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<strong>METRO</strong> <strong>AG</strong><br />
ANNUAL REPORT 1996
Metro Wholesale<br />
Department Stores<br />
Hypermarkets<br />
Food Stores & Discounters<br />
Consumer Electronics Centers<br />
Home Improvement Centers<br />
Furniture Centers<br />
Computer Centers<br />
Fashion Centers<br />
Footwear Centers<br />
Mail Order<br />
Restaurant & Catering<br />
Real Estate<br />
Others<br />
MGV
At a glance<br />
<strong>METRO</strong> <strong>AG</strong> GROUP 1996 IN FIGURES<br />
72<br />
DM million<br />
Gross sales (incl. VAT) 62,024<br />
Result from ordinary operations 1,062<br />
Net income 717<br />
Net income excl. third-party P&L shares 610<br />
Result according to DVFA/SG 712<br />
Return on equity after taxes 14.9%<br />
Capital expenditure 1) 1,639<br />
Cash flow according to DVFA/SG 1,898<br />
Balance sheet total 20,777<br />
Equity 4,826<br />
Capital stock 501<br />
For each DM 5 share of stock DM<br />
Earnings according to DVFA/SG 7.10<br />
Cash dividend + bonus<br />
•<br />
common stock 2.00 + 2.00<br />
preferred stock I 2.25 + 2.00<br />
preferred stock II 2.25 + 2.00<br />
Cash dividend + bonus incl. tax credit 2)<br />
common stock 4.07<br />
preferred stock I 4.32<br />
preferred stock II 4.32<br />
Cash flow according to DVFA/SG 18.93<br />
1) additions to tangible and intangible assets (excl. goodwill)<br />
2) for German resident stockholders
<strong>METRO</strong> <strong>AG</strong> GROUP PROFIT/LOSS BY DIVISION 1996<br />
DM million<br />
Metro Wholesale 420.0<br />
Department Stores 202.6<br />
Hypermarkets 99.7<br />
Food Stores & Discounters 61.3<br />
Consumer Electronics Centers 240.4<br />
Home Improvement Centers 186.9<br />
Furniture Centers (124.9)<br />
Computer Centers 46.0<br />
Fashion Centers 28.2<br />
Footwear Centers 24.9<br />
Mail Order 20.5<br />
Restaurant & Catering 21.1<br />
Real Estate 179.4<br />
Others 69.1<br />
Division results from ordinary operations,<br />
before goodwill amortization 1,475.2<br />
less holding company’s result (219.3)<br />
less amortization of goodwill (193.9)<br />
Result from ordinary operations 1,062.0<br />
less income taxes (274.5)<br />
less other taxes (70.3)<br />
Net income of the <strong>Group</strong> 717.2<br />
73
Contents<br />
Letter to the stockholders 3<br />
Management Report on the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> and <strong>METRO</strong> <strong>AG</strong> 6<br />
Additional information 19<br />
General economic setting 19<br />
Division reports 25<br />
Internationalization drive 55<br />
<strong>Group</strong> synergies 59<br />
Environmental protection 60<br />
Key areas of personnel work 61<br />
Interest rate and currency management 63<br />
Earnings per share according to DVFA/SG 63<br />
Cash flow according to DVFA/SG 65<br />
Balance sheet structure, <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> 65<br />
Cash flow statement, <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> 66<br />
Metro stock 67<br />
Notes to the Metro <strong>AG</strong> <strong>Group</strong>’s financial statements 72<br />
Comments on the consolidated balance sheet 76<br />
Comments on the income statement 83<br />
Supervisory Board and Executive Board 87<br />
Report of the Supervisory Board 89<br />
Summary of major <strong>Group</strong> companies 92<br />
Balance sheet and income statement<br />
<strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> 94<br />
<strong>METRO</strong> <strong>AG</strong><br />
1
<strong>METRO</strong> <strong>AG</strong><br />
2
Letter to the stockholders<br />
Dear Stockholders:<br />
Inside a record period of only 10 months following<br />
the announcement, <strong>METRO</strong> <strong>AG</strong> was formed<br />
in 1996 amid great public interest as part of a<br />
complex merger process from three different<br />
and legally independent companies. Metro stock<br />
was first listed on July 25, 1996, much earlier<br />
than expected. Thus all the essential conditions<br />
were fulfilled for tailoring the group of companies<br />
perfectly to future challenges.<br />
In this annual report the Executive Board would<br />
like to inform you about <strong>METRO</strong> <strong>AG</strong>’s first fiscal<br />
year and to present key aspects of its corporate<br />
strategy.<br />
Fiscal 1996: satisfactory in general<br />
The fiscal year turned out to be satisfactory<br />
even though the budgeted figures formulated<br />
by the Executive Board in March 1996 in the<br />
course of the merger were not quite achieved.<br />
At about DM 62 billion, <strong>Group</strong> sales reached the<br />
level of the preceding year. Adjusted for disposals<br />
and acquisitions, sales rose by 1.8 percent.<br />
Additionally and as part of a nongratuitous contract<br />
for services, <strong>METRO</strong> <strong>AG</strong> through Metro<br />
International Management GmbH (MIM) handles<br />
an international C&C sales volume of around<br />
DM 10.9 billion.<br />
Consumer Electronics Centers, Department<br />
Stores and – adjusted for nonrecurrent expenses<br />
– Adler Fashion Centers performed exceptionally<br />
well. Metro Wholesale consolidated its<br />
dominant earnings position within the <strong>Group</strong>,<br />
whereas Hypermarkets and Food Stores & Discounters<br />
improved their results appreciably<br />
compared with the previous year but remain<br />
well below medium-term objectives owing<br />
to restructuring processes and start-up losses<br />
at Tip Discounters. Earnings at the Home Improvement<br />
Centers, Footwear Centers and<br />
Computer Centers were below expectations.<br />
<strong>METRO</strong> <strong>AG</strong><br />
The Furniture Center division continues to present<br />
problems. Owing to the recessionary environment<br />
in this sector, especially in the fourth<br />
quarter, it fell well short of the targeted reduction<br />
in operating losses.<br />
<strong>METRO</strong> <strong>AG</strong> achieved a total net income of DM<br />
717 million for the <strong>Group</strong>. The result from ordinary<br />
operations came to DM 1,062 million.<br />
The result according to DVFA/SG, adjusted for<br />
extraordinary expenses and income and after<br />
third-party profit shares, amounted to DM 712<br />
million. Accordingly, earnings per share were<br />
DM 7.10.<br />
In 1996, <strong>METRO</strong> <strong>AG</strong> came a good deal closer to<br />
its self-set profitability targets. The return on<br />
(gross) sales reached 1.7 percent, the return on<br />
equity after taxes being 14.9 percent. In this context,<br />
the Company still aims to achieve in the<br />
medium term a return on equity of a comparable<br />
magnitude even after full utilization of the<br />
existing tax loss carryovers, i.e. even when required<br />
to bear again a higher income tax burden.<br />
In the course of the merger, the Executive<br />
Board informed you about <strong>METRO</strong> <strong>AG</strong>’s future<br />
dividend policy, which will equally safeguard<br />
the stockholders’ and the Company’s interests.<br />
Therefore, the Supervisory and Executive<br />
Boards are proposing you a 1996 cash dividend<br />
of DM 2 + a bonus of DM 2 for the common<br />
stock, as well as one of DM 2.25 + DM 2 for the<br />
preferred stock I and II. If resolved as proposed,<br />
the tax credit for German resident stockholders<br />
amounts to DM 0.07 since most of the profit<br />
will be distributed from a low-tax equity portion<br />
(“EK 01“). The absolute sum distributed will be<br />
DM 403.4 million, DM 211.1 million being transferred<br />
to the reserves retained from earnings.<br />
The <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s equity ratio was 23.2<br />
percent at the close of 1996.<br />
3
<strong>METRO</strong> <strong>AG</strong>’s strategic environment<br />
Never in its history has European trade faced<br />
so many and such great challenges arising<br />
simultaneously:<br />
As a result of drastically changing world economic<br />
conditions, consumer demand will stagnate<br />
in West European countries for years to<br />
come and even decline in some sectors. Nevertheless,<br />
those trading companies in particular<br />
that have devoted themselves to a policy of<br />
internationalization will further expand their<br />
respective market shares at domestic level.<br />
At the same time, spending power in the newly<br />
industrialized countries including Eastern<br />
Europe will rise overproportionately in the coming<br />
decades owing to the changed global economic<br />
environment, and markets will open up<br />
to modern forms of trading. A dynamic transfer<br />
to these emerging markets of the progressive<br />
types of trading outlets found in industrialized<br />
countries has begun; in the most attractive<br />
of these the battle for first-class locations is<br />
already in full swing.<br />
The change in customer behavior at all levels<br />
poses another great challenge. Customers are<br />
becoming more critical and demanding with<br />
regard to quality, and rising price transparency<br />
is heightening their price awareness. On the<br />
other hand, demand for a shopping experience<br />
is growing among certain target groups.<br />
Sluggish buying potential, intensifying competition<br />
and growing price awareness among<br />
consumers are forcing the trade to take completely<br />
new rationalization measures cutting<br />
across company boundaries, measures which<br />
have assumed a specific shape within the “process<br />
chain optimization“ concept.<br />
4<br />
Last but not least, the further development of<br />
multimedia products and services will have a<br />
lasting impact on the situation in the over-thecounter<br />
trade.<br />
Strategic positioning of <strong>METRO</strong> <strong>AG</strong><br />
How will <strong>METRO</strong> <strong>AG</strong> position itself in this<br />
environment in future so as to bring about<br />
a sustained medium-term enhancement in<br />
shareholder value?<br />
<strong>METRO</strong> <strong>AG</strong>’s whole trading portfolio is subject<br />
to an ongoing and far-reaching optimization<br />
process. In this respect, we will continue consistently<br />
to restructure domestic outlet chains<br />
in order to fully exploit the <strong>Group</strong>’s earnings<br />
potential. The Department Stores and Hypermarkets<br />
divisions provide classic examples of<br />
successfully improved cost and earnings structures<br />
in 1996.<br />
As part of a more extensive optimization of<br />
<strong>METRO</strong> <strong>AG</strong>’s portfolio, we have made a decision<br />
to sell off within a disinvestment program,<br />
certain sections of the Company or fringe activities<br />
that have repeatedly been unprofitable. In<br />
1996, this included parts of the Food Stores &<br />
Discounters division (Bolle, Schätzlein) and, as<br />
of December 31, 1996, the sale of the wholesale<br />
delivery business of the BLV <strong>Group</strong>. The majority<br />
holding in ITC Immobilien Team Consulting<br />
GmbH as well as Mac Fash Textilhandels GmbH<br />
were disposed of in 1997. Where necessary, we<br />
shall in future continue our disinvestment policy<br />
in less promising sectors and in such areas<br />
that do not form part of our core business activities<br />
or have repeatedly generated a belowaverage<br />
rate of return on the capital employed.
The overriding consideration in any further<br />
development of our sales outlet concepts is the<br />
need to follow current and anticipate future<br />
customer trends. However, further developing<br />
these concepts only within the scope of national<br />
requirements is not enough. Rather, such concepts<br />
must also be capable of holding their<br />
own internationally.<br />
At the same time, we are concentrating in the<br />
current fiscal year on continuing our restructuring<br />
programs in some divisions in addition to<br />
the speedy realization of merger synergies.<br />
By using the most up-to-date control and logistics<br />
systems, we are striving throughout our<br />
divisions for productivity and cost leadership,<br />
the prerequisites for price leadership.<br />
Internationalization enjoys high priority within<br />
our strategic plans. Therefore, <strong>METRO</strong> <strong>AG</strong> has<br />
been stepping up the internationalization of<br />
individual types of outlets in selected countries<br />
since mid-1996. In order to consolidate this<br />
strategic positioning, we are devoting special<br />
attention to human resources development at<br />
national and international level.<br />
<strong>METRO</strong> <strong>AG</strong><br />
A closer dialogue with the financial community<br />
<strong>METRO</strong> <strong>AG</strong>’s investor relations activities aim to<br />
improve the transparency of corporate development<br />
through professional, open and ongoing<br />
information management. Through these efforts<br />
we would also like to enhance the relationship<br />
of mutual trust with our stockholders and institutional<br />
investors as well as with financial analysts<br />
and to allow outsiders the opportunity to<br />
assess Metro stock adequately. <strong>METRO</strong> <strong>AG</strong> will<br />
therefore continue to step up its dialogue with<br />
the capital markets in 1997.<br />
In coping with the tasks facing us, we rely on<br />
the support and confidence of our customers,<br />
employees, stockholders and business partners.<br />
It is part of the credo of <strong>METRO</strong> <strong>AG</strong>’s Executive<br />
Board to fulfill with great motivation and utmost<br />
commitment the expectations placed in the<br />
Company and its management.<br />
Our thanks go to all our employees who tackled<br />
outstandingly and with great dedication the<br />
tasks set in fiscal 1996, which proved to be an<br />
extraordinary year.<br />
Sincerely,<br />
Urban Wiegandt<br />
Kaske Dr. Körber<br />
Dr. Loose Suhr<br />
5
Management Report on the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> and <strong>METRO</strong> <strong>AG</strong><br />
6<br />
Emergence of <strong>METRO</strong> <strong>AG</strong> as parent of the<br />
<strong>METRO</strong> <strong>AG</strong> <strong>Group</strong><br />
<strong>METRO</strong> <strong>AG</strong> as parent of the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong><br />
has emerged from<br />
the contributions in kind made by majority<br />
stockholder Metro Vermögensverwaltung<br />
GmbH & Co KG, Düsseldorf, i.e. the contribution<br />
of its controlling interests in Saarbrücken-based<br />
Asko Deutsche Kaufhaus <strong>AG</strong><br />
and Cologne-based Kaufhof Holding <strong>AG</strong>, as<br />
well as the major Metro Wholesale/Germany<br />
companies and several service enterprises,<br />
and from<br />
the subsequent mergers of Asko Deutsche<br />
Kaufhaus <strong>AG</strong> including its subsidiary, Deutsche<br />
SB-Kauf <strong>AG</strong>, and Kaufhof Holding <strong>AG</strong><br />
into <strong>METRO</strong> <strong>AG</strong>.
Organization and structure<br />
of the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong><br />
<strong>METRO</strong> <strong>AG</strong> functions as a<br />
management holding company<br />
of an internationally<br />
oriented trading and services<br />
group with sales of around<br />
DM 62 billion and a workforce<br />
of some 176,500.<br />
The <strong>Group</strong> comprises 14 operating<br />
divisions, some of which<br />
are subdivided into outlet<br />
chains, and legally independent<br />
service companies that<br />
combine functions for both<br />
the outlet chains and <strong>Group</strong><br />
management.<br />
<strong>METRO</strong> <strong>AG</strong> as the <strong>Group</strong><br />
management works out strat-<br />
Metro<br />
Wholesale<br />
Computer<br />
Centers<br />
Department<br />
Stores<br />
Fashion<br />
Centers<br />
egies and targets with the outlet<br />
chains and decides within<br />
the scope of its responsibilities<br />
on resource allocation,<br />
internationalization and ways<br />
of achieving synergies. It coordinates<br />
the divisions and outlet<br />
chains and ensures the<br />
selection and career development<br />
of well-qualified executives<br />
in the <strong>Group</strong>.<br />
The <strong>Group</strong>’s portfolio consists<br />
of the following divisions:<br />
Metro Wholesale, Department<br />
Stores, Hypermarkets, Food<br />
Stores & Discounters, Consumer<br />
Electronics Centers,<br />
Home Improvement Centers,<br />
Furniture Centers, Computer<br />
Centers, Fashion Centers,<br />
Footwear Centers, Mail Order,<br />
Hypermarkets<br />
Footwear<br />
Centers<br />
<strong>METRO</strong> <strong>AG</strong><br />
<strong>METRO</strong> <strong>AG</strong><br />
Food Stores &<br />
Discounters<br />
Mail Order<br />
Consumer<br />
Electronics<br />
Centers<br />
Restaurant &<br />
Catering<br />
<strong>METRO</strong> <strong>AG</strong><br />
Restaurant & Catering, Real<br />
Estate and Others. These<br />
autonomous divisions bear<br />
responsibility for their operations.<br />
The service companies act as<br />
know-how providers for the<br />
whole <strong>Group</strong> and are under<br />
the direct control of the <strong>Group</strong><br />
Management. They include<br />
the following:<br />
Metro MGE Einkauf (purchasing),<br />
Metro MGL Logistik<br />
(logistics), Metro MGI Informatik<br />
(information technology),<br />
Metro Werbegesellschaft<br />
(ad agency).<br />
A simplified <strong>Group</strong> structure<br />
is shown below:<br />
Service<br />
companies<br />
(MGE, MGL, etc.)<br />
Home<br />
Improvement<br />
Centers<br />
Furniture<br />
Centers<br />
Real Estate Others<br />
7
<strong>Group</strong> sales<br />
The <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> achieved gross sales<br />
of about DM 62 billion in 1996. Adjusted for<br />
the disposal of small-space supermarkets<br />
(sales volume approx. DM 1 billion) and of<br />
Wenz mail-order business (DM 0.6 billion) as<br />
well as for the acquisition of 27 Spar home<br />
improvement centers (sales volume around<br />
DM 0.3 billion) and the first-time consolidation<br />
of Free Com Die Telekommunikationsgesellschaft<br />
(DM 0.2 billion), <strong>Group</strong> sales increased<br />
by 1.8 percent.<br />
8<br />
Metro Wholesale 18%<br />
Division portfolio<br />
Discounter sales outlets are the main focus of<br />
<strong>METRO</strong> <strong>AG</strong>’s activities. The following are market<br />
leaders in Germany:<br />
Metro C&C Wholesale<br />
Media Markt/Saturn Consumer Electronics<br />
Centers<br />
Vobis Computer Centers<br />
Praktiker Home Improvement Centers<br />
Real Hypermarkets<br />
<strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> – sales breakdown<br />
Furniture Centers 3%<br />
Fashion Centers 2%<br />
Others 1%<br />
Restaurant & Catering 1%<br />
Hypermarkets 17%<br />
Mail Order 1%<br />
Kaufhof Department Stores and Reno Footwear<br />
Centers occupy the number two position in<br />
their respective market segments in Germany.<br />
Computer Centers 5%<br />
Home Improvement Centers 7%<br />
Footwear Centers 1%<br />
Consumer Electronics Centers 12%<br />
Food Stores & Discounters 13%<br />
Department Stores 19%
Analyses of sales and results, divisions<br />
<strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>: sales analysis 1996<br />
<strong>METRO</strong> <strong>AG</strong><br />
Management Report<br />
Sales<br />
(gross, in DM million) % change<br />
1996 1995 1) vs. 1995<br />
<strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> 62,024 62,029 –<br />
thereof outside of Germany 3,015 2,721 10.8<br />
Divisions<br />
Metro Wholesale 11,033 11,188 2) (1.4)<br />
Department Stores 11,539 11,737 (1.7)<br />
Hypermarkets 10,722 10,736 (0.1)<br />
Food Stores & Discounters 7,859 8,308 (5.4)<br />
Consumer Electronics Centers 7,632 6,386 19.5<br />
Home Improvement Centers 4,304 4,080 5.5<br />
Furniture Centers 1,704 1,960 (13.1)<br />
Computer Centers 3,135 3,085 1.6<br />
Fashion Centers 1,417 1,363 4.0<br />
Footwear Centers 816 918 (11.1)<br />
Mail Order 495 1,092 (54.7)<br />
Restaurant & Catering 474 399 18.8<br />
Others 3) 894 777 15.1<br />
1) Not comparable with 1995 due to partly different fiscal years and different disclosures<br />
2) Previous year’s figures adjusted for intercompany sales with other <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> companies<br />
3) Mainly Rungis Express, Free Com Die Telekommunikationsgesellschaft, Jacques’ Weindepot and Massa-Ausbauhaus<br />
9
The <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> achieved a result from<br />
ordinary operations in the period under review<br />
of DM 1,062 million.<br />
Results from ordinary operations within the <strong>Group</strong><br />
DM million<br />
Gross sales (incl. VAT) 62,024.1<br />
Division results<br />
Metro Wholesale 420.0<br />
Department Stores 202.6<br />
Hypermarkets 99.7<br />
Food Stores & Discounters 61.3<br />
Consumer Electronics Centers 240.4<br />
Home Improvement Centers 186.9<br />
Furniture Centers (124.9)<br />
Computer Centers 46.0<br />
Fashion Centers 28.2<br />
Footwear Centers 24.9<br />
Mail Order 20.5<br />
Restaurant & Catering 21.1<br />
Real Estate 179.4<br />
Others 69.1<br />
Division results from ordinary operations<br />
before goodwill amortization 1,475.2<br />
less holding company result (219.3)<br />
less amortization of goodwill (193.9)<br />
Result from ordinary operations 1,062.0<br />
less income taxes (274.5)<br />
less other taxes (70.3)<br />
Net income of the <strong>Group</strong> 717.2<br />
10
Against the background of<br />
sluggish consumer demand,<br />
Metro Wholesale generated<br />
sales of DM 11 billion (down<br />
1.4 percent), consolidating its<br />
dominant earnings position.<br />
Department Stores sales fell<br />
by 1.7 percent to DM 11.5 billion<br />
with the difficult environment<br />
in this sector persisting,<br />
although favorable profit levels<br />
were achieved.<br />
Taking into account declining<br />
sales in southern Germany<br />
owing to the continuing conversion<br />
of stores to the Real<br />
marketing concept, Hypermarkets<br />
achieved virtually<br />
unchanged sales of DM 10.7<br />
billion. The disposal of small<br />
supermarkets (Bolle, Schätzlein)<br />
led to a 5.4-percent<br />
decrease in sales to DM 7.9<br />
billion in the Food Stores &<br />
Discounters division. The<br />
results were satisfactory in<br />
general given the background<br />
of absorbed restructuring<br />
expenses.<br />
Consumer Electronics Centers<br />
saw sales climb strongly to<br />
DM 7.6 billion (up 19.5 percent)<br />
thanks to targeted expansion.<br />
Even on a same-space basis,<br />
sales increased by an appreciable<br />
6.9 percent. Profit levels<br />
were likewise encouraging.<br />
Home Improvement Centers<br />
recorded a sales growth of<br />
5.5 percent to DM 4.3 billion,<br />
further expanding their market<br />
position in a highly competitive<br />
sector. However, this division<br />
fell well short of profit<br />
expectations.<br />
Inter alia owing to the closedown<br />
of unprofitable stores,<br />
sales at Furniture Centers<br />
dropped by 13.1 percent to<br />
DM 1.7 billion. Earnings suffered<br />
from a recessionary<br />
environment in this sector<br />
and continuing expenditure<br />
on restructuring.<br />
Computer Centers achieved<br />
a sales rise of 1.6 percent to<br />
DM 3.1 billion in a market<br />
characterized by fierce price<br />
competition. Although failing<br />
to fulfill earnings expectations,<br />
the division did succeed in<br />
gaining another lead over<br />
competitors.<br />
<strong>METRO</strong> <strong>AG</strong><br />
Management Report<br />
Fashion Centers recorded a<br />
heartening 4.0-percent rise in<br />
sales to DM 1.4 billion. Adjusted<br />
for nonrecurring costs<br />
amounting to DM 42 million<br />
for the transfer of the existing<br />
logistics center, the division’s<br />
result was good.<br />
The income generated by<br />
Metro service companies from<br />
synergy projects has been<br />
duly allocated to the annual<br />
results achieved by the divisions,<br />
all according to the<br />
originator principle.<br />
One of the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s<br />
fundamental strategic goals is<br />
to expand abroad. Here, gross<br />
sales of DM 3.0 billion, up<br />
10.8 percent, were achieved,<br />
the main sales markets being<br />
Austria, France, Switzerland,<br />
and Italy. Sales were recorded<br />
for the first time in Poland<br />
and the People’s Republic of<br />
China, countries targeted for<br />
strategic expansion.<br />
11
Net income of the <strong>Group</strong><br />
and earnings according to<br />
DVFA/SG<br />
In fiscal 1996, the <strong>Group</strong>’s net<br />
income came to DM 717.2 million,<br />
the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong><br />
thus reaping the profit expected<br />
from the merger. After<br />
deducting third-party profit<br />
shares, the <strong>Group</strong>’s net income<br />
allocable to <strong>METRO</strong> <strong>AG</strong>’s<br />
stockholders amounts to DM<br />
610.4 million. Adjusted for<br />
the nonrecurring factors included<br />
in total net income,<br />
earnings per share according<br />
to DVFA/SG correspond to<br />
DM 7.10.<br />
Annual accounts of<br />
<strong>METRO</strong> <strong>AG</strong><br />
<strong>METRO</strong> <strong>AG</strong> as parent company<br />
of the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong><br />
presents a solid net-asset,<br />
financial and income position<br />
in its annual accounts as of<br />
December 31, 1996. Based on<br />
total assets of DM 9.76 billion<br />
(substantially consisting of<br />
12<br />
financial assets and accounts<br />
due from <strong>Group</strong> companies),<br />
the equity ratio is 39.4 percent.<br />
Net financial indebtedness<br />
decreased from January 1,<br />
1996, to December 31, 1996,<br />
by DM 483.7 million. <strong>METRO</strong><br />
<strong>AG</strong> earned a net income of DM<br />
614.4 million, derived mainly<br />
from the investments in its<br />
subsidiaries. A major reason<br />
for the difference between<br />
<strong>METRO</strong> <strong>AG</strong>’s net income and<br />
the <strong>Group</strong>’s is the outside<br />
stockholders’ DM 106.8 million<br />
profit share in the <strong>Group</strong>’s<br />
net income. After transferring<br />
DM 211.1 million to the reserves<br />
retained from earnings,<br />
<strong>METRO</strong> <strong>AG</strong>’s net earnings<br />
amount to DM 403.4 million.<br />
The share exchange ratios<br />
stipulated for the mergers of<br />
Asko Deutsche Kaufhaus <strong>AG</strong>,<br />
Deutsche SB-Kauf <strong>AG</strong> and<br />
Kaufhof Holding <strong>AG</strong> will be<br />
reviewed upon application by<br />
stockholders of the three former<br />
mergee companies in<br />
proceedings pending before<br />
the Regional Courts of Saarbrücken,<br />
Frankfurt/Main, and<br />
Cologne. The applicants allege<br />
that the respective share<br />
exchange ratios were understated<br />
to their debit. Neither<br />
the position of the court proceedings<br />
nor the arguments<br />
submitted by the applicants<br />
give rise to any reason for<br />
doubting the correctness of<br />
the exchange ratios determined<br />
in the merger agreements.<br />
The full annual accounts of<br />
<strong>METRO</strong> <strong>AG</strong>, on which Fasselt-<br />
Mette & Partner Wirtschaftsprüfungsgesellschaft<br />
as the<br />
statutory auditors issued their<br />
unqualified opinion, will be<br />
published in the German Federal<br />
Gazette and deposited<br />
with the Local Court of Cologne<br />
under Commercial<br />
Register number HRB 26888;<br />
they may also be obtained<br />
from <strong>METRO</strong> <strong>AG</strong> as a separate<br />
publication.
