42. Segment reporting

Segmentation follows the group’s internal reporting as it is used as a basis for resource allocation and performance measurement by the Chief Operating Decision-Maker (member of the Management Board of METRO AG).

METRO is active in the self-service wholesale trade with the brands METRO and MAKRO as well as in the delivery business (FSD) with the METRO delivery service and, among others, with the supply specialists Classic Fine Foods, Pro à Pro and Rungis Express. Operating segments are aggregated to form reporting segments based on the division of the business into individual regions. The individual regions are Germany, Western Europe (excluding Germany), Russia, Eastern Europe (excluding Russia) and Asia.

The Others segment includes in particular Hospitality Digital, the business unit that bundles the group’s digitalisation initiatives. It also includes the service companies METRO PROPERTIES, METRO LOGISTICS, METRO-NOM, METRO ADVERTISING and METRO SOURCING and others, which provide group-wide services in the areas of real estate, logistics, information technology, advertising and procurement. METRO MARKETS is further expanding its digital portfolio for independent restaurateurs with a new B2B online marketplace. Through this distribution channel, METRO offers non-food articles from its own product range as well as products from third parties. The sales and pro rata costs generated by METRO MARKETS are included in the operating units, while the development activities of METRO MARKETS beyond it are included in the Others segment.

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. These transactions are settled at normal market conditions.
• Segment EBITDA comprises EBIT before depreciation and reversals of goodwill, impairment losses of property, plant and equipment, other intangible assets and investment properties.
• The adjusted EBITDA includes EBITDA excluding transformation costs and earnings contributions from real estate transactions.
• The term ‘transformation costs’ refers to non-recurring expenses related to efficiency measures, which mainly relate to personnel measures in the headquarters.
• The earnings contributions from real estate transactions include the EBITDA-effective earnings from the disposal of land and land usage rights and/or buildings as part of a disposal transaction. Earnings from the disposal of dedicated real estate companies or the disposal of shares in such companies capitalised at equity are, as a result of their commercial substance, also included in the earnings contributions from real estate transactions. The earnings have been reduced by cost components incurred in relation to real estate transactions.
• 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. In principle, 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.
• 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.
• Non-current segment assets include non-current assets. They mainly exclude financial assets, investments accounted for using the equity method, tax items, inventories, trade receivables, receivables from suppliers and cash and cash equivalents.
• In principle, transfers between segments are made based on the costs incurred from the group’s perspective.

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