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METRO GROUP : ANNUAL REPORT 2010 : BUSINESS
→ GROUP MANAGEMENT REPORT : 3. EARNINGS POSITION
EqUITy CAPITAL COSTS
Risk-free rate of return
+
4.7%
Market risk premium 5.0%
x Beta factor (specific risk premium for METRO GROUP) 1.0
= 9.7%
weighting at market rates 50%
In the calculation of EBITaC, special items from the Shape
2012 project are distributed over four years on a straightline
basis and considered in earnings before interest and
taxes (EBIT) in the reporting year. Special items from Shape
2012 that were recorded in the financial year 2010 are largely
the result of an optimisation of the location portfolio, selling
spaces and organisational structures. As the respective
positive EBIT effects largely arise with a time lag to expenses,
the distribution of these special items over several years
provides for an accurate presentation of operating performance.
As a result, short-term special effects do not fully
impact earnings during the period in which they occur. In
addition, the periodisation helps ensure that measures that
create value over the long term are not abandoned because
of negative short-term earnings effects.
The results of the EBITaC analysis are used, among other
things, for the management of METRO GROUP’s portfolio as
well as for the allocation of investment funds. Medium- to
long-term effects on value creation are the key factor determining
the allocation of investment funds. As a result, the
cash value of future value added represents the key criterion
for all investments within METRO GROUP. In order to provide
for value creation as well as sufficient liquidity, the value
added of investment projects, free cash flow and the cash
recovery period are used as additional liquidity-based key
performance metrics. Above all in times of capital squeeze,
7.2% Group WACC after taxes
Tax effect (1–26.6%)
9.8% Group WACC before taxes
→ p. 087
DEBT CAPITAL COSTS
Risk-free rate of return 4.7%
+
Average long-term risk premium 1.5%
= 6.2%
– Tax effect –1.6%
= 4.6%
weighting at market rates 50%
a ranking of alternative investment projects represents an
important success factor in corporate management.
In the financial year 2010, METRO GROUP successfully
deployed its business assets and achieved a positive EBITaC
of €668 million. After periodisation of special items from
Shape 2012 in the amount of €204 million and consideration
of periodised expenses from 2008 (€237 million for the
streamlining of the Real store network) and 2009 (€343 million
in one-time expenses from Shape 2012) EBIT for 2010
totalled €2,219 million. Given average business assets of
€15,895 million, the cost of capital amounted to €1,551 million.
The growth of capital employed, which is partly due to
increased international expansion, was offset by EBIT
growth. The Metro Cash & Carry sales division achieved
positive value added again in 2010, exceeding the previous
year’s level. Media Markt and Saturn also achieved positive
value added in 2010, although this figure fell short of the
previous year’s level. The decline compared with 2009 is due
to the Shape 2012 one-time expenses related to the sale of
the Saturn consumer electronics stores in France pending
approval by the antitrust authority. despite the periodisation,
these expenses shaved about €30 million off Media
Markt and Saturn’s earnings. Galeria Kaufhof also earned
its cost of capital. In a reflection of the successful continuation
of its restructuring, Real posted a significant increase
in EBITaC compared with the previous year.