<strong>METRO</strong> <strong>AG</strong><br />
Balance sheet as of December 31, 1996<br />
Assets<br />
<strong>METRO</strong> <strong>AG</strong><br />
Management Report<br />
Balance at Balance at<br />
In DM million<br />
Fixed assets<br />
12-31-1996 1-1-1996<br />
Intangible assets 0.326 0.285<br />
Tangible assets 4.654 26.993<br />
Financial assets 5,971.300 5,749.503<br />
Current assets<br />
5,976.280 5,776.781<br />
Receivables and sundry assets 2,707.489 2,714.219<br />
Short-term securities and note loans 305.628 404.363<br />
Cash on hand and in bank 768.218 987.616<br />
3,781.335 4,106.198<br />
Prepaid expenses and deferred charges 6.869 5.003<br />
Stockholders’ equity and liabilities<br />
9,764.484 9,887.982<br />
Balance at Balance at<br />
In DM million<br />
Stockholders’ equity<br />
12-31-1996 1-1-1996<br />
Capital stock 501.212 501.014<br />
Reserve from capital surplus 2,729.608 2,725.363<br />
Reserves retained from earnings 211.070 –<br />
Unappropriated retained earnings 403.366 –<br />
3,845.256 3,226.377<br />
Untaxed/special reserves 217.856 267.193<br />
Accruals 879.669 1,085.064<br />
Liabilities 4,820.611 5,308.518<br />
Deferred income 1.092 0.830<br />
9,764.484 9,887.982<br />
13
<strong>METRO</strong> <strong>AG</strong><br />
Income statement<br />
for the year ended December 31, 1996<br />
In DM million 1996<br />
Income from investments 1,012.437<br />
Financial result (43.921)<br />
Other operating income 394.407<br />
14<br />
1,362.923<br />
Personnel expenses<br />
Amortization of intangible<br />
(93.966)<br />
and depreciation of tangible assets (4.232)<br />
Other operating expenses (526.575)<br />
(624.773)<br />
Result from ordinary operations 738.150<br />
Income taxes (110.280)<br />
Other taxes (13.434)<br />
Net income 614.436<br />
Transfer to reserves retained from earnings (211.070)<br />
Net earnings 403.366
Profit appropriation<br />
<strong>METRO</strong> <strong>AG</strong>’s Supervisory and Executive Boards<br />
will propose to the annual stockholders’ meeting<br />
on July 9, 1997, to appropriate the profit<br />
of DM 403.4 million, which remains after transfer<br />
to the reserves retained from earnings,<br />
as follows:<br />
Distribution of a cash dividend of DM 2<br />
plus a bonus of DM 2, totaling DM 4 for<br />
each DM 5 share of common stock at par<br />
Distribution of a cash dividend of DM 2.25<br />
plus a bonus of DM 2, totaling DM 4.25 for<br />
each DM 5 share of preferred stock I at par<br />
Distribution of a cash dividend of DM 2.25<br />
plus a bonus of DM 2, totaling DM 4.25 for<br />
each DM 5 share of preferred stock II at par<br />
Attaching to the dividend is a tax credit of 3 / 7<br />
of DM 0.152 per share of common stock, and<br />
one of 3 / 7 of DM 0.161 per share of preferred<br />
stock; German resident stockholders may offset<br />
this credit against their personal or corporate<br />
income taxes, together with the capital<br />
yields tax and the solidarity surtax.<br />
Cash flow and capital expenditure in the <strong>Group</strong><br />
The <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s cash flow reached<br />
DM 1,948 million and thus clearly exceeded the<br />
DM 1,514 million of funds used in investing<br />
activities.<br />
Cash flow, <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong><br />
<strong>METRO</strong> <strong>AG</strong><br />
Management Report<br />
In DM million 1996<br />
Net income of the <strong>Group</strong> 717<br />
Amortization/depreciation/<br />
write-down of fixed assets 1,218<br />
Change in noncurrent accruals 7<br />
Transfer to untaxed/<br />
special reserves 17<br />
All other items (11)<br />
1,948<br />
The Real Estate division spent DM 424.6 million,<br />
particularly to secure land acquisitions in Germany<br />
and abroad and to erect buildings.<br />
Department Stores invested DM 290.5 million,<br />
primarily in the swift changeover to the successful<br />
Galeria Kaufhof merchandising concept.<br />
The integration of outlets into the Real merchandising<br />
concept accounted for a capital expenditure<br />
by Hypermarkets of DM 197.5 million.<br />
Metro Wholesale spent a total DM 134 million,<br />
largely directed toward expansion in the People’s<br />
Republic of China and in Romania.<br />
Consumer Electronics Centers used DM 112 million<br />
to invest in the network of German and foreign<br />
branches.<br />
Expansion abroad and additional outlets opened<br />
up in Germany required Home Improvement<br />
Centers to spend DM 86.4 million.<br />
15
Asset and capital structure of the <strong>Group</strong><br />
<strong>METRO</strong> <strong>AG</strong>’s 1996 consolidated balance sheet<br />
shows an equity capital of DM 4,826 million,<br />
which covers 49.9 percent of fixed assets. Total<br />
assets of DM 20,777 million bring the equity<br />
ratio to 23.2 percent. Net financial accounting<br />
indebtedness amounts to some DM 770 million,<br />
or 3.7 percent of the balance sheet total, after<br />
netting interest-bearing assets and liabilities.<br />
<strong>Group</strong> balance sheet structure<br />
Assets DM million<br />
Fixed assets 9,673<br />
Current assets 11,104<br />
20,777<br />
Equity & liabilities DM million<br />
Equity 4,826<br />
Long-term debt 3,061<br />
Short-term debt 12,890<br />
20,777<br />
16<br />
Material subsequent events<br />
Subsequent to December 31, 1996, there were<br />
no events of material significance to either<br />
<strong>METRO</strong> <strong>AG</strong>’s or the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s netasset,<br />
financial or income position.<br />
For information only, it is mentioned that the<br />
Supervisory and Executive Boards will propose<br />
to the annual stockholders’ meeting of July 9,<br />
1997, to raise <strong>METRO</strong> <strong>AG</strong>’s capital stock by<br />
DM 701.7 million, from DM 501.2 million to<br />
DM 1,202.9 million, by transferring an equivalent<br />
amount from the reserve from capital surplus.<br />
Moreover, <strong>METRO</strong> <strong>AG</strong> submitted in April<br />
1997 to the outside stockholders of Alzey-based<br />
Massa <strong>AG</strong>, a 96-percent <strong>METRO</strong> <strong>AG</strong> subsidiary,<br />
a voluntary public offering to purchase their<br />
stock at a price of DM 150 for each DM 50 share<br />
at par. In addition, under its <strong>Group</strong> portfolio<br />
streamlining program, <strong>METRO</strong> <strong>AG</strong> disposed<br />
in the spring of 1997 of all its shares in ITC<br />
Immobilien Team Consulting GmbH and Mac<br />
Fash Textilhandels GmbH.
Prospects<br />
In the 1997–1999 period <strong>METRO</strong> <strong>AG</strong>’s paramount<br />
goal will be to improve division results<br />
continuously, this being the only way to reach<br />
the following medium-term targets:<br />
<strong>Group</strong> return on sales of 3 percent before<br />
taxes<br />
Return on equity of 15 percent after taxes.<br />
<strong>METRO</strong> <strong>AG</strong> will push ahead with the measures<br />
already introduced and aimed at optimizing<br />
productivity and expanding its competitive<br />
position both at home and abroad. This will include,<br />
in particular, efforts to generate earnings<br />
from groupwide synergies in the purchasing,<br />
logistics, information technology and administrative<br />
sectors. <strong>METRO</strong> <strong>AG</strong> will also continue<br />
pursuing its disinvestment and restructuring<br />
programs consistently.<br />
At home, sales will rise thanks to the expansion<br />
of selected divisions and ongoing sales<br />
outlet conversions in the Department Store<br />
and Hypermarket divisions.<br />
The <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> will greatly boost foreign<br />
sales by tapping new growth markets.<br />
Metro Wholesale will continue to be the main<br />
income generator in 1997. It will press ahead<br />
with its well-directed internationalization efforts<br />
by opening up further wholesale markets in the<br />
People’s Republic of China and in Romania.<br />
Kaufhof Warenhaus <strong>AG</strong> will achieve improved<br />
profits from the department stores converted<br />
into the Galeria concept in 1996. Activities in<br />
1997 will focus on the restructuring of additional<br />
branches.<br />
<strong>METRO</strong> <strong>AG</strong><br />
Management Report<br />
Hypermarkets will step up the integration of<br />
the former Meister-Märkte stores into the Real<br />
outlet structure in southern Germany. The internationalization<br />
of the Hypermarket division is<br />
starting with the penetration of the Polish and<br />
Turkish markets.<br />
The Food Stores & Discounters division is continuing<br />
to round off the Extra chain of outlets.<br />
The Tip stores will substantially expand their<br />
sales at home and abroad.<br />
Further outlets to be opened up in Germany<br />
and abroad will promote the success being<br />
shown by the Consumer Electronics Centers<br />
contrary to the industry trend.<br />
On the domestic market, Praktiker stores will<br />
concentrate on integrating the Spar home improvement<br />
centers and on extending the outlet<br />
network nationwide. Abroad, markets in Poland,<br />
Turkey, Hungary, and Italy will be accessed.<br />
The economic situation of the furniture, fixtures,<br />
fittings and household effects sector will not improve<br />
to any great degree in 1997. Despite fundamental<br />
streamlining measures, the Furniture<br />
division will not enhance its result appreciably<br />
in 1997 compared with the preceding year.<br />
Computer Centers will direct efforts at strengthening<br />
the existing network of Superstores and<br />
further boost franchise sales. Maxdata wholesale<br />
business will expand at home and abroad.<br />
The Fashion Centers division is stepping up<br />
measures to optimize productivity through the<br />
relocation of logistics capacity to Thuringia.<br />
Poland is another foreign market to be accessed<br />
by the Adler chain.<br />
In general, Management is confident that it will<br />
succeed in further increasing the result from<br />
ordinary operations.<br />
17
Dependency report<br />
In its letter dated January 4, 1996, Metro Vermögensverwaltung<br />
GmbH & Co KG informed<br />
<strong>METRO</strong> <strong>AG</strong> pursuant to Art. 20(4) German Stock<br />
Corporation Act (“AktG“) that it holds a majority<br />
stake in <strong>METRO</strong> <strong>AG</strong>. Analogously, by letter<br />
of May 3, 1996, Metro Holding <strong>AG</strong>, Baar, Switzerland,<br />
informed <strong>METRO</strong> <strong>AG</strong> under the terms<br />
of Art. 20(4) in conjunction with Art. 16(4) AktG<br />
that it owns a controlling stake in <strong>METRO</strong> <strong>AG</strong>’s<br />
stock indirectly through its majority interest in<br />
Metro Vermögensverwaltung GmbH & Co KG.<br />
Thereupon, and in accordance with Art. 312<br />
AktG, <strong>METRO</strong> <strong>AG</strong>’s Executive Board prepared<br />
a report on the <strong>Group</strong> affiliation.<br />
Certified without qualification by the Duisburgbased<br />
statutory auditors, Fasselt-Mette & Partner<br />
Wirtschaftsprüfungsgesellschaft, the dependency<br />
report on fiscal 1996 was submitted to the<br />
Supervisory Board. The Executive Board ended<br />
its report with the following representation:<br />
“The Executive Board of <strong>METRO</strong> <strong>AG</strong> states and<br />
represents that, under the circumstances which<br />
were known to the Executive Board at the time<br />
legal transactions were entered into, the Company<br />
has in all cases received an equitable<br />
consideration. Other reportable actions were<br />
neither taken nor omitted.“<br />
18
Additional information<br />
General economic setting<br />
Germany<br />
Growth in the German economy<br />
continued to weaken<br />
generally in 1996. Real gross<br />
domestic product rose by<br />
only 1.4 percent compared<br />
with 1.9 percent in the preceding<br />
year. In eastern Germany,<br />
the economic slowdown was<br />
especially marked, gross domestic<br />
product growing by a<br />
real 2.0 percent following a<br />
5.3-percent increase in 1995.<br />
The 1.3-percent rise in gross<br />
domestic product in western<br />
Germany was also down from<br />
1.6 percent in 1995.<br />
A crucial factor in the economic<br />
downturn was declining<br />
construction activity, expenditure<br />
for building falling by a<br />
real 2.7 percent. On the other<br />
hand, expenditure for capital<br />
equipment (up 2.4 percent),<br />
government consumption (up<br />
2.6 percent) and exports (up<br />
4.9 percent), which benefited<br />
from the slight drop in the parity<br />
of the German mark, made<br />
an above-average contribution<br />
to real economic growth.<br />
Private consumption – up by<br />
1.3 percent and just below the<br />
rise in gross domestic product<br />
– provided no impetus.<br />
Overall productivity rose by<br />
2.5 percent. Real growth of<br />
1.4 percent was achieved<br />
solely through increased productivity,<br />
with an on balance<br />
negative effect on the employment<br />
market. The national<br />
unemployment rate thus<br />
climbed to 11.5 percent, with<br />
a higher increase in eastern<br />
Germany from 14.9 percent<br />
to 16.7 percent than in the<br />
western part of the country<br />
(up to 10.1 percent from 9.3<br />
percent). On an annual average,<br />
some 4 million people<br />
were registered as unemployed<br />
in Germany in 1996,<br />
9.8 percent more than in 1995.<br />
Gross domestic product<br />
real % change<br />
+4<br />
+3<br />
+2<br />
+1<br />
0<br />
-1<br />
-2<br />
-3<br />
-4<br />
92 93 94 95 96<br />
Private consumption<br />
real % change<br />
+4<br />
+3<br />
+2<br />
+1<br />
0<br />
-1<br />
-2<br />
-3<br />
-4<br />
92 93 94 95 96<br />
Retail trade sales<br />
real % change<br />
+4<br />
+3<br />
+2<br />
+1<br />
0<br />
-1<br />
-2<br />
-3<br />
-4<br />
<strong>METRO</strong> <strong>AG</strong><br />
92 93 94 95 96<br />
Strict retail trade sales 1)<br />
real % change<br />
+4<br />
+3<br />
+2<br />
+1<br />
0<br />
-1<br />
-2<br />
-3<br />
-4<br />
92 93 94 95 96<br />
1) Excl. motor car, fuel, lubricant, and<br />
pharmacy sales<br />
19
Retail and wholesale trade<br />
At DM 920.3 billion, German retail trade sales<br />
were 0.7 percent higher than in the preceding<br />
year, equivalent to a fall of 0.2 percent in real<br />
terms.<br />
Retail trade’s share of private consumption continued<br />
to decline. Given small rises in disposable<br />
income and a constant rate of savings, private<br />
households displayed a reluctance to spend in<br />
the retail trade sector so as to be able to meet<br />
higher payments in other areas, such as rent,<br />
travel or insurance.<br />
The Federal Statistical Office reported increased<br />
sales for the motor trade/filling stations (up 4.5<br />
percent), pharmacies (up 2.8 percent) and bicycles/sporting<br />
equipment retailing (up 2.9 percent).<br />
Sales of foodstuffs (up 0.2 percent), footwear<br />
(up 0.3 percent) and building and home improvement<br />
plus do-it-yourself supplies and<br />
products (down 0.6 percent) remained roughly<br />
at the preceding year’s level. There was a clear<br />
drop in sales of electrical household appliances<br />
and radio and television sets (down 3.2 percent)<br />
and of furniture, fixtures, fittings and household<br />
effects (down 2.7 percent). The clothing and<br />
textile sectors also registered reduced sales<br />
(down 1.9 and 2.1 percent, respectively).<br />
20<br />
Retail trade sales in the narrower definition of<br />
the term (excluding motor car, fuel, lubricant,<br />
and pharmacy sales) receded by 0.9 percent to<br />
DM 706.9 billion, representing a fall of 1.5 percent<br />
in real terms. This means that sales have<br />
dropped in real terms for four years in a row.<br />
The price index rose by 0.6 percent in 1996,<br />
demonstrating a situation of extensive price<br />
stability.<br />
The German wholesale trade (excluding motor<br />
cars) recorded sales which were down by 1.4<br />
percent in terms of value and by 0.7 percent in<br />
terms of units compared with 1995. Wholesale<br />
prices dipped by 0.7 percent.<br />
Wholesale trading in food, beverages and tobacco<br />
rose by 0.5 percent. In the consumer<br />
durables and nondurables sector, wholesale<br />
revenues diminished by a nominal and real 3.1<br />
percent. Sales in nonfood wholesaling were<br />
therefore less favorable than in many retail trade<br />
sectors.
