, ‘net debt’, ‘cash flow before financing activities’ and ‘Return on Capital

Employed (RoCE)’. A complete overview of the adaptation of the earnings in financial year

2018/19 in accordance with IFRS 16 will be provided in January 2020.

2.3 Innovation management

METRO takes pride in driving innovation. Innovations are essential for new solutions, which

METRO develops for its operational business and also for its customers. With Hospitality

Digital and METRO-NOM, we are pursuing the goal of developing these types of solutions

and making workflows more efficient.

Hospitality Digital: supporting the digitalisation of our business customers
In October 2018, METRO launched the DISH (dish.co) platform to further accelerate the

digitalisation of the hospitality industry. The platform enables restaurateurs to quickly

access digital products, such as tools to create an internet presence operated by

Hospitality Digital or an online reservation tool. The digital solutions offered by DISH were

developed by Hospitality Digital and external providers. Membership on DISH is free and

accessible to all restaurateurs, even if they are not yet METRO customers. Restaurateurs are

encouraged to connect via the platform and find out about current gastronomic trends and

events. DISH is already available in 14 countries with more than 170,000 restaurateurs using

the solutions on the platform. Since April 2019, METRO has also been offering the DISH

app, which provides users mobile access to all digital DISH tools without having to log in

for each individual product. Moreover, the app features a free personnel management tool,

which allows restaurateurs to easily control their entire personnel management online.

In addition, Hospitality Digital is conducting various pilot projects aimed at increasing

the revenue of the participating hospitality businesses. One example is a loyalty

programme that allows consumers to collect loyalty points in restaurants in Berlin. The goal

is to increase both the attractiveness and the sales of the participating restaurants.

Another project is the cooperation with Google, which began in 2018 with the support

of Hospitality Digital regarding the verification of ‘Google My Business’ accounts. In 2019,

the cooperation continued by connecting the online reservation tool to ‘Reserve with

Google’. This link allows the consumer to reserve a table using the online reservation tool

within the Google search function. This has led to a 20% increase in reservations via the

online reservation tool at participating restaurants.

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In addition to the already established accelerator programmes in the hospitality and

retail sectors, METRO launched the ‘METRO Target Retail Accelerator, Certified by

Techstars’ in May 2019. International start-ups have participated in the programme, which

took place at the METRO Accelerator in Berlin and at Target, the American retail company

based in Minneapolis.

Furthermore, Hospitality Digital invests in promising technology companies through the

LeadX Capital Partners brand. It often collaborates with other external investors.

METRO-NOM: innovative solutions for the operational business
METRO is also forging ahead with the digitalisation of its operating business in order to

better meet individual customer needs, deploy resources profitably and utilise data for its

operations. Digital solutions also support METRO’s sustainability initiatives by making

processes more efficient and, for example, minimising the use of paper. In line with this

initiative, METRO-NOM develops innovative approaches for the 24 national subsidiaries in

which METRO Wholesale is represented with wholesale stores.

By standardising processes, synergy effects are used in the introduction of central IT

solutions. At the same time, METRO-NOM accounts for the special requirements of the

individual business models in the individual countries. In Romania, METRO-NOM cooperates

with the IT service provider Spryker in setting up a tailor-made online shop for Trader

customers. This online shop will now also be transferred to Russia, where Traders

customers represent the key target group. In addition, the digital ordering process via M-

Shop is currently available to – or in the process of being activated for – professional

customers in 17 countries. In financial year 2018/19, around 5.3 million orders were recorded

via M-Shop.

The METRO Companion app was developed to improve the shopping experience for

customers. Customers can use the app to search for products, check their in-store

availability and create individual shopping lists. The app also serves as a digital customer

card and includes digital coupons that replace a plastic card or paper receipts.

As part of a test project, METRO-NOM is testing blockchain technology for secure

archiving of irrevocably decentralised stored data. The solution enables storing and

comprehensively analysing raw data, such as POS data. This analysis helps predict

shopping behaviour of customers to adjust product inventories in advance.

In addition, METRO-NOM is testing in France whether using robotics to analyse stock

levels in the stores generates added value. They expect the robot to detect inventory gaps

faster and more accurately than conventional methods. If this pilot project proves to be

successful, the concept will be implemented across the board.

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NX-Food: The innovation hub for promotion of start-ups
Another important task for METRO is the promotion of young companies in the food

industry. The innovation hub NX-Food was founded in March 2018 to develop innovative

and sustainable food concepts in the retail and hospitality sectors. Via NX-Food, METRO

offers start-ups a platform to market their innovative food products. More than 600 start-

up companies have already submitted their applications to METRO Germany and METRO

Austria to have their products featured in the product range for a 3-month test phase. More

importantly, they hope to stay on the shelves permanently, if the test phase is successful.

NX-Food also cooperates with the airline Eurowings and with Retail in Motion. From August

2018 to October 2019, products from up to 4 start-ups have been featured in Eurowings’

magazine ‘Wings Bistro’ for one quarter.

NX-Food is also very engaged in community and partnership programmes. Amongst

other things, NX-Food has hosted more than 30 events bringing together over 2,000

industry experts, start-up entrepreneurs, restaurateurs and people with a passion for

innovative food.

To reinforce this commitment, NX-Food decided in 2019 to partner with Europe’s leading

food innovation initiative, the European Institute of Innovation & Technology (EIT) Food.

NX-Food advises the start-ups of the RisingFoodStars Association and supports them with

extensive market expertise.

NX-Food and METRO are also founding members of the new Association for Alternative

Protein Sources (BALPro). The association brings together more than 60 representatives

from trade, industry, science and research to provide transparent and traceable information

on animal and plant protein sources.

2.4 Combined non-financial statement of METRO AG

With this chapter, METRO AG fulfils its duty to produce a non-financial statement (NFS) for

the holding company, pursuant to §§ 289b–e of the German Commercial Code, and a non-

financial group statement, pursuant to §§ 315b–c together with §§ 289c–e of the German

Commercial Code, in the form of a consolidated non-financial statement. As a separate

chapter, this declaration constitutes a part of the combined management report. Unless

stated otherwise, the concepts described here apply to the entire group as well as the

holding company. Unless expressly stated otherwise, all presentations in the combined

management report refer to continuing operations (excluding the hypermarket business

and excluding METRO China). The Management Board of METRO AG is fully involved in all

topics presented here and is regularly updated about their progress.

The NFS is integrated in the combined management report. It was produced in

consideration of the GRI standards for Corporate Responsibility Reporting and the UN

Global Compact. The contents are not subject to statutory audits of the annual and

consolidated financial statements, but are part of the limited assurance business audit

according to ISAE 3000 by KPMG AG Wirtschaftsprüfungsgesellschaft. The assurance

statement of the independent auditor is available at www.metroag.de/cr-report-2018-19/

assurance

Business model

For more information about METRO’s business model, see chapter 2 principles of the group − 2.1. group
business model

page 49

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METRO SUSTAINABLE
Our society is more exposed than ever to economic, environmental, social and cultural

challenges. Similarly, we experience every day that sustainability is the key to transforming

these challenges into opportunities.

It is our vision to make wholesale more sustainable along the value chain in our work

with small and medium-sized independent suppliers and customers in contact with

consumers. By reconciling our business imperative and goals with the needs of nature,

people and future generations, we can act responsibly, remain successful in the long term

and overcome the conventional limits of growth. Through information, inspiration,

motivation and support from our employees, customers and partners, this visionary

approach has the potential to reach millions of people.

METRO SUSTAINABLE – OUR CONTRIBUTION
TO SUSTAINABLE DEVELOPMENT

As a partner for independent businesses

along the entire value chain, we thus do

more for business-passionate people – in a

responsible way. This reflects the core of our

business and means that, for our

sustainability approach, we not only practice

METRO SUSTAINABLE in our own business,

but also support our customers in making

their businesses more sustainable through

sustainable value creation. We strengthen

local communities and call for more

conscious nutrition. As an innovation driver

for sustainable solutions, we contribute to a

sustainability movement. For example, by

using the digital solution of Too Good To Go

in our stores as well as offering it to our

customers, we reduce food waste on

different levels in our value chain. This is how

we achieve our goal of becoming part of an

ecosystem analogous to nature through

METRO SUSTAINABLE and making an

impact for increased sustainability.

To ensure that our sustainability approach

addresses the aspects and issues that most

affect our business and that we can leverage through our business activities, we conducted

a materiality analysis in the course of financial year 2017/18 in accordance with the

requirements of the CSR Directive Implementation Act. Assessment of the facts was based

on the legally required materiality definition. The aspects and issues identified in the

analysis are the content of this NFS and comply with the requirements of the CSR Directive

Implementation Act for the reporting of non-financial content. The results of this

materiality analysis were confirmed in financial year 2018/19 by our customer survey

conducted in 23 countries with a focus on sustainability and in a 1-day sustainability

strategy workshop with the participation of the Management Board of METRO AG, other

senior management positions and other expert functions of the entire METRO group. With

our focus on the food sector, we emphasise on 3 main topics:

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1. We want to make our range of products and services more sustainable by positively

influencing the availability, quality and wholesomeness as well as the social and

environmental safety of food.

2. We promote more conscious consumption, including the use of a diverse range of

proteins.

3. By pooling our partnership strengths, we are fighting against food waste.

For us, this means improving our ‘foodprint’ while minimising our ecological and social

footprint by treating people and resources responsibly and creating positive effects for

society as a whole. Not only through the discourse with internal and external stakeholders

such as employees, customers, suppliers and business partners, local communities, NGOs,

political representatives, investors, competitors and committees do we know that further

material issues, such as the protection of human rights, the use of more sustainable

packaging and less conventional plastic, our actions to improve climate protection and

responsible procurement as well as the pursuit of diversity and inclusion naturally remain

within our responsibility.

More information about METRO SUSTAINABLE is available online at www.metroag.de/cr-report-2018-19/
approach.

The guiding principles for us are the United Nations Sustainable Development Goals

(SDGs). These goals also form the global action framework of our corporate strategy, which

is shaped by the principle of sustainability. Along our areas of responsibility (Empower)

People, (Secure) Planet, (Unfold) Prosperity and (Enhance) Partnerships, we support the

SDGs, in particular the goals in which we are most directly involved: 2 (Zero Hunger), 8

(Decent Work and Economic Growth), 12 (Responsible Consumption and Production), 13

(Climate action) and 17 (Partnerships for the goals). Through the diversity of our activities

and the interdependence between these projects and the SDGs, we contribute to the 17

goals of the global agenda with our commitment to sustainability. As a member of the UN

Global Compact, we also incorporate the 10 principles of the UNGC into our work, strategy

and corporate culture.

By taking these international initiatives into account, we highlight our actions as a

responsible, global and locally active company. We consider ourselves to be a value-

creating part of society and we contribute to achieving sustainable economic, social and

environmental development.

Actively managing sustainability
The sustainability management serves the purpose of systematically and organisationally

anchoring the notion of sustainability in our core business operations and to consider the

interdependencies between economic, environmental and social aspects in an efficient,

solution-oriented manner. Via the formalised reporting and evaluation of sustainability-

related opportunities and risks, which have been evaluated in the materiality analysis, it is

closely linked to our overall opportunity and risk management. This enables the

Management Board to systematically identify, evaluate and control deviations from the

sustainability goals and the ensuing opportunities and risks. No risks subject to mandatory

disclosure pursuant to § 289c Section 3 Nos. 3 and 4 of the German Commercial Code

(HGB) were identified. The sustainability risk that was reported in the opportunity and risk

report does not fulfil the criterion of double materiality. However, a carbon price or

increased energy prices in general could negatively affect the financial situation of METRO

in the short and long term. The existing, company-own climate target will further help in

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managing this risk. Since 2019 this target has additionally included the supply chain as the

highest environmental impact accumulates here.

The Sustainability Committee sets the strategic framework, facilitates the exchange of

information on sustainability issues at the highest level (also with external input) and

defines group-wide objectives. To adequately respond to the specific market and customer

requirements, the METRO companies manage the operational implementation of

sustainability within this framework. They are responsible for working on the relevant

sustainability issues, for defining specific targets and measures and for monitoring their

success. They report on current developments and achieved progress to the Sustainability

Committee.

The committee is chaired by 2 representatives from the top management, who are

frequently regularly rotated. Other members of the committee are:

People in charge of corporate responsibility at METRO AG

Representatives of the core functions purchasing, own brands, communication as well as

investments and technical solutions

Representatives of the METRO Wholesale national subsidiaries

Ad hoc expert groups prepare specific issues on the operational level and then present

them to the Sustainability Committee for decision. Depending on the issue, participants

include experts from the METRO Wholesale national subsidiaries and the head office.

Additional interfaces between the strategic and operational levels of sustainability are

periodic telephone calls of the sustainability experts and 1-to-1 responsibilities of the

sustainability colleagues of METRO AG for all METRO Wholesale national subsidiaries

through individual country support. Much like the ad hoc expert groups, the activities

promote exchange and support to implement decisions made by the Sustainability

Committee.

In addition, we integrate sustainability aspects into relevant business processes and

decision making processes, among other things via guidelines such as the new policy on

the procurement of sustainable soy. We also involve our employees via our quarterly

employee survey, various sustainability activities such as our Sustainability Day as well as

via our social network platform. We strive to enable our employees to understand the

significance of sustainability with respect to both themselves and their professional

environment, and to conduct themselves accordingly. For example, to support this goal we

have our principles, self-commitments and positions that provide directional guidance and

include compliance with laws as well as meeting additional requirements. Employee

development programmes that integrate sustainability issues are an important aspect. For

example our ambassador programme METRO Sustainable Leadership Programme, which

enriches management development with a focus on sustainability. While METRO may be

able to drive the issue in a top-down approach, each one of the more than 100,000

employees is our ambassador and can effectively contribute to our impact on sustainability.

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Our stakeholders evaluate the sustainability measures implemented by us, for example,

through ratings. These evaluations by independent third parties are an important motivator

to us and serve as a management tool, because they demonstrate the progress and

potential to improve our activities. An example of this is the linking of the remuneration of

the Management Board and the global senior management to the valuation of METRO’s

sustainability performance in the rating of the Dow Jones Sustainability Index (DJSI).

Oekom Research (now called ISS-oekom) awarded the prime status C+ (on a scale from

D- to A+) to METRO in August 2018. Having been ranked as the best in the industry for 4

consecutive years by the internationally significant Dow Jones Sustainability World index,

we attained second place in financial year 2018/2019 in the Food & Staples Retailing Group.

