46. Leases

METRO as lessee

Real estate leases

METRO mainly rents land and buildings for its wholesale stores, distribution centres, offices and warehouses. The leases are individually negotiated and contain a variety of different terms and conditions.

The lease agreements for the properties are generally concluded for fixed periods of 5 to 15 years and in some cases include extension options, as described in the section on extension and termination options.

Vehicle leasing

In addition, commercial vehicles such as trucks, forklift trucks and industrial trucks with terms of 4 to 6 years as well as passenger cars with a lease term of 3 to 4 years are also leased.

Other leases

Other leases, which account for an insignificant portion of the leases, include the rental of technical equipment and machinery, IT infrastructure as well as business and office equipment.

The maturities of lease liabilities are shown in the following table.

In financial year 2020/21, there were no material expenses for variable lease payments that were not included in the measurement of lease liabilities.

Effects of leases recognised in profit or loss

The following expenses and income in connection with leases were recognised in the income statement.

The total cash outflow, which comprises repayment of lease liabilities (interest and redemption portion), payments for short-term leases, payments for leases of assets of minor value and variable lease payments, amounts to €561 million (30/9/2020: €564 million).

In its announcement ‘Covid-19-Related Rent Concessions’ (amendment to IFRS 16) on 28 May 2020, the IASB granted lessees an option to simplify the accounting for concessions, such as deferral of lease payments or rent discounts, granted in connection with the outbreak of the coronavirus pandemic until 30 June 2021. In its announcement dated 31 March 2021, the IASB extended the period for the option by 1 year, until 30 June 2022. METRO has exercised the option of recognising all granted rental discounts amounting to €1 million (30/9/2020: €1 million).

Extension and termination options

Extension and termination options are included in a significant number of leases in all asset classes of METRO. These terms and conditions are used to maximise operational flexibility in contract management, particularly in relation to the asset classes of land and buildings, plant and machinery, vehicles as well as IT infrastructure.

When METRO determines the lease term and assesses the length of the non-cancellable period of a lease, it specifies the period for which the agreement is enforceable. A lease agreement is no longer enforceable if the lessee and the lessor each have the right to terminate the lease agreement without the other party’s consent for at most an insignificant penalty. If only a lessee has the right to terminate a lease, that right is considered a termination option available to the lessee, which a company considers when determining the lease term. If only a lessor has the right to terminate a lease, the non-cancellable period of the lease includes the period covered by the termination option. The majority of the extension and termination options held can only be exercised by METRO and not by the respective lessor.

In determining the lease term, management takes into account all facts and circumstances that create an economic incentive to exercise an extension option or not to exercise a termination option. Examples of facts and circumstances include the terms of the lease for the optional periods compared to market conditions, significant improvements to the leases, costs associated with terminating the lease contract and the significance of the underlying asset to METRO’s operations. The measurement is reviewed if a significant event or significant change in circumstances occurs that affects this measurement.

Potential future cash outflows of €2,098 million (30/9/2020: €2,054 million) for extension or termination options that are not sufficiently certain were not included in the lease liability as of 30 September 2021 because it is not reasonably certain that the leases will be renewed or not terminated.

During the financial year, lease extensions totalling €224 million (30/9/2020: €70 million) were exercised and included in lease liabilities using the incremental borrowing rate at the modification date of this lease.

Residual value guarantees and purchase options

METRO has no significant leases that contain residual value guarantees or purchase options.

Leasing agreements not yet commenced

Undiscounted payment obligations for leases that had not yet been commenced on the closing date and were thus not disclosed under lease liabilities totalled €9 million (30/9/2020: €6 million).

Sale-and-leaseback transactions

In financial year 2020/21, MAKRO Portugal sold the Lisbon site as part of a sale-and-leaseback transaction. The income realised from the transaction amounted to €17 million.

METRO as lessor

METRO is a lessor that rents and leases real estate owned by the company. These subleases are classified as operating leases or finance leases. The net investments from the finance leases are recognised as receivables in the balance sheet. The receivables are reduced by the redemption portion included in the lease payment. The interest portion included in the lease payment is recognised as finance income in the income statement.

Lease payments (METRO as lessor) due in subsequent periods from entities outside METRO for the rental of properties that are classified as finance leases are shown below:

If the rental of real estate is classified as an operating lease, the lease payments are immediately recognised in the income statement as rental income. In subsequent periods, the group is entitled to receive lease payments from third parties, which are due as follows:

The following rental income in connection with leases was recognised in the income statement.