Western industrialized nations<br />
The rate of expansion of the world economy<br />
quickened somewhat in 1996 in general.<br />
Western industrialized nations’ real gross domestic<br />
product rose by 2.3 percent in 1996<br />
following a 2.0-percent rise in 1995. However,<br />
there were pronounced differences in growth<br />
rates in the individual regions.<br />
Real gross domestic product and consumer prices in the industrialized nations 1995–1996,<br />
% changes versus previous year<br />
Gross domestic<br />
Weight product Consumer prices<br />
in % 1996 1995 1996 1995<br />
Germany 11.2 1.4 1.9 1.5 1.9<br />
France 7.1 1.3 2.2 2.0 1.8<br />
UK 5.1 2.4 2.5 2.4 3.4<br />
Italy 5.1 0.7 2.9 3.9 5.4<br />
Spain 2.6 2.2 2.8 3.6 4.7<br />
Netherlands 1.8 2.8 2.1 2.1 1.9<br />
Belgium 1.3 1.4 1.9 2.1 1.5<br />
Austria 1.1 1.0 1.8 1.9 2.2<br />
Sweden 1.1 1.1 3.6 0.7 2.5<br />
Denmark 0.8 2.4 2.6 2.1 2.1<br />
Finland 0.6 3.2 4.5 0.6 1.0<br />
Greece 0.5 2.6 2.0 8.5 9.3<br />
Portugal 0.5 2.5 1.8 3.2 4.1<br />
Ireland 0.3 6.3 10.7 1.6 2.6<br />
Luxembourg 0.1 2.4 3.7 1.4 1.9<br />
European Union 39.2 1.6 2.4 2.3 2.8<br />
Switzerland 1.4 – 0.7 0.1 0.8 1.8<br />
Norway 0.7 4.8 3.3 1.3 2.5<br />
Western Europe 41.3 1.6 2.3 2.2 2.8<br />
USA 32.3 2.4 2.0 2.9 2.8<br />
Japan 23.8 3.6 1.4 0.1 – 0.1<br />
Canada 2.6 1.5 2.3 1.6 2.1<br />
Total 1) 100.0 2.3 2.0 1.9 2.1<br />
1) Total of the nations listed. Weighted with the 1995 gross domestic product.<br />
Source: Spring appraisal issued by the Pool of Economic Institutes<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
21
Among the major industrialized nations, Japan<br />
recorded the strongest overall growth of 3.6<br />
percent. The US economy grew at an aboveaverage<br />
rate of 2.4 percent, the stable upward<br />
trend thus gaining further strength there.<br />
In contrast, the forces of economic recovery<br />
were much more muted in Western Europe. On<br />
average the 1995 real macroeconomic performance<br />
was exceeded by only 1.6 percent. As a<br />
result the rate of growth in Western Europe fell<br />
short of the 1995 level by almost one percentage<br />
point. However, the average figure obscures<br />
considerable differences between individual<br />
countries. Contrary to the overall trend, the Irish<br />
economy expanded 6.3 percent in 1996, recording<br />
– similar to 1995 – the best performance<br />
among Western European countries. The Italian<br />
economy was the weakest (up by 0.7 percent).<br />
In the other EU countries, growth rates ranged<br />
mainly between 1 and 3 percent. In Germany<br />
overall growth was comparatively weak at 1.4<br />
percent.<br />
Favored by the continuing devaluation of most<br />
European currencies in relation to the dollar,<br />
exports improved in 1996 compared with the<br />
preceding year.<br />
Domestic demand also picked up as the year<br />
progressed, helped by low interest rates and a<br />
marked quickening of money supply growth.<br />
Nevertheless, Europe achieved a high degree<br />
of price stability. Even countries with normally<br />
above-average price increases were again successful<br />
in combating inflation in 1996.<br />
22<br />
The efforts of many European countries to fulfill<br />
the Maastricht criteria bore initial fruit, although<br />
the tight fiscal policy being predominantly pursued<br />
also had a considerable dampening effect<br />
on private consumption. In addition, state<br />
spending in many countries has to be restricted<br />
or reduced in order to meet the criteria for<br />
entry to European Monetary Union. This need<br />
to make savings in virtually all public budgets<br />
left little scope for measures to stimulate economic<br />
activity through government spending.<br />
The employment situation again deteriorated<br />
in many countries in 1996.<br />
Other countries<br />
Dynamic economic expansion among the states<br />
of South-East Asia weakened somewhat in 1996<br />
due to growing inflationary risks and thus rising<br />
interest rates. Nonetheless, with a real gross domestic<br />
product growth rate of some 7 percent,<br />
the Far East was the fastest-growing region<br />
worldwide. The P.R. China remained the frontrunner<br />
among Far Eastern countries, posting a<br />
plus of 9 percent.<br />
In Central and South America inflation was<br />
noticeably checked, providing a good basis for<br />
a continuing stable upswing.<br />
In Central and Eastern Europe economic development<br />
is characterized by clear contrasts.<br />
Whereas the Russian and Bulgarian economies<br />
suffered a severe setback in 1996, Poland, the<br />
Czech Republic, Romania and Slovakia again<br />
achieved appreciable growth rates.
Nation survey<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
Private Consumer<br />
Nation Population 19951) Gross domestic product (GDP) consumption goods trade<br />
total per km2 GDP per capita in US$ in US$ billion in US$ billion in US$ billion in % of<br />
in based on 19942) pur- total GDP total total Ger-<br />
1,000 chasing-power parities 19963) 19963) 19964) many<br />
Austria 7,968 95 20,348 226 125 64 10<br />
Belgium 10,113 331 19,765 268 166 78 12<br />
PR China 1,200,336 126 3,002 830 398 278 42<br />
France 57,981 107 21,784 1,560 934 398 61<br />
Germany 81,539 228 19,395 2,354 1,355 655 100<br />
Greece 10,451 79 8,618 120 89 58 9<br />
Hungary 10,115 109 6,098 44 31 20 3<br />
Italy 57,187 190 18,109 1,203 752 302 46<br />
Luxembourg 406 157 30,950 5) 5) 5) 5)<br />
Netherlands 15,503 380 20,264 392 235 120 18<br />
Poland 38,388 119 6,208 133 86 56 8<br />
Romania 22,835 96 3,522 33 22 15 2<br />
Spain 39,621 78 13,888 581 361 159 24<br />
Switzerland 7,202 174 24,230 292 174 130 20<br />
Turkey 61,945 80 5,235 184 130 91 14<br />
UK 58,395 239 18,592 1,152 738 385 59<br />
1) Source: Federal Statistical Office<br />
2) Source: ifo-Schnelldienst 10/97 (ifo-Institut, Munich)<br />
3) Source: FERI<br />
4) End-user consumer goods trade<br />
(Sources: EUROSTAT, Deutsche Bundesbank, M+M EURODATA, joint diagnosis,<br />
EU Commission, our own calculations and estimates)<br />
5) No data available<br />
23
Division reports<br />
<strong>METRO</strong> <strong>AG</strong> reports in a concise form on the<br />
performance of all its divisions in the past fiscal<br />
year. In addition, certain divisions or outlet<br />
chains will be presented in greater detail to<br />
provide the reader with a deeper insight into<br />
corporate policy and strategies.<br />
The Metro Wholesale division, the Kaufhof<br />
Warenhaus outlet chain and the Hypermarkets<br />
<strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> by divisions<br />
Result<br />
from Capital<br />
Sales ordinary expen- Employees Selling<br />
(gross) operations diture 1) (full-timers) Outlets space<br />
DM million DM million DM million Number Number 1,000 m²<br />
Metro Wholesale 11,033 420 134 17,583 70 715<br />
Department Stores 11,539 203 291 35,755 306 1,690<br />
Hypermarkets 10,722 100 198 19,905 162 1,145<br />
Food Stores & Discounters 7,859 61 120 13,948 889 958<br />
Consumer Electronics Centers 7,632 240 112 10,244 156 396<br />
Home Improvement Centers 4,304 187 86 10,213 222 1,091<br />
Furniture Centers 1,704 (125) 31 5,172 94 785<br />
Computer Centers 3,135 46 53 2,922 279 63<br />
Fashion Centers 1,417 28 28 5,588 133 247<br />
Footwear Centers 816 25 10 1,936 469 287<br />
Mail Order 495 21 5 1,152 0 0<br />
Restaurant & Catering 474 21 18 3,877 261 97<br />
Real Estate 0 179 425 487 0 0<br />
Others 894 69 125 5,472 137 22<br />
<strong>METRO</strong> <strong>AG</strong> 0 (413) 2) 3 3113) 0 0<br />
<strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> 62,024 1,062 1,639 134,565 3,178 7,496<br />
1)<br />
Additions to tangible and intangible assets (excl. goodwill)<br />
2)<br />
Including DM 194 million amortization of goodwill<br />
3)<br />
As of Dec. 31, 1996, 179 full-timers worked for <strong>METRO</strong> <strong>AG</strong> directly.<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
division have been selected for in-depth coverage<br />
for 1996, with further reports of this nature<br />
to follow gradually in future years.<br />
<strong>METRO</strong> <strong>AG</strong>’s divisions had differing fiscal years<br />
as well as, in some cases, varying sales definitions<br />
in 1995. Therefore, direct comparisons<br />
cannot be drawn with sales and result figures<br />
for fiscal 1996. All the 1995 data merely serve<br />
statistical purposes.<br />
25
Metro Wholesale<br />
The cash-and-carry concept<br />
The cash-and-carry business, established in<br />
1964 as a special form of self-service wholesaling,<br />
forms the basis and core of Metro’s<br />
activities. The crucial keys to success in this<br />
type of outlet are<br />
Broad range of products with high availability,<br />
Low costs passed on in the form of<br />
reasonable prices,<br />
Direct advertising,<br />
Preferential treatment,<br />
Use of the most up-to-date organizational,<br />
information and management tools,<br />
Flat hierarchical structures,<br />
Ability to multiply.<br />
The Metro model was successful from the<br />
outset. Thanks to a clearly defined structure,<br />
it was possible to transfer the C&C sales outlet<br />
concept to new countries quickly. Numerous<br />
stores have been established in Germany and<br />
in another 18 countries, some operating within<br />
a long-standing partnership under the Makro<br />
name.<br />
Metro C&C<br />
As the largest entity within international C&C<br />
business, Metro Wholesale in Germany has in<br />
its 50 wholesale outlets a potential clientele of<br />
2.8 million traders and institutional bulk consumers.<br />
A cohesive merchandise information<br />
system makes it possible not only to define customer<br />
groups exactly but also to provide over<br />
1.5 million buyers with information and assistance<br />
every other week through direct advertising<br />
media. Further development and market<br />
adjustment of this cash-and-carry concept, which<br />
26<br />
has been successful for over 30 years, have<br />
made Metro C&C one of the most important<br />
sources of supply especially for small and medium-sized<br />
traders.<br />
The range is geared to the overall operating<br />
needs of commercial customers. It comprises<br />
about 15,000 food and 20,000 nonfood items,<br />
including a full range of food, beverages and<br />
tobacco, and a basic assortment of other consumer<br />
goods, albeit covering all the essential<br />
nonfood product categories.<br />
Great importance is attached to expanding<br />
and developing qualitatively the range of fresh<br />
foods so as to meet the needs of customers and<br />
strengthen ties with them. The concept rests on<br />
guaranteeing the freshness and optimizing the<br />
presentation of the goods offered. Demand for<br />
high quality calls for staffing adjustments in<br />
the fruit and vegetable, meat and delicatessen<br />
areas, as the only way to reliably ensure compliance<br />
with readiness for sale and freshness<br />
guarantees.<br />
Customers can obtain advice from regional<br />
consultants attached to each C&C store. Instore<br />
goods presentation is clear, meeting self-service<br />
criteria while helping to cut shopping time. Customers<br />
select their goods, pay for them in cash,<br />
and carry them away.<br />
A cohesive merchandise information system<br />
allows individual C&C stores to purchase<br />
goods according to their needs, enabling not<br />
only low inventory levels but also minimum<br />
capital tie-up.
Metro Eco<br />
Eco is a specialty wholesale outlet concept with<br />
particular emphasis on the food sector, concentrating<br />
on the key needs of the food, restaurant<br />
and catering trades. A comprehensive range of<br />
food products comprising some 11,000 items<br />
(dry foods and fresh produce) as well as a concentrated<br />
nonfood assortment of about 1,500<br />
consumer durables and nondurables for the<br />
restaurant and catering trade are offered on<br />
selling space of approx. 3,500 m². The key fresh<br />
food areas are the fruit and vegetable section,<br />
the meat department, and the fresh fish indoor<br />
market, offering 70–120 fresh fish varieties. The<br />
first stores of this type were opened in Trier<br />
and Bielefeld at the end of 1996 in order to test<br />
the market.<br />
Sigma Bürowelt<br />
This specialty chain operates in the field of office<br />
equipment, PCs, telecommunications, office<br />
supplies, stationery, and office furniture.<br />
At the start of fiscal 1996, Sigma Bürowelt operated<br />
five specialty office stores in Germany.<br />
Dynamic expansion of this type of outlet is<br />
planned on the basis of this well-developed<br />
and successful concept. In the first phase, another<br />
fifteen specialty office stores are to be<br />
established, two of which were actually opened<br />
in Wuppertal and Duisburg at the end of 1996.<br />
In particular, shopping malls and specialty store<br />
centers already associated with other outlet<br />
chains belonging to the Metro <strong>Group</strong> are being<br />
sought as locations.<br />
Internationalization<br />
Metro International Management GmbH (MIM),<br />
a <strong>METRO</strong> <strong>AG</strong> subsidiary, is the management<br />
company in charge of all wholesale activities at<br />
28<br />
home and abroad. It is responsible for the management<br />
and strategic controlling of C&C business<br />
in France, Italy, Austria, Hungary, Turkey,<br />
and Denmark on behalf of the Swiss Metro<br />
Holding <strong>AG</strong>, which owns these foreign-based<br />
companies. The direct access to foreign knowhow<br />
involved is of great benefit to <strong>METRO</strong> <strong>AG</strong>.<br />
Any new operations abroad in the wholesale<br />
sector will be held by MIM itself.<br />
Romania’s first C&C store was opened in<br />
Bucharest in October 1996. Because of performance<br />
to date, the Metro Wholesale division<br />
will continue to invest in Romania.<br />
Following the successful opening of the first<br />
store in the P.R. China, speedy expansion is<br />
planned there. A strong joint-venture partner<br />
has been found in this country in the shape of<br />
the Jinjiang <strong>Group</strong>, which holds a 40-percent<br />
stake in the Chinese Metro company. The C&C<br />
store opened in Shanghai in November 1996 is<br />
developing very well.
Metro Wholesale maintains its market position<br />
Metro Wholesale managed to stabilize its market<br />
and competitive position despite unfavorable<br />
trading conditions. The Metro C&C, Eco, BLV-<br />
Grossverbraucherservice and Sigma Bürowelt<br />
outlet chains (all in Germany) which comprise<br />
the Wholesale division, as well as C&C activities<br />
in China and Romania recorded gross sales in<br />
fiscal 1996 of DM 11.0 billion, 1.4 percent below<br />
the preceding year’s level. In terms of comparable<br />
selling space, sales declined by 2.5 percent.<br />
Sales registered by the activities newly launched<br />
in the fourth quarter of 1996 (Eco outlet chain,<br />
access to Chinese and Romanian markets; DM<br />
84.8 million) as well as Sigma Bürowelt’s satisfactory<br />
performance failed to compensate fully<br />
for declining sales among the core outlet chains<br />
in Germany.<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
The fall in sales is attributable to the buying<br />
resistance related to continuing weak investment<br />
and consumer spending as well as to<br />
intensifying selling space and systems competition<br />
in the wholesale sector.<br />
Against the background of modest growth in<br />
gross domestic product (up a real 1.4 percent)<br />
in 1996, a muted propensity to consume persisting<br />
in virtually all goods segments, retail<br />
trade performance which has been sluggish<br />
for years, and very slack business in the restaurant<br />
and catering trade, a large proportion of<br />
the commercial customers of wholesale outlet<br />
chains (such as Metro C&C) had to cope with a<br />
difficult year, a reduced business volume with<br />
these customers often being the result.<br />
29
At the same time, the network of suppliers also<br />
in the cash-and-carry segment is growing increasingly<br />
dense. For example, the number of<br />
C&C outlets rose by almost 4 percent in 1996<br />
alone to about 400 stores throughout Germany.<br />
Despite this difficult environment, Metro C&C<br />
maintained its leading market position in Germany<br />
in this type of trading outlet. With the<br />
opening of two Eco stores in the fourth quarter<br />
of 1996, a new specialty wholesale concept<br />
operating on a cash-and-carry basis is being<br />
tested. If it proves successful, more stores based<br />
on this principle will be opened.<br />
Sigma Bürowelt added another two specialty<br />
stores to its existing network of seven.<br />
As part of continuing internationalization efforts,<br />
C&C outlets were opened in China (Shanghai)<br />
and in Romania (Bucharest). The selling space<br />
was expanded by 42,210 m² to 715,471 m².<br />
Further improved result from<br />
ordinary operations<br />
The division increased the 1996 result from<br />
ordinary operations by DM 30.0 million to DM<br />
420.0 million, up by 7.7 percent from the previous<br />
year.<br />
The fact that improved pretax profit was generated<br />
despite falling sales is the result of welldirected<br />
management of personnel expense<br />
and cost of materials. In addition, continuing<br />
synergy projects in the <strong>Group</strong> contributed another<br />
DM 26.6 million to pretax profit.<br />
30<br />
Strategic capital spending at home and abroad<br />
Compared with the previous year, capital<br />
expenditure rose by DM 72.7 million to DM<br />
134.0 million (up by 119 percent), of which<br />
expansion in China and Romania accounted<br />
for about DM 50 million. In addition, capital<br />
spending went into the fresh-food concept at<br />
C&C stores and into new outlets.<br />
Workforce rises thanks to expansion<br />
The number of employees within the whole<br />
division, translated into full-timers, averaged<br />
17,583, including 686 full-time staff engaged<br />
in new activities abroad.<br />
Concentration on core capabilities and<br />
international expansion<br />
Great importance is being attached to the expansion<br />
and further development of the freshfood<br />
concept, the aim being to improve efforts<br />
to meet the needs of the restaurant and catering<br />
trade, the hotel industry, and the food trade.<br />
Internationalization of the C&C concept is continuing<br />
through the opening-up of markets in<br />
the P.R. China and in Romania. Initial results<br />
are in line with targets, endorsing the decision<br />
to access markets in economic regions undergoing<br />
structural change.<br />
At the end of the fiscal year, the BLV wholesale<br />
delivery business was sold, consistent with the<br />
policy of concentrating the portfolio on the<br />
<strong>Group</strong>’s declared core specializations.