In the Dow Jones Sustainability Index Europe however, we were ranked best in the industry

for the fifth consecutive year. METRO is also listed in the FTSE4Good index. METRO has

been issuing public statements on climate protection and water for many years through

CDP. For the 2 topics, METRO achieved a rating of A- and B- respectively (scale F to A) in

2018 and is thus well above the industry average. METRO participated in CDP Forest for the

first time. The results for 2019 were not yet available on the publication date.

Environmental matters
A responsible consumption of energy and other natural resources is crucial for all of us. The

use of resources has a direct effect on our operating costs and may entail undesirable

environmental impact, such as the emission of climate-damaging greenhouse gases. Our

approach is to significantly reduce the climate-relevant emissions caused by our business

operations and resulting from our supply chain as well as to decrease our consumption of
natural resources1. We do this by focusing on behavioural change (Energy Awareness
Programme) and investment aimed at increasing our energy efficiency (Energy Saving

Programme). We also operate a global energy management system to identify potential

savings in our stores and monitor our overall savings targets. At METRO Wholesale, we

reduced electricity consumption in our stores by 3.4% in year-on-year comparison in the

past financial year and thus clearly exceeded our target of 2.2%. Wherever possible, we are

also converting our cooling systems to natural refrigerants (F-Gas Exit Programmes). This

reduces our energy requirements as well as our costs. In financial year 2018/19, among

other things, we invested €14.9 million in METRO Energy Saving Programme, which saves

us approximately €5.3 million in energy costs each year. Examples of measures in the

reporting year are:

Commissioning of other transcritical ejector refrigeration plants, including in Germany,

France, Italy, Bulgaria, Romania, Croatia and Russia

Initiated roll-out of LED store lighting in Russia with an investment volume of

€7.6 million, but also numerous diverse lighting optimisations in Germany, France,

Romania, Poland, the Netherlands, Portugal, Ukraine and Moldova

Installation of additional photovoltaic systems and expansion of the total capacity to

more than 11,500 kWp in Germany, France, Pakistan and Japan.

1 Due to the company size and alignment (management), the aspect of environmental concerns is not significant for the holding company, METRO AG.

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Heat recovery measures in connection with the installation of new refrigeration plants,

including in Bulgaria, Croatia and Russia

Improvement of building management system by installing a lighting control system in

Spain

Construction of charging stations for electric vehicles for METRO customers, especially

in Germany, Poland and Austria At the Düsseldorf Campus, we commissioned a total of

80 electric chargers for customer, employee and company vehicles

METRO uses an internal carbon price that was originally set at €25 and increased to €50

in 2019 due to general market expectations. We use the carbon price to approve energy-

efficient projects with lower financial savings.

This is METRO’s response to risks identified in initial scenario analyses (as recommended by

Task Force on Climate-related Financial Disclosures TCFD) in our business operations as

well as in our supply chain:

Physical risks resulting from extreme weather events and water damage (scarcity or

flooding)

Business disruptions due to extreme weather events and declining economic power

pose a risk to our customers’ businesses and thus to our sales.
Transition risks such as rising prices for CO2 emissions (with short-term impact on costs
and product prices)

Shortage of resources (rising prices for agricultural products over the next 5 to 10 years)

Investments in new technologies (carbon-neutral cooling units planned worldwide until

2030) and in the generation of renewable energies (extensive installation of solar

systems planned until 2030)

We consider these risks in our medium-term risk management and assess risks for revenues

and costs based on rising prices and decreasing availability of resources. No risks subject

to mandatory disclosure pursuant to § 289c Section 3 Nos. 3 and 4 of the German

Commercial Code (HGB) were identified. The climate-change-related risk listed under

sustainability risk in the opportunity and risk report does not meet the requirement of

double materiality. Furthermore, we assess potential approaches to perform a

comprehensive climate change scenario analysis for METRO.

Further key focal issues in relation to sustainable business operations are the prevention

of waste, the reuse of resources and their recovery by means of recycling. The reduction of

food waste is an issue of particular importance to the operations of METRO. Every food

product that is rejected or discarded instead of being eaten represents wasted economic,

social and environmental resources. METRO has therefore committed itself to the

Resolution on Food Waste by the Consumer Goods Forum (CGF) and thus to eliminate 50%

of wasted food in our own operations by the year 2025 compared to 2016. Therefore for

example, the ‘Food Loss and Waste Protocol’ was successfully implemented in Turkey in

financial year 2017/18, and other countries are currently being discussed. In 22 countries we

cooperate with food service organisations and social institutions in order to avoid food

waste in the stores, including our restaurants and warehouses. In addition, 6 of these

countries cooperate with Too Good To Go.

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In connection with the METRO Water Initiative, the goal was set to save 5% of water by

2025 compared to the base year 2016/17. In 2019, we were able to reduce the consumption

in our METRO wholesale stores by 6% calculated per square metre of net operating area

compared to the previous year. Since the greatest impact for water is also in the supply

chain, we use the CDP Supply Chain Programme to recognise potential opportunities and

risks with our suppliers at an early stage.

Status of climate protection target
From October 2018 to September 2019,
METRO generated 267 kg of CO2-equivalents
per square metre of selling and delivery

space. This figure is down from 299 kg in the

previous year’s period. In financial year 2018/

19, we retroactively switched to a different

emission factor set for energy. We also

report figures excluding discontinued

operations. Our goal is to reduce these

emissions by 50% to 188 kg by 2030

compared with 2011, and with 29% we are on

the right track in the reporting period. In

particular, we focus on the aforementioned

programmes. In financial year 2018/19,

METRO expanded the climate target to the

supply chain and as the first German retailer

set a recognised science-based target for

CLIMATE PROTECTION TARGET STATUS

Greenhouse gas emissions in kg CO2 (CO2
equivalent) per m2 of selling and delivery
space

376

311

299

267

188

2030
(target
year)

2011
(reference
year)

2016/17

2017/18

2018/19

Scope 1 & 2

Scope 3

itself. METRO AG undertakes to reduce its
Scope 1 and Scope 2 CO2 emissions by 60% per square metre selling and delivery area by
2030 compared to 2011. Our goal is thus in line with the reductions required to keep global

warming well below 2 °C. A reduction of 26% has been achieved in this area since 2011.
Furthermore, METRO AG is committed to reducing absolute Scope-3-CO2 emissions
(supply chain) by 15% by 2030 compared to 2018.

Employment matters
With regard to the legally required content in relation to the aspect of employee matters,

we refer to the chapter employees of the combined management report.

Further information can be found in the combined management report − 2 principles of the group −
2.5 employees

page 70 .

Social matters
Compliance with social matters within our own company, especially within the supply

chain, is a complex challenge that may affect internal and external perception as well as the

performance of our supply chain, and thus of our own company, both positively and

negatively. With the procurement of the products that we offer our customers in terms of

availability, quality and sustainability, especially with regard to social matters, we are

dependent on this very efficiency of the supply chain. Simultaneously, we have influence on

it through direct contact with our suppliers as producers and manufacturers. We have been

committed to accepting this responsibility for many years.

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With regard to the description of risks associated with non-compliance of standards by our suppliers, we
refer to the section on ‘supplier and product risks – quality risks’ in chapter 5 opportunity and risk report

page 108 . We did not identify any significant risks.

Respect for human rights
Respect for human rights is one of the fundamental values of METRO, as formalised in our

Policy for Human Rights. We pledge to respect all human rights, as set out in the United

Nations’ Universal Declaration of Human Rights, the International Bill of Human Rights, the

OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and

Human Rights and the Declaration on Fundamental Principles and Rights at Work of the

International Labour Organization (ILO). This obligation applies to our own employees (see

chapter 2.5 employees – human rights and employer-employee relationships
and to our business partners within our value chain2.

page 78 )

Since we expect our business partners to adopt and honour similar values, the METRO

Code of Conduct for Business Partners is an integral part of every business relationship.

This code of conduct includes compliance with human rights according to the International

Bill of Human Rights, the OECD Guidelines for Multinational Enterprises, UN and ILO

standards, occupational and social matters based on the principles of the International

Labour Organization’s 4 core labour standards, environmental protection and corporate

ethics, in particular anti-corruption and anti-bribery, antitrust and competition laws as well

as data protection. Furthermore, all of our own-brand contracts contain a social standards

clause that gives us legal means to enforce our requirements.

In case of violations of our basic human rights principles, our employees can contact

their supervisors or the company’s compliance officers. Using a tool that is publicly

accessible via the METRO compliance page, every internal and external individual, including

stakeholders of our suppliers, can report situations that do not comply with the values and

guidelines of METRO or with statutory provisions. We also expect our suppliers to establish

a grievance channel and to convey the same expectation to their own suppliers. The

reported incidents will be promptly investigated and processed by our experts to take

appropriate action, if necessary. We are also committed to working with our suppliers to

remedy impacts and not obstructing access to other legal remedies. We believe that

collaborating with other initiatives and stakeholders to deal with reported incidents is more

successful than working alone.

2 For the METRO AG holding company, the aspect of human rights in the supply chain is not essential because of its business orientation, but rather only in

relation to its own employees.

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Global labour and social standards in the supply chain and supplier development
We aim to contribute to ensuring socially acceptable working conditions within our

sourcing channels. Therefore, in addition to a contractual manifestation of our

requirements, the application of social standards systems is an integral part of the listing

process as well as an important tool. Social standards systems enable us to take effective

action against any potential violations. Irresponsible practices within the supply chain can

damage the confidence in our conduct and, consequently, also our business. We will

therefore require our producers to be audited in accordance with the supply chain

management standard set out by the Amfori Business Social Compliance Initiative (Amfori

BSCI), the Sedex audit according to SMETA or an equivalent social standards system. This

applies to all producers in defined risk countries (based on the Amfori BSCI assessment) in

which METRO SOURCING and METRO Food Sourcing have imported goods manufactured.

It also applies to all other producers who manufacture own brands or imports for our sales

lines. For many years now, a corresponding process has been worked on for our non-food
producers3. With effect from 1 June 2019, these requirements were established analogously
for all food and near-food producers in the own-brand sector. To this end, all national

subsidiaries are requested to develop country-specific development plans in the coming

financial year, if possible, so that METRO can reach the goal of ensuring social compliance

for all own-brand suppliers by 2030.

As of 30 September 2019, 1,077 non-food producers were audited, with 99% (1,071

producers) passing the audit. Effective 1 January 2019, non-food producers who fail the

audit cannot be commissioned until they achieve an acceptable audit result. In other words,

they have to receive an A, B or C for the Amfori BSCI assessment or an audit that is
acknowledged as equivalent.4

The verification of compliance with our requirements is performed via an internal IT-

based process management database, which is synchronised with the audit results in the

Amfori BSCI database. By working with our database, the responsible employees of our

METRO national subsidiaries carry out the portfolio management of the affected suppliers

and the associated producers and strive to integrate the procedures for compliance with

social standards and human rights into their daily work routines. On the other hand, the

process management is automated, for example, to warn our suppliers of expiring audits

and to initiate the individual review of Amfori BSCI D or Amfori BSCI E audits or equivalent

audits by METRO and to effect improvements. The database is also used as a contract

compliance mechanism during initial negotiations or suspension of ongoing business, since

the required documents are uploaded and reviewed before conclusion of the contract or

suspension of the supplier is triggered in case of misconduct by deal-breakers specified by

METRO. This includes findings in the areas of child labour, forced labour, occupational

safety hazards with regard to fire safety and ethical behaviour. If there is a misconduct

discovered at suppliers and their producers concerning one of these areas, they are

required by METRO to develop short-term and long-term solutions. New orders or follow-

up orders are suspended until the findings in the deal-breaker process have been resolved.

3 This includes merchandise producers (non-food own-brand products and own non-food imports) in high-risk countries that carry out the final value-

creating production step, for example produce the final item of clothing.

4 2 METRO Wholesale companies were granted the exception until the end of the financial year to continue using individual producers with D audit results.

These producers were trained by special training units in order to arrive at an acceptable audit result.

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Supplier development was also identified as a material topic for the business activities

of our operational business. By training small and medium-sized suppliers on aspects of

food safety, hygiene, processing and implementation of fair working conditions, we enable

them to meet relevant standards and thus help them merchandise their goods. This
increases their revenue and simultaneously secures our product range.5

In order to not only ensure the social requirements of our suppliers, but also contribute

to improving them and thereby further increasing the proportion of valid social audits,

METRO SOURCING works with our local non-food producers and supports them through

training courses designed to understand and comply with social standards. In financial year

2017/18, METRO Turkey and METRO Pakistan piloted a 1-day training course for employees

in key positions, which was then completed at METRO Ukraine and METRO Bulgaria in the

reporting year. The intention is to reintroduce the importance of the topic into our

organisation and to empower our employees to identify, process and prevent potential

and/or actual forced labour incidents in the supply chain. The development and execution

of the training is carried out in collaboration with the Amfori Business Social Compliance

Initiative (BSCI). By 30 September 2020, all METRO Wholesale national subsidiaries are

expected to have completed this training.

SOCIAL AUDITS RELATING TO OWN IMPORTS BY METRO SOURCING AND NON-FOOD OWN-BRAND
PRODUCTS OF THE METRO SALES LINES

As of the closing date of 30/9

Producers with a valid audit (number)

Thereof with passed audit (in %)

1,080

138

2016/17¹

2017/18¹

2018/19

Total 1,218

1,173

101

Gesamt 1.557
Total 1,274

1,071

Total 1,077

Thereof with passed audit

Thereof with failed audit

2016/17¹

2017/18¹

2018/19

Producers that have passed the audit can prove the
successful implementation of the Amfori BSCI
system of social standards or an equivalent system
by providing a certificate issued by an independent
third party.

¹ Figures presented here include Real and METRO China.

Combating corruption and bribery
The Management Board of METRO AG is committed to complying with applicable laws,

rules and regulations. METRO employs a group-wide compliance management system

(CMS) to ensure compliance with laws and a self-imposed code of conduct, including key

risks such as combating corruption and bribery and the prevention of antitrust law

violations. The aim of the CMS is to systematically and sustainably prevent, detect and

sanction regulatory infringements within the company.

