METRO is a customer-oriented wholesaler with multichannel business operations. With the implementation of the sCore strategy, our wholesale stores will be streamlined towards sustainable growth. Furthermore, the delivery business will be substantially expanded, and the online marketplace will be further rolled out in the country portfolio. Our primary objective here is to increase the company value sustainably. This principle is also reflected in our internal management system. METRO uses the key figures described in the following for the planning, management and control of our business activities. Selected key performance indicators of our management system (sales growth, EBITDA and Return on Capital Employed) form the basis for the Management Board’s variable remuneration component.
The focus of the group’s operational management is on the value drivers that have a direct impact on the company’s medium- and long-term targets and are directly related to the sCore strategy.
The most important key performance indicators for METRO are the exchange rate-adjusted sales growth and the adjusted EBITDA. Our management system also makes use of other significant performance indicators, which are explained in the following.
Management system
Key performance indicators describing the earnings position
The first of our most important key performance indicators for our operational business is the exchange rate-adjusted total sales growth, which is also viewed as a key figure adjusted for portfolio changes. The focus here is on the control function of the portfolio. The key figure reflects a change in sales adjusted for significant divestments. Significant acquisitions within the financial year are only included in the key figure in the following year. Generally speaking, the outlook is also based on a consistent portfolio.
The second of our most important key performance indicators is the EBITDA excluding earnings contributions from real estate transactions and transformation costs. The adjusted EBITDA reflects the operating efficiency of METRO in a transparent format. Irrespective of it, the development of real estate assets and the proceeds from divestments remain core components of the group’s real estate strategy. Transformation costs generally do not include regularly recurring expenses from strategic portfolio adjustments. Furthermore, transformation costs in previous years included income effects from efficiency measures tied to the focus on the wholesale business. Due to the progress achieved in the transformation, expenses from efficiency measures are no longer reported as a component of transformation costs since financial year 2021/22. Instead, they are recognised directly under adjusted EBITDA.
Other important key performance indicators of METRO are the profit or loss for the period and the earnings per share. These key performance indicators ensure that the tax and net financial result as well as impairment losses are given consideration in addition to the operational result. Thereby, they allow for a holistic assessment of METRO’s earnings position from the perspective of the shareholders.
- For more information about these key performance indicators, see chapter 3 economic report – 3.2 asset, financial and earnings position – earnings position.
Key performance indicators describing the financial and asset position
The management of METRO’s financial and asset position aims at sustainably assuring liquidity and arranging cost-effective sources for the financing requirements of our subsidiaries.
- For more information about the financial and asset position, see chapter 3 economic report – 3.2 asset, financial and earnings position – financial and asset position.
The key performance indicators used in this area also include the investments, which are planned, reported and audited both in aggregate for the group and separately for the segments. Investments are defined as additions to non-current assets (excluding financial instruments and deferred tax assets).
Another focal point in the area of the financial and asset position are regular analyses of the net working capital, which are carried out for the purpose of managing the operational business and capital deployment. Developments in net working capital over time result from changes in stock inventories, trade receivables and trade liabilities. Receivables from suppliers are reported within Other financial and other non-financial assets.
The net debt and free cash flow are also used as key performance indicators to manage METRO’s liquidity and capital structure. The net debt results from the balance of financial liabilities (including liabilities from leases), cash or cash equivalents and short-term financial investments. Free cash flow represents the unrestricted funds generated throughout the financial year, which are primarily available for redemption of borrowings, distribution of dividends or for M&A activities. Free cash flow is calculated from cash flow from operating activities based on continuing operations plus divestments less investments (excluding financial investments), lease payments as well as net interest paid and other borrowing costs. The free cash flow defined in this manner can be derived directly from the cash flow statement. Furthermore, a simplified cash flow definition, focusing on the main cash flow components, is used for internal control purposes. The simplified free cash flow is calculated as adjusted EBITDA less lease payments and cash investments (excluding mergers and acquisitions) +/− changes in net working capital.
Value-oriented key performance indicators
The key performance indicator Return on Capital Employed (RoCE) is still used to assess the operational business. This key figure measures the Return on Capital Employed (RoCE = EBIT/average capital employed) in a certain period under review and allows for an assessment of the performance of the group’s individual segments.
The resulting RoCE is benchmarked against the respective segment-specific cost of capital before taxes. It represents a minimum yield on the employed capital at market rates and is based on capital market models.
METRO also frequently uses value-oriented key performance indicators to assess both prospective and past investments. Accordingly, METRO uses the discounted cash flow method, the key figure economic value added (EVA) and other liquidity-oriented key performance indicators such as the amortisation period to form its investment-related decisions.
Key performance indicators for implementation of the strategy
In connection with sCore, METRO has implemented a key figure system that is used to continuously measure and review the implementation status of the key strategic elements. At the top of the key figure system are 7 main key figures, which are supplemented or operationalised at subsequent levels with other specific key figures. The key figures include the strategic customer sales share, the sales share of regularly returning customers, the share of delivery sales in total sales, the digital sales share, the own-brand sales share, the availability of goods and the Net Promoter Score of the strategic customers.
- The specific definitions of the individual key figures are listed in the glossary of the annual report. The development of the key figures is presented in the chapter ‘Earnings position’.