Metro Wholesale locations<br />
52 Metro C&C outlets<br />
2 Metro Eco outlets<br />
Düsseldorf<br />
Saarbrücken<br />
BREMEN<br />
LOWER SAXONY<br />
Wiesbaden<br />
ROMANIA P.R. CHINA<br />
Bucharest<br />
NORTH RHINE-WESTPHALIA<br />
Cologne<br />
RHINELAND-<br />
PALATINATE<br />
SAARLAND<br />
Mainz<br />
Kiel<br />
SCHLESWIG-<br />
HOLSTEIN<br />
HESSE<br />
Stuttgart<br />
BADEN-WÜRTTEMBERG<br />
HAMBURG<br />
Hannover<br />
Erfurt<br />
THURINGIA<br />
Shanghai<br />
Schwerin<br />
MECKLENBURG-<br />
WESTERN POMERANIA<br />
BRANDENBURG<br />
Magdeburg<br />
SAXONY-ANHALT<br />
BAVARIA<br />
Munich<br />
BERLIN<br />
Berlin<br />
Potsdam<br />
Frankfurt/Oder<br />
SAXONY<br />
Dresden<br />
As of December 1996
Department Stores<br />
With the emergence of new types of outlet and<br />
additional out-of-town retail selling space, primarily<br />
in the specialty store sector, basic needs<br />
are today usually covered by discounter type<br />
stores through the exploitation of functional<br />
advantages.<br />
Accordingly, the department store must also<br />
abandon its efforts to strike a happy mean, offering<br />
only average product assortments and<br />
price levels, and reinvent itself through an innovative<br />
marketing concept with a range structure<br />
which targets specific markets while offering<br />
higher quality. The department store is thus<br />
striving for improved added value through controlled<br />
growth, taking into account higher capital<br />
and personnel costs within its trading outlets.<br />
The Galeria Kaufhof concept<br />
The Galeria Kaufhof concept is Kaufhof Warenhaus<br />
<strong>AG</strong>’s forward-pointing long-term concept.<br />
Merchandise is displayed on a multiplicity of<br />
islands, each a distinctive world of its own,<br />
where the array of products is geared to the specific<br />
needs of target markets and assembled according<br />
to demand. For the customer this means<br />
that a broad assortment of related goods can be<br />
surveyed at a glance. The emphasis is on value<br />
for money and a pronounced brand policy, with<br />
attention being paid to seasonal activities, topicality<br />
and specific themes running through the<br />
ranges concerned.<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
An integral presentation is another key aspect<br />
of the Galeria concept. This embraces various<br />
elements of shopping experience-related goods<br />
display, the inclusion of brand shops, coordinated<br />
advertising as well as extensive services<br />
involving direct communication with the customer<br />
and innovative multimedia deployment.<br />
The Galeria Kaufhof concept is being continuously<br />
modified and geared to changing customer<br />
trends and needs. For this purpose, the<br />
management has wide-ranging market research<br />
and control tools at its disposal.<br />
The Galeria which was opened at the new<br />
shopping megamall “Centro Oberhausen” in<br />
September 1996, with new ground-breaking<br />
concepts in terms of service, multimedia, sports<br />
and children’s ranges, as well as architecture,<br />
shop design and goods presentation, is a showcase<br />
example of a Galeria Kaufhof.<br />
Given limited volume growth in saturated<br />
markets, the Galeria department store with its<br />
consistent value-for-money formula is tapping<br />
new customer groups, who regard shopping in<br />
a sophisticated atmosphere as a lifestyle choice.<br />
From the point of view of the department store,<br />
value for the customer means a combination<br />
of first-class service, an attractive product mix<br />
and high availability of the ranges offered. The<br />
most up-to-date control and logistics systems<br />
are being used to expand productivity and cost<br />
leadership.<br />
33
With the integration of the former Horten<br />
branches into joint department store operations,<br />
the ongoing conversion to the Galeria<br />
Kaufhof concept has been in progress since<br />
the start of 1995. Stores with selling space of<br />
more than 7,000 m² and a sales potential of<br />
around DM 1.5 billion in the respective catchment<br />
area are the most suitable conversion<br />
candidates. As of the end of March 1997, 40<br />
department stores had been converted to this<br />
new outlet type. By the end of 1997 half of the<br />
suitable branches or 65–70 percent of selling<br />
space will have been refurbished. On a samespace<br />
basis, the stores restructured to Galerias<br />
have improved sales on average.<br />
34<br />
Structure of the Department Stores division<br />
<strong>METRO</strong> <strong>AG</strong>’s Department Stores division consists<br />
of the Kaufhof Warenhaus <strong>Group</strong> and<br />
Kaufhalle <strong>AG</strong>. The division recorded sales of<br />
DM 11.54 billion (down by 1.7 percent) in<br />
fiscal 1996 (like-for-like selling space, down 0.9<br />
percent). Total selling space rose by 0.9 percent<br />
to 1,690,467 m², while the number of stores<br />
fell to 306.<br />
The Kaufhof Warenhaus <strong>Group</strong> with its 145<br />
branches and 1,326,163 m² selling space registered<br />
sales of DM 9.31 billion (down 0.8 percent).<br />
In terms of comparable selling space,<br />
this represents a slight dip in sales of 0.3 percent.<br />
The western German Kaufhof branches,<br />
aided by the successful Galeria Kaufhof concept,<br />
improved their same-space performance compared<br />
with the preceding year.<br />
The Horten branches in Frankfurt/Oder, Halle,<br />
Jena, Weimar, Stralsund, and Potsdam were<br />
closed, whereas a Galeria Kaufhof branch with<br />
17,650 m² selling space was opened at Centro<br />
Oberhausen. Here sales were well above<br />
expectations.<br />
Kaufhalle <strong>AG</strong> with its 161 branches achieved<br />
sales of DM 2.23 billion (down by 3.2 percent).<br />
In western German branches of Kaufhalle <strong>AG</strong>,<br />
retail sales fell by 1.6 percent and in eastern<br />
Germany by 13.6 percent compared with 1995.<br />
The generally weak state of the retail trade in<br />
eastern Germany and the domination of “outof-town”<br />
shopping complexes led to an appreciable<br />
decline in sales at Kaufcenter branches<br />
in downtown locations.
In fiscal 1996, Kaufhalle <strong>AG</strong> opened branches<br />
in Cologne’s Neusser Strasse and in the Billstedt<br />
district of Hamburg. The branch in Berlin-<br />
Weissensee was completely renovated, with its<br />
selling space virtually doubled. The outlet in<br />
Halle-Neustadt was also modernized.<br />
Stores in Berlin/Frankfurter Tor, Dessau, Havelberg,<br />
Neuruppin and Schönebeck were closed<br />
in 1996 while those in Mainz and Cologne/Wiener<br />
Platz were transferred to temporary premises<br />
owing to the demolition of their buildings.<br />
The new stores are due to be completed by<br />
early or mid-1998.<br />
Kaufhof Warenhaus <strong>Group</strong>’s pretax profit<br />
well up<br />
The Department Stores division achieved clear<br />
earnings growth in 1996. The result from ordinary<br />
operations soared by DM 108.6 million to<br />
DM 202.6 million. Synergy projects generated<br />
DM 16.7 million for the division.<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
In particular, Kaufhof Warenhaus <strong>AG</strong> helped<br />
to boost profits. The 1995 revamping and merger-related<br />
expenses of DM 28 million incurred<br />
through the integration of eastern German<br />
Horten-Konsument Warenhaus GmbH and<br />
Horten Thüringen GmbH into Kaufhof Warenhaus<br />
<strong>AG</strong>, did not accrue in 1996, a period in<br />
which the increased income also resulted from<br />
an improved gross profit and savings in personnel<br />
and impersonal expenses. This was<br />
achieved mainly through consistent optimization<br />
of administrative and logistics capacities related<br />
to the advancing integration of the Horten<br />
<strong>Group</strong> in the second year after takeover. At the<br />
same time and as part of process chain streamlining,<br />
Kaufhof logistics were largely transferred<br />
to the Horten branches.<br />
Kaufhalle <strong>AG</strong>’s result from ordinary operations<br />
was unsatisfactory. The income position was<br />
adversely affected by restructuring expenditure<br />
in connection with the closedown/refurbishing<br />
of individual outlets.<br />
35
Capital expenditure<br />
The Kaufhof Warenhaus <strong>Group</strong>’s capital expenditure<br />
totaled DM 245.0 million in 1996. Investment<br />
focused on the conversion of Kaufhof<br />
branches to the Galeria concept, which made<br />
up about 40 percent of total spending. A significant<br />
proportion went into logistics restructuring.<br />
Maintenance and extension projects accounted<br />
for additional capital spending.<br />
Kaufhalle <strong>AG</strong>’s capital expenditure for tangible<br />
assets, centered on targeted branch modernization<br />
and the acquisition of a property in Brandenburg,<br />
came to DM 45.3 million.<br />
The department store logistics concept<br />
The “new logistics/stage 2” concept for textiles<br />
and hardware goods, which is tapping significant<br />
potential for rationalization, has been afoot<br />
since the spring of 1995. The aim is to concentrate<br />
goods procurement and processing at a<br />
few centers in order to cut operating costs drastically<br />
and lastingly and to improve range-related<br />
efficiency and service levels substantially.<br />
These measures result in<br />
36<br />
Reduced costs through simplified work flows,<br />
More favorable purchase terms by pooling<br />
goods procurement and transport flows,<br />
Smaller capital tie-up owing to reduced<br />
stocks, and<br />
Increased sales thanks to improved coverage<br />
and service.<br />
With its new logistics, Kaufhof Warenhaus <strong>AG</strong><br />
can face its rivals well equipped. The project is<br />
due to be completed in the spring of 1998.<br />
Personnel deployment optimized<br />
In the Kaufhof Warenhaus <strong>Group</strong>, the number<br />
of employees, translated into full-timers, averaged<br />
28,988. At 37 percent of all full-time staff<br />
on an annual basis, the proportion of part-timers<br />
remained virtually unchanged.<br />
At the same time, the Kaufhof Warenhaus<br />
<strong>Group</strong> enhanced efficiency among its sales staff<br />
considerably through the introduction of computer-controlled<br />
flexible rostering. Communication<br />
TV is another efficiency factor. As the first<br />
corporate TV in the German wholesale or retail<br />
trade, it ensures quick yet personal interaction<br />
with all members of staff. Its main use is to<br />
promote dialogue between the Executive Board<br />
and employees and among the various departments<br />
such as Purchasing and Sales. Product<br />
training sessions, advanced courses and live<br />
broadcasts are all on the agenda. Employees<br />
can input their own contributions direct by<br />
phone or fax hot line. Communication TV is<br />
broadcast digitally and received via satellite.<br />
Translated into full-timers, Kaufhalle <strong>AG</strong>’s workforce<br />
averaged 6,767 in 1996. This represents a<br />
drop of 7.9 percent, the result, inter alia, of the<br />
closedown of Kaufcenter branches. The proportion<br />
of part-time staff rose by 1.4 percentage<br />
points to 68 percent of all employees.
Kaufhof Warenhaus <strong>Group</strong> locations<br />
145 Kaufhof Warenhaus <strong>Group</strong> department stores<br />
NORTH RHINE-WESTPHALIA<br />
Cologne<br />
RHINELAND-<br />
PALATINATE<br />
SAARLAND<br />
HESSE<br />
Frankfurt<br />
Stuttgart<br />
BADEN-WÜRTTEMBERG<br />
SCHLESWIG-<br />
HOLSTEIN<br />
MECKLENBURG-<br />
WESTERN POMERANIA<br />
HAMBURG<br />
BREMEN<br />
LOWER SAXONY<br />
Hannover<br />
SAXONY-ANHALT<br />
THURINGIA<br />
Nürnberg<br />
BAVARIA<br />
BRANDENBURG<br />
Munich<br />
BERLIN<br />
Leipzig<br />
SAXONY<br />
As of December 1996
Hypermarkets<br />
The Real merchandising concept<br />
Today’s Real hypermarket organization arose<br />
from the combination – mainly through acquisitions<br />
– of 10 hypermarket companies (Realkauf,<br />
Divi, Continent, Esbella, Basar, Massa,<br />
Massa-Mobil, Meister, BLV, and Huma) with<br />
completely diverse merchandising and system<br />
concepts as well as highly disparate collective<br />
wage agreements and company agreements.<br />
A merchandising concept operating under the<br />
name of Real, which was geared to the greatly<br />
changed needs of consumers, was developed<br />
and successfully tested in 1992. After that the<br />
gradual conversion of existing hypermarkets to<br />
this trading-outlet concept got under way.<br />
Together with the development of a forwardpointing<br />
administrative and logistics-oriented<br />
corporate structure, this led to far-reaching<br />
restructuring of the Hypermarkets division,<br />
which will be completed in 1998 with the conversion<br />
of the last Meister stores in southern<br />
Germany. Inside 5 years the “Real” outlet concept<br />
has advanced to the status of market leader<br />
among hypermarket chain stores in Germany.<br />
The hypermarket remains a growth area in Germany’s<br />
food retailing sector. Real represents<br />
the new type of up-to-date and successful<br />
hypermarkets. It combines great product depth<br />
in both the food and nonfood sector with very<br />
competitive pricing over the whole range. In a<br />
clear and friendly environment, the customer<br />
finds attractive assortments arranged, wherever<br />
possible, according to product groups rather<br />
than suppliers, and can therefore compare<br />
products and make a choice from a clearly presented<br />
array of merchandise. Among fresh<br />
foods, customers interested in natural products<br />
will find organically grown produce under the<br />
“Grünes Land” label.<br />
38<br />
Real stands for price leadership in the hypermarket<br />
sector, which is reflected in every day<br />
low prices combined with a policy of selected<br />
special offers.<br />
In view of increasingly fierce competition in the<br />
retail trade and in order to achieve cost and productivity<br />
leadership in the hypermarket sector,<br />
Real will have to swiftly harmonize its complex<br />
logistics structures, some of which still decentralized,<br />
upon completion of the integration<br />
phase. This will create the foundations for the<br />
introduction of largely automated goods supply<br />
processes with a high proportion of sourcing<br />
from central warehouses. In this process, Real<br />
will be able to call on the logistics know-how<br />
already available within the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>.<br />
Satisfactory sales in fiscal 1996<br />
At the end of the period under review, <strong>METRO</strong><br />
<strong>AG</strong>’s Hypermarkets division comprised 162 outlets<br />
with a total of 1,144,830 m² selling space.<br />
The division achieved sales of DM 10.7 billion<br />
(down 0.1 percent from 1995; or up by 0.4 percent<br />
including meantime sold Fleischproduktion<br />
Cottbus); in terms of comparable selling<br />
space, sales matched the 1995 level. Whereas<br />
the Real operations in northern, western, central<br />
and eastern Germany, whose conversion<br />
had already been completed earlier, improved<br />
their same-space sales performance, the southern<br />
German region, currently undergoing restructuring,<br />
registered an appreciable drop in<br />
sales owing to the conversion process.<br />
Another 6 stores were converted into Real<br />
outlets, including 5 former Meister stores<br />
(Bad Wörishofen, Schweinau, Nürnberg, Fürth,<br />
and Schwabach) and a former Massa store in<br />
Rüsselsheim. Five new hypermarkets (Erfurt,<br />
Wildau, Zittau, Flensburg, and Traunstein) were
opened in 1996, coinciding with the closedown<br />
of 5 temporary Massa-Mobil outlets in eastern<br />
Germany.<br />
Much improved profits thanks to optimized<br />
cost structure<br />
After a weak performance in 1995, the Hypermarkets<br />
division generated much higher earnings<br />
in 1996. The result from ordinary operations<br />
climbed from DM 38 million to DM 99.7<br />
million. Alongside a higher gross profit from<br />
trading operations, the lower overall impersonal<br />
expenses led to encouraging improvements,<br />
also registered by the Massa, Huma and Meister<br />
outlets converted in 1995. Real moreover benefited<br />
DM 16.4 million from synergy projects.<br />
Conversion to Real stepped up<br />
The Hypermarkets division’s capital expenditure<br />
totaled DM 197.5 million. The main areas<br />
of spending were the ongoing conversion of<br />
stores into Real outlets and the opening of<br />
new stores.<br />
The number of employees within the Hypermarkets<br />
division, translated into full-time jobs,<br />
averaged 19,905.<br />
40<br />
Reorientation continues with the organizational<br />
integration of Massa hypermarkets<br />
Massa <strong>AG</strong> (in which <strong>METRO</strong> <strong>AG</strong> holds a 96.2percent<br />
stake) runs 15 extra large hypermarkets<br />
with sales of approx. DM 1.3 billion. Except for<br />
one store in Koblenz, all the hypermarkets have<br />
now been converted into Real outlets. Within<br />
Real, Massa – together with the southwest German<br />
region – forms the central German region.<br />
To fully capitalize on synergies, hypermarket<br />
operations require also organizational integration<br />
into the Real outlet chain. In addition, as<br />
from April 28, 1997, <strong>METRO</strong> <strong>AG</strong> submitted a<br />
voluntary public offering to Massa <strong>AG</strong>’s outside<br />
stockholders to purchase their stock at a price<br />
of DM 150 for each DM 50 share at par.<br />
Strategic outlook<br />
In the current fiscal year, too, Real hypermarkets<br />
will continue to improve their competitive position<br />
purposefully through the conversion of<br />
former Meister stores in southern Germany. In<br />
this regard, Real expects further expenditure<br />
for restructuring. The measures taken to optimize<br />
the flow of goods include direct stocking<br />
responsibility at hypermarkets, enabling improved<br />
inventory control through comprehensive<br />
goods management from the supplier’s<br />
ramp to the store. As for marketing strategy, the<br />
nonfood concept will be further refined and extended.<br />
For a finer-meshed network of branches<br />
aiming at making sustained use of synergies,<br />
such as in administration and advertising, Real<br />
will open further hypermarkets. The corporate<br />
structure will be simplified by merging individual<br />
companies into Real Holding GmbH.
Hypermarket locations<br />
162 <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> hypermarkets<br />
SAARLAND<br />
Saarbrücken<br />
Düsseldorf<br />
NORTH RHINE-<br />
WESTPHALIA<br />
Cologne<br />
RHINELAND-<br />
PALATINATE<br />
Mainz<br />
Wiesbaden<br />
BREMEN<br />
LOWER SAXONY<br />
HESSE<br />
Kiel<br />
SCHLESWIG-<br />
HOLSTEIN<br />
HAMBURG<br />
Stuttgart<br />
BADEN-WÜRTTEMBERG<br />
Hannover<br />
Erfurt<br />
THURINGIA<br />
Schwerin<br />
MECKLENBURG-<br />
WESTERN POMERANIA<br />
BERLIN<br />
Berlin<br />
Magdeburg Potsdam<br />
Frankfurt/Oder<br />
SAXONY-ANHALT<br />
BAVARIA<br />
BRANDENBURG<br />
Munich<br />
SAXONY<br />
Dresden<br />
As of December 1996
Food Stores & Discounters<br />
Reorientation of the division through the<br />
strategic sale of supermarkets<br />
Following a comprehensive reorientation in<br />
the fiscal year, <strong>METRO</strong> <strong>AG</strong>’s Food Stores &<br />
Discounters division consists mainly of two<br />
outlet chains: Extra convenience stores and<br />
Tip discounters.<br />
Extra outlet chain<br />
On selling space of between 1,000 and 4,000 m²,<br />
the convenience stores of the Food Stores &<br />
Discounters division offer a comprehensive assortment<br />
of up to 20,000 items in central locations.<br />
The key features of Extra are quality and<br />
service with fresh produce, and every day low<br />
prices in the dry food range. With 103 conversions,<br />
21 openings and 9 closedowns in 1996,<br />
the network of convenience stores was extended<br />
to 485 and 714,005 m². Through planned<br />
improvements to the fresh-produce and service<br />
sectors, expansion of its private-label range and<br />
a competitive price policy, Extra is seeking to<br />
further enhance the attractiveness of its outlets.<br />
Far-reaching restructuring<br />
The starting point for refocusing the Extra outlet<br />
chain was the disposal of small-space supermarkets.<br />
As of February 1, 1996, altogether 66<br />
Bolle stores in the Berlin region were sold to<br />
Spar Handels <strong>AG</strong>, and as of May 1, 1996, a<br />
total of 142 Schätzlein stores belonging to the<br />
western region were acquired by the Tengelmann<br />
<strong>Group</strong>. The division’s sales thus fell by<br />
about DM 1 billion. The large-space Comet<br />
supermarket chain with an average selling<br />
space of 1,100 m² was integrated into the Extra<br />
convenience store organization (115 outlets). In<br />
42<br />
addition, 103 large-space supermarkets from<br />
the former Bolle and Schätzlein outlet chains<br />
were converted into Extra stores.<br />
The cash-and-carry chain (Schaper) with 23<br />
stores will be co-managed by Metro Wholesale<br />
in future.<br />
Lower sales basis following disposal of<br />
small-space supermarkets<br />
As a result of the disposal of Bolle and Schätzlein<br />
stores, sales declined by 5.4 percent from<br />
DM 8,308 million to DM 7,859 million. In terms<br />
of comparable selling space, sales fell by 0.9<br />
percent compared with the preceding year. The<br />
total number of stores within the Food Stores<br />
& Discounters division (including Schaper) decreased<br />
from 1,018 to 889, with selling space<br />
amounting to 958,632 m² at the end of 1996.<br />
Tip outlet chain<br />
The Tip merchandising concept is characterized<br />
by the following features:<br />
Streamlined range (approx. 1,300 items),<br />
Price leadership,<br />
Proximity to customers,<br />
At least 60 parking spaces.<br />
On a selling space of 500–600 m², Tip offers<br />
alongside its own “Tip” budget label virtually<br />
all well-known branded goods, provided they<br />
are the market leaders in their product category.<br />
The stores are located in densely populated residential<br />
areas and in suburbs with good transportation<br />
connections. Bakeries and butcher’s<br />
shops as instore concepts as well as fresh pro-
duce such as fruit and vegetables offer the customer<br />
an up-to-the-minute yet varying range<br />
with special emphasis on freshness.<br />
The whole network of Tip outlets in Germany<br />
currently comprises 381 stores. In fiscal 1996,<br />
altogether 70 new stores were opened and<br />
selling space reached 191,493 m² at year-end.<br />
Apart from expansion within Germany, Tip<br />
established its first stores in Poland in 1996.<br />
Result from ordinary operations well up<br />
The sale of small-space supermarkets led in<br />
the period under review to a clear easing of<br />
pressure on income. At the same time the Food<br />
Stores & Discounters division benefited from<br />
synergy projects to the tune of DM 11.1 million.<br />
The result from ordinary operations surged<br />
accordingly to DM 61.3 million (up from DM<br />
16.2 million). As expected, the start of the Tip<br />
outlet chain’s expansion into Poland placed a<br />
burden on net income.<br />
Capital expenditure<br />
Capital expenditure totaled DM 111.1 million<br />
in the fiscal year (excluding Tip/Poland). Apart<br />
from the high expansion rate of Tip/Germany,<br />
the Food Stores & Discounters division directed<br />
its investment into converting large-space supermarkets<br />
into Extra stores and modernizing the<br />
existing shop network.<br />
Employees<br />
Following the disposal of small-space supermarkets,<br />
the number of employees decreased<br />
appreciably, falling by some 15 percent to average<br />
13,948 full-timers on an annual basis.<br />
Consumer Electronics Centers<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
Media Markt/Saturn continues to expand<br />
The Consumer Electronics Centers division<br />
(shareholding: 71.7 percent) consists of the<br />
Media Markt, Saturn and Flachsmann outlet<br />
chains. At year-end the division operated 156<br />
stores with 395,686 m² (up from 141 stores<br />
with 362,565 m²). The Media Markt/Saturn<br />
<strong>Group</strong> opened 15 new stores in 1996.<br />
Close to urban areas, Media Markt as efficient<br />
specialty outlets with an aggressive pricing<br />
policy offers, in addition to the conventional<br />
household appliances segment (brown and<br />
white goods), a diverse range of “new media”<br />
comprising some 15,000 items on an average<br />
selling space of 2,500–3,000 m². Media Markt<br />
thus skillfully combines supremely competitive<br />
pricing with a broad product mix, well-developed<br />
product know-how, high-caliber advice<br />
and sophisticated services. Media Markt operated<br />
113 specialty consumer electronics stores<br />
at the end of 1996 on 282,309 m² selling space<br />
in Germany, Austria, France, and Switzerland.<br />
Saturn runs specialty electrical stores with a<br />
selling space of 1,500–6,000 m². In traditional<br />
downtown locations, Saturn primarily covers<br />
the entertainment sector (MCs, CDs, etc.), including<br />
complete video systems. Saturn operates<br />
both as separate stores with about 18,000 items<br />
and as an integral part of other <strong>METRO</strong> <strong>AG</strong> outlet<br />
chains, such as its department stores, within<br />
the Saturn instore concept, offering a range of<br />
some 12,000 items. As of December 31, 1996,<br />
Saturn ran 30 stores with 91,069 m².<br />
43
The Flachsmann merchandising concept concentrates<br />
on medium-sized and small towns and<br />
– unlike the full Media and Saturn product<br />
ranges – offers an assortment which is dependent<br />
on regional priorities on selling space of<br />
400–2,000 m². There were 13 Flachsmann<br />
branches with altogether 22,308 m² at the end<br />
of 1996.<br />
Media Markt/Saturn records substantial sales<br />
growth on comparable selling space<br />
The Media Markt/Saturn <strong>Group</strong>’s sales were<br />
very encouraging. With the exception of France,<br />
the division registered appreciable sales growth<br />
in Germany as well as Austria and Switzerland<br />
on comparable selling space. Sales climbed to<br />
DM 7.63 billion (up by 19.5 percent). On a samespace<br />
basis, sales improved by 6.9 percent compared<br />
with the preceding year.<br />
In a stagnant market, sales of “new media”<br />
products in particular (office communication,<br />
telecommunications, and computers) were<br />
above expectations. Media Markt/Saturn will<br />
focus on expanding its market position in this<br />
promising line of merchandise.<br />
Result from ordinary operations<br />
The result from ordinary operations rose<br />
clearly in 1996 to DM 240.4 million (up by 37<br />
percent), the main reason being a higher gross<br />
profit from greatly increased productivity on<br />
comparable selling space. Media Markt continued<br />
to set itself apart from the competition<br />
successfully and consistently expanded its<br />
market position.<br />
Capital expenditure<br />
Capital expenditure reached DM 112.0 million<br />
in fiscal 1996, most of which was required for<br />
expanding and modernizing existing stores.<br />
44<br />
The Media Markt <strong>Group</strong> in Germany accounted<br />
for DM 91.7 million of capital spending, while<br />
DM 20.3 million was invested abroad. The division’s<br />
sound financial footing provides a good<br />
basis for further growth.<br />
Employees<br />
As a result of continued successful expansion,<br />
the number of employees rose, averaging<br />
10,244 full-timers on an annual basis.<br />
Outlook<br />
The Consumer Electronics Centers division is<br />
continuing to extend in the current fiscal year<br />
both at home and abroad as part of a targeted<br />
and controlled strategy. All outlet chains are<br />
seeking to further extend their branch networks<br />
in Germany. At the same time, Media is stepping<br />
up its expansion into Eastern Europe, with<br />
the first Media Markt store opening in Budapest,<br />
Hungary, in March 1997.<br />
Home Improvement Centers<br />
Praktiker consolidates its market leadership<br />
through acquisition of Spar home improvement<br />
centers<br />
In fiscal 1996, the Praktiker <strong>Group</strong>, in which<br />
<strong>METRO</strong> <strong>AG</strong> holds a 75-percent stake, achieved<br />
group sales of DM 4.3 billion (up by 5.5 percent).<br />
Branches opened in the period under review<br />
accounted for DM 136.3 million of sales, whereas<br />
the newly acquired Spar home improvement<br />
centers contributed DM 291.9 million. On a<br />
same-space basis, sales fell by 6.4 percent. This<br />
is attributable to a double-figure percentage<br />
rise in selling space against the background of<br />
increasing competition and declining market<br />
growth rates.