5 Due to the company alignment, the aspect of supplier development is not significant for the holding company, METRO AG.

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The METRO Business Principles are at the heart of our compliance initiatives and are

firmly anchored throughout the group particularly by ongoing training measures. The CMS

is based on the METRO Business Principles. Business Principle no. 2, for example, explicitly

prohibits corruption and bribery in dealing with business partners and authorities. To set up

the CMS, METRO was guided by the basic elements of such a system described in the IDW

PS 980 audit standard. It operationalises the 7 CMS elements on a risk basis applying a

wealth of organisational, structural, procedural and individual measures for all major group

companies.

The Management Board of METRO AG and the General Management of the relevant

METRO group companies demonstrate proper conduct and lead by example. In addition to

informal role model behaviour, frequent ‘tone from the top’ messages are foreseen in the

organisations. New members of management committees and other executives undergo

compliance onboarding at the beginning of their job. Indications of compliance incidents

are investigated in a clearly defined and objective process involving all relevant functions

including compliance, legal, auditing and HR.

The defined goal of the CMS is additionally implemented in the organisation via human

resources management tools. As part of the regular performance reviews, compliance

aspects are included in the evaluation as part of the METRO Guiding Principles.

Generally, the CMS compliance risks control is risk-based. As part of regular risk audits,

for example in the form of workshops with relevant stakeholders in the respective units, the

compliance risks are continuously checked for completeness and relevance. In addition,

each relevant group unit is classified in 1 of 3 risk classes. External and internal indicators

are used for this purpose, such as Transparency International’s indices, employee turnover

rates and compliance maturity in past periods.

A compliance programme with different intensities is defined for each risk class. It is

based on the guidelines developed for each significant compliance risk and adopted by the

Management Board. When it comes to combating corruption and bribery, this is one

guideline for dealing with business partners, including a business partner assessment, and

dealing with public officials.

The CMS is implemented by the compliance organisation. A compliance officer has been

appointed to each relevant METRO group company for this purpose, who reports directly

to the METRO AG Corporate Compliance department as part of Corporate Legal Affairs &

Compliance. The overall responsibility lies with the Chief Compliance Officer of METRO AG,

who reports directly to the Chairman of the Management Board of METRO AG. The

compliance organisation is centrally managed by Corporate Compliance. Corporate

Compliance keeps the CMS conceptually on a risk-appropriate level and provides the

concepts and tools for implementation in the METRO group companies of each CMS

element. The disciplinary and technical leadership of the compliance officers takes place

via institutionalised reporting dates as well as target agreements. The compliance officers

regularly report directly to the local management in their units. Moreover, identified key

compliance risks are recognised within the GRC subsystems Internal Control Operations

and Internal Control Finance and integrated into the systems there.

An IT-based whistle-blower system provides employees and external third parties with

an opportunity to provide information (under the protection of anonymity, if preferred) on

regulatory infringements within the company. All reported regulatory infringements,

irrespective of whether the measures for ensuring compliance with these rules fall within

the area of responsibility of the compliance organisation, are investigated and sanctioned

systematically by the compliance management system, which relies on the compliance

incident handling system operated by the compliance organisation. The respective

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departments are responsible for regulatory compliance measures that fall outside of the

area of responsibility of the compliance organisation, with the exception of compliance

incident handling.

Compliance topics and measures are systematically communicated to the workforce

through a variety of channels in the company in a targeted manner. A core tool is

compulsory compliance training, which is either carried out in person or through e-training.

In financial year 2018/19, compliance training was executed in all relevant METRO group

companies. The selection of relevant employee groups is risk-based with practical training

content. A variety of other communication formats are used in addition to training, such as

compliance talks, posters, flyers, intranet, department visits, function and leadership

conferences as well as personnel development events.

The METRO companies cooperate with a large number of third-party business partners.

Before entering into specific contractual relationships, a risk-based examination is

performed to determine whether there are reasons from a compliance perspective not to

engage a third party. Certain groups of business partners, such as consultants with contact

to public officials as part of the order fulfilment, require an in-depth audit that is

appropriate for the risk. To this end, the existing process has been digitalised and an IT tool

is currently being rolled out throughout the group for auditing purposes. The audit

approach is risk-based in various degrees of intensity, for example in the form of self-

disclosure, but also by examining external databases with relevant risk information.

Proper implementation of the defined risk-based measures for the implementation of

the CMS is ensured through frequent KPI reporting for each relevant METRO group

company. Through KPI reporting, a compliance maturity level is determined annually, which

in turn is incorporated into risk classification and definition of measures. The efficacy of our

internal compliance controls is regularly assessed by our Internal Audit unit. As part of

METRO’s GRC approach, the Group Audit department evaluates the effectiveness of the

group-wide CMS every year. This assessment is presented to the Management Board and

the Supervisory Board as part of the regular reporting on compliance issues. Besides

internal reviews and audits, the need for further development of the compliance

management system is ascertained from the results of regular employee surveys.

Overall, the mentioned control and monitoring measures demonstrate an appropriate

level of compliance maturity.

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Customers

Customer satisfaction and innovation management
METRO is a leading international food wholesaler and global market leader in the cash-and-

carry format. METRO’s strategy as a fully-fledged wholesale group is aimed at long-term,

consistent growth of (like-for-like) sales and earnings. METRO focuses on identifying and

addressing customers’ current and future challenges at an early stage in a constantly

changing environment. It is thereby elevating the customer relationship from a

transactional merchandise trade to a sustainable and holistic partnership.

Customer focus and customer satisfaction are central elements of our strategy. In order

to continuously measure and consistently improve customer satisfaction at

METRO Wholesale, we have implemented the Net Promoter Score across the board, in

other words in all 24 METRO Wholesale countries in which METRO is represented with

wholesale stores. Since its introduction, METRO has received about 2.2 million customer

feedbacks. Besides the purely quantitative measurement of the current satisfaction values,

suggestions from customers can be systematically recorded and evaluated. They can be

used to identify further potential to improve the shopping and delivery experience, which is

reflected in the design of our stores, product ranges and delivery services, etc.

Moreover, METRO aims to increase our operating efficiency in order to reduce our cost

base. To this end, on the one hand, the group-wide synergy potential is to be exploited. On

the other hand, cost advantages are to be realised through strategic cooperation projects

with international retail and wholesale companies, for example by reducing procurement

costs through international purchasing alliances.

We also value our customers and their opinions in the area of sustainability. Therefore,

from February to June 2019, we conducted a customer survey in 23 countries in which

METRO is active, which showed us the importance of sustainability for our customers

across all customer groups. This enabled us to verify the findings of the materiality analysis

conducted in 2018. Out of almost 50,000 interested customers, almost 7,500 responded

and confirmed the importance of our activities to improve our impact on the environment

and society. Today, our professional customers and their customers attach great

importance to acting responsibly.

In order to exploit the opportunities derived from digitalisation and to realise synergies,

we are bundling our digitalisation initiatives with the business units Hospitality Digital and

METRO-NOM. To this end, METRO is expanding the range of professional services and

digital solutions that support professional customers in the successful execution of their

business activities and strengthen their competitiveness.

Hospitality Digital develops customer- and user-oriented solutions, for example for the

calculation of menus, a free online reservation tool or other digital solutions specifically

designed for the gastronomy sector. In addition, innovative start-up companies are

supported through initiatives such as the various METRO accelerator programmes.

Since October 2018, restaurateurs have had access to relevant digital solutions such as

the free online reservation tool via the new DISH online platform. The solutions were

developed by Hospitality Digital as well as third-party providers. In addition, restaurateurs

can find out about new gastronomic trends and events on DISH. Since April 2019, DISH has

been available as an app, which includes a free personnel planning tool, making it easier for

the restaurateur to manage his or her business on the move.

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With our METRO-NOM business unit, we continue to digitalise our core business.

METRO-NOM supports, develops and optimises all digital solutions used by our customers,

such as the online shop of METRO Wholesale or the METRO Companion app, as well as by

our colleagues. The internally used solutions cover the entire value chain.

Protection of personal data
The protection of personal data of customers, employees and business partners is

extremely important to METRO. This is particularly true considering the fact that corporate

processes are increasingly being digitalised, requiring data collection, processing and

storage. However, this can only work efficiently if the data-processing subjects can trust

that their data will be handled with care and that their personal rights will be respected.

METRO therefore always undertakes to comply with the respective data protection laws

of the countries in which METRO is active. In addition, METRO has created a group-wide

binding for all group companies. The requirements of the internal privacy policy and

national laws apply to all METRO employees.

For companies operating in Europe, the European Union has already established

Europe-wide uniform regulations on the handling of personal data by passing the General

Data Protection Regulation (GDPR), which has been in force since 25 May 2018, which leads

to more transparency in the processing of personal data. Within the scope of 2 projects, all

data protection processes of all respective METRO companies throughout the group were

reviewed with regard to the new requirements of the General Data Protection Regulation

(GDPR). Company solutions were adapted to the requirements of the GDPR where

necessary (among other things declarations of consent, data protection regulations, IT

systems, privacy default settings).

METRO has also created a group-wide data protection organisation, consisting of local

data protection officers and data privacy managers responsible for corporate data

protection. It facilitates the pursuit of overarching and national data protection and

digitalisation developments in order to continue to meet the statutory data protection

requirements across the group.

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2.5 Employees

Sustainable human resource strategy
With focus on METRO Wholesale, METRO is targeting long-term, consistent growth of sales

and earnings. In addition to expanding our core business, we intend to use our Wholesale

360 approach to further strengthen the competitiveness of our customers in order to build

long-term customer retention and establish ourselves as a partner for our key customers.

We are therefore aligning our human resources strategy with our corporate strategy and

continuously developing our employees. As a foundation for sustainable employee

development, we have been investing in our leadership culture and management

development for years.

Our engagement levels, which have been rising since 2011 and are well above the

industry average, are proof that our employees are doing their best every day to achieve

the goals of the group. With our efforts in human resources, we are contributing to

reinforce this motivation, to encourage teamwork and to promote entrepreneurial thinking,

open-mindedness and taking responsibility in the company. Our focus is on the following

areas:

Development of our talent management and investments in our employer brand in order

to fill positions in our company with the most talented employees.

Evolution to an adaptive, learning organisation that responds quickly to market and

customer needs and participates in shaping trends. Therefore we make significant

investments to accomplish this.

Creating an appealing, open-minded and inspiring work environment for our employees.

We firmly believe: only satisfied employees who are treated in accordance with their

capabilities and engagement can offer a first-class customer experience.

Increasing efficiency through conscious use of our resources and continuous

improvement of our processes.

Our underlying holistic approach to human resources with customised initiatives and

programmes spans the entire career of an employee – from recruitment through various

career and life stages to retirement models. Involvement of the Management Board or

country boards or management of the service companies respectively often already takes

place during the development phase of the personnel concepts and thus ensures proper

balance between adaptation to local conditions and standardisation throughout the group.

One example is METRO-NOM’s new M-Trails career model. It was developed in

collaboration with members of the management team, human resources managers and the

works council. It is a role-based model that emphasises self-responsibility, reduces

hierarchies, focuses on employee expertise and aims to improve fairness, transparency and

collaboration. M-Trails thus creates a framework for the modified organisational structures

and principles of METRO-NOM. It reflects agile operating principles in order to be able to

act more efficiently and flexibly and to respond to changes.

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Recruiting employees
In the competition to hire the best specialists and executives, our goal is to position

METRO as an attractive employer and to attract qualified, talented people to our company.

By training junior employees for the wholesale sector, we are able to develop leaders from

our own ranks. At the same time, METRO is constantly exploring the market for motivated

specialists in order to strengthen its own workforce and to make the best possible progress

in the business.

Initial training at METRO
We assign great importance to the comprehensive, sustainable training of our employees in

all national METRO subsidiaries and service companies. It allows us to make an important

social contribution while our customers benefit from competent contact partners

throughout the company. Prioritising needs-based vocational training allows us to hire a

large portion of graduates at the end of the programme. In Germany, the company

management and the Group Works Council have thus agreed that apprentices who

complete the initial apprenticeship programme with a positive aptitude assessment will

generally be offered permanent, full-time positions. The individual METRO companies in

Germany have defined their own specific requirements and possible exceptions. The

organisation and implementation of the initial apprenticeship programmes and the

specification of their curricula are the responsibility of the companies. They offer various

projects and programmes for their junior employees. For example, on 1 August 2019, 8

apprentices started at the METRO Campus in Düsseldorf, 6 of them at METRO-NOM and 1

apprentice each at METRO ADVERTISING and METRO Campus Services. In addition to the

apprenticeship programme, it is also possible to complete a dual study programme that

includes practical modules.

Talent development
In order to systematically develop our future executives from our own ranks, our initiatives

and programmes are focused on our junior employees. Since 2014, METRO Wholesale has

been offering the METRO Potentials Programme in all countries in which the sales line

operates. The programme targets the best university graduates and young professionals

worldwide with 2 to 3 years of work experience. During the 2-year trainee programme, the

participants have an opportunity to expand their knowledge of our core business by

participating in various hands-on projects. The trainees complete various stations in their

own country and abroad as well as at the company’s headquarters in Düsseldorf. They are

also mentored by a member of the respective country board who supports them as contact

person and coach during that time. After completion of the programme and depending on

availability and qualification, they can assume a management position, for example as store

manager. But the career prospects go far beyond that, up to a position on the Management

Board of the respective country. 11 trainees completed the programme in financial year

2018/19.

Employer brand and human resources marketing
In financial year 2018/19, we implemented various measures to position the METRO

employer brand in a targeted manner. METRO offers interested applicants various

opportunities to obtain information and establish contact via trade fairs, for example by

attending the ”Absolventenkongress” in Cologne, as well as via social networks and in-

house events. Moreover, this was the first time METRO contributed to the World Business

Dialogue, the world’s largest voluntary student business conference. Interested students

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had the opportunity to interact with METRO in a ‘Creation Lab’ lasting several days, while

working on the development of an integrated business plan for a ‘green restaurant’.

In addition to that 7 national subsidiaries, and for the first time METRO AG and METRO-

NOM received the ‘Top Employer’ award in the reporting period. The Top Employers

Institute certifies outstanding employee environments worldwide. At METRO AG, the wide

range of offers and services for all employees was particularly rated positively: It ranges

from an extensive training catalogue and development programmes such as MyRevolution

or Invest-In-Me to kindergartens, the METRO Activity Centre and the home office

agreement.

