17. Goodwill and other intangible assets

At the closing date, the breakdown of goodwill among the major cash-generating units was as shown below:

Additions to goodwill are the result of acquisitions made in financial year 2023/24; they relate to Fisk Idag and Donier (JHB group) as well as Caterite.

The expected future cash flows on which the impairment test is based are derived from a qualified planning process, which takes intra-group experience as well as macroeconomic data collected by third-party sources into account. The detailed planning period generally spans 3 years, with various scenarios being derived and analysed with regard to their appropriateness for the impairment test. The detailed planning period can generally be extended by up to 2 further planning years for units undergoing a transformation process. No use was made of this option in financial year 2023/24 nor in the previous year. Following the detailed planning period, a growth rate of 1.25% is assumed, as in the previous year. The capitalisation rate as the weighted average cost of capital (WACC) is determined using the capital asset pricing model. In the process, an individual peer group is assumed for all groups of cash-generating units operating in the same business segment. In addition, the capitalisation rates are determined on the basis of an assumed basic interest rate of 2.59% (30/9/2023: 2.45%) and a market risk premium of 6.75% (30/9/2023: 6.97%) in Germany as well as a beta factor of 0.90 (30/9/2023: 0.86). Country-specific risk premiums are applied to the equity cost of capital and to the borrowing costs.

Considering the continued consistent implementation of the sCore strategy, we assume sales and EBITDA growth in the detailed planning phase. For the units with goodwill considered to be significant, this results in the following development of sales and EBITDA until the end of the detailed planning period.

Full impairment of goodwill led to an expense of €20 million in the financial year (2022/23: €0 million). It related mainly to METRO Austria (segment West) and was required as a result of the expected reduction in sales and earnings performance and the resulting consequences for future cash flows.

The estimated recoverable amount of the goodwill of Johan i Hallen & Bergfalk (JHB) exceeds the carrying amount by €2 million. A change in 2 assumptions, which was considered possible, could lead to the carrying amount exceeding the recoverable amount. If the capitalisation rate was 0.07 percentage points higher, at 6.94% (rather than 6.87%), and EBITDA in perpetuity included in the assumed free cash flow of €8.8 million (rather than €8.9 million) was 0.8 percentage points lower, fair value less costs of disposal would be equal to the carrying amount.

Disposals of goodwill arise due to changes in the consolidation group and are reported at the time of deconsolidation.

The development of intangible assets is shown in the following table.

The acquired brand rights changed as follows:

Trademark rights generally represent assets with an indefinite useful life. The expected useful life of the trademark rights is generally indeterminable, because METRO can use these rights without restrictions and abandoning them is not envisaged in the future. The carrying amounts of these brands are reviewed annually for units to which goodwill is not simultaneously allocated in line with the procedure for the respective purchase price allocations using the licence price analogy method. Level 3 input parameters of the fair value hierarchy are applied here. The mandatory annual impairment test confirmed the recoverability of the carrying amounts. The estimated recoverable amount of the trademark rights of Classic Fine Foods exceeds the carrying amount by €2 million. If the capitalisation rate was 0.23 percentage points higher, at 7.05% (rather than 6.82%), and the sales assumed in perpetuity were €9 million lower, at €303 million (rather than €312 million), fair value less costs of disposal would be equal to the carrying amount.

Other intangible assets include €24 million (2022/23: €23 million) in software purchased from third parties and still in development and €9 million (2022/23: €7 million) in concessions, rights and licences.

Research and development expenses recognised in expenses essentially concern internally generated software and amounted to €43 million (2022/23: €42 million).

As in the previous year, there are no material restrictions on title or right to dispose of intangible assets. Purchasing obligations for intangible assets amounting to €1 million (30/9/2023: €2 million) were recorded.