Praktiker substantially raised non-German<br />
sales to DM 305 million (up by 22.5 percent)<br />
through its expansion into Austria and the opening<br />
of another home improvement center in<br />
Luxembourg.<br />
The number of Praktiker home improvement<br />
centers rose by 38 to 222. Apart from 13 new<br />
stores, 27 outlets acquired from Spar strengthened<br />
the network of Praktiker branches in hitherto<br />
underrepresented regions of western Germany<br />
such as Hamburg and the Rhine-Ruhr area.<br />
Two stores were closed. Total selling space expanded<br />
appreciably by 171,200 m² (up by 18.6<br />
percent) to a total of 1,091,400 m².<br />
Result from ordinary operations receding<br />
The result from ordinary operations fell by 15.0<br />
percent from DM 220.0 million to DM 186.9 million.<br />
The drop in earnings is the result of lower<br />
sales on a same-space basis as well as the preoperating<br />
and start-up expenses involved in<br />
opening new centers. Expenditure on penetrating<br />
the Austrian market was in line with targets,<br />
whereas the acquisition of the Spar home improvement<br />
centers led initially to slight pressure<br />
on income.<br />
Capital expenditure rises clearly owing to<br />
takeover of Spar home improvement centers<br />
Capital expenditure in fiscal 1996 totaled DM<br />
86.4 million. Apart from the opening of 13 new<br />
stores, 7 existing home improvement centers<br />
were refurbished. Goodwill rose by DM 105 million<br />
from the acquisition of Spar home improvement<br />
centers.<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
Higher number of employees and proportion<br />
of part-timers<br />
Because of the opening of new stores, the absorption<br />
of Spar home improvement centers<br />
and expansion abroad, the average number of<br />
employees, translated into full-timers, rose to<br />
10,213 in 1996. The proportion of part-timers<br />
was further raised to a scheduled 25.6 percent<br />
of full-time staff as part of the flexible staff<br />
deployment strategy.<br />
Price leadership expanded thanks to redefined<br />
advertising strategy<br />
Praktiker is further expanding its price leadership<br />
in the do-it-yourself market with an<br />
advertising strategy which was redefined in<br />
mid-November 1996, combining aggressively<br />
priced special offers with an attractive and comprehensive<br />
range of products. Praktiker is thus<br />
addressing consumer weakness for special offers<br />
in the do-it-yourself and home improvement<br />
sector, which has less price transparency than<br />
the food trade. The measures taken are starting<br />
to impact favorably on sales in the current fiscal<br />
year.<br />
Internationalization enjoys strategic priority<br />
Internationalization of the Praktiker concept enjoys<br />
priority as part of a medium-term growth<br />
strategy. Having accessed the Luxembourg and<br />
Greek markets, Praktiker is steadfastly continuing<br />
its international expansion in Austria with<br />
the opening of additional home improvement<br />
centers in 1997. Sales trends confirm the competitiveness<br />
of Praktiker sales outlets even in<br />
an international context. In years to come, further<br />
expansion to 15 locations in Austria’s urban<br />
centers is planned.<br />
45
The preparations for expansion into Poland,<br />
Italy, Hungary and Turkey got under way in 1996.<br />
Praktiker plans to open its first home improvement<br />
centers in these countries in 1997.<br />
Furniture Centers<br />
Falling sales in difficult economic climate<br />
The German furniture retail trade suffered in<br />
1996, especially in the 4th quarter, from continuing<br />
reluctance on the part of the public to<br />
purchase consumer durables. Sales of furniture,<br />
fixtures, fittings and household effects thus<br />
weakened considerably throughout the year,<br />
falling by a nominal 2.7 percent compared<br />
with the preceding year. The sector also faced<br />
the additional burden of generally intensifying<br />
price competition, which increasingly stepped<br />
up pressure on margins and advertising.<br />
Möbel Unger continues restructuring course<br />
The Furniture Centers division’s sales amounted<br />
to DM 1,704 million. Because of the closedown<br />
of 12 Massa stores, division sales decreased by<br />
13.1 percent, declining by 6.5 percent in terms<br />
of comparable selling space.<br />
Möbel Unger is continuing its turnaround and<br />
restructuring program. Owing to closedown and<br />
the disposal of unprofitable stores, the number<br />
of Möbel Unger furniture outlets dropped clearly<br />
from 89 to 63, with selling space receding by<br />
20.6 percent from 843,170 m² to 669,245 m².<br />
At year-end the whole Furniture Centers division<br />
comprised 94 stores with 784,600 m² compared<br />
with 108 outlets with 894,730 m² in the preceding<br />
year. Apart from the Möbel Unger and Massa<br />
outlet chains, 31 stores belonged to the Divi<br />
(29 outlets), Möbel Busch (1 outlet) and Roller/<br />
Luxembourg (1 outlet) furniture stores.<br />
46<br />
Logistics and inventory management<br />
streamlining rigorously continued<br />
Apart from the sale of unprofitable stores, activities<br />
focused on optimizing logistics and<br />
merchandise information. For example, Möbel<br />
Unger closed a service and sales center, ten<br />
warehouses and five centers-cum-warehouse.<br />
A new merchandise information system to make<br />
order processing more efficient and on schedule<br />
was put into practice in the fiscal year. As of<br />
January 1, 1997, all logistics services were concentrated<br />
in Unger Service und Logistik GmbH.<br />
Increased sales of self-collection furniture reduced<br />
delivery volumes.<br />
On the marketing level, Möbel Unger refocused<br />
its product range policy along the lines<br />
of regional priorities. In order to create a more<br />
youthful image, the “Young Unger” concept,<br />
with which Unger is seeking to appeal to younger<br />
customers with up-to-date ranges and attractively<br />
presented products, was expanded at<br />
six stores.<br />
In order to improve cost structure, the average<br />
number of employees, translated into<br />
full-timers, fell again, from 6,153 to 5,172.<br />
Capital expenditure of DM 31.5 million is largely<br />
attributable to rationalization measures.
Roller achieves satisfactory result<br />
Roller (shareholding: 49.9 percent) saw its sales<br />
rise by 10 percent to DM 1.2 billion as it continued<br />
to expand. Sales on comparable selling<br />
space fell by 6.0 percent, however. The Roller<br />
investee comprised 59 stores with 382,583 m².<br />
Apart from outlets in Germany, Roller also operates<br />
self-collection furniture stores in Austria<br />
and the Netherlands. Against the background<br />
of continuing expansion and general consumer<br />
resistance, Roller achieved a net result which<br />
fell short of the preceding year.<br />
Earnings burdened by restructuring measures<br />
The Furniture Centers division’s income was<br />
greatly affected by measures to restructure and<br />
refocus Möbel Unger, with the integration of<br />
the former Massa furniture outlets having an<br />
especially adverse effect on the income. In view<br />
of the unsatisfactory sales trend, the decline in<br />
gross profit largely overabsorbed the savings<br />
in personnel and impersonal expenses achieved<br />
in the fiscal year. At Divi, conversion-related expenditure<br />
for the integration of Massa furniture<br />
centers led to a worse annual result. The loss<br />
from ordinary operations (including Roller’s prorated<br />
contribution) deteriorated from DM 85<br />
million to DM 124.9 million.<br />
Despite far-reaching restructuring measures,<br />
the Furniture Centers division’s result for 1997<br />
will not improve greatly on the preceding year<br />
either.<br />
Computer Centers<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
The sales network of the Vobis <strong>Group</strong>, in which<br />
<strong>METRO</strong> <strong>AG</strong> holds a 90-percent stake, currently<br />
comprises 1,105 stores (including franchisees)<br />
in 11 European countries with franchisees accounting<br />
for altogether 75 percent. Vobis sells<br />
computers and related accessories, including<br />
its own Highscreen private label as well as the<br />
brand products of other PC manufacturers. The<br />
sales outlet structure developed according to<br />
plan in 1996, the proportion of sales through<br />
franchisees (excluding Real, Kaufhof) rising from<br />
9.7 to 17.2 percent. The Vobis <strong>Group</strong>’s non-German<br />
sales reached 28 percent.<br />
Vobis increases sales to DM 3.14 billion<br />
In 1996 Vobis consistently expanded its leading<br />
market position in Germany and continued its<br />
successful course. The companies belonging to<br />
the Vobis <strong>Group</strong> (including wholesale business<br />
with franchisees and Maxdata sales) registered<br />
sales of DM 3.14 billion at home and abroad<br />
(up 1.6 percent). A comparison should take into<br />
account that the preceding year’s sales included<br />
goods supplied to Metro <strong>Group</strong> companies.<br />
Sales growth adjusted for this effect amounted<br />
to 5.3 percent. Turnover of PCs in Germany<br />
soared to 521,000 (up 27 percent), the volume<br />
sold in Europe climbing to 721,000 PCs (up 18<br />
percent). With its BTC (built to customer) assembly<br />
method, the company enjoys a clear<br />
competitive advantage. The technique allows<br />
the customers to have their PC configured to<br />
meet their personal requirements at the local<br />
branch or by phone/the Internet. The PC is then<br />
delivered inside 48 hours.<br />
47
Vobis <strong>Group</strong> achieves satisfactory result<br />
from ordinary operations<br />
Fiscal 1996 was characterized especially in its<br />
first six months by a weaker market volume in<br />
the traditional private-customer segment. In<br />
Germany, structural market changes in the first<br />
quarter of 1996 also led temporarily to a significant<br />
heating up of competition.<br />
With Maxdata the division has enjoyed a share<br />
in the fast-growing corporate business sector<br />
since 1994. Market volume here mounted 20<br />
percent compared with the preceding year. Maxdata<br />
continued to gain market shares in 1996.<br />
In a generally difficult environment, the Vobis<br />
<strong>Group</strong> achieved a satisfactory result from ordinary<br />
operations of DM 46.0 million (down by 8<br />
percent).<br />
Expansion of Superstore concept continued<br />
The fiscal year’s capital expenditure of DM 53.4<br />
million was directed mainly at expansion of the<br />
branch network at home and abroad. The Superstore<br />
merchandising concept was extended as<br />
planned to an additional 15 stores, bringing the<br />
total number in Europe to 51. At the same time,<br />
the network of outlets was modernized through<br />
consistent expansion of selling space at existing<br />
branches. Capital spending also targeted optimization<br />
projects aimed at further reducing production<br />
costs. Maxdata GmbH built a new logistics<br />
center to cope with the increased sales<br />
volume.<br />
Flexible staff deployment stepped up<br />
Taking into account extended shopping hours,<br />
flexibility in staff deployment was further<br />
expanded, so as to cover additional personnel<br />
needs as far as possible without incurring extra<br />
48<br />
costs. The division increased its average number<br />
of employees, translated into full-timers,<br />
from 2,816 to 2,922.<br />
Vobis <strong>Group</strong> adheres to consolidation and<br />
internationalization course<br />
Thanks to extensive optimization measures in<br />
marketing and customer services as well as in<br />
production, logistics and administration management,<br />
the company is well equipped to cope<br />
with continually strong price competition.<br />
Vobis is striving to boost sales appreciably in<br />
1997, including targeted efforts to further augment<br />
its foreign sales. In terms of trading outlets,<br />
Vobis will again increase the number of<br />
Superstores which offer a greatly extended and<br />
attractive assortment of PC-related goods on<br />
selling space of up to 1,000 m².<br />
With Maxdata (shareholding: 51 percent), Vobis<br />
has established itself successfully in the overproportionately<br />
growing segment of wholesale<br />
and corporate customers. The German market<br />
leader in monitor sales is pressing ahead with<br />
expansion into European countries outside of<br />
Germany.<br />
Fashion Centers<br />
Adler further strengthens its market position<br />
Adler fashion centers operate as specialty<br />
clothes outlets located predominantly outside<br />
major towns. Adler sees itself as the specialty<br />
clothes store for the whole family, with a strong<br />
merchandise mix in terms of price, quality and<br />
fashion. Adler offers the customer a clear and<br />
competitively priced range of textile goods.<br />
Stores are operated in Germany, Austria, and<br />
Luxembourg. High customer satisfaction with<br />
Adler is reflected in fast-growing acceptance of
the Adler Card, with which shoppers can purchase<br />
goods at reasonable prices in all Adler<br />
stores, having had ample time to make a selection<br />
at home from up-to-date fashion brochures.<br />
During the period under review, another seven<br />
stores in Chemnitz, Plauen, Dollgow, Eiche,<br />
Jena, Gera and Haibach (jeans store) were<br />
added; one store was relocated. At year-end<br />
Adler had 88 stores with 208,768 m² (up from<br />
81 with 191,444 m²).<br />
Adler achieves encouraging sales<br />
in a difficult submarket<br />
Against the background of continuing weak<br />
activity in the sector, the Fashion Centers sales<br />
were at a satisfactory level in general, improving<br />
by 4.0 percent from 1,363 million to DM<br />
1,417 million. In terms of comparable selling<br />
space, the Adler outlets achieved a sales rise<br />
of 1.0 percent, whereas division sales (Adler<br />
plus Mac Fash) receded by 0.2 percent altogether<br />
on a same-space basis.<br />
Profits adversely affected by nonrecurring<br />
Motex logistics expenditure<br />
The result from ordinary operations decreased<br />
clearly from DM 68 million to DM 28.2 million<br />
in 1996. Declining earnings are exclusively attributable<br />
to nonrecurring expenditure of DM<br />
42.0 million for the relocation of the distribution<br />
center to Thuringia. On an adjusted basis,<br />
Adler recorded a slightly higher pretax profit<br />
compared with the preceding year. Thanks to<br />
targeted optimization measures in goods purchasing,<br />
Adler enhanced the quality and fashionableness<br />
of its merchandise mix appreciably.<br />
This led to an improved gross profit.<br />
Adler prepares for the future<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
During the period under review, Adler introduced<br />
an inventory optimization system. It monitors<br />
current stock on hand and initiates an<br />
order procedure with the supplier automatically<br />
if stocks run low, enabling Adler to reduce its<br />
out-of-stock rate and allowing product ranges<br />
to be adapted to current fashions or seasonal<br />
variations at short notice.<br />
In fiscal 1996, Adler Austria’s central purchasing<br />
organization was shifted to Germany, Austrian<br />
sales operations having been managed from<br />
there since 1995.<br />
Relocation of Motex logistics center to<br />
Thuringia<br />
In order to increase storage capacity and optimize<br />
the flow of goods, Adler laid the foundation<br />
stone in 1996 for the construction of a new<br />
logistics center in Thuringia to replace the current<br />
Grossostheim site. Building work started<br />
in December 1996, with capital expenditure expected<br />
to reach DM 130–140 million. Adler is<br />
thus creating the logistics environment for targeted<br />
extension of the network of sales outlets<br />
and for additional growth.<br />
In fiscal 1996, the division invested DM 27.8<br />
million in further widening of the branch network<br />
and in the relocation of Adler’s Motex<br />
warehouse to Thuringia.<br />
The Fashion Centers division’s number of<br />
employees, translated into full-timers, averaged<br />
5,588.<br />
49
Mac Fash<br />
Mac Fash branches are located primarily at<br />
out-of-town sites close to hypermarkets. Mac<br />
Fash offers a basic rather than a full range, including<br />
all traditional sectors such as ladies’<br />
outerwear, men’s and children’s clothing. Items<br />
sold by this outlet chain are in the lower price<br />
range and belong predominantly to mainstream<br />
fashion trends. During the period under review,<br />
the number of outlets remained at 45 with selling<br />
space totaling 37,830 m² (up from 37,644 m²).<br />
<strong>METRO</strong> <strong>AG</strong> has meanwhile sold its 100-percent<br />
stake in Mac Fash.<br />
Footwear Centers<br />
Aggressive cut-price policy; new store image<br />
with three merchandising concepts<br />
In order to underpin its market position as the<br />
leading footwear discounter, Reno redefined<br />
its price and advertising strategy. At the same<br />
time, the program aimed at expanding cost<br />
leadership was stepped up.<br />
Through two differing POS presentations in 469<br />
outlets (up from 408) on a total of 287,197 m²<br />
(up from 270,693 m²), the division is pursuing<br />
a graduated strategy of every day low prices.<br />
“Pay-less” is an outlet chain firmly positioned<br />
in the low price range; it benefits from downtown<br />
locations well frequented by customers,<br />
and is to be found in Germany, Austria, and<br />
Switzerland. The traditional Reno merchandising<br />
concept operates at a somewhat higher price<br />
level than Pay-less, though still well below<br />
the market average. At larger Reno footwear<br />
centers, the product assortment is supplemented<br />
by reasonably priced textile goods<br />
and children’s clothing.<br />
50<br />
Apart from Germany, Reno also operates its<br />
stores in Austria, France, Hungary, and Switzerland.<br />
As of January 1, 1996, Reno acquired a 30-percent<br />
stake in Mayer Schuh GmbH. The Mayer<br />
outlets complement the Reno concept with<br />
footwear ranges of higher quality combined<br />
with well-developed services.<br />
Sales from over-the-counter and footwear<br />
mail order business amounted to DM 816 million.<br />
At the footwear centers, sales increased<br />
only marginally despite expansion owing to<br />
lower average prices. On a same-space basis,<br />
over-the-counter sales dipped by 2.4 percent.<br />
Further scaling-down of mail order business<br />
continued in 1996 as planned.<br />
Result from ordinary operations down<br />
The new pricing and advertising concept did<br />
produce the desired turnover figures in fiscal<br />
1996. However, because of the new cut-price<br />
policy accompanied by a reduction in the gross<br />
margins, the result from ordinary operations<br />
dropped from DM 50 million to DM 24.9 million<br />
in 1996.<br />
Capital expenditure<br />
Additions to tangible assets resulting from outlet<br />
network expansion amounted to DM 10.1 million.<br />
A 30-percent stake in Mayer Schuh GmbH<br />
was also acquired.<br />
Reno franchise system branching out<br />
In order to reduce fixed costs, Reno is pressing<br />
ahead with the conversion to independent franchisees.<br />
In fiscal 1996, a total of 113 branches<br />
were transferred to the Reno franchise system.