Succession planning and remuneration models
Our systematic succession planning enables our skilled employees and managers to

develop attractive careers within our company. Our remuneration models also provide

incentives for employees to perform and to align their work practices with our guiding

principles.

Executive development
The systematic development of executives is a core responsibility of all general

management teams of the respective METRO group companies. By taking this approach,

we ensure that the skills and abilities of our managers are consistently aligned with the

requirements and strategic objectives of our company. At the same time, we establish

specific international career paths for our executives in collaboration with the METRO

country organisations, subsidiaries and METRO AG. Our career-planning processes also

allow us to identify and support internal candidates for key positions in the company. This

way, vacant positions can be filled from our own ranks. In financial year 2018/19, the

internal succession rate for the country boards of METRO Wholesale was 70.8%.

To bolster our management capabilities and to achieve sustainable growth, we launched

the Lead & Win programme at METRO in financial year 2016/17. The integrated learning

concept is used to develop approximately 11,500 executives and is divided into 3 to 4

modules for different management levels. The participants learn about group-specific

topics. The objective is for all executives to have completed the programme by the end of

2022. 5,003 executives started the programme in financial year 2018/19. In the coming

years, the focus will increasingly be on levels 3 and 4 in the stores, namely the business,

operations and department managers.

Furthermore, our young talents and top executives – employees who have highly

complex tasks with special significance to the success of our company – are asked to

define their own individual development plan based on a structured self-assessment of

their personality focused on the management competencies relevant to the position.

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For further support, we introduced the METRO competencies in financial year 2018/19

and defined 5 leadership dimensions as the basis for management training and talent

programmes at METRO. The 43 METRO competencies are allocated to the following 5

dimensions of leadership:

Lead Self

Guide

Develop Culture

Build Momentum

Deliver Results

This highlights that all employees are responsible for their own development and also

business success.

In another major initiative, the METRO Sustainable Leadership Programme (MSLP)

supports approximately 30 international executives each year over a period of 1.5 years to

improve their self-management and proactive change management and to implement an

individual sustainability project. The projects address environmental and social matters

such as e-mobility, waste reduction and sustainability in the supply chain.

Individual job performance reviews
As part of our Results & Growth process, we conduct individual performance reviews for

the entire group once a year. This allows us to better assess progress and skills and

establish a strong feedback and development culture. We define the corresponding

priorities at the beginning of each financial year, which are then examined and adjusted as

necessary through mid-year reviews. The final performance review is then conducted at the

end of each financial year in a feedback session, in which compliance with the group-wide

guiding principles is also addressed.

Systematic succession planning
With the Leadership Talent Review, we have established a long-term process to identify

and support talented employees at an early stage with the goal to fill top positions. Once a

year, we use this review to discuss succession planning for key positions with the various

METRO national subsidiaries. The competencies, skills and experience of each candidate

are assessed and compared with the updated job specifications of the corresponding

positions. These interviews form the basis for filling all top positions. In financial year 2018/

19, we focused in particular on identifying young talent and we managed to find the top

500 junior managers worldwide. We now take specific measures and set up programmes to

promote the development of young employees.

Performance-based remuneration for executives (with the exception of members of the
Management Board)6
Our remuneration system ‘Perform & Reward’ comprises a monthly fixed salary as well as

1-year and multi-year variable remuneration components whose payment amounts are

essentially linked to our company’s business performance. Additionally, the 1-year variable

remuneration considers our executives’ individual achievements, generation of additional

value for customers as well as their implementation of our guiding principles in their daily

work. The multi-year variable compensation components include a sustainability

component and allow executives to participate in METRO’s share price development.

6 See chapter 6 remuneration report

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Remuneration principles
The remuneration model for top executives is based on the following 4 principles:

Fair and internally consistent remuneration

Performance-based pay

Market-driven and appropriate salaries

Encouragement of role model behaviour

With the 1-year and multi-year variable remuneration, top executives participate directly in

the success of their respective units.

The 1-year variable remuneration is based on sales, profit (EBITDA) and cash flow. In

addition, customer satisfaction is a relevant key performance indicator.

As part of the multi-year variable remuneration (long-term incentive, LTI), a specific plan

has been created for top executives of the group with focus on the increase in value of

METRO. The LTI is based on the relative total shareholder return (TSR) of the METRO AG
share compared to a benchmark (MDAX and a group of selected benchmark companies7).
The economic success of each company during the performance period of the plan is

another indicator. Furthermore, sustainability is measured by the rank METRO achieves in

the Dow Jones Sustainability Index.

Additionally, a mid-term incentive (MTI) was set up for top executives to support the

transformation at METRO over a period of 2 years. The plan allows participants to join in on

METRO’s success and rewards the achievement of important internal transformation goals,

such as customer satisfaction and the quality of our master data.

Top executive remuneration is complemented by benefits, such as an attractive pension

model, promotion of health care and a mobility budget that can be used for a vehicle or

train rides as part of METRO’s ‘Green Car Policy’.

Continued development of employees
Our in-house corporate academy House of Learning has been awarded the internationally

renowned CLIP certification from the European Foundation for Management Development

(EFMD) for the learning and development programmes offered by METRO. The foundation

was particularly impressed with the consistent employee development and proximity to the

business. The House of Learning division offers customised personnel development

measures, learning solutions and services that target the corporate strategy of METRO as

well as the special features of the wholesale business.

House of Learning focuses on learning and development programmes about customer

orientation, leadership, transformation, sales, field service, supply, purchasing, finance and

human resources. The focus is on employees and managers of METRO AG as well as the

national subsidiaries.

7 BidCorp; Bizim Toptan; Marr; Eurocash Group; Performance Food Group; US Foods Sysco; Sligro

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TRAINING COURSES AT METRO

Number

Participants

Participant hours

TRAINING COURSES AT METRO AG

E-Learning modules,
webinars and
online courses

Seminars,
on-the-job training

285,518

286,964

171,483

9,913

134,278

862,420

Number

Participants

Participant hours

E-Learning modules,
webinars and
online courses

Seminars,
on-the-job training

1,774

1,891

1,055

242

886

11,590

Total

295,431

421,242

1,033,903

Total

2,016

2,777

12,645

In financial year 2018/19, we enhanced our learning opportunities. Moreover, we designed

and launched internal master programmes for the first time in order to prepare high-

potential employees in the company for the challenges of future management tasks in the

wholesale business and to ensure long-term succession planning. One example of

programme is the ‘Master in Store Operations’ course. It was launched in June 2019 after a

balanced nomination process by the employees, the management of the respective country

and a committee in the corporate headquarters with store managers from 15 different

METRO countries. This intensive, multi-month study course will run until February 2020

and will be supported by numerous sponsors from the Management Board and Operating

Board. Comparable academic concepts with master programmes are currently being

developed in other areas as well (for example, Purchasing and HR).

Employee engagement
Our global employee survey METRO ‘Voice it!’ is an important tool used to determine the

engagement of the workforce and their loyalty to the company. We conduct it in the

national subsidiaries and service companies and at METRO AG. Since 2019, the employee

survey takes place quarterly and will therefore reflect the mood in the company at fairly

short intervals. Another objective of the new concept is to promote constant

communication within the teams and thus contribute to continuous improvement of the

work environment. Under the motto ‘Our start for a continuous dialogue’, more than

80,000 employees were invited to participate in the survey in May and August 2019. 81% of

employees at the surveyed business units took part in the survey in May. In August, 74% of

employees took part in the survey despite the summer holiday season.

The level of engagement, which indicates the level of solidarity, loyalty to the company

and willingness to perform, increased from 72% in May to 74% in August in financial year

2018/19. This is still well above the Global Retail Benchmark of the consulting firm

Kincentric (65%).

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DEVELOPMENT OF THE ENGAGEMENT SCORE

in %

64 63

63 64

65 64

2010

2017

2018

5/2019

8/2019

METRO Engagement Score

Global Retail Benchmark

Global All Industries Benchmark

Occupational safety and health management
The demographic evolution of society, profound changes in the work environment and

increasing competition for a good workforce require sustainable and forward-looking

concepts for occupational safety as well as viable health management. In order to identify

areas with high accident rates or particularly vulnerable groups, to evaluate the causes of

accidents and to define targeted countermeasures, METRO has implemented an

appropriate reporting system that records employee accidents at 74% of METRO

companies worldwide. Due to different definitions and legal requirements in the countries

in which METRO is active, we are continuing to work on a central solution that meets local

requirements and simultaneously facilitates uniform and comparable data collection

throughout the company.

In financial year 2018/19, 94% of the employees in the German METRO companies were

recorded via accident reporting. These companies have been able to reduce the number of

accidents compared to the equivalent period in financial year 2017/18.

The Lost Time Injury Frequency Rate (LTIFR) for German METRO companies in financial

year 2018/19 was 20 (2017/18: 27.48). This system records the number of accidents that
cause a downtime of at least 1 day (without the day of the accident) per 1 million working

hours. Deaths and long-term incapacity or disability are included, but commuting accidents

are not.

In order to increase awareness among our employees that occupational safety is also the

responsibility of each individual employee, we conduct numerous programmes and events

in our sales lines and service companies as well as METRO AG on topics like nutrition,

sports, medical screening and mental health. Furthermore, in our national subsidiaries, the

employees responsible for occupational safety and health management are increasingly

collaborating in an international network to discuss and improve occupational health and

safety measures and to achieve positive results for employees in a timely manner.

8 Prior-year adjustment due to discontinued operations

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Diversity management
We strongly believe that diversity and inclusion lead to better business results. In order to

establish a diverse and inclusive corporate culture and to gain better access to more talent,

METRO has developed a company-wide diversity approach. Our goal is to create an open

work environment in which individual differences are respected, valued and promoted. We

strive to build a workforce in which each individual can develop and use their unique

potential and strengths.

Equal opportunities at work
We promote equal opportunities at work for men and women. METRO aims to further

increase the proportion of women in executive positions. We have made progress towards

this goal again during the past financial year. The objective is for 20% of employees on the
1st management level below the Management Board and 35% of employees on the second
management level below the Management Board of METRO AG to be women by June

2022. At the end of financial year 2018/19, a share of 11.6% of women were employed in the

first management level below the Management Board and 34.1% in the second management

level below the Management Board. Additionally, the Supervisory Board has stipulated the

objective of having at least one female member appointed to the Management Board of

METRO AG by June 2022. As of 1 November 2019, Andrea Euenheim was appointed to the

Management Board of METRO AG as the new labour director. She is succeeding Heiko

Hutmacher, who is leaving the company as of 31 December 2019 at his own request.

METRO AG will achieve the target set by the Supervisory Board already in 2019.

Furthermore, METRO has set a voluntary target for the share of women in executive

positions at METRO Wholesale. By June 2022, 25% of managerial positions on levels 1–3

(including store managers) of METRO Wholesale locations worldwide will be filled by

women. At the end of the financial year, the proportion of women in management positions

in levels 1 to 3 (including store managers) at METRO Wholesale was 24.2%. We will

incorporate these goals in our succession planning and recruitment activities.

In 2017, METRO established a Diversity and Inclusion Committee, which created a long-

term strategy and is pursuing to promote diversity within the organisation and harness it to

benefit the business. As part of this strategy, the committee agreed on individual goals for

the group companies with the Management Board of METRO AG, which are monitored

using specific key performance indicators. Another task of the aforementioned committee

is to support the METRO companies in achieving their goals with best practice sharing and

newly developed initiatives. In 2019, METRO AG held its first Diversity & Inclusion Days at

the Düsseldorf Campus in order to make diversity and inclusion in the corporate

environment more tangible for employees. With a total number of 350 participants events

on 5 dimensions (sexual orientation, disability, gender, ethnicity, age), the event was very

successful and will be repeated in 2020 at the METRO Campus in Düsseldorf.

METRO is actively participating in various initiatives, such as the Diversity Charter, the

LEAD Network and Prout at Work. Beyond that, various employee networks have been

established. In 2018, METRO launched the Women Leadership Programme (WLP).

Following the successful completion of a pilot programme in June 2018, the Women

Leadership Programme was rolled out at METRO AG, METRO Wholesale and the service

companies in 2019.

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Life phase-oriented programmes
We offer various opportunities for part-time employment and support our employees in

caring for relatives. In addition, the head office in Düsseldorf operates 3 kindergartens with

spaces for children from the age of 4 months. The staff speak German and English to the

children.

Human rights and employer-employee relationships
Our guiding principles on fair working conditions and social partnership are a crucial

component in shaping our employer-employee relations. These principles are based on the

UN Guiding Principles on Business and Human Rights, the core labour standards of the

International Labour Organization (ILO) as well as the 3 main principles of the Resolution

on Forced Labour by the Consumer Goods Forum. Accordingly, our guiding principles

contain the right to free unionisation and collective agreements, structured working hours

and wages, occupational safety and health management as well as the prohibition of forced

labour, child labour and discrimination.

We ensure that our sales lines and their national subsidiaries comply with the principles

of fair working conditions by auditing our regional headquarters, stores and logistics

centres. In order to improve the working conditions in the national subsidiaries, corrective

action plans are defined with the local colleagues, in which substantive measures with clear

responsibilities and timetables are defined and executed. Since financial year 2016/17,

extensive audits on compliance with the METRO principles were performed in 15 national

subsidiaries (Pakistan, Bulgaria, Japan, Hungary, Italy, Serbia, India, Slovakia, Moldova,

Spain, Russia, Croatia, Kazakhstan, Portugal and France). Many areas returned satisfactory

results, while others showed potential for improvement, in particular in the area of

occupational safety. The on-site audits were followed by comprehensive training on the

METRO principles on fair working conditions. Additional audits of the METRO Wholesale

companies are planned for financial year 2019/20 with the objective of auditing all METRO

companies and continuously working on improvement measures.

In cooperation with the Amfori Business Social Compliance Initiative (Amfori BSCI), a

special course on forced labour was piloted at the national subsidiaries in Turkey and

Pakistan in financial year 2017/18 and continued in Ukraine and Bulgaria in financial year

2018/19. The objective is to train METRO employees to recognise forced labour within the

supply chain and to support the appropriate ability to act. The training will be introduced in

all METRO countries by 2020.

