43. Discontinued operations

Disposal of the hypermarket business

The Management Board of METRO AG decided in its meeting on 13 September 2018 to sell the hypermarket business, including the real estate portfolio used in the hypermarket business and owned by METRO. The decision was made with the intention to focus exclusively on wholesale business in the future. In addition to all Real locations, the hypermarket business also includes companies providing procurement and online services for Real as well as real estate and a supplier. Together, the assets and liabilities have been treated as discontinued operations within the meaning of IFRS 5 since September 2018. In February 2020, the notarised purchase contract was concluded between METRO and SCP Group S.à r.l. for the disposal of the hypermarket business and related properties. This transaction resulted in a total net cash inflow after taxes in the amount of €0.3 billion. Tax payments on the sale will result in a cash outflow after the tax return has been assessed.

In June 2020, the disposal of the hypermarket business and significant parts of the real estate portfolio was completed. With the exception of a real estate company, the real estate properties remaining in IFRS 5 as of 30 June 2020 were sold in September 2020 when the transaction was completed. The transfer of the remaining property is expected in the first half of 2020/21. Until the transaction is completed, the real estate company will be reported as assets and liabilities held for sale (disposal group). As of 30 September 2020, €22 million is reported as assets held for sale and €7 million as liabilities related to assets held for sale in connection with the property.

Profit or loss for the period after taxes

The current result of the hypermarket business, together with all related consolidation entries recognised in the income statement, was shown in a separate section in the consolidated income statement as profit or loss for the period from discontinued operations after taxes. To increase the economic meaningfulness of the earnings statement of the continuing sector, its shares in the consolidation effects were also included in the discontinued section of the earnings statement as far as they were related to business relations that are to be upheld in the long term even after the planned disposal.

Until the deconsolidation date, the disposal group ‘hypermarket business’ was measured at fair value based on an analysis of the purchase contract and the agreed purchase price mechanism.

Profit or loss for the period from discontinued operations after taxes is attributable to the shareholders of METRO AG in the amount of €−414 million (2018/19: €−216 million). Non-controlling interests account for €0 million of earnings (2018/19: €1 million).

In connection with the divestment process, expenses in the low 2-digit million euro range have been incurred.

As a result, profit or loss for the period from discontinued operations after taxes for the hypermarket business is made up as follows:

Effects of other comprehensive income

Of the other comprehensive income for financial year 2019/20 attributable to the shareholders of METRO AG, €4 million (2018/19: €−8 million) is attributable to the discontinued operations of the hypermarket business. This includes components that can be recognised as income in the future in the amount of €0 million (2018/19: €0 million) and components that cannot be recognised as income in the future in the amount of €4 million (2018/19: €−8 million).

Assets/liabilities held for sale

As a result of the classification as discontinued operations and after consolidation measures up to the date of deconsolidation were carried out, €2,955 million was recognised in the consolidated balance sheet into the item assets held for sale and €2,608 million into the item liabilities related to assets held for sale. The respective asset and liability items to be consolidated were recognised in the corresponding balance sheet items of both the continuing and the discontinued segment.

The assets and liabilities of the hypermarket business held for sale and disposed of as part of the deconsolidation are comprised as follows:

Effects of other comprehensive income

In financial year 2019/20, METRO AG declared an assumption of debt for former (inactive) employees of Real. The effects in connection with the assumed pension obligations in other comprehensive income of €−10 million from the measurement of pension plans and €3 million of the related income tax effects were transferred to METRO AG. As part of the deconsolidation of the hypermarket business, the remaining effects of €−6 million from the measurement of pension plans, the related income tax effects and the fair value measurement of investments without reclassification, which were included in other comprehensive income, were reclassified to other reserves retained from earnings.

Cash flow

The cash flows of the hypermarket business are as follows:

Other disclosures

Prior to deconsolidation, the discontinued hypermarket business employed an average of 34,347 people (2018/19: 35,073).

Disposal of METRO China

On 11 October 2019, METRO AG entered into an agreement with Wumei Technology Group, a leading Chinese retailer, to form a strategic partnership for the operations of METRO China and related real estate. This partnership includes the sale of METRO AG’s entire indirect majority shareholding in METRO China to a subsidiary of Wumei Technology Group for an enterprise value (100%) of approximately €1.9 billion. The transaction was closed on 23 April 2020, after receipt of the usual competitive and regulatory approvals, and resulted in a net cash inflow of €1.6 billion, which included the advance payment for the use of the METRO trademark. METRO will retain a stake of about 20% in the activities of METRO China.

Profit or loss for the period after taxes

The current result of METRO China was reclassified in the consolidated income statement under the item profit or loss for the period from discontinued operations after taxes, taking into account necessary consolidation measures. To increase the economic meaningfulness of the earnings statement of the continuing sector, its shares in the consolidation effects were also included in the discontinued section of the earnings statement as far as they were related to business relations that are to be upheld in the long term even after the planned disposal.

Profit or loss for the period from discontinued operations after taxes is attributable to the shareholders of METRO AG in the amount of €1,020 million (2018/19: €118 million). Non-controlling interests account for €6 million of earnings (2018/19: €5 million).

In connection with the divestment process, expenses in the low 2-digit million euro range have been incurred to date.

As a result, profit or loss for the period from discontinued operations after taxes is made up as follows for METRO China:

Effects of other comprehensive income

Of the other comprehensive income for financial year 2019/20 attributable to the shareholders of METRO AG, €9 million (2018/19: €14 million) is attributable to the discontinued operations of METRO China. This includes components that can be recognised in income in the future in the amount of €9 million (2018/19: €14 million) and components that cannot be recognised in income in the future in the amount of €0 million (2018/19: €0 million).

Assets/liabilities held for sale

As a result of the classification as discontinued operations and after consolidation measures up to the date of deconsolidation were carried out, €1,775 million was reclassified in the consolidated balance sheet into the item assets held for sale and €1,024 million into the item liabilities related to assets held for sale. The respective asset and liability items to be consolidated were recognised in the corresponding balance sheet items of both the continuing and the discontinued segment.

The assets and liabilities of METRO China held for sale and disposed of as part of the deconsolidation are comprised as follows:

Effects of other comprehensive income

The components included in the equity of METRO China up to the deconsolidation date, which are part of the other comprehensive income attributable to the shareholders of METRO AG from currency translation differences, had an effect of €23 million on net income from disposals due to their derecognition through profit or loss.

Cash flow

The cash flows of METRO China from discontinued operations are as follows:

Other disclosures

Prior to deconsolidation, the discontinued operation of METRO China employed an average of 11,863 people (2018/19: 11,836).