As a consequence, the number of employees,<br />
translated into full-timers, decreased by 26.2<br />
percent from 2,622 to 1,936 on an average<br />
annual basis.<br />
Mail order<br />
The Mail Order division consists of Oppermann<br />
Versand <strong>AG</strong> and Hanseatisches Wein- und Sekt-<br />
Kontor Hawesko GmbH. Oppermann is a mail<br />
order company specializing in promotional and<br />
gift items as well as office supplies for corporate<br />
and private customers, whereas Hawesko’s<br />
main activity is dispatching high-quality wines<br />
and champagnes to end users.<br />
Disposal of Wenz halves sales<br />
In fiscal 1996, the division generated sales of<br />
494.6 million (down from DM 1,092 million in<br />
1995), representing a drop of 54.7 percent. The<br />
reason for the reduced sales is the disposal of<br />
the Wenz <strong>Group</strong> to the Pforzheim-based Klingel<br />
<strong>Group</strong> as of December 31, 1995/January 1, 1996.<br />
During the fiscal year, Oppermann only just<br />
managed to match the preceding year’s sales<br />
level despite increased advertising efforts,<br />
whereas Hawesko further expanded its leading<br />
market position.<br />
Pressure on pretax profit eased by Wenz sale<br />
The result from ordinary operations improved<br />
strongly, reaching DM 20.5 million (up from a<br />
loss of DM 39 million in 1995). This favorable<br />
situation is attributable to discontinued restructuring<br />
costs following the Wenz sale.<br />
Capital expenditure<br />
Capital expenditure totaled DM 5.2 million in<br />
fiscal 1996. Capital spending at Oppermann<br />
went, inter alia, toward expansion and modernization<br />
of the mail order system.<br />
Appreciable fall in number of employees<br />
On an average the number of employees, translated<br />
to full-timers, sank from 2,113 to 1,152 in<br />
1996 owing to the sale of Wenz.<br />
Restaurant and Catering<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
Successful integration of Horten restaurant<br />
operations boosts sales<br />
The Dinea <strong>Group</strong> consists of Dinea Gastronomie<br />
GmbH, Grillpfanne Gastronomische Betriebe<br />
GmbH, Axxe Reisegastronomie GmbH (50 percent)<br />
and Bon Appetit Horten Restaurant GmbH.<br />
Following the complete takeover of the restaurant<br />
and catering operations at Horten department<br />
stores, the Dinea <strong>Group</strong> is one of Germany’s<br />
leading instore restaurant and catering<br />
companies.<br />
The group achieved sales of DM 474 million<br />
(up from DM 399 million). This growth of 18.8<br />
percent compared with the previous year is<br />
essentially the result of the takeover of the<br />
Horten restaurant and catering operations in<br />
September 1995.<br />
Structural improvements / capital expenditure<br />
As of December 31, 1996, the division comprised<br />
261 outlets with 96,769 m² (down from 263<br />
outlets with 97,552 m²). In order to upgrade the<br />
overall quality of its establishments, 11 were<br />
closed as planned, 9 restaurants were opened<br />
and 18 completely refurbished. Including the<br />
franchises, Dinea has more than 320 restaurant<br />
and catering operations.<br />
Of capital expenditure amounting to DM 17.6<br />
million, DM 10.1 million went toward refurbishment<br />
and structural improvements.<br />
51
Improved earnings<br />
The result from ordinary operations improved<br />
appreciably to DM 21.1 million (up from DM<br />
14.9 million).<br />
Number of employees up owing to takeover<br />
On an annual average the division increased its<br />
number of employees, translated to full-timers,<br />
by 13.4 percent from 3,419 to 3,877, due to the<br />
takeover of the Horten operations.<br />
Dinea acquires "Die Büffeteria" as of<br />
February 1, 1997<br />
As of February 1, 1997, Dinea Gastronomie<br />
GmbH acquired from the Schickedanz <strong>Group</strong><br />
the systems restaurant and catering company,<br />
“Die Büffeteria” Restaurantbetriebe GmbH &<br />
Co KG, Nürnberg. The company has 42 instore<br />
and motorway restaurants in Germany and<br />
Austria employing some 400 staff (translated<br />
into full-timers). Sales are likely to reach DM 48<br />
million in the current fiscal year.<br />
Real Estate<br />
Metro Immobilien Holding GmbH’s structure<br />
Metro Immobilien Holding GmbH (MIH) is the<br />
parent company of Metro’s Real Estate division<br />
with three operating areas<br />
Metro Grundbesitzverwaltung GmbH (MGV)<br />
CMG Centermanagement und Entwicklungs<br />
GmbH (CMG)<br />
BSV-Bau, Bauservice und Verwaltung GmbH<br />
(BSV)<br />
and the real-estate holding company<br />
52<br />
GBS Gesellschaft für Unternehmensbeteiligungen<br />
mbH (GBS).<br />
MIH performs all the central intercompany tasks<br />
of its affiliates and carries out interdivisional<br />
Real Estate-related projects for the <strong>Group</strong>.<br />
MGV is the central company for rental of its<br />
own real estate, option properties and outside<br />
joint locations. It is the management company<br />
for real-estate enterprises run by the same<br />
management.<br />
CMG is responsible for center management<br />
and administration of specialty store centers<br />
belonging to <strong>METRO</strong> <strong>AG</strong>.<br />
BSV is the central company for all modernization/new-building<br />
activities, planning measures<br />
and maintenance work, insofar as such operations<br />
exceed a defined division-specific scale.<br />
GBS holds stakes in the <strong>Group</strong>’s real-estate<br />
enterprises.<br />
Corporate combination of real-estate service<br />
providers<br />
As part of the merger, the property structure was<br />
streamlined, coinciding with the organizational<br />
combination of all real-estate service providers<br />
and the integration of real-estate enterprises.<br />
The restructuring process is due to be completed<br />
in fiscal 1997.<br />
As part of the plans to internationalize successful<br />
types of outlet within <strong>METRO</strong> <strong>AG</strong>’s division<br />
lineup, GBS acquired sites in Poland, Hungary,<br />
Italy, and Turkey. GBS built its first hypermarket<br />
in the Polish city of Szczecin.<br />
The TEC Erfurt and Förde-Park Flensburg<br />
centers were opened and the second phase of<br />
the Weserpark Bremen complex was commis-
sioned. The Bischofsheim center was built and<br />
opened in 1996 and a hypermarket in Wittlich<br />
was extended.<br />
Horten <strong>AG</strong><br />
Horten <strong>AG</strong> is <strong>METRO</strong> <strong>AG</strong>’s only corporation<br />
listed on the stock exchange which owns and<br />
administers real estate.<br />
All department store properties and multistorey<br />
car parks owned are let to Kaufhof Warenhaus<br />
<strong>AG</strong> on the basis of a long-term lease agreement.<br />
Annual rental income totals DM 119 million.<br />
Fluctuations in Horten <strong>AG</strong>'s earnings caused by<br />
the prevailing market situation for large properties<br />
used by the retail trade are not anticipated<br />
due to the long-term nature of Horten <strong>AG</strong>’s<br />
lease agreements with Kaufhof Warenhaus <strong>AG</strong>.<br />
Owing to the present state of the market, Horten<br />
<strong>AG</strong> is concentrating on optimizing the current<br />
property portfolio in close coordination with the<br />
main lessee, Kaufhof Warenhaus <strong>AG</strong>.<br />
Real estate owned and option properties (as of Dec. 31, 1996)<br />
Asset Immobilien GmbH & Co KG<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
Asset Immobilien GmbH & Co KG holds the<br />
property assets of former Kaufhof Holding <strong>AG</strong>.<br />
<strong>METRO</strong> <strong>AG</strong> is the sole limited partner. The<br />
100-percent stake in the corporate general<br />
partner is held by Horten <strong>AG</strong>, a <strong>METRO</strong> <strong>AG</strong><br />
subsidiary.<br />
The purpose of the company is to build, develop,<br />
acquire and sell properties on its own land<br />
and land belonging to third parties and to lease<br />
such properties to Kaufhof Warenhaus <strong>AG</strong> and<br />
Kaufhalle <strong>AG</strong> in the main.<br />
Two department stores (Gera, Plauen) and<br />
five plots of land were purchased in 1996.<br />
The headquarters in Cologne and the Kaufhof<br />
department store in Saarbrücken were refurbished.<br />
<strong>Group</strong> real estate Option properties Total real estate<br />
No. of No. of No. of<br />
Type properties Area m2 properties Area m2 properties Area m2 Shopping centers/<br />
combined sites 5 219,111 45 3,965,637 50 4,184,748<br />
Hypermarkets 8 197,826 17 582,842 25 780,668<br />
Department stores 177 778,391 36 127,278 213 905,669<br />
Food stores & discounters 62 315,686 11 96,445 73 412,131<br />
Home improvement centers 11 283,236 23 399,056 34 682,292<br />
Furniture centers 23 561,884 23 561,884<br />
Fashion centers 7 124,587 6 115,720 13 240,307<br />
C&C centers 6 130,519 1 14,826 7 145,345<br />
Warehouses 20 939,514 11 886,483 31 1,825,997<br />
Empty land 38 2,009,006 13 1,097,651 51 3,106,657<br />
Other 383,736 491,067 874,803<br />
334 5,381,612 186 8,338,889 520 13,720,501<br />
53
Outside financing of option properties<br />
The book values of option properties at December<br />
31, 1996, amount to DM 4,681 million, the<br />
pertinent residual liabilities to DM 4,896 million.<br />
DM 117 million was repaid in fiscal 1996.<br />
Capital expenditure<br />
The Real Estate division spent a total DM 590.3<br />
million to acquire additional properties, DM<br />
424.6 million thereof allocable to tangible and<br />
intangible assets, the remaining DM 165.7<br />
million to investments in (almost exclusively<br />
non-German) real-estate enterprises holding<br />
properties for the expansion planned abroad.<br />
Real Estate’s result from ordinary operations<br />
came to DM 179.4 million.<br />
Some 80 percent of Real Estate’s rental income<br />
was earned from <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> companies.<br />
54<br />
Others<br />
The “Others” division comprises essentially the<br />
affiliates Free Com Die Telekommunikationsgesellschaft<br />
(marketing, importation and exportation<br />
of mobile telecommunications equipment),<br />
Rungis Express (wholesale, supplying<br />
the restaurant and catering trade, with special<br />
emphasis on fresh produce and high quality),<br />
Jacques’ Wein-Depot (wine retailing), CWD<br />
(importing of and trading in wine, champagne<br />
and sparkling wine), Michel Farah (mainly<br />
clothes importing, exporting, wholesaling<br />
and retailing), as well as Massa-Ausbauhaus.<br />
The sales generated by the division rose by<br />
15.1 percent to DM 894 million, the result from<br />
ordinary operations reaching DM 69.1 million.<br />
The division’s capital expenditure totaled DM<br />
128.4 million.<br />
The number of employees, translated into fulltimers,<br />
averaged 5,472.
<strong>METRO</strong> <strong>AG</strong>’s internationalization drive:<br />
Global strategy – local concepts<br />
The globalization of the economy is gradually<br />
embracing all sectors of developed national<br />
economies with increasing speed. Since the<br />
beginning of the 1990s, trade has also been<br />
characterized by systematic internationalization.<br />
The driving forces behind this trend are, firstly,<br />
the foreseeable end to great growth opportunities<br />
in domestic markets and, secondly, purchasing<br />
power in the newly industrialized countries,<br />
which is expected to rise overproportionately in<br />
the next ten to fifteen years owing to the dramatically<br />
changing global economic environment.<br />
At the same time, consumer markets in these<br />
countries are opening up to both international<br />
consumption trends and modern forms of trading.<br />
Government and municipal authorities<br />
recognize the economic advantages of mass distribution<br />
which cuts transaction costs and the<br />
additional scope for exports created for local<br />
consumer goods industries from the transfer<br />
of foreign trading companies’ know-how.<br />
In addition, consumers in the newly industrializing<br />
countries are accepting and adopting the<br />
contemporary types of sales outlet found in<br />
industrialized nations without any appreciable<br />
time-related adjustment problems.<br />
In particular, system-driven discounter outlet<br />
types such as hypermarkets and specialty discount<br />
stores will bring about structural changes<br />
in trade at international level.<br />
With the establishment of <strong>METRO</strong> <strong>AG</strong>, the central<br />
foundations have been laid for skilled and<br />
dynamic internationalization, which enjoys<br />
strategic priority in the development of selected<br />
outlet chains within the <strong>METRO</strong> <strong>AG</strong> portfolio.<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
International trading groups are already active<br />
to a greater or lesser degree or preparing<br />
activities in all the up-and-coming economic<br />
regions. The time frames for penetrating emerging<br />
markets are therefore not only determined<br />
by the specific features of a growth market but<br />
also greatly influenced by the decisions of global<br />
competitors. The majority of trading companies<br />
from Europe, the USA and Japan which are<br />
expanding into new economic regions possess,<br />
for historical reasons, a highly concentrated portfolio<br />
or even a monostructural outlet type concept.<br />
In their home markets, they have achieved<br />
a market position of absolute dominance.<br />
In comparison, <strong>METRO</strong> <strong>AG</strong> offers a broad range<br />
of outlet types within its portfolio. The bulk of<br />
the outlet types envisaged for globalization also<br />
enjoy a strong market position at home. Against<br />
the background of limited resources, such a<br />
broad lineup of outlet types leads, however, to<br />
internationalization disadvantages in relation<br />
to monostructural competitors, which can concentrate<br />
their resources on one sector alone.<br />
On the other hand, <strong>METRO</strong> <strong>AG</strong>’s diversified<br />
outlet type portfolio offers substantial competitive<br />
advantages amid competition for locations<br />
in the urban areas of newly industrialized countries,<br />
because it can offer up-to-date shopping<br />
centers from a single source.<br />
Crucial benefits are emerging for <strong>METRO</strong> <strong>AG</strong><br />
from its experience abroad spanning more than<br />
20 years with the C&C <strong>Group</strong>, which is managed<br />
under a nongratuitous contract for services<br />
by Metro International Management GmbH<br />
(MIM). This know-how extends to newly industrialized<br />
countries, to former Eastern bloc countries<br />
as well as to the developed markets in<br />
Western industrialized nations.<br />
55
Since internationalization develops swiftly, it<br />
is now necessary to make use of competitive<br />
edges speedily and to compensate as far as<br />
possible for the disadvantages of the broad<br />
lineup of outlet types by exploiting the synergies<br />
of all <strong>METRO</strong> <strong>AG</strong> outlet chains expanding<br />
in any one country.<br />
<strong>METRO</strong> <strong>AG</strong>’s strategic approach to<br />
internationalization comprises<br />
56<br />
Preparing feasibility studies for selected<br />
countries,<br />
Defining the priorities among target countries<br />
and time-scales on the basis of expert<br />
and weighted assessment criteria,<br />
Selecting top locations,<br />
Strategic orientation of the market access<br />
concept to the benchmarks of national trading<br />
structures and of local market leaders,<br />
Decentralized orientation of each merchandising<br />
concept to customer needs within the<br />
country concerned,<br />
Precise gearing of the operation’s core function<br />
to local conditions,<br />
Active and offensive know-how transfer<br />
between <strong>METRO</strong> <strong>AG</strong> outlet chains in the<br />
country targeted for expansion,<br />
Use of powerful information and logistics<br />
systems,<br />
Development of high-caliber management<br />
teams made up of national and international<br />
staff,<br />
Use of innovative financing models adapted<br />
to national conditions,<br />
Goal of market leadership in each division.<br />
<strong>METRO</strong> <strong>AG</strong> is convinced that consistent orientation<br />
toward these factors will guarantee the<br />
competitiveness of the international portfolio<br />
long term.<br />
Internationalization efforts in 1996<br />
In the course of further expanding wholesale<br />
business abroad, the first cash-and-carry store<br />
in Shanghai, China, was opened on October 31,<br />
1996. At the same time, the cash-and-carry<br />
internationalization drive in Eastern Europe continued<br />
with the opening of a store in Bucharest,<br />
Romania, on October 24, 1996. Both stores are<br />
developing according to expectations. Expansion<br />
in the P.R. China and Romania is part of a<br />
cohesive strategy, with the opening of further<br />
outlets planned in 1997.<br />
At year-end, <strong>METRO</strong> <strong>AG</strong> managed 125 international<br />
wholesale operations in eight countries.<br />
The <strong>Group</strong>’s retail outlet chains also pushed<br />
ahead energetically with their internationalization<br />
efforts.<br />
Media Markt broadened its international business,<br />
operating 12 specialty stores in Austria,<br />
11 in France and 3 in Switzerland in 1996. The<br />
results achieved likewise signal continuing expansion,<br />
an example being the opening of the<br />
first Media Markt in Budapest, Hungary, in<br />
March 1997.<br />
The Vobis <strong>Group</strong> operated outlets in 10 countries<br />
outside of Germany at the end of the period<br />
under review. The branching-out of international<br />
activities is concentrating on additional<br />
franchisees and expansion of the Superstore<br />
branch network.
Praktiker penetrated the Austrian market successfully<br />
in fiscal 1996 with the opening of two<br />
home improvement centers. Six stores are<br />
operated in Greece, where Praktiker remains<br />
the market leader. A third outlet was opened in<br />
Luxembourg.<br />
Adler’s specialty textile stores further expanded<br />
their market leadership in Austria with<br />
13 fashion centers. In Luxembourg, Adler runs<br />
two stores.<br />
At year-end, Reno footwear centers operated<br />
81 stores altogether in Austria, France, Hungary<br />
and Switzerland. (Sales in France and<br />
Hungary are not included in consolidation.)<br />
Operations outside of Germany 1996, <strong>METRO</strong> <strong>AG</strong> (Dec. 31, 1996) 1)<br />
Denmark<br />
C & C 4<br />
UK<br />
Vobis 350<br />
Netherlands<br />
Vobis 36<br />
Belgium<br />
Vobis 12<br />
Austria<br />
C & C 11<br />
Media 12<br />
Vobis 22<br />
Reno 34<br />
Adler 13<br />
Praktiker 2<br />
Luxembourg<br />
Vobis 2<br />
Praktiker 3<br />
Adler 2<br />
Roller 1<br />
Spain<br />
Vobis 51<br />
France<br />
C & C 60<br />
Vobis 39<br />
Media 11<br />
Reno2) 13<br />
<strong>METRO</strong> <strong>AG</strong><br />
Nations: 16<br />
Outlets: 1,037<br />
Italy<br />
C & C 35<br />
Vobis 180<br />
Non-German sales in 1996: DM 13.9 billion<br />
1) Operations per outlet type and nation (incl. C&C business management)<br />
2) Not consolidated<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
The discounter Tip accessed the Polish food<br />
retailing business with the opening of 16 stores<br />
in Poland. The performance of these first outlets<br />
up to year-end has prompted the decision<br />
to increase substantially the opening rate of<br />
new stores in 1997.<br />
Altogether, <strong>METRO</strong> <strong>AG</strong> was active in 16 countries<br />
with 9 outlet chains (including Oppermann<br />
mail order business) in fiscal 1996. Foreign<br />
sales amounted to DM 13.9 billion, representing<br />
19.1 percent of the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s<br />
sales plus C&C business management (DM<br />
72.9 billion in total).<br />
Foreign outlets employed 6,955 staff, translated<br />
into full-timers, on an annual average<br />
(excluding C&C business management and<br />
franchisees).<br />
Switzerland<br />
Media 3<br />
Vobis 38<br />
Reno 20<br />
Greece<br />
Praktiker 6<br />
PR China<br />
C & C 1<br />
Poland<br />
Vobis 32<br />
Tip 16<br />
Hungary<br />
C & C 7<br />
Reno2) 14<br />
Romania<br />
C & C 1<br />
Turkey<br />
C & C 6<br />
57
<strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>: 1996 non-German sales by nations 1)<br />
Adler Media Opper- Praktiker Reno Roller Tip Vobis C&C Others Metro C&C Total<br />
mann divisions business nonmanage-<br />
German<br />
In DM million ment sales<br />
Austria 127 864 34 50 104 28 1,207 1,724 2,931<br />
Belgium 47 47 47<br />
PR China 22 22 22<br />
Denmark 499 499<br />
France 360 14 44 418 4,334 4,752<br />
Greece 196 196 196<br />
Hungary 924 924<br />
Italy 188 188 2,814 3,002<br />
Luxembourg 35 74 19 12 2 142 142<br />
Netherlands 178 178 178<br />
Poland 33 52 85 85<br />
Romania 63 63 63<br />
Spain 57 57 57<br />
Switzerland 221 36 120 377 377<br />
Turkey 578 578<br />
UK 35 35 35<br />
Total sales<br />
by division 162 1,445 14 304 86 19 33 837 85 30 3,015 10,873 13,888<br />
1)<br />
Focal points: Poland, Turkey, and P.R. China<br />
<strong>METRO</strong> <strong>AG</strong> will continue to expand its international<br />
position and access new growth markets.<br />
Poland and Turkey have been singled out<br />
as initial targets, whereas the P.R. China has<br />
priority for Metro International Management<br />
GmbH (MIM).<br />
Following intensive study, <strong>METRO</strong> <strong>AG</strong> identified<br />
Poland as a priority for strategic expansion,<br />
the first Real hypermarket opening in Szczecin<br />
in February 1997. Acceptance among Polish<br />
customers is fully in line with expectations. The<br />
Praktiker and Adler outlet chains plan to open<br />
their first specialty stores in the early half of<br />
1997. The discounter Tip will step up its expansion<br />
efforts which have already proved successful.<br />
As of March 1997, five additional stores had<br />
been opened, so that Tip boasted a network of<br />
21 outlets altogether in the first quarter of 1997.<br />
58<br />
Incl. C&C business management<br />
One strategic advantage enjoyed by <strong>METRO</strong> <strong>AG</strong><br />
against the background of intensifying competition<br />
in Poland is optimum organization of interfaces<br />
between outlet chains. In order to create<br />
the required conditions, <strong>METRO</strong> <strong>AG</strong> moved into<br />
a joint administration center for all its outlet<br />
chains in Warsaw in 1996.<br />
Turkey, with its above-average economic growth<br />
and fast-growing population of around 62 million,<br />
a high proportion of whom are under the<br />
age of 30, is regarded as one of the most promising<br />
markets of southeast Europe. Turkey’s retailing<br />
structure, over 75 percent of which is still<br />
concentrated on small spaces of below 100 m²,<br />
appears to offer large-space outlets great scope<br />
for growth. <strong>METRO</strong> <strong>AG</strong> therefore decided to prepare<br />
for Real and Praktiker’s penetration of the<br />
Turkish market systematically and consistently<br />
in 1997.