On a national and international level, METRO maintains constant communication with

works councils and unions and encourages management to engage in constructive and

mutually informative dialogue with our employees and their representatives. This dialogue

resulted in several collective employment agreements at the level of business units,

countries or individual stores – depending on local laws and customary practices. Based on

a survey at METRO Wholesale as well as a few service companies in the previous 2 financial

years, 73% of METRO employees were globally represented by works councils, employee

representatives and trade unions or covered by collective agreements.

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Development of employee numbers
During the reporting period, METRO employed an average workforce of 93,133 full-time

equivalents (2017/18: 96,344). This is a decrease of 3.3% from the same period of the

previous year. The majority of our employees work outside of our home market Germany.

Internationally, we had 75,943 full-time equivalents, 3.7% fewer than during the same

period of the previous year. In Germany, the workforce by full-time equivalents decreased

slightly to 17,190 (2017/18: 17,508). During the reporting period, METRO Wholesale

employed an average of 85,261 full-time equivalents. This represents a decrease of 3.6%

over the same period of the previous year. The workforce by full-time equivalents at

METRO AG declined by 2.7% to 855 while the number of full-time equivalents in the Others

segment decreased by 0.4% to 7,017.

DEVELOPMENT OF EMPLOYEE NUMBERS BY SEGMENTS

By headcount1 as of closing date of 30/9

METRO

METRO Germany

METRO Western Europe (excl. Germany)

METRO Russia

METRO Eastern Europe (excl. Russia)

METRO Asia

Others

METRO AG

Total

1 Excluding METRO China.

DEVELOPMENT OF EMPLOYEE NUMBERS BY SEGMENTS

Full-time equivalents1 as of the closing date of 30/9

METRO

METRO Germany

METRO Western Europe (excl. Germany)

METRO Russia

METRO Eastern Europe (excl. Russia)

METRO Asia

Others

METRO AG

Total

1 Excluding METRO China.

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2018

92,603

13,711

27,207

13,960

29,060

8,665

7,008

909

100,520

2018

86,239

11,816

24,073

13,884

28,264

8,202

6,916

863

94,018

2019

89,574

13,606

27,227

12,357

28,375

8,009

7,152

880

97,606

2019

82,979

11,760

24,044

12,288

27,589

7,298

7,067

837

90,883

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2.6 Characteristics of the accounting-related internal control and risk
management system and explanatory report of the Management Board

METRO’s accounting-related internal control and risk management system employs

coordinated instruments and measures for the prevention, early detection, assessment and

management of risks. The Corporate Accounting department of METRO AG is responsible

for the group-wide implementation of these instruments and measures.

Overarching responsibility for all processes related to the preparation of the

consolidated and individual annual financial statements as well as the combined

management report of METRO AG rests with the Board department headed by the Chief

Financial Officer of METRO AG, Mr Christian Baier. The actual preparation of the financial

statements as well as the combined management report, however, is the legal responsibility

of the Management Board of METRO AG. The consolidated and individual annual financial

statements as well as the combined management report are audited and approved by the

auditor during and after their preparation. They are then discussed and reviewed by the

Supervisory Board of METRO AG. The auditor attends this Supervisory Board meeting. The

auditor reports on the key findings of his audit and is available for additional questions.

Provided that the Supervisory Board has no objections, it approves the annual financial

statements and the combined management report. The annual financial statements of

METRO AG are adopted once the Supervisory Board has issued its approval.

Group-wide framework
Building on the ‘Internal Control – Integrated Framework’ concept of the Committee of

Sponsoring Organizations of the Treadway Commission (COSO), the Group Governance

department within the Corporate Accounting department of METRO AG has defined group-

wide minimum requirements regarding the design of the accounting-related internal

control system of METRO AG, the sales lines and the major service companies. With these

requirements, the company particularly wants to ensure adherence to the relevant

accounting standards and the respective internal guidelines (for example the IFRS

accounting guideline).

Among others, these requirements cover the design and implementation of controls,

monitoring the effectiveness of controls and reporting on effectiveness analyses.

Design of controls: Taking a top-down approach, the company has identified the risk of

material errors relating to the financial reporting for significant financial and accounting-

related processes. In addition, the Corporate Accounting department has stipulated

binding group-wide control objectives which the group companies must meet by

employing company-specific control activities.

Implementation of controls: The group companies must keep records of the

implementation of these controls.

Effectiveness of controls: The major group companies are obligated to evaluate the

effectiveness of controls at the end of each financial year (self-evaluation). In the

process, they must apply the uniform, group-wide method stipulated by the Corporate

Accounting department. In addition, the effectiveness of controls is reviewed as part of

the risk-oriented, independent audits conducted by the Group Internal Audit

department.

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Reporting: The results of the self-evaluations must be reported to the Corporate

Accounting department using a standardised reporting format. The companies’

individual reports are validated by the Corporate Accounting department and compiled

in an overall report on METRO’s accounting-related internal control system. This is

reported to the Governance, Risk and Compliance Committee (GRCC) as well as the

Management Board of METRO AG.

The key requirements (for example the IFRS accounting guideline), accounting processes,

individual controls and independent review by the Group Internal Audit department and

the auditor are described in detail below.

IFRS accounting guideline
The interim consolidated financial statements and the consolidated financial statements of

METRO AG are prepared in accordance with the International Financial Reporting

Standards (IFRS) as applicable in the European Union. A group-wide IFRS accounting

guideline that is compulsory for all companies included in the consolidated financial

statements ensures the uniform METRO group-wide application of accounting procedures

in accordance with IFRS. To monitor compliance with the IFRS accounting guideline, the

management of each major group company is obligated to confirm compliance by means

of a letter of representation. The IFRS accounting guideline covers all IFRS relevant to

METRO AG. Amendments to IFRS are continually updated in the IFRS accounting guideline

and communicated to all companies included in the consolidated financial statements.

Accounting processes of companies included in the consolidated financial statements
The preparation of the individual financial statements of consolidated companies according

to IFRS for consolidation purposes is principally carried out in SAP-based accounting

systems (SAP FI). The organisational separation of central and subledger accounting, such

as fixed asset, receivables and payables accounting, provides for clear assignments of

individual tasks related to the preparation of the financial statements. It also provides for a

functional separation that ensures the efficacy of control processes, such as the 4-eye

principle. Many group companies prepare their individual financial statements in these

accounting systems on the basis of a centrally managed table of accounts using uniform

accounting rules.

Aside from failure to comply with accounting rules, risks can also arise from failure to

observe formal deadlines. An online planning tool was introduced to help avoid these risks

and document the obligatory processes required as part of the preparation of individual

and consolidated financial statements under IFRS, their chronological order and the

responsible persons. The online planning tool can be used to monitor the workflows for

preparing individual and consolidated financial statements in accordance with IFRS in

terms of content and time. The planning tool divides the process of preparing the

individual financial statements into key milestones, which in turn are divided into individual

activities. In terms of content, these milestones and activities are geared towards METRO’s

IFRS accounting guideline and thus reflect its implemented state. The scheduling and

monitoring of the milestones and activities required to achieve these group milestones in

the preparation of individual financial statements are part of the responsibilities of the

respective company’s management.

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The consolidation of accounting-related data for the purpose of group reporting is

performed by a centralised consolidation system (CCH Tagetik). Without exception, all

consolidated METRO companies must work within this system. It provides a uniform

accounts table to be used by all consolidated companies in accordance with the IFRS

accounting guideline. Once they have been transmitted from the separate financial

statements to the consolidation system, the financial data are subjected to an automated

plausibility review in relation to accounting-specific contexts and dependencies. Any errors

or warning messages generated by the system during this validation process must be

addressed by the person responsible for the individual financial statements before the data

are transmitted to the consolidation facility.

An additional control instrument is the report comparing the most significant balance

sheet and income statement positions against the previous period’s figures. This report

must be submitted to METRO AG by all major group companies at the time of preparing

their individual financial statements and must also provide comments on any considerable

deviations.

To warrant the security of the group’s information technology systems (IT), access to

the accounting-related IT systems (SAP FI) is regulated. Each company included in the

consolidated financial statements is subject to the regulations concerning IT security. These

regulations are summarised in an IT security guideline, with group-wide compliance being

monitored by the Group Internal Audit department of METRO AG. This ensures that users

only have access to the information and systems needed to fulfil their specific tasks.

Accounting processes for consolidation purposes
The processes and controls in connection with preparation of the consolidated financial

statements comprise all activities related to the preparation of the consolidated financial

statements. This includes the completeness check of the consolidation group, verification

of punctual, complete and correct data submission, avoidance of undesirable data changes,

a complete and error-free execution of typical consolidation steps such as the elimination

of interim results, the elimination of sales, expenses, income and liabilities, as well as capital

consolidation.

The group also relies on external service providers to handle support activities related to

the preparation of the consolidated financial statements. These services essentially relate

to the valuation of real estate assets, pension obligations and share-based remuneration.

The consolidation measures required for the preparation of the consolidated financial

statements are subject to various systematic and manual controls. The automated

plausibility reviews (validations) used in separate financial statements data also apply to

the consolidation measures. A 2-signature principle supported by the consolidation system

was implemented for manual postings. In the end, reviews are carried out to ensure that

the information in the annual report is complete and error-free.

The control measures are documented in a central documentation system.

Using the central consolidation system, compliance with deadlines and milestones that

are centrally provided for the purpose of structuring and coordinating the preparation of

the consolidated financial statements is monitored by METRO AG’s Corporate Accounting

department. Additional monitoring mechanisms at group level include target-performance

comparisons as well as analyses dealing with the composition and movements of individual

items in the balance sheet and the income statement. An annual self-assessment is used to

verify whether internal controls for the preparation and booking process are adhered to

during the preparation of the consolidated financial statements.

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Access regulations for the consolidation system are implemented to ensure adherence

to IT security regulations (write/read authorisations). Access authorisations to use the

consolidation system are centrally managed and are subject to customary approval

mechanisms. They are reviewed annually by Corporate Accounting to ensure that users

only have access to the data they need to perform their tasks.

Independent audit/validation
The Group Internal Audit department of METRO AG provides independent and objective

auditing and consulting services within METRO and supports the Management Board of

METRO AG and the management of the group companies in reaching their goals by

subjecting the key management and business processes to a potential-oriented evaluation.

In coordination with the Management Board and the group companies, Group Internal

Audit develops a risk-oriented audit and project plan every 3 years, which is updated

annually as needed.

Based on the described principles, the Group Internal Audit department carries out

independent audits of the controls monitoring the process of preparing the consolidated

financial statements, the implementation of the IFRS accounting guideline and group

accounting processes within METRO. For this purpose, focal topics are defined as part of

risk-oriented planning for the annual audit.

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3 E C O N O M I C R E P O R T

3 ECONOMIC REPORT

3.1 Macroeconomic and sector-specific parameters

Global economy
The growth of the global economy was clearly positive in financial year 2018/19, even if it

was noticeably lower than in the same period of the previous year. While the Eastern

European and Asian regions continued to show stable growth, albeit below the previous

year’s level, the Western European countries in particular recorded lower growth rates. In

the economic sectors, the service sector contributed to stabilising growth. Barriers to

economic development continued to result from the uncertainties in international trade,

which, among other things, can be attributed to trade policy conflicts and protectionism,

primarily triggered by the USA.

Germany
In financial year 2018/19, the German economy grew across all industries, albeit at a

significantly slower pace than in the previous year. This development particularly affected

the 2019 calendar year. The economic development was supported by domestic demand

and the continued positive consumer behaviour. The latter was boosted by a low

unemployment rate and higher wages. The service sector also contributed to economic

growth, which somewhat cushioned the decline in the industrial sector. Inflation remained

at a low level. Direct trade conflicts with the USA and the dispute between the USA and

China remain risk factors – as does Brexit.

Western Europe
In Western Europe, the economic trend deteriorated increasingly compared to the previous

year as well as over the course of financial year 2018/19. However, the weaker development

in private spending of the export sector was partially offset by stable growth in the service

sector.

Despite lower growth compared to the previous year, domestic demand was boosted by

private consumption and by the continued good situation of the labour market. Price

inflation was low in most countries during the reporting period, particularly in Italy and

Portugal. The impact of Brexit has not yet been directly felt in the rest of Western Europe.

Russia
The Russian economy grew in financial year 2018/19, albeit at a much slower pace than in

the previous year. Exports in particular collapsed and the rouble remained weak despite a

slight appreciation against the euro, partly as a result of US trade restrictions. In addition,

inflation rose considerably. Domestic demand and private consumption grew more slowly

than in the same period of the previous year. The labour market, on the other hand,

continued to develop positively. Other negative influencing factors included the increase in

value added tax and pension cuts.

Eastern Europe
In the other Eastern European countries, growth was noticeably stronger than in Western

Europe, albeit slightly lower than in the same period of the previous year. The downturn

was particularly affected by Turkey, which was in the middle of a recession. Growth in the

region was also reflected in private consumption, which, with the exception of Turkey, was

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supported by very good labour market development, for example in Poland, Hungary and

Romania.

The inflation rate and the exchange rate against the euro developed differently in the

countries, but overall at a stable, moderate level. Turkey, however, was excluded from this

development.

Asia
Economic growth in Asia remained at a high level, albeit slightly below previous year’s

level. China in particular remained on a steady growth course despite the trade conflict

with the USA. India and Malaysia also exhibited strong development. Growth in private

consumption was quite stable and the labour market situation remained positive.

DEVELOPMENT OF GROSS DOMESTIC PRODUCT IN IMPORTANT WORLD REGIONS AND GERMANY

Year-on-year change in %

World

Germany

Western Europe (excl. Germany)

Russia

Eastern Europe (excl. Russia)

Asia

20181

20192

3.6

1.5

1.9

2.3

4.1

5.6

2.9

0.6

1.3

1.1

3.6

4.9

Real GDP growth corrected for purchasing power. Source: Oxford Economics
1 The previous year’s figures may slightly deviate from the Annual Report 2017/18, since retrospective corrections are being made by the data provider.
2 Outlook.

Wholesale sector development
On a global scale, self-service wholesale trade sales were at a similar level to the previous

year; however, the development varied across the countries in which METRO operates. The

sectors of our core customer groups HoReCa and Traders developed positively again

compared to the same period of the previous year. Strong growth in out of home

consumption across all METRO regions played a major role in this trend.

In Germany, self-service wholesale trade growth stagnated in financial year 2018/19. By

contrast, the delivery sales business continued to grow strongly. Compared to financial year

2017/18, sales growth in the HoReCa and Traders sectors increased to a good level. This was

driven by a particularly strong increase in out of home consumption and an increase in

overnight accommodation services.

