42. Segment reporting

The segmentation corresponds to the group’s internal controlling and reporting structures. Operating segments are aggregated to form reporting segments based on the division of the business into individual sectors.

METRO Wholesale

The METRO Wholesale segment is primarily geared towards business customers. It is active in the self-service wholesale trade with its METRO and MAKRO brands as well as in the food service distribution (FSD) with the METRO Delivery Service and, among others, with the supply specialists Classic Fine Foods, Pro à Pro and Rungis Express.

The business customers in focus are divided into 3 groups: HoReCa (focus on hotels, restaurants, bars, cafés, catering companies and canteen operators), Trader (focus on grocers, kiosks, street food vendors as well as gas stations and wholesalers) as well as service companies and offices (SCO, professional service companies and organisations). METRO Wholesale is active in 35 countries in Europe and Asia. In 25 of these countries, METRO Wholesale operates store-based wholesaling, while in the remaining 10 countries only delivery services are offered.

As the 3 customer groups currently display sufficient similarities with respect to their business model, their products and services as well as their customer structure – especially compared with the other legal entities of METRO – they will be bundled into one reporting segment in spite of their divergent strategic focus.

Real

Real focuses on the retail business, turning its concept to end consumers. Real is a hypermarket operator in Germany, where it operates both physical stores and an online store. All stores offer a broad food assortment with a large proportion of fresh produce that is complemented by a non-food assortment. Real represents a separate operating and reporting segment as internal management with respect to the allocation of in-house resources and performance measurement by the Chief Operating Decision-Maker (member of the Management Board of METRO AG) is separately applied to Real.

Others

All other business activities do not constitute reportable segments and are summarised under “Other”. Other business activities include the HoReCa Digital business unit, which bundles the group’s digitisation initiatives. Other service companies, such as METRO PROPERTIES, METRO LOGISTICS, METRO SYSTEMS, METRO ADVERTISING and METRO SOURCING and others, provide group-wide services in the areas of real estate, logistics, information technology, advertising and procurement.

Aside from the information on the operating segments listed above, equivalent information is provided on the METRO regions. Here, a distinction is made between the regions Germany, Western Europe (excluding Germany), Eastern Europe and Asia.

The key components of segment reporting are as follows:

• External sales represent sales of the operating segments to third parties outside the group.
• Internal sales represent sales between the group’s operating segments.
• Segment EBITDA comprises EBIT before depreciation and reversals of goodwill, impairment losses of property, plant and equipment, other intangible assets and investment properties.
• EBIT is the key ratio for segment reporting and describes operating earnings for the period before net financial result and income taxes. Intra-group rental contracts are shown as operating leases in the segments. The rental takes place at normal market conditions. The properties are leased at market terms. In principle, store-related risks and impairment risks related to non-current assets are only shown in the segments where they represent group risks. In analogy, this also applies to deferred assets and liabilities, which are only shown at segment level if this was also required in the consolidated balance sheet.
• Business transactions or a number of uniform business transactions that do not recur regularly, that are reflected in the income statement and that have a significant impact on business activities are classified as special items. The EBITDA before special items and EBIT before special items is adjusted for all transactions falling under this definition, such as restructuring measures or changes in the group’s portfolio.

The reconciliation from EBITDA before special items to reported EBITDA and the reconciliation from EBIT before special items to reported EBIT are shown in the following table:

• Segment investments include additions (including additions to the consolidation groups) to goodwill, other intangible assets and property, plant and equipment and investment properties. Exceptions to this are additions due to the reclassification of “assets held for sale” as non-current assets.
• The non-current segment assets include non-current assets. They do not include mostly financial assets, investments accounted for using the equity method, tax items, cash and cash equivalents and assets allocable to discontinued operations.

The reconciliation from segment assets to group assets is shown in the following table:

• In principle, transfers between segments are made based on the costs incurred from the group’s perspective.