The know-how accumulated by Metro Cashand-Carry,<br />
Turkey, in more than six years will<br />
help considerably in assessing market opportunities<br />
and working out merchandising<br />
concepts.<br />
<strong>Group</strong> synergies<br />
One reason for merging Asko Deutsche Kaufhaus<br />
<strong>AG</strong>, Deutsche SB-Kauf <strong>AG</strong> and Kaufhof<br />
Holding <strong>AG</strong> into <strong>METRO</strong> <strong>AG</strong> in 1996 was to<br />
achieve synergies to be realized from fiscal<br />
1997.<br />
Following the registration of the merger in July<br />
1996, development of the planned <strong>Group</strong> structure<br />
and project implementation got under way<br />
more quickly than assumed in the merger report.<br />
As part of the merger preparations, three<br />
major areas in which synergies are to be<br />
exploited from 1997 were defined:<br />
•<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
Integration of holding company functions<br />
This includes the concentration of tasks<br />
through interlinking of hitherto independent<br />
areas of activity such as finance, strategic<br />
planning, controlling, <strong>Group</strong> accounting,<br />
investor relations, personnel management<br />
and H.R. development, legal matters, taxes,<br />
and public relations.<br />
This has resulted in that adherence to accounting,<br />
publication and stock exchange<br />
regulations is now the sole responsibility of<br />
<strong>METRO</strong> <strong>AG</strong>.<br />
Procurement and private-label management<br />
In procurement pooling, terms and costs are<br />
to be influenced through reduced numbers<br />
of suppliers and process chain optimization<br />
between suppliers and trade.<br />
With regard to the private labels, the aim<br />
is to demonstrate the price-performance<br />
strength of outlet chains through distinctive<br />
private-label management and <strong>Group</strong>-wide<br />
optimization of purchasing and accounting<br />
structures.<br />
Synergy areas in the services sector<br />
In the fields of information technology, logistics,<br />
advertising and financing, the purpose is<br />
also to realize synergies as from fiscal 1997<br />
through optimization. This is achieved through<br />
service companies which make their specialized<br />
knowledge and expertise available to the<br />
divisions in all the sectors cited and group<br />
together demand for services. The synergies<br />
obtained were allocated and credited to the<br />
individual outlet chains.<br />
The cost limit of planned merger-related expenditure<br />
amounting to DM 50 million for<br />
1996 was adhered to, DM 47.4 million being<br />
the actual amount spent.<br />
59
Environmental protection<br />
Pro-environmental conduct is an essential<br />
element of <strong>METRO</strong> <strong>AG</strong>’s corporate credo. An<br />
environmental committee for Metro Grosshandelsgesellschaft,<br />
the Asko <strong>Group</strong> and Kaufhof<br />
Holding <strong>AG</strong> was established back in 1993,<br />
which in a first joint project set an example by<br />
developing and implementing cleaning and<br />
waste disposal solutions.<br />
With the establishment of an environmental<br />
management system, specific measures have<br />
been taken to publicize the Company’s environmental<br />
policy both internally and externally.<br />
The system’s tasks are to develop and coordinate<br />
environmental protection strategies as part<br />
of corporate goals, to implement <strong>METRO</strong> <strong>AG</strong>’s<br />
environment-related projects, to monitor projects<br />
adopted and expand successful schemes,<br />
as well as to formulate environmental principles<br />
and compile an environmental report.<br />
Defined criteria and quality targets for purchasing<br />
eco-friendly products were further developed<br />
during the period under review. Organically<br />
grown agricultural produce forms part of the<br />
merchandise mix offered by outlets.<br />
60<br />
Activities by outlet chains to safeguard conservation<br />
efforts, save resources and reduce environmental<br />
damage are being continually expanded.<br />
This involves the conversion to alternative<br />
refrigerant systems, use of ecologically<br />
sound paper in the production of brochures,<br />
and further improved logistics. Comprehensive<br />
solutions for recycling transport packaging are<br />
being constantly examined.<br />
In order to implement the German Recycling &<br />
Waste Management Act which came into force<br />
in October 1996, Wertstoff-Circle Services GmbH<br />
& Co KG was established back in August 1994,<br />
which is engaged specifically in the disposal<br />
and marketing of recyclable waste. More than<br />
300,000 tonnes of waste from Metro divisions<br />
is recycled through this company. The reutilization<br />
rate is 80 percent.<br />
About 1,000 tonnes of plastic waste of all descriptions<br />
is produced within the <strong>Group</strong> annually.<br />
A special system is used to treat the mixed<br />
plastic waste economically, crush it without additional<br />
cleaning or chemicals, process it into<br />
usable items and then sell it in stores.
Key areas of personnel work<br />
H.R. development<br />
Human resources development is of gaining<br />
importance to <strong>METRO</strong> <strong>AG</strong> and its divisions.<br />
The aim is to enable staff to take on high- and<br />
top-level managerial positions, to provide the<br />
human resources to open up and further develop<br />
stores at home and abroad, to ensure a<br />
systematic, goal-oriented and integrated H.R.<br />
development policy in the divisions and a ready<br />
supply of young skilled specialists (school<br />
leavers and university graduates). Interdivisional<br />
career paths are to be made available both at<br />
home and abroad and the transfer of know-how<br />
between the divisions is to be assisted through<br />
formation of a network.<br />
As part of this strategy, <strong>METRO</strong> <strong>AG</strong> has developed<br />
a whole series of interdivisional promotional<br />
schemes, such as the Metro Academy’s<br />
TOP program, which is designed to demand<br />
and promote initiative and creativity among<br />
top-flight executives. The Metro management<br />
sponsoring group is a one-year interdivisional<br />
program designed for middle management in<br />
which hands-on projects in particular are tackled.<br />
At the end of the year, the results of these<br />
innovative projects will be submitted to the executive<br />
and management boards of the divisions<br />
and then largely implemented.<br />
Almost 100 young administrators from staff<br />
departments of various divisions at the Cologne<br />
head office took part in 10 junior employee<br />
schemes within which they planned and implemented<br />
their own skills-upgrading courses.<br />
Alongside continuing education objectives, this<br />
project is designed to teach networking skills,<br />
enable the participants to brush up knowledge<br />
about their own company and deal with topics<br />
outside the scope of their specific departments.<br />
A large number of courses are also conducted<br />
in the divisions as part of career and advancement<br />
programs and subject-specific training<br />
projects they offer. This also applies to personnel<br />
development abroad. For example, many<br />
of Metro’s junior managers from various European<br />
countries have studied issues relating to<br />
assignments abroad and political and economic<br />
conditions in the European region at the European<br />
Academy in Otzenhausen. Seminars were<br />
also held for German and Polish executives as<br />
preparation for future tasks in Poland.<br />
Vocational training<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
The promotion of vocational training enjoys<br />
high priority within the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>. It<br />
offers a wide range of prospects and allows<br />
graduates from all types of schools to enter<br />
the working world. Owing to the strained situation<br />
in the German apprenticeship market,<br />
the <strong>Group</strong> increased its number of apprenticeships,<br />
providing a total of 3,031 in 1996, a rise<br />
of 5.0 percent compared with 1995. Despite<br />
the tight situation mentioned, not all vacancies<br />
were filled. The <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> will again<br />
substantially increase the number of apprenticeships<br />
in the current year and take suitable<br />
measures to ensure that training places in<br />
hitherto less appealing vocational occupations<br />
are filled. The <strong>Group</strong> employed a total of 7,721<br />
apprentices in 1996, representing – in relation<br />
to full-timers – a proportion of 5.8 percent.<br />
61
Personnel structure<br />
On average the <strong>Group</strong> employed 168,797 persons<br />
(excluding apprentices) in 1996. Translated<br />
into full-timers, this was equivalent to a<br />
workforce of 134,565, of whom 69.6 percent<br />
were women. The average length of service<br />
with the company was 8.1 years, the average<br />
age 36.6 years.<br />
The proportion of full-timers within the <strong>Group</strong>’s<br />
workforce came to approx. 55 percent. Parttime<br />
employment rose as flexible working hour<br />
schemes were further improved. This meant<br />
that in all <strong>Group</strong> companies adjustment to the<br />
changed store opening hours in Germany was<br />
ensured in a way that met the needs of customers<br />
as well as the interests of employees.<br />
Wage policies<br />
In Germany, personnel and pay policy-makers<br />
faced the special challenge of responding to<br />
legislative initiatives in 1996.<br />
Even more than amendments to paid sick leave<br />
legislation, deregulation of shop opening hours<br />
proved to be an acid test for the efficiency of<br />
62<br />
retail trade organizations, which had to create<br />
the necessary preconditions for this initiative.<br />
It is not least thanks to the dedicated efforts of<br />
the <strong>Group</strong>’s pay-negotiating experts that – with<br />
the exception of the Lower Saxony and Mecklenburg–Western<br />
Pomerania wage-bargaining<br />
regions – workable pay settlements were agreed.<br />
In the two regions cited, pay agreements were<br />
not concluded at the level of the respective employer/employee<br />
organizations, with company<br />
pay agreements being agreed instead.<br />
At the same time, the divisions laid the foundations<br />
for comprehensive extension of shop<br />
opening hours in Germany from November 1,<br />
1996. Special emphasis was laid on meeting<br />
fluctuations in customer traffic through flexible<br />
staff deployment and attractive working hour<br />
schemes without affecting costs as far as possible<br />
and on continuing to offer good service.<br />
In division companies with their own pay agreements,<br />
the respective wage-rate systems were<br />
consistently further developed in the direction<br />
of greater flexibility, increased use of performance<br />
incentives and creation of tailor-made<br />
structures.
Interest rate and currency management<br />
The <strong>Group</strong>’s interest rate and currency management<br />
is handled by <strong>METRO</strong> <strong>AG</strong> on behalf of all<br />
<strong>Group</strong> companies and aims at reducing basic<br />
risks. Trading and settlement are segregated;<br />
contracts are made with blue-chip parties only.<br />
The use of derivatives entails major gyrations<br />
in the financial result since, in contrast to classical<br />
financial instruments, profits and losses<br />
are partly realized short term.<br />
Translated into a financing term of 10 years<br />
and based on the 1996 long-term finance plan,<br />
36 percent of the entire long-term interest rate<br />
risk was during 1996 covered by fixed-income<br />
or straight bonds and fixed-rate loans (80 percent),<br />
as well as by interest rate derivatives (20<br />
percent). At fiscal year-end, comparable hedging<br />
came to 41 percent.<br />
Currency management encompasses the protection<br />
of operational business, real estate and<br />
financial transactions (such as foreign-currency<br />
funding). In this context, all elements form one<br />
separate unit and are hedged as a function of<br />
the overall risk position.<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
On an annual average and related to all companies,<br />
micro hedges cover some 25 percent of<br />
yearly requirements from individual operational<br />
risks, according to the particular circumstances<br />
at the various business areas.<br />
Earnings per share according to DVFA/SG<br />
The earnings per share according to DVFA/SG<br />
were determined as a yardstick to measure the<br />
Company’s earning power. Earnings per share<br />
according to DVFA/SG represent a standardized<br />
value jointly developed by Deutsche Vereinigung<br />
für Finanzanalyse und Anlageberatung<br />
e.V. (German Association of Financial Analysis<br />
and Investment Consultancy – “DVFA”) and<br />
Schmalenbach Gesellschaft Deutsche Gesellschaft<br />
für Betriebswirtschaft (German Society<br />
of Business Administration – “SG”). After eliminating<br />
adjustable expense and income items<br />
and deducting third-party P&L shares, the<br />
<strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s 1996 result amounted to<br />
DM 712.0 million. Related to the 100.2 million<br />
shares of stock, earnings per DM 5 share according<br />
to DVFA/SG came to DM 7.10.<br />
63
Accounting analysis of the fiscal 1996 DVFA/SG result<br />
Adjustable income/<br />
Adjustable income/ expenses included<br />
In DM million expenses of the year in DVFA/SG result<br />
Net income 717.2 717.2<br />
Adjustable income<br />
Gains from fixed-asset disposals (108.9) (50.3)<br />
Income from the release of accruals (192.5) (35.0)<br />
Adjustable income, net total (301.4) (85.3)<br />
Adjustable expenses<br />
Amortization of goodwill 193.9 171.2<br />
Transfer to untaxed/special reserves 17.2 15.7<br />
Other (nonrecurrent expenses Motex GmbH: DM 42.0 million;<br />
merger-related expenses: DM 47.4 million) 89.4 –<br />
Adjustable expenses, net total 300.5 186.9<br />
Result (acc. to DVFA/SG) 818.8<br />
Third-party profit shares (106.8)<br />
Result acc. to DVFA/SG excl. third-party profit shares 712.0<br />
Average number of shares ranking for<br />
dividend in fiscal year (million) 100.2<br />
Earnings per share in DM (acc. to DVFA/SG) 7.10<br />
Comments on the determination of<br />
DVFA/SG-based earnings<br />
In fiscal 1996, the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> earned a<br />
net income of DM 610.4 million (excluding thirdparty<br />
shares). In accordance with DVFA/SG recommendations,<br />
adjustments totaling DM +101.6<br />
million were made to determine the DVFA/SGbased<br />
result. Each adjustment amount only accounts<br />
for the <strong>Group</strong>’s share and is stated gross<br />
for net (i.e., excluding any imputed tax burden)<br />
since most adjustments refer to <strong>Group</strong> companies<br />
which do not earn any taxable income or<br />
are bound by a profit & loss transfer agrement<br />
with <strong>METRO</strong> <strong>AG</strong>, which, in turn, is carrying forward<br />
tax losses.<br />
64<br />
The highest amount of adjustment is the addition<br />
of amortized goodwill, attributable to goodwill<br />
from capital consolidation and to that carried<br />
forward from individual financial statements.<br />
Both <strong>METRO</strong> <strong>AG</strong>’s and the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s<br />
purposes include the acquisition and disposal<br />
as well as the management of land and buildings.<br />
Book gains and/or losses from the disposal<br />
of any such fixed assets are, therefore, not adjusted<br />
to the extent that they are part of the<br />
<strong>Group</strong>’s ordinary business operations and not<br />
unusually high. When determining the DVFA/SG<br />
result, such book gains were deducted from net<br />
income as were yielded from the sale of land<br />
and buildings subsequently leased back.
A multitude of specific circumstances caused<br />
numerous <strong>Group</strong> companies to release accruals<br />
to income. None of the accruals providing for<br />
such circumstances were released in the period<br />
at an amount in excess of DM 12 million. Most<br />
of the accruals were provided for as a charge<br />
against such companies’ operating result and,<br />
as far as former Asko, DSBK or Kaufhof <strong>Group</strong><br />
companies are concerned, had already reduced<br />
these companies’ DVFA/SG results in the past.<br />
Where the provision for accruals did not decrease<br />
DVFA/SG results, the amounts from the<br />
release of accruals were eliminated.<br />
Cash flow according to DVFA/SG<br />
The <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s cash flow was determined<br />
according to DVFA/SG recommendations<br />
and reached DM 1,898 million for fiscal 1996.<br />
The resultant cash flow per DM 5 share of stock<br />
came to DM 18.93.<br />
Other current assets 4,559<br />
Inventories 6,545<br />
Financial assets 681<br />
Tangible and intangible assets 8,992<br />
Assets<br />
20,777<br />
22%<br />
32%<br />
43%<br />
Cash flow of <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong><br />
Balance sheet structure 1996, <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong><br />
in DM million<br />
3%<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
In DM million 1996<br />
Net income of the <strong>Group</strong> 717<br />
Amortization/depreciation/write-down<br />
of fixed assets 1,218<br />
Straight cash flow 1,935<br />
Change in noncurrent accruals 7<br />
Transfer to untaxed/<br />
special reserves 17<br />
All other items (11)<br />
Annual cash flow 1,948<br />
Adjustment for significant<br />
cash income (50)<br />
Cash flow according to DVFA/SG 1,898<br />
Equity & liabilities<br />
20,777<br />
62%<br />
8%<br />
6%<br />
1%<br />
23%<br />
12,890 Short-term debt<br />
1,778 Long-term debt<br />
1,266 Pension accruals<br />
17 Untaxed/special reserves<br />
4,826 Equity<br />
65
Cash flow statement, <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong><br />
In DM million 1996<br />
Net income 717.2<br />
Amortization/depreciation/write-up of fixed assets 1,217.8<br />
Change in noncurrent accruals 6.4<br />
Other non-cash expenses and income – net 6.4<br />
Annual cash flow – gross 1,947.8<br />
Profit/loss from fixed-asset disposals (91.9)<br />
Changes in current accruals (38.9)<br />
Changes in current assets and in liabilities 1,189.6<br />
Net cash provided by operating activities 3,006.6<br />
Cash provided by fixed-asset disposals 622.8<br />
Cash used in additional fixed assets (2,137.3)<br />
Net cash used in investing activities (1,514.5)<br />
Decrease in third-party capital shares (140.1)<br />
Cash provided for stockholders (104.9)<br />
Other changes in equity 23.7<br />
Decrease in financial debts (114.6)<br />
Net cash used in financing activities (335.9)<br />
Cash-based change in liquid assets 1,156.2<br />
Cash and cash equivalents at Jan. 1 561.8<br />
Cash and cash equivalents at Dec. 31 1,718.0<br />
The cash flow statement was prepared in accordance<br />
with IdW Statement HFA 1/1995 (issued<br />
by Institut der Wirtschaftsprüfer in Deutschland<br />
e.V., a German society of sworn public auditors)<br />
and SG recommendations. The line “net cash<br />
provided by operating activities” additionally<br />
66<br />
reflects the cash flow for the year. The net cash<br />
from financing activities states the liquid assets<br />
and note loans. Major effects of changes in the<br />
group of consolidated companies are reflected<br />
in the various account lines.