In Western Europe, self-service wholesale trade recorded stable growth slightly below

previous year’s level, with Austria and Spain growing particularly strongly. Self-service

wholesale trade also continued to develop steadily in France, albeit below previous year’s

level. Growth in the HoReCa and Traders sectors accelerated as a result of the increased

trend of out of home consumption.

After a downturn in the previous year, self-service wholesale trade in Russia recorded

growth again in financial year 2018/19. The sales of our customer groups HoReCa and

Traders also developed positively.

Across Eastern Europe, self-service wholesale trade as well as the HoReCa and Traders

sectors the development varied. Turkish self-service wholesale trade stagnated despite

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high inflation, while the HoReCa and Traders sectors continued to grow. Romania and the

Ukraine experienced high growth in all areas. In Poland, the cash & carry market grew, with

both the HoReCa and Traders sectors showing growth.

The Asian markets in which METRO operates outperformed financial year 2017/18.

Growth in cash & carry and the HoReCa and Traders sectors in India accelerated

particularly strongly. In Pakistan, the HoReCa and Traders sectors also grew significantly

faster than in the previous year. In Japan, the HoReCa and Traders sectors recovered

compared to the previous year and showed slight growth.

3.2 Asset, financial and earnings position

Overall statement by the Management Board of METRO AG on the business development
and situation of METRO
In financial year 2018/19, the growth of the global economy was noticeably slower than in

the same period of the previous year, but was still clearly positive overall. From a regional

perspective, Western European countries in particular recorded lower growth rates, while

the Eastern European and Asian regions continued to show steady growth despite falling

short of the previous year’s level.

However, the Management Board can look back on a successful financial year in which

great progress was made in implementing the transformation strategy and sales growth

was accelerated. In the outlook view, in particular Eastern Europe (excluding Russia),

Western Europe (excluding Germany) and Asia contributed to the good development.

Growth was also shaped by expansion of the core business, wholesale. The consistent focus

on the 2 core customer groups HoReCa (hotels, restaurants and catering companies) and

Traders (independent retailer) also made a noticeable contribution to the good sales trend.

EBITDA developed in line with expectations. Accordingly, the Management Board is

satisfied with the development of the business as a whole, especially with the good

earnings performance in Western Europe and Asia. Earnings per share for continuing

operations including METRO China increased from €1.22 to €1.44. Accordingly, an attractive

dividend will also be proposed to shareholders for financial year 2018/19.

In October 2019, METRO signed an agreement to sell a majority stake in METRO China

to Wumei. As a result of the sale, METRO China is reported as a discontinued operation as

of 30 September 2019 in accordance with IFRS 5.

Unless expressly stated otherwise, all presentations in the combined management report

refer to continuing operations (excluding the hypermarket business and excluding METRO

China).

Only the comparison of the outlook with actual business developments as well as the

dividend proposal refer to the outlook issued for 2018/19 which includes METRO China.

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Financial and asset position

Financial management

Principles and objectives of financial activities
The financial management ensures the long-term liquidity of METRO reduces financial risks

where economically feasible and grants loans to group companies. METRO AG centrally

performs and controls these activities for all group companies. The objective is to ensure

that group companies can cover their funding requirements in a cost-efficient manner and,

where possible, via the international capital markets. This objective will be pursued with

regard to operating business as well as investment activities. The selection of financial

products is based in principle on the maturities and terms of the underlying transactions.

Intra-group cash pooling allows the surplus liquidity of individual group companies to be

used for providing internal finance to other group companies. This reduces the group’s

amount of debt and thus its interest expenses. The financial activities are based on a

financial budget for the group, which covers all relevant companies.

METRO’s current long-term investment grade rating of BBB- and short-term rating of

A-3 by Standard & Poor’s both ensure access to international financial and capital markets.

We are utilising this access within the scope of our Commercial Paper Programme as well

as our ongoing capital market programme as required. Frequent dialogue with credit

investors and analysts always takes place.

The following principles apply to all group-wide financial activities:

External presentation of METRO as a single financial unit

Protection of our financial scope of action by limiting the volume of transactions with

individual banks

Centralised financial risk management

Centralised risk monitoring

Approval process for collaboration with contractual partners in the field of financial

instruments

Implemented functional separation

For more information about the risks stemming from financial instruments and hedging relationships, see the
notes to the consolidated financial statements in no. 44 – management of financial risks

page 274 .

Rating
METRO AG has instructed Standard & Poor’s to assess and monitor its credit rating.

Standard & Poor’s current assessment of METRO’s credit rating is as follows:

Category

Long-term

Short-term

Outlook

2019

BBB−

A-3

stable1

1 The outlook was temporarily lowered by Standard & Poor to ‘CreditWatch negative’, particularly in light of the EP Global Commerce takeover bid. On

25 October 2019, the outlook was confirmed as stable again.

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Financing measures
The company’s medium-term and long-term financing needs are covered by an ongoing

capital market bond programme with a maximum volume of €5 billion. On 1 March 2019, a

due bond of €500 million was repaid with a coupon of 3.375%. As of 30 September 2019,

the utilised bond issuance programme amounted to a total of €1,901 million.

Short-term financing requirements are covered through the Euro Commercial Paper

Programme with a maximum volume of €2 billion. On average, the programme was used at

€785 million during the reporting period. As of 30 September 2019, the utilisation

amounted to €387 million (30/9/2018: €497 million).

Bilateral credit facilities totalling €359 million were used as of 30 September 2019. As a

cash reserve, 2 syndicated credit facilities worth €1,750 million and additional multi-year

bilateral credit facilities worth €250 million were concluded. At no point during the

reporting period were the syndicated credit facilities used.

For more information about financing programmes and credit facilities, see the notes to the consolidated
financial statements – in no. 36 – financial liabilities

page 249 .

UNDRAWN CREDIT FACILITIES BY METRO

30/9/2018

30/9/2019

Remaining term

€ million

Total

up to 1 year

over 1 year

Total

up to 1 year

over 1 year

Bilateral credit facilities

Utilisation

Undrawn bilateral
credit facilities

Syndicated credit facilities

Utilisation

Undrawn syndicated
credit facilities

Total credit facilities

Total utilisation

Total undrawn credit facilities

633

−383

250

1,750

2,383

−383

2,000

318

−318

318

−318

315

−65

250

1,750

2,065

−65

609

−359

250

1,750

2,359

−359

2,000

279

−279

279

−279

330

−80

250

1,750

2,080

−80

2,000

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Investments / Divestments
In financial year 2018/19, METRO invested €499 million, considerably less than the

investment amount in the previous year. The decline in investments is mainly due to a more

selective expansion activity. With 3 new store openings in financial year 2018/19, it declined

compared to the previous year (2017/18: 9 new store openings), which is attributable in

particular to the development in Russia. 1 new METRO store was opened in the current

financial year, compared to 4 stores in the previous year. The 2 additional new openings are

a smaller and more cost-effective store format in Turkey and Croatia. There were no

closures in financial year 2018/19.

In addition, the decrease in investments resulted, among other things, from special

projects in financial year 2017/18, such as the expansion of the logistics network as well as

project developments in Germany. These special projects were not offset by projects of a

comparable magnitude in the reporting period. Further progress was also made in

improving capital efficiency in the areas of concept conversions and delivery sales.

The investment focus in financial year 2018/19 included IT and digitalisation. Investments

in these areas increased compared to the previous year. In addition to investments in the

newly established online marketplace METRO MARKETS, above all digital services for

wholesale customers and IT solutions for the delivery sales were further expanded.

Furthermore, an increase in lease extensions and investments in maintenance was

recorded for the reporting year.

Proceeds of €505 million (2017/18: €271 million) were received from divestments

(including disposals of subsidiaries, but excluding cash investments), resulting mainly from

the disposal of properties.

For more information about divestments, see the cash flow statement in the consolidated financial statements
as well as the notes to the consolidated financial statements in no. 41 – notes to the cash flow statement

page 263 .

2017/18

2018/19

absolute

Change

127

195

−2

565

128

180

−2

499

−48

−6

−2

−15

−66

5.7

0.9

−57.8

−8.4

−7.1

−7.5

−29.4

−11.7

METRO INVESTMENTS

€ million

Germany

Western Europe (excl. Germany)

Russia

Eastern Europe (excl. Russia)

Asia

Others

Consolidation

METRO

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Liquidity (cash flow statement)
Cash inflow from operating activities from continuing operations amounted to €796 million

in financial year 2018/19 (2017/18: cash inflow of €766 million). Investing activities led to

cash inflow of €46 million (2017/18: cash outflow of €292 million). Compared with the

previous year’s period, this represents an increase in cash flow before financing activities of

€368 million to €842 million. Cash outflow from financing activities exhibited a cash

outflow of €1,122 million (2017/18: cash outflow of €587 million). Total cash flow from

investing activities of discontinued operations amounts to €−88 million (2017/18:

€−24 million).

For more information, see the cash flow statement in the consolidated financial statements as well as the
notes to the consolidated financial statements in no. 41 – notes to the cash flow statement

page 263 .

CASH FLOW STATEMENT1

€ million

2017/18

2018/19

Cash flow from operating activities of continuing operations

Cash flow from operating activities of discontinued operations

Cash flow from operating activities

Cash flow from investing activities of continuing operations

Cash flow from investing activities of discontinued operations

Cash flow from investing activities

Cash flow before financing activities of continuing operations

Cash flow before financing activities of discontinued operations

Cash flow before financing activities

Cash flow from financing activities of continuing operations

Cash flow from financing activities of discontinued operations

Cash flow from financing activities

Total cash flows

Currency effects on cash and cash equivalents

Total change in cash and cash equivalents

1 Abridged version. The complete version is shown in the consolidated financial statements.

766

139

905

−292

−89

−381

474

524

−587

−74

−661

−137

−30

−167

796

157

953

−136

−90

842

863

−1,122

−109

−1,231

−368

−351

Capital structure
As of 30 September 2019, the METRO group balance sheet reports equity attributable to

continuing and discontinued operations in the amount of €2.7 billion (30/9/2018:

€3.1 billion). The profit or loss for the period from continuing operations leads to an

increase in reserves retained from earnings. The profit or loss for the period from

discontinued operations as well as dividend payments for financial year 2017/18 have an

opposite effect. The equity ratio stands at 18.9% (30/9/2018: 20.2%).

Negative reserves retained from earnings are not due to a history of loss but to a

reclassification of the equity item ‘net assets attributable to the former METRO GROUP’,

recognised in the combined financial statements of the MWFS GROUP as of 1 October

2016, to the legally defined equity items.

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€ million

Equity

Share capital

Capital reserve

Reserves retained from earnings1

Non-controlling interests

1 Adjustment of previous year according to explanation in notes.

Note no.

30/9/2018

30/9/2019

3,074

363

6,118

−3,449

2,735

363

6,118

−3,778

For more information about our equity, see the notes to the consolidated financial statements in the number
listed in the table.

Net debt related to continuing operations decreased by €0.2 billion in the adjusted year-

on-year comparison, amounting to €2.9 billion as of 30 September 2019 (30/9/2018:

€3.1 billion after adjustment). Cash and cash equivalents decreased by €0.4 billion as of

30 September 2019 to €0.5 billion (30/9/2018: €0.9 billion after adjustment). By contrast,

financial liabilities decreased by €0.6 billion to €3.4 billion (30/9/2018: €4.0 billion after

adjustment).

€ million

Cash and cash equivalents

Short-term financial investments2

Financial liabilities (incl. finance leases)

Net debt

1 Adjusted for effects of the discontinued business segment.
2 Shown in the balance sheet under other financial assets (current).

30/9/2018

30/9/2018
adjusted1

30/9/2019

1,298

4,010

2,710

906

4,010

3,102

500

3,369

2,858

As of 30 September 2019, non-current liabilities of the continuing operations amounted to

€3.4 billion (30/9/2018: € 3.4 billion). While pension provisions increased by €76 million in

year-on-year comparison, mainly due to the decrease in the applicable interest rate,

financial liabilities decreased by €92 million.

As of 30 September 2019, METRO’s current liabilities amounted to €8.2 billion (30/9/

2018: €8.3 billion). The decrease of €0.4 billion compared to the adjusted previous year’s

figure is mainly due to the repayment of a bond in the amount of €0.5 billion. The other

balance sheet items showed a stable development; only trade payables increased by

€69 million, mainly due to currency effects.

Compared to 30 September 2018, the debt ratio increased from 79.8% by

11.3 percentage points to 81.1%. It should be noted here that current liabilities of €2.6 billion

(30/9/2018: €2.4 billion) include liabilities related to assets held for sale.

For more information about the maturity, currency and interest rate structure of financial liabilities as well as
the credit facilities, see the notes to the consolidated financial statements in no. 36 – financial liabilities

page 249 .

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€ million

Non-current liabilities

Provisions for post-employment benefits plans and
similar obligations

Other provisions

Financial liabilities

Other financial and other non-financial liabilities

Deferred tax liabilities

Current liabilities

Trade liabilities

Provisions

Financial liabilities

Other financial and other non-financial liabilities

Income tax liabilities

Liabilities related to assets held for sale

1 Adjustment of previous year according to explanation in notes.
2 Adjusted for effects of the discontinued business segment.

Note no.

30/9/20181

30/9/2018
adjusted2

30/9/2019

3,427

3,426

3,419

34, 36

34, 37

34, 35

34, 36

34, 37

468

126

468

126

543

132

2,590

2,498

123

120

8,705

3,993

274

1,420

1,136

191

1,691

123

119

8,706

3,503

203

1,420

954

188

127

119

8,343

3,572

168

871

962

169

2,438

2,601

For more information about the development of liabilities, see the notes to the consolidated financial
statements in the numbers listed in the table. Information about contingent liabilities and other financial
liabilities can be found in the notes to the consolidated financial statements in no. 45 – contingent liabilities

page 281 and no. 46 – other financial commitments

page 281 .

Asset position
In financial year 2018/19, total assets of continuing and discontinued operations decreased

by €709 million to €14.5 billion (30/9/2018: €15.2 billion).

In financial year 2018/19, non-current assets from continuing operations decreased by

€141 million to €6.7 billion (30/9/2018: €6.9 billion), primarily relating to property, plant

and equipment. In addition to cost-efficient investment activities, this was mainly due to

individual property sales, while currency effects increased the carrying amount.

