50. Long-term incentive for executives

Permissions for the wholesale business and METRO AG (MCC LTI)

The long-term incentive (MCC LTI) developed for the METRO Wholesale sales line in financial year 2015/16 was tailored specifically to the operating model. It was issued for the first time to senior executives and the management bodies of METRO Wholesale country companies in financial year 2015/16. In addition, it was granted pro rata temporis to the top executives of METRO AG in financial year 2016/17. The MCC LTI is a cyclical plan that is issued once every 3 years. The respective performance targets focus on value creation in the individual national subsidiaries and/or in the wholesale segment as a whole, as well as their sustained development and prospects. The performance period of the MCC LTI extends from 1 April 2016 to 31 March 2019. The individual target amounts are accumulated proportionally during this period. The final target amount that has been accumulated at the end of the performance period is based on the period of eligibility for the MCC LTI as well as the individual’s position. According to the plan conditions, executives can be newly admitted to the circle of beneficiaries on a pro rata basis or be removed from the plan.

Permissions for the retail business unit (Real LTI)

In financial year 2016/17, the Real long-term incentive (Real LTI) was developed for the retail business segment. The authorised executives and senior executives of the retail business segment were eligible. The performance period started on 1 April 2017 and ends on 31 March 2020. The operating principles are based on the MCC LTI and are shown below.

Operating principles of the MCC and Real LTI

After the end of each performance period, the payout amount is determined by multiplying the respectively accumulated individual target amount with a total goal achievement factor. The goal achievement rate of this factor for both the past performance and future value components accounts for 45%; the remaining 10% are accounted for by the goal achievement rate of the sustainability component. The payout amount is capped and the total goal achievement factor cannot drop below 0. The relevant measure for the past performance and future value components for eligible executives at the METRO Wholesale national subsidiaries is the performance/value creation of the respective national subsidiary of METRO Wholesale. The relevant measure for the other eligible executives is the overall performance of the respective METRO Wholesale or Real sales line.

The past performance component rewards the achievement of internal economic target values and is determined on the basis of the EBITDA after special items generated cumulatively over financial years 2015/16 to 2017/18 for METRO Wholesale and 2016/17 to 2018/19 for Real. Separate target values for a goal achievement factor of 1.0 and 0.0, respectively, have been defined. In the case of intermediate values and values above 1.0, the factor for goal achievement is calculated using linear interpolation to 2 decimal places. The goal achievement factor for the past performance component cannot drop below 0 and is capped.

The future value component mirrors METRO Wholesale and Real’s external valuation with respect to the expected future performance of the respective national subsidiary and each sales line as a whole from an analyst’s perspective. For the purpose of target setting, the enterprise value of the respective sales line was determined on the basis of analyst valuations before the start of the performance period. It is determined again at the end of each performance period. The enterprise value of METRO Wholesale’s national subsidiaries is derived from the enterprise values of the METRO Wholesale sales line. Separate target values for a goal achievement factor of 1.0 and 0.0, respectively, have been defined. In the case of intermediate values and values above 1.0, the factor for goal achievement is calculated using linear interpolation to 2 decimal places. The goal achievement factor for the future value component cannot drop below 0 and is capped.

Performance achievement for the sustainability component is determined on the basis of the average rating which METRO AG is awarded in an external corporate sustainability assessment during each performance period. In each year of the performance period, METRO AG participates in the Corporate Sustainability Assessment conducted by the independent service provider RobecoSAM. RobecoSAM AG uses this assessment to determine METRO AG’s ranking within the industry group Food & Staples Retailing that is defined in accordance with the Global Industry Classification Standard (GICS). RobecoSAM AG will inform METRO AG of any changes in its sector classification. In case of material changes in the composition of companies or the ranking method, RobecoSAM AG can determine adequate comparable values.

The company’s average ranking, rounded to whole numbers, is determined on the basis of the rankings communicated during each performance period. The factor for the sustainability component is determined in the following manner on the basis of the average of the performance period:

As of 30 September 2018, the target amount for the eligible group of persons was €26 million. The mentioned tranches of share-based payment programmes resulted in total expenses of €9 million (2016/17: €25 million).

The related provisions as of 30 September 2018 amount to €28 million (30 September 2017: €19 million).