Note no.

30/9/20181

30/9/2018
adjusted2

30/9/2019

7,503

797

499

5,314

178

202

329

6,877

6,736

778

496

785

562

4,892

4,760

178

262

179

191

€ million

Non-current assets

Goodwill

Other intangible assets

Property, plant and equipment

Investment properties

Financial assets

Investments accounted for using the equity method

Other financial and other non-financial assets

Deferred tax assets

1 Adjustment of previous year according to explanation in notes.
2 Adjusted for effects of the discontinued business segment.

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For more information about the development of non-current assets, see the notes to the consolidated
financial statements in the numbers listed in the table.

Current assets of continuing operations decreased by €569 million compared to the

previous year's figures to €7.8 billion (30/9/2018: €8.3 billion). Cash and cash equivalents in

particular contributed to this development with a decrease of €407 million to €0.5 billion

(30/9/2018: €0.9 billion).

€ million

Current assets

Inventories

Trade receivables

Financial assets

Other financial and other non-financial assets

Entitlements to income tax refunds

Cash and cash equivalents

Assets held for sale

1 Adjusted for effects of the discontinued business segment.

Note no.

30/9/2018

30/9/2018
adjusted1

30/9/2019

30, 43

7,703

2,108

571

913

206

1,298

2,605

8,329

1,905

496

796

202

906

7,761

1,946

482

881

190

500

4,024

3,758

For more information about the development of current assets, see the notes to the consolidated financial
statements in the numbers listed in the table.

Discontinued operations
The assets held for sale amount to €3.8 billion (30/9/2018: €2.6 billion as reported). The

liabilities recognised in this connection amount to €2.6 billion (30/9/2018: €1.7 billion as

reported).

Of the resulting net assets, €0.5 billion (30/9/2018: €0.9 billion) relate to the

hypermarket business. In particular, write-downs on the carrying amounts of the disposal

group led to a reduction in the net assets carried in the balance sheet.

METRO China was reported as a disposal group for the first time as of 30 September

2019 which accounts for €0.7 billion in net assets.

For more information, see the notes to the consolidated financial statements in no. 43 discontinued business
sectors

page 266 .

Earnings position

Overview of group business development
In financial year 2018/19, METRO’s like-for-like sales rose by 2.1%. The growth was

particularly pronounced in Eastern Europe (excluding Russia), Western Europe (excluding

Germany) and Asia. Sales in local currency grew by 2.2%. Due to adverse exchange rate

developments in Eastern Europe, Russia and Asia, reported sales increased by only 1.1% to

€27.1 billion.

The earnings before depreciation and amortisation (EBITDA) excluding earnings

contributions from real estate transactions of METRO totalled €1,021 million in financial

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year 2018/19 (2017/18: €1,088 million). The exchange rate developments of primarily the

Turkish and Russian currencies had a negative impact on earnings. Adjusted for currency

effects, the decrease was €−49 million less than in the previous year. As expected, the

ongoing repositioning of the Russian business and increased costs for digitalisation/IT had

a negative impact on earnings. The positive earnings development in Western Europe

(excluding Germany), Germany and Asia had a compensating effect. Earnings contributions

from real estate transactions totalled €338 million (2017/18: €128 million). EBITDA reached

€1,359 million (2017/18: €1,216 million).

€ million

Sales

EBITDA excluding earnings contributions from
real estate transactions

Earnings contributions from real estate transactions

EBITDA

EBIT

Investments

Stores

Selling space (1,000 m²)

1 Adjusted for effects of the discontinued operations.

2017/181

26,792

1,088

128

1,216

713

565

675

4,665

2018/19

27,082

Change

1.1%

1,021

338

1,359

828

499

678

4,728

−6.1%

–

11.8%

16.1%

−11.7%

0.4%

1.3%

The reconciliation from sales to like-for-like sales in local currency is shown in the following:

€ million

Total sales

Total sales in local currency1

Sales of stores that were not part of the
like-for-like panel in 2018/192

Like-for-like sales in local currency

Continuing operations

2017/18

26,792

26,504

197

26,307

2018/19

Change

27,082

224

26,858

1.1%

2.2%

2.1%

1 Sales in local currency of the previous year were calculated by converting reported sales of the previous year at the average exchange rate of the current

financial year.

2 Not included in the like-for-like panel are, among others, new openings, stores in start-up phase, closures, service companies and major refurbishments.

Comparison of outlook with actual business developments
The comparison of the actual business development with the outlook for financial year

2018/19 relates to the continuing operations of METRO including METRO China. The

contract for the sale of the majority share in METRO China was signed on 11 October 2019.

The outlook was based on the assumption of stable exchange rates without adjustments

to the portfolio. Our reporting also assumed a continuously complex geopolitical situation.

Despite the persistently challenging economic environment particularly in Russia,

METRO expected to see an increase in overall sales in the range of 1% to 3% for financial

year 2018/19, to which Eastern Europe (excluding Russia) and Asia in particular were

supposed to contribute. With total revenue growth of 2.5% in local currency, METRO met

this target. The expected measurable trend improvement in Russia was also achieved.

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METRO equally expected an increase in like-for-like sales in the range of 1% to 3% in

financial year 2018/19, which was also supposed to be driven by Eastern Europe (excluding

Russia) and Asia. With like-for-like sales growth of 2.4%, this target was met as well. The

expected measurable trend improvement in Russia could be realised as well. For both sales

figures, the segment outlook was also achieved in each case except for the sales trend in

the Germany segment, which remained slightly below expectations.

The Management Board of METRO AG expected a slight decline in EBITDA (adjusted for

currency effects and excluding earnings contributions from real estate transactions) of

around 2% to 6% compared to financial year 2017/18 (€1,242 million). In particular, a decline

in the double-digit percentage range was expected in the Others segment (2017/18:

€−129 million) and a decline in the mid to high single-digit percentage range in the Russia

segment. For all other segments, an EBITDA around previous year’s level was expected.

This outlook for the Russia segment was adjusted in the third quarter and a decrease of

approximately 15% was expected. The slightly weaker result in Russia should be positively

compensated by slightly better results in Western Europe (excluding Germany) and Asia.

Adjusted for negative currency effects of €17 million, METRO’s EBITDA excluding

earnings contributions from real estate transactions was €−52 million or −4.2% below the

previous year’s figures. With this decrease METRO is in the expected range of the outlook

of 2% to 6%. This also applies to the outlook at segment level except for the EBITDA

development of the Eastern Europe segment (excluding Russia), which remained slightly

below expectations. The Russia segment developed in line with the adjusted expectations.

METRO has thus achieved its sales and earnings targets outlook in the previous year for

financial year 2018/19.

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Sales trend (like-for-like)

METRO Germany

METRO Western Europe (excl. Germany)

METRO Russia

METRO Eastern Europe (excl. Russia)

METRO Asia

Sales trend in local currency

METRO Germany

METRO Western Europe (excl. Germany)

METRO Russia

METRO Eastern Europe (excl. Russia)

METRO Asia

EBITDA excluding earnings contributions from real
estate transactions in € million1

METRO Germany

METRO Western Europe (excl. Germany)

METRO Russia

METRO Eastern Europe (excl. Russia)

METRO Asia

Others

2017/18

1.3%

0.9%

−0.4%

−7.0%

6.1%

4.0%

1.5%

0.3%

1.7%

−8.0%

5.6%

4.4%

1,242

491

266

363

162

−129

Outlook 2018/191

2018/19

1%−3% growth

Noticeable trend
improvement

Special article

1%−3% growth

Noticeable trend
improvement

Special article

2%−6% decline

Previous year’s level

Decline in mid to high
single-digit percentage
range2

Previous year’s level

Decline in double-digit
percentage range

2.4%

0.3%

1.3%

−4.3%

6.3%

5.1%

2.5%

−0.6%

1.3%

−3.3%

6.4%

6.3%

−4.2%

4.1%

1.6%

−15.5%

−3.0%

8.8%

−22.6%

1 At constant exchange rates, without further portfolio adjustments and excluding transformation costs.
2 The outlook for the METRO Russia segment was adjusted in the 3rd quarter and a decline of approximately 15 % was expected. The slightly weaker result in

Russia should be positively compensated by slightly better results in Western Europe (excl. Germany) and Asia.

Sales and earnings development of the segments
Like-for-like sales of METRO increased by 2.1% in financial year 2018/19. The growth was

particularly pronounced in Eastern Europe (excluding Russia), Western Europe (excluding

Germany) and Asia. Sales in local currency grew by 2.2%. Due to adverse exchange rate

developments in Eastern Europe (excluding Russia), Russia and Asia, reported sales

increased by only 1.1% to €27.1 billion.

In Germany, like-for-like sales in financial year 2018/19 rose by 0.3%, while reported

declined sales by −0.5%, significantly impacted by the first-time application of IFRS 15.

Like-for-like sales in Western Europe (excluding Germany) rose by 1.3% in financial year

2018/19 after a negative development in the previous year. Reported sales increased by

1.3% to €10.8 billion. France, delivery company Pro à Pro, Spain and Portugal particularly

contributed to this.

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In Russia, the trend improved compared to the previous year, but the market

environment remains challenging. Like-for-like sales in financial year 2018/19 declined by

−4.3%. In local currency, revenues decreased by −3.3%. As a result of negative currency

effects, the reported sales decreased by −5.4%.

In Eastern Europe (excluding Russia), like-for-like sales in financial year 2018/19 were

clearly positive with an increase of 6.3%. This is predominantly attributable to the

performance in Turkey, Romania and Ukraine. In local currency, sales grew by 6.4%. Due to

negative currency effects, especially in Turkey, reported sales increased by 3.4% only.

Like-for-like sales in Asia increased by 5.3% in financial year 2018/19. All countries in this

segment (India, Japan, Pakistan) and Classic Fine Foods contributed to this result. Sales in

local currency grew by 7.3%. Due to negative currency effects, reported sales increased by

only 5.2%.

METRO’s delivery sales developed very dynamically. In financial year 2018/19, sales rose

by 9.2% to €4.6 billion (2017/18: €4.2 billion). As a result, delivery business now accounts

for 17% (2017/18: 16%) ofsales.

As of 30 September 2019, the store network spans 678 individual stores (30/9/2018:

675 stores). In financial year 2018/19, 3 stores were opened (1 store each in Croatia, Russia

and Turkey). In addition, METRO strengthened its reach by further expanding the supply

infrastructure.

METRO KEY SALES FIGURES 2018/19

In year-on-year comparison

Change in % compared with the previous year’s period

Sales (€ million)

2017/18

2018/19

in group
currency
(€)

Currency
effects in
percentage
points

in local
currency

Like-for-like
(local currency)

26,792

27,082

1.1%

4,761

4,735

−0.5%

10,609

10,752

1.3%

2,815

2,662

−5.4%

6,952

1,612

7,191

1,696

3.4%

5.2%

7.4%

−1.1%

0.0%

−2.1%

−3.0%

−2.1%

0.0%

2.2%

−0.6%

1.3%

−3.3%

6.4%

7.3%

7.4%

2.1%

0.3%

1.3%

−4.3%

6.3%

5.3%

–

METRO

Germany

Western Europe
(excl. Germany)

Russia

Eastern Europe
(excl. Russia)

Asia

Others

The EBITDA excluding earnings contributions from real estate transactions reached a

total of €1,021 million in financial year 2018/19 (2017/18: €1,088 million). The exchange rate

developments of primarily the Turkish and Russian currencies had a negative impact on

earnings. Adjusted for currency effects, the decrease was €−49 million less than in the

previous year. As expected, the ongoing repositioning of the Russian business and

increased costs for digitalisation/IT had a negative impact on earnings. The positive

earnings development in Germany, Western Europe (excluding Germany), and Asia, had a

compensating effect.

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Earnings contributions from real estate transactions totalled €338 million (2017/18:

€128 million). The increase of €210 million is essentially attributable to the postponement

of a transaction in India from financial year 2017/18 to financial year 2018/19 as well as the

earlier-than-expected conclusion of a transaction in China. The property in China is not part

of the disposal group, so the income remains in continuing operations. Overall, EBITDA

rose to €1,359 million (2017/18: €1,216 million).

In Germany, EBITDA excluding earnings contributions from real estate transactions

reached €95 million in financial year 2018/19 (2017/18: €91 million).

In Western Europe (excluding Germany) EBITDA excluding earnings contributions from

real estate transactions reached a total of €499 million in financial year 2018/19 (2017/18:

€491 million). Earnings contributions from real estate transactions totalled €29 million

(2017/18: €39 million), resulting especially from a real estate transaction in Spain.

The EBITDA excluding earnings contributions from real estate transactions in Russia

amounted to €220 million in financial year 2018/19 (2017/18: €266 million). Adjusted for

currency effects, the decline amounts to €−40 million and is mainly sales and margin

related.

In Eastern Europe (excluding Russia) EBITDA excluding earnings contributions from real

estate transactions reached a total of €344 million in financial year 2018/19 (2017/18:

€363 million). Among other things, this decline is due, to the negative currency

development in Turkey. Adjusted for currency effects, EBITDA excluding earnings

contributions from real estate transactions in Eastern Europe (excluding Russia) fell by

€−11 million. The decline in earnings in the Czech Republic was partially offset by the good

development in Turkey, Poland and Ukraine. Earnings contributions from real estate

transactions in Poland, the Czech Republic and Hungary amounted to €181 million (2017/18:

€12 million).

EBITDA excluding earnings contributions from real estate transactions in Asia reached a

total of €11 million in financial year 2018/19 (2017/18: €9 million). Earnings contributions

from real estate transactions in China and India amounted to €107 million (2017/18:

€8 million).

EBITDA excluding earnings contributions from real estate transactions in the Others

segment (including consolidation) amounted to €−148 million in financial year 2018/19

(2017/18: €−132 million). While the cost of digitalisation/IT rose as expected, this profit or

loss also includes revenues from damages in the low double-digit millions, which were

focused in the Others segment. This was offset by consulting costs of around €20 million in

connection with the voluntary takeover bid by EPGC. Earnings contributions from real

estate transactions amounted to €21 million (2017/18: €69 million) essentially from the sale

of a speciality centre in Germany.

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METRO KEY PERFORMANCE INDICATORS FOR 2018/19

EBITDA excluding
earnings contributions
from real estate
transactions

Earnings
contributions
from real
estate
transactions

EBITDA

EBIT

Investments

€ million

METRO

2017/
18

2018/
19

Change
(€)

2017/
18

2018/
19

2017/
18

2018/
19

2017/
18

2018/
19

2017/
18

2018/
19

1,088

1,021

−67

128

338

1,216

1,359

713

828

565

499

Germany

Western Europe
(excl. Germany)

Russia

Eastern Europe
(excl. Russia)

Asia

491

266

499

220

363

344

Others/consolidation

−132

−148

−46

−19

−16

181

107

530

266

529

220

388

390

214

164

375

524

278

426

119

−5

127

128

−63

−127

−177

−260

193

178

Discontinued operations
Like-for-like sales of discontinued operations increased by 1.0% in financial year 2018/19.

Like-for-like sales in China rose by 5.0%, while the hypermarket business developed

negatively (−0.6%). In local currency, total sales of the discontinued operations rose by

0.4%. Reported sales grew by 0.5% to €9.8 billion.

The online business through Real.de continued to develop dynamically. GMV (gross

merchandise value) grew by 51% to €579 million in financial year 2018/19 compared to

financial year 2017/18.

The EBITDA excluding earnings contributions from real estate transactions of

discontinued operations reached a total of €−2 million in financial year 2018/19 (2017/18:

€308 million). While METRO China recorded earnings at the previous year’s level, Real

developed negatively. The decrease is mainly attributable to the negative effect on

earnings resulting from the termination of the future collective agreement, expenses for

future store closures as well as store-related risks and the sales and margin development.

Earnings contributions from real estate transactions amounted to €50 million (2017/18:

€1 million) from a real estate transaction in China.

As a result of disclosure as discontinued operations and according to IFRS 5,

depreciation for the hypermarket business and amortisation on fixed assets of €180 million

have been suspended in financial year 2018/19. In financial year 2018/19, an impairment of

the hypermarket business in the amount of €401 million was recognised through profit or

loss.

As of 30 September 2019, the store network comprised 97 locations in China (2017/18:

94 locations) and 276 locations for Real (2017/18: 279 locations).

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100

METRO KEY SALES FIGURES – DISCONTINUED OPERATIONS 2018/19

In year-on-year comparison

Change in % compared with the previous year’s period

Sales (€ million)

2017/18

2018/19

in group
currency (€)

9,742

2,684

7,058

9,788

2,846

6,942

0.5%

6.0%

−1.6%

Currency
effects in
percentage
points

0.1%

0.3%

0.0%

in local
currency

Like-for-like
(local currency)

0.4%

5.7%

−1.6%

1.0%

5.0%

−0.6%

METRO

thereof METRO China

thereof hypermarkets

METRO KEY PERFORMANCE INDICATORS – DISCONTINUED OPERATIONS 2018/19

EBITDA excluding
earnings contributions
from real estate
transactions

Earnings
contributions
from real
estate
transactions

EBITDA

EBIT

Investitionen

2017/
18

2018/
19

Change
(€)

2017/
18

2018/
19

2017/
18

2018/
19

2017/
18

2018/
19

2017/
18

2018/
19

309

−398

246

154

155

202

110

157

−154

−83

−555

210

215

189

€ million

METRO

308

−2

−310

thereof METRO China

thereof hypermarkets

154

152

−2

−154

−308

Net financial result and taxes

€ million

Earnings before interest and taxes EBIT

Earnings share of non-operating companies recognised at equity

Other investment result

Interest income/expenses (interest result)

Other financial result

Net financial result

Earnings before taxes EBT

Income taxes

Profit or loss for the period from continuing operations

Profit or loss for the period from discontinued operations after taxes

Profit or loss for the period

1 Adjustment of previous year according to explanation in notes.

2017/181

2018/19

713

−136

−2

−137

576

−216

359

−22

337

828

−1

−119

709

−298

411

−526

−115

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Net financial result
The net financial result from continuing operations primarily comprises the interest result of

€−119 million (2017/18: €−136 million) and the other financial result of €1 million (2017/18:

€−2 million). Net interest result improved significantly as a result of more favourable

refinancing terms.

For more information about the net financial result, see the notes to the consolidated financial statements in
no. 7 – earnings share of operating/non-operating companies recognised at equity
investment result
financial result

page 203 , no. 9 – net interest income/interest expenses

page 203 and no. 10 – other

page 202 , no. 8 – other

page 204 .

Taxes
At €298 million (2017/18: €216 million), recognised income tax expenses are €81 million

higher than the previous year’s figures.

During the reporting period, the group tax rate for the continuing segment is 42.0%

(2017/18: 37.6%). The group tax rate represents the relationship between recognised income

tax expenses and earnings before taxes. The increase in the ratio in the current financial

year is mainly attributable to impairments on deferred taxes on loss carry-forwards in

Germany. The comparatively low ratio in the previous year includes positive one-off tax

effects such as tax rate changes abroad and the reduction for risk provisions.

For more information about income taxes, see the notes to the consolidated financial statements in no. 12 –
income taxes

page 206 .

€ million

Actual taxes

thereof Germany

thereof international

thereof tax expenses/income for the current period

thereof tax expenses/income of previous periods

Deferred taxes

thereof Germany

thereof international

1 Adjustment of previous year according to explanation in notes.

2017/181

2018/19

173

(14)

(159)

(194)

(−21)

(39)

(4)

216

215

(9)

(206)

(221)

(−6)

(104)

(−21)

298

Profit or loss for the period and earnings per share
The profit or loss for the period from continuing operations in financial year 2018/19 was

€ 411 million, €52 million higher than the profit or loss for the period of the previous year

(2017/18: €359 million).

The profit or loss for the period from continuing and discontinued METRO operations

was €−115 million in financial year 2018/19, and was thus €−453million below the net result

for the period for the previous year’s period (2017/18: €337 million). This decrease was

mainly due to an impairment of €401 million in the hypermarket business.

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Net of earning shares of non-controlling interests, profit for the period attributable to

the shareholders of METRO AG from continuing and discontinued operations amounts to

€−126 million (2017/18: €333 million). This represents a decrease of €459 million. An

improvement of €49 million resulted from continuing operations.

On this basis, METRO achieved a result of €−0.35 per share from its continuing and

discontinued operations in financial year 2018/19 (2017/18: €0.92), of which €1.12 came from

continuing operations (2017/18: €0.98). The calculation for the reporting period was based

on a weighted number of 363,097,253 shares. Profit or loss for the period attributable to

shareholders of METRO AG was distributed according to this number of shares. There was

no dilution from so-called potential shares in financial year 2018/19 or in the previous year.

The profit or loss for the period from an outlook perspective (continuing operations

including METRO China) reached €523 million in financial year 2018/19 and was thus

€80 million above the net income for the period of the previous year (2017/18:

€443 million). For a tax expense of €341 million, this corresponds to a tax rate of 39.0%. In

financial year 2018/19, METRO recorded earnings per share from continuing operations

including METRO China of €1.44 (2017/18: €1.22).

This result forms the basis for the dividend recommendation.

2017/18

2018/19

absolute

Change

411

14.4

359

−22

(0)

337

(3)

(1)

333

(357)

(−23)

0.92

(0.98)

−526

−504

(−401)

−115

−453

(6)

(5)

−126

(405)

(3)

(4)

−459

(49)

(−532)

(−508)

−0.35

(1.12)

−1.27

(0.13)

(−0.06)

(−1.46)

(−1.40)

–

94.4

–

13.7

–

13.7

–

Profit or loss for the period from
continuing operations

Profit or loss for the period from
discontinued operations after taxes

€ million

thereof impairment of the hypermarket business

€ million

Profit or loss for the period

Profit or loss for the period attributable to non-
controlling interests

thereof from continuing operations

thereof from discontinued operations

Profit or loss for the period attributable to the
shareholders of METRO AG

thereof from continuing operations

thereof from discontinued operations

Earnings per share (basic = diluted)

thereof from continuing operations

thereof from discontinued operations

€ million

€

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C L O S I N G D A T E A N D O U T L O O K

103

4 REPORT ON EVENTS AFTER THE CLOSING DATE AND
OUTLOOK

REPORT ON EVENTS AFTER THE CLOSING DATE

Events after the closing date

METRO AG sells majority share in METRO China to Wumei Technology Group
On 11 October 2019, METRO AG (‘METRO’) entered into an agreement with Wumei

Technology Group, Inc. (‘Wumei’), a leading Chinese retailer, to form a strategic partnership

for the Chinese operations of METRO (‘METRO China’). This partnership includes the sale of

METRO’s entire indirect investment in METRO China (excluding a real estate company sold

separately in September 2019) to a subsidiary of Wumei (the buyer) for a company value

(enterprise value, 100%) of approximately €1.9 billion. The consideration includes an

estimated net cash inflow of more than €1.0 billion as well as a 20% investment of METRO

in METRO China.

The closing of this transaction is subject to the approval of the regulatory authorities.

EP Global Commerce GmbH increases its share of voting rights in METRO AG
EP Global Commerce GmbH increased its voting rights in METRO AG from 17.52% to 29.99%

as of 6 November 2019 based on the notifications of voting rights submitted to the

company. They and possibly other affiliated companies and related parties will thus

become related companies and parties of METRO AG as of this date. Franz Haniel & Cie.

GmbH and its subsidiaries are no longer related parties due to the reduction of their voting

rights.

OUTLOOK

The outlook prepared by METRO considers relevant facts and events that were known at

the time of preparing the consolidated financial statements and that may impact the future

development of our business. The outlook on economic parameters is based on an analysis

of primary data used to derive outlook. Oxford Economics is the main source of the data

used to forecast anticipated business conditions. The following conclusions reflect a mid-

range scenario of expectations.

Macroeconomic parameters

Global economy
For financial year 2019/20, we expect global economic growth to develop at a similar level

as in reporting year 2018/19. Consumption remains a positive growth driver, while industrial

production in Europe remains at a similar level as in financial year 2018/19. The

development of trade conflicts will potentially have a major impact on the global economy.

The US trade dispute with China and the EU, as well as Brexit, must be mentioned explicitly

in this context. Overall, we expect inflation-adjusted global economic growth of

approximately 3.1% for 2020.

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104

Germany
With real economic growth of +0.7%, the outlook for the development of the German

economy in financial year 2019/20 is similar to that of the reporting year. Only slight

growth is expected for exports and industrial production. According to the outlook, private

consumption will grow just above the continued low inflation rate and thus acts as a

growth driver. The situation in the labour market is expected to remain positive despite

possible short-time work measures in some industrial companies. However, the

development will depend on the outcome of the negotiations regarding Britain’s

withdrawal from the EU, which is currently expected to take place at the beginning of

2020.

Western Europe
For financial year 2019/20, growth is expected to be similar (1.2%) to that of the past

financial year. Overall, a virtually unchanged low development is forecast. In Italy, the

economy is stagnating and the fiscal deficit is also expected to expand under the new

government. In France and Spain, economic development remains relatively stable at a low

level. The monetary policy of the European Central Bank (ECB) is expected to be similar to

that of the previous year, that is, interest rates are expected to rise only very slightly or

even be negative in the short term. The effects of Brexit on individual countries and an

escalating trade conflict with the USA remain unclear. Both developments pose great risks

for exports, which are a growth driver for Europe.

Russia
For Russia, economic growth is expected to improve slightly compared to financial year

2018/19, but still to be low overall, at approximately 1.49%. This is accompanied by a slight

decline in private consumption, which will also be affected by a VAT increase and pension

reforms. By contrast, inflation is expected to be below the previous year’s rate at a total of

3.3%. A stabilised level for the currency is forecast. Nevertheless, sanctions continue to

contribute to the drain on the economy.

Eastern Europe
For the economy in Eastern Europe, we again expect growth to be slightly lower than in the

previous year, but still clearly positive. This trend can be seen in almost all countries in this

region. The economic situation in Turkey is slowly recovering and growth is therefore

expected to be stronger than in the previous year. Private consumption in many countries

is growing less strongly than in the previous year, but remains at a positive level overall and

continues to drive economic growth. The outlook for inflation vary from country to country.

In Poland, the rate is rising more strongly than in the previous year; in Turkey and the

Ukraine the rates are falling, but remain at a high level overall. In the Eastern European

countries, the labour market situation remains very good or is developing positively, for

example in Serbia and Turkey. The currencies remain relatively stable against the euro.

Asia
The Asian economy continues to grow steadily at a similar level as in financial year 2018/19.

The labour market and private consumption continue to develop very positively, even as

the inflation rate continues to rise slightly. For China, economic growth is forecast to turn

out below the level of the previous year, carrying the risk that the trade conflict with the

USA will intensify again. The Indian economy continues to grow strongly according to

forcasts, driven by private consumption, rising exports and low unemployment.

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D A T E

105

METRO Wholesale: development in the self-service wholesale trade sector
The global development of the self-service wholesale trade sector in financial year 2019/20

will remain positive, contrary to the general economic trend. Again, the contribution of the

individual regions will vary. This also applies to the regions in which METRO operates.

Growth will be stronger in Europe than in Asia.

In comparison to the reporting period, we expect financial year 2019/20 to exhibit

stronger growth in sales for cash and carry companies operating in Germany. Further sales

growth is forecast for the hospitality industry sector, which represents an important

customer group for METRO.

The self-service wholesale trade sector in Western Europe will increase in nominal terms

in the forecast year after only slight growth in financial year 2018/19, especially in the

METRO countries France, Austria and Portugal. The hospitality industry sector is also likely

to develop positively, especially in Portugal and Spain.

In Russia, we expect strong decline in the self-service wholesale trade sector. However,

we expect sales growth for our core customer groups HoReCa and Traders.

In Central and Eastern European countries, the self-service wholesale trade sector will

likely grow again in financial year 2019/20, especially in countries such as Turkey and

Hungary. Despite the difficult economic environment, we believe that the HoReCa industry

sector will grow in Turkey, supported by the fact that tourism is picking up again. We

expect the HoReCa and Traders sectors to continue their strong growth momentum,

particularly in Romania and Poland.

The cash & carry markets in Asia, particularly in Japan and India, are forecast to deliver

stable economic growth in financial year 2019/20.

Earnings position outlook: outlook for METRO
METRO continues its long-term strategy of focusing on wholesale and, in particular, on