Metro stock<br />
First quotation of <strong>METRO</strong> <strong>AG</strong> stock<br />
on July 25, 1996<br />
On July 19, 1996, upon entry in <strong>METRO</strong> <strong>AG</strong>’s<br />
Commercial Register of the merger, trading in<br />
Asko Deutsche Kaufhaus <strong>AG</strong> common and preferred<br />
stock, in Deutsche SB-Kauf <strong>AG</strong> common<br />
stock and in Kaufhof Holding <strong>AG</strong> common and<br />
preferred stock was discontinued. Pending the<br />
commencement of official quotation, initially<br />
only share exchange options for <strong>METRO</strong> <strong>AG</strong><br />
stock were traded between July 19 and 24, 1996.<br />
Then, on July 25, 1996, <strong>METRO</strong> <strong>AG</strong> stock was<br />
for the first time officially listed at the stock exchanges<br />
in Frankfurt/Main and Düsseldorf. The<br />
opening price of common stock was DM 136,<br />
while preferred stock I and II was each quoted<br />
at DM 101.<br />
Par value of Metro stock fixed at DM 5<br />
By subdividing the capital stock into DM 5 shares<br />
at par after the merger, the magnitude of Metro<br />
stock prices is now on an internationally accepted<br />
level. <strong>METRO</strong> <strong>AG</strong> thus addresses a wide<br />
range of potential stockholders and promotes<br />
investment in shares by private individuals.<br />
<strong>METRO</strong> <strong>AG</strong>’s stock is divided into three classes:<br />
common stock, preferred stock I, and preferred<br />
stock II. In terms of dividend privileges, preferred<br />
shares I are based on former Kaufhof preferred<br />
stock, while Metro preferred stock II is<br />
predicated on former Asko preferred stock. This<br />
means that the two classes of preferred stock<br />
entitle holders to different dividend claims depending<br />
on the percentage of distribution for<br />
common stock (in percent of share par value).<br />
Equity-funded capital increase<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
The increase in capital stock, announced in the<br />
merger period and to be equity funded, has<br />
meanwhile been firmly planned. Subject to the<br />
approval by the annual stockholders’ meeting<br />
of July 9, 1997, the capital stock will be raised<br />
in the ratio of 5:7 by transfer from the reserve<br />
from capital surplus. The capital stock will then<br />
increase by DM 701.7 million, from DM 501.2<br />
million to DM 1,202.9 million.<br />
This move is believed to clearly improve the<br />
liquidity of all Metro stock classes after implementation<br />
of the capital transactions.<br />
At the same time, based on the proposed adjustment<br />
ratio, another accounting adjustment<br />
to the Metro stock price level in relation to other<br />
listed international trading corporations will be<br />
the consequence.<br />
After implementing the equity-funded capital increase<br />
and fully utilizing the EK-01 low-tax equity<br />
portion, profit distributions for fiscal 1997 will<br />
probably be made from the tax-exempt EK-04<br />
equity portion; since this source of distribution<br />
is deemed repaid capital, it will be nontaxable<br />
income for stockholders. However, stockholders<br />
carrying their investment in <strong>METRO</strong> <strong>AG</strong> as operating<br />
assets will be required to deduct such distributions<br />
from their book value.<br />
67
Metro stock: prices volatile<br />
Against the backdrop of a continuing weak<br />
situation within the German consumer goods<br />
retail trade and with sales and income prospects<br />
remaining poor in comparison with other DAX<br />
sectors, German retail stocks in 1996 fell short<br />
of the DAX/CDAX average.<br />
In the year 1996, the German stock index (DAX)<br />
climbed 28.2 percent to 2,888.69 points. The<br />
CDAX index, which covers 356 German listed<br />
companies (as of December 30, 1996), likewise<br />
surged by 22.1 percent to 263.46 points. In contrast,<br />
the so-called CDAX Consumption Index,<br />
which reflects the price trend of German listed<br />
Metro stock price trend 1)<br />
DM<br />
180<br />
175<br />
170<br />
165<br />
160<br />
155<br />
150<br />
145<br />
140<br />
135<br />
130<br />
125<br />
120<br />
115<br />
110<br />
105<br />
100<br />
68<br />
companies of the retail and consumer goods<br />
industries, underperformed, inching up by 4.2<br />
percent to 143.28 points at December 30, 1996.<br />
As of December 30, 1996, Metro common stock<br />
was quoted at a closing price of DM 124, hence<br />
some 8.8 percent below the opening quotation<br />
of DM 136. Preferred stock I and II fell 13.9 and<br />
15.8 percent to DM 87 and DM 85, respectively.<br />
As from January through end-April 1997, prices<br />
of Metro stock showed a general upswing.<br />
<strong>METRO</strong><br />
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr<br />
1)<br />
January 1996 through April 1997. Metro stock absolute; determination of historical price trend (Jan. 2 to July 18, 1996)<br />
based on price history of Kaufhof common stock and allowing for merger-related share exchange ratio plus cash<br />
premium. DAX, CDAX, CDAX Consumption indexed to Metro stock.<br />
Source: Datastream<br />
DAX<br />
CDAX Consumption<br />
CDAX
Taking into account the share exchange ratios,<br />
which were fixed during the merger proceedings,<br />
and of the cash dividends paid in 1996<br />
(for German resident Kaufhof stockholders, including<br />
tax credit), the investment growth for<br />
an Asko or Kaufhof common stockholder versus<br />
the close of 1995 came to 48.9 and 30.2 percent,<br />
respectively. In a direct performance comparison<br />
with the DAX/CDAX (and particularly with<br />
the CDAX Consumption Index) for the entire<br />
year, Metro common stock did well. Using the<br />
above computation basis, the value of Metro<br />
preferred stock I (ex Kaufhof) and II (ex Asko)<br />
rose by 16.7 and 24.4 percent, respectively.<br />
Metro stock indicators 1996<br />
<strong>METRO</strong> <strong>AG</strong>’s end-1996 market capitalization at<br />
DM 12.07 billion<br />
Since its initial listing, <strong>METRO</strong> <strong>AG</strong> has been<br />
among the 30 corporations included in the DAX.<br />
Admission criteria are market capitalization and<br />
stock exchange trading volume of Metro stocks.<br />
With a market capitalization of DM 12.07 billion<br />
as of December 30, 1996, <strong>METRO</strong> <strong>AG</strong> is among<br />
the 20 biggest German listed companies. In just<br />
under five months’ trading after the first official<br />
quotation, Metro stock worth some DM 11.5 billion<br />
was turned over at the Frankfurt/Main and<br />
Düsseldorf bourses (excluding IBIS trading, a<br />
screen-based system comprising Germany’s<br />
top 30 shares and leading bond issues). Translated<br />
into all-1996 turnover of Metro stock, this<br />
would correspond to a volume worth around<br />
DM 25.7 billion. Among all the companies listed<br />
in Germany, <strong>METRO</strong> <strong>AG</strong> thus ranks 23rd and is<br />
Germany’s largest listed trading corporation.<br />
Data per share Common stock Preferred stock I Preferred stock II<br />
Annual closing price DM 124.00 87.00 85.00<br />
Annual high DM 143.00 103.70 104.00<br />
Annual low DM 120.50 86.50 83.00<br />
Shares number 90,658,539 7,963,880 1,620,000<br />
Option rights outstanding number 2,978,576 – –<br />
Cash dividend DM 2.00 2.25 2.25<br />
Bonus DM 2.00 2.00 2.00<br />
Tax credit 1) DM 0.07 0.07 0.07<br />
Total distribution DM 4.07 4.32 4.32<br />
Dividend yield 2) (incl. bonus) % 3.3 5.0 5.1<br />
Per DM 5 share of stock<br />
Earnings (net) acc. to DVFA/SG DM 7.10<br />
Cash flow acc. to DVFA/SG DM 18.93<br />
Market/book value 2.5<br />
Market capitalization DM bill. 12.07<br />
1) for German resident stockholders<br />
2) based on annual closing price<br />
<strong>METRO</strong> <strong>AG</strong><br />
Additional information<br />
69
<strong>METRO</strong> <strong>AG</strong> intensifies dialogue with<br />
capital markets<br />
In the course of the merger proceedings, the Executive<br />
Board held many meetings with analysts<br />
and investors in order to explain the merger<br />
background and present the future corporate<br />
strategy. One focal session was held on March<br />
14, 1996, with some 170 analysts and investors<br />
from Germany and abroad.<br />
Additional information<br />
Reuters’ abbreviations:<br />
Common stock MEOG.F<br />
Preferred stock I MEOG_p.F<br />
Preferred stock II MEOG_pa.F<br />
Option warrant (86/98) DE781905.F<br />
Bloomberg’s abbreviations:<br />
Common stock MEO GR<br />
Preferred stock I MEO3 GR<br />
Preferred stock II MEO5 GR<br />
Option warrant (86/98) KFHC GR<br />
Securities identification numbers (SINs):<br />
Common stock 725 750<br />
Preferred stock I 725 753<br />
Preferred stock II 725 755<br />
Option warrant (86/98) 781 905<br />
70<br />
<strong>METRO</strong> <strong>AG</strong> sees investor relations as targeted,<br />
ongoing communication with investors and analysts<br />
on <strong>METRO</strong> <strong>AG</strong>’s business development,<br />
both past and present, and its expectations from<br />
the market.<br />
Metro stock is traded at: Frankfurt/Main, Düsseldorf stock exchanges; IBIS<br />
Investor relations agenda 1997/1998:<br />
Annual earnings conference/<br />
analysts meeting 1997 May 27, 1997<br />
Annual stockholders’ meeting 1997 July 9, 1997<br />
Semiannual report 1997 late August 1997<br />
Sales report 3rd quarter 1997 late October 1997<br />
Quiet period December 1997 to January 1998<br />
Preliminary sales report 1997 early February 1998<br />
Sales report 1st quarter 1998 late April 1998
Annual accounts 1996<br />
of the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong><br />
71
Notes<br />
to the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s financial statements<br />
(1) Legal basis, date of initial consolidation<br />
and comparative data<br />
<strong>METRO</strong> <strong>AG</strong>’s consolidated accounts have been<br />
prepared in accordance with the provisions of<br />
the German Commercial Code (“HGB”) and the<br />
German Stock Corporation Act (“AktG”). The<br />
<strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> was formed by Metro Vermögensverwaltung<br />
GmbH & Co KG contributing<br />
in March 1996 to <strong>METRO</strong> <strong>AG</strong> the stock held<br />
in Asko Deutsche Kaufhaus <strong>AG</strong> and Kaufhof<br />
Holding <strong>AG</strong>, along with its interest in Metro<br />
SB-Grossmärkte GmbH & Co KG and various<br />
other companies. Such contributions in kind<br />
took economic effect at January 1, 1996, which<br />
is hence the date of the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s<br />
formal inception.<br />
In mid-July 1996, the mergers of Asko Deutsche<br />
Kaufhaus <strong>AG</strong>, Deutsche SB-Kauf <strong>AG</strong> and Kaufhof<br />
Holding <strong>AG</strong> into <strong>METRO</strong> <strong>AG</strong> were entered<br />
in the Commercial Registers concerned and<br />
took retroactive effect as of January 1, 1996,<br />
thus the date underlying the first-time consolidation<br />
of all companies included in the <strong>Group</strong><br />
accounts.<br />
With a view to enhancing conclusiveness of<br />
the 1996 <strong>Group</strong> accounts, the comparative<br />
figures in the consolidated balance sheet as of<br />
December 31, 1996, are the post-merger values<br />
at January 1, 1996. The same accounting and<br />
valuation principles as for the accounts at<br />
January 1, 1996, were consistently applied. No<br />
comparative figures can be provided for the<br />
1996 consolidated income statement since the<br />
<strong>Group</strong> has existed for one year only.<br />
72<br />
The annual financial statements of companies<br />
included in the <strong>Group</strong> accounts are predicated<br />
on <strong>Group</strong>wide uniform accounting and valuation<br />
principles. The fiscal year of most of these<br />
companies is identical with <strong>METRO</strong> <strong>AG</strong>’s.<br />
Wherever fiscal years of companies included<br />
close at a date different from <strong>METRO</strong> <strong>AG</strong>’s and<br />
thus also from the <strong>Group</strong>’s balance sheet date,<br />
interim financial statements were prepared for<br />
consolidation purposes.<br />
(2) <strong>Group</strong> of consolidated companies,<br />
associated affiliates<br />
Besides <strong>METRO</strong> <strong>AG</strong> as the parent, the <strong>Group</strong><br />
accounts comprise 444 German and 110 foreign<br />
companies in which <strong>METRO</strong> <strong>AG</strong> directly or<br />
indirectly holds the majority of voting rights.<br />
Pursuant to Art. 271 par. 2 HGB, the list of<br />
<strong>Group</strong> companies encompasses not only<br />
<strong>METRO</strong> <strong>AG</strong>’s subsidiaries but also those of<br />
Düsseldorf-based Metro Vermögensverwaltung<br />
GmbH & Co KG and Baar-based Metro Holding<br />
<strong>AG</strong> which directly or indirectly hold a majority<br />
stake in <strong>METRO</strong> <strong>AG</strong>. The relations to these<br />
companies (which do not require inclusion<br />
in <strong>METRO</strong> <strong>AG</strong>’s consolidated accounts) are<br />
disclosed in separate caption lines under<br />
“nonconsolidated <strong>Group</strong> companies.”<br />
Under the terms of Art. 296 HGB, 28 subsidiaries<br />
of minor significance are not consolidated;<br />
of these, 13 companies are not or no longer<br />
engaged in operational activities.
In comparison with January 1, 1996, the group<br />
of consolidated companies changed as follows:<br />
Number at Jan. 1, 1996 509<br />
Changes in fiscal 1996:<br />
due to mergers into other<br />
<strong>Group</strong> companies –18<br />
due to voting right changes –3<br />
due to new formations +50<br />
due to share acquisitions +16<br />
Number at Dec. 31, 1996 554<br />
The additions due to share acquisitions refer<br />
to Praktiker Dritte Baumärkte GmbH & Co KG<br />
(formerly Spar Bau- und Heimwerkermärkte<br />
GmbH), 5 non-German companies as well as<br />
real-estate enterprises.<br />
The investments in 10 so-called associated<br />
affiliates – i.e., entities over which a consolidated<br />
company can exercise a significant<br />
influence on business and financial policies<br />
and 20 percent or more of whose voting rights<br />
are held (statutory assumption) – are included<br />
in the <strong>Group</strong> accounts at equity under the<br />
terms of Arts. 311, 312 HGB. Pursuant to Art.<br />
311(2) HGB, 26 associated affiliates of minor<br />
significance are stated at book value.<br />
The full listing of the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s consolidated<br />
companies and associated affiliates<br />
will be deposited with the Commercial Register<br />
of the Local Court of Cologne under no. HRB<br />
26888. The complete list of <strong>Group</strong> companies<br />
may, moreover, be obtained directly from<br />
<strong>METRO</strong> <strong>AG</strong>.<br />
(3) Consolidation principles<br />
For consolidation, the so-called book value<br />
method of accounting is adopted: In a single<br />
step, the cost of subsidiaries is offset against<br />
the <strong>Group</strong>’s share in the subsidiaries’ equity<br />
as of the date of first-time consolidation or<br />
acquisition. In accordance with legislative provisions,<br />
any resultant net equity under cost is<br />
allocated to the reserves hidden in the consolidated<br />
subsidiaries’ assets. Any residual net<br />
equity under cost is disclosed as goodwill.<br />
<strong>METRO</strong> <strong>AG</strong><br />
Notes<br />
The shares in Asko Deutsche Kaufhaus <strong>AG</strong>’s<br />
and Kaufhof Holding <strong>AG</strong>’s stock were contributed<br />
to <strong>METRO</strong> <strong>AG</strong> in terms of time and logic<br />
consequence prior to the merger into <strong>METRO</strong><br />
<strong>AG</strong> of these holding companies. Therefore,<br />
initial consolidation is required to be based on<br />
the book values of <strong>METRO</strong> <strong>AG</strong>’s investments<br />
in these holding companies. Under the initial<br />
consolidation of the shares in Asko Deutsche<br />
Kaufhaus <strong>AG</strong>’s and Kaufhof Holding <strong>AG</strong>’s<br />
stock, the resultant net equity was first applied<br />
to all assets and liabilities of the subgroup<br />
concerned, in due accordance with Art. 301<br />
par. 1(3) HGB. The net equity under cost from<br />
the first-time consolidation of Kaufhof Holding<br />
<strong>AG</strong> has been fully allocated to the reserves<br />
hidden in the Kaufhof subgroup’s land and<br />
buildings, while the maximum net equity from<br />
the initial consolidation of Asko Deutsche Kaufhaus<br />
<strong>AG</strong>’s stock has been applied to this subgroup’s<br />
real property and real-estate investee<br />
companies. Any residual net equity under cost<br />
is disclosed as goodwill.<br />
Goodwill acquired by the <strong>Group</strong> for valuable<br />
consideration is also capitalized to the extent<br />
that such goodwill is allocable to third-party<br />
stockholders. Amortization of third-party<br />
shares in goodwill is charged to the <strong>Group</strong>’s<br />
income and disclosed as third-party P&L<br />
shares.<br />
Investees included at equity are capitalized<br />
according to the book value method at their<br />
prorated equity. Any net equity under cost<br />
from the inclusion at equity of investments in<br />
associated affiliates as of December 31, 1996,<br />
is shown under goodwill.<br />
The minority shares of outside stockholders in<br />
the capital of consolidated subsidiaries are<br />
disclosed separately pursuant to Art. 307(1)<br />
HGB. The same applies to third-party shares in<br />
goodwill to the extent that these outside stockholders<br />
have acquired such goodwill jointly<br />
with the Company.<br />
73
Under the terms of Art. 308 par. 3(1) HGB,<br />
the untaxed/special reserves set aside in the<br />
individual financial statements are principally<br />
carried over to the consolidated accounts.<br />
Untaxed/special reserves existing at initial<br />
consolidation date are allocated to deferred<br />
taxation or to the reserves retained from earnings<br />
in accordance with their third-party capital<br />
shares or their equity shares, respectively, thus<br />
being duly reflected in capital consolidation.<br />
Intercompany P&L, intra-<strong>Group</strong> transfers,<br />
expenses and income, as well as receivables<br />
and payables are eliminated. The option of<br />
third-party debt consolidation is utilized.<br />
If based on timing differences substantially<br />
after 4 years, deferred taxes are provided for<br />
income tax effects from consolidation transactions<br />
recognized in net income. The reason<br />
for this approach is that tax loss carryovers<br />
exist within the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> which,<br />
according to current income forecasts, will<br />
have been fully applied after 3 or 4 years.<br />
(4) Currency translation<br />
All balance sheet captions, including net<br />
income and all lines upstream of net earnings,<br />
denominated in non-DM currencies are translated<br />
at the mean current rate. For expenses<br />
and income, the annual average rate is used.<br />
Currency translation differences are thus produced<br />
in the income statement which are<br />
posted to other operating expenses or other<br />
operating income, as applicable. Consolidationrelated<br />
differences from currency translation<br />
are offset against the reserves retained from<br />
earnings and not recognized in net income.<br />
74<br />
(5) Accounting and valuation principles<br />
Intangible assets are stated at acquisition cost,<br />
tangible assets at purchase or production cost,<br />
both less accumulated systematic amortization<br />
or depreciation, less write-down and less<br />
accelerated cost recovery (ACR) charges as<br />
applicable or required. Additions to movable<br />
tangibles are generally depreciated by using<br />
the tax convenience of charging the full or half<br />
the rate for additions in the first or the second<br />
six-month period, respectively. Systematic<br />
depreciation is charged to buildings and selfcontained<br />
building appurtenances or elements<br />
on a straight-line basis, while for movable<br />
tangible assets, the declining-balance method<br />
is as a rule used wherever permitted by tax<br />
regulations. From the year in which straightline<br />
depreciation exceeds declining-balance<br />
charges, the former method is adopted thenceforth.<br />
Assets are written down whenever any<br />
impairment in value is of a long-term nature.<br />
So-called low-value assets (i.e., at net cost of<br />
DM 800 or less) are fully written off in the year<br />
of their addition. Systematic amortization and<br />
depreciation are based on the following useful<br />
lives (AAR/ADRs) throughout the <strong>Group</strong>:<br />
Goodwill: generally 15 years<br />
Buildings: 25–50 years<br />
Leasehold<br />
improvements: lease term or 10 years,<br />
whichever is shorter<br />
Store improvements: 7 years (first use prior to<br />
1-1-1994: 8 years)<br />
Factory and<br />
office equipment: 3–10 years<br />
Where holdings of minor significance are<br />
involved, investments in associated affiliates<br />
and shares in nonconsolidated <strong>Group</strong> companies<br />
are capitalized at cost. Investments<br />
other than insignificant in associated affiliates<br />
are then stated at the prorated net accounting<br />
equity. For first-time consolidation purposes,<br />
the cost of such associated affiliates is offset<br />
against their prorated equity, any adjustment<br />
to <strong>Group</strong>wide uniform valuation methods<br />
being waived in these cases. The cost of<br />
investments stated according to the equity<br />
method of accounting varies as a function of<br />
the annual change in equity capital.
Long-term loans are capitalized at par, non-<br />
or low-interest loans being discounted to their<br />
present values.<br />
Inventories are priced at the lower of cost or<br />
market.<br />
Purchase cost of inventories is partly determined<br />
on a cost price basis according to the<br />
merchandise information system (MIS), or<br />
else by applying the inverse method to the<br />
selling value. Where the inverse method is<br />
used to determine purchase cost, the markdown<br />
rates derived from pricing margins of<br />
stocks on hand are deducted from stocked<br />
goods valued at selling prices.<br />
Risks from changing fads and similar exposures<br />
are adequately allowed for at standard industry<br />
rates. Pricing is based on net realizable values.<br />
Production cost also includes reasonable<br />
portions of overhead expenses besides direct<br />
costs.<br />
Receivables and sundry assets are principally<br />
stated at par or face value. Specific allowances<br />
provide for the risks inherent in doubtful receivables;<br />
non-interest receivables are discounted.<br />
Standard allowances for doubtful accounts<br />
provide for part of the general collection risk.<br />
Short-term securities and note loans are valued<br />
at cost, market or current value, whichever is<br />
lower.<br />
Accruals provide for foreseeable or apprehensible<br />
risks, uncertain commitments and<br />
impending losses, as deemed appropriate<br />
in accordance with sound business practice<br />
and judgment. The actuarial present value is<br />
used to provide for pension accruals, on the<br />
basis of an imputed yearly interest rate of 6<br />
percent, all pursuant to Art. 6a German Income<br />
Tax Act (“EStG”). Same-amount accruals provide<br />
for the deficient cover resulting from nonconsolidated<br />
Supplementary Pension Funds.<br />
Long-term accruals, such as for deficient rental<br />
cover or employment anniversary allowance<br />
commitments, are disclosed at par, i.e. not<br />
discounted.<br />
<strong>METRO</strong> <strong>AG</strong><br />
Notes<br />
Liabilities are generally stated at the amount<br />
repayable.<br />
Financial derivatives of interest rate and currency<br />
management are used to minimize risks<br />
from the companies’ operational activities,<br />
their valuation being itemwise and predicated<br />
on the imparity principle (which requires<br />
unrealized losses to be accrued and prohibits<br />
recognition of unrealized profits).<br />
Nonlisted financial instruments are valued<br />
either as marked to market, by using generally<br />
accepted option pricing models or, for nonoption-type<br />
derivatives, according to the<br />
present-value method.<br />
Currency-related financial transactions are principally<br />
valued at the current mean spot price.<br />
Exchange transactions maturing later are<br />
valued at the forward rates for the respective<br />
remaining terms.<br />
For interest rate futures and options thereon,<br />
net security payments made are directly<br />
deducted.<br />
Specific accruals provide in principle for<br />
impending losses from derivative financial<br />
instruments at the notional losses from<br />
evening up such positions (marked to market).<br />
In accordance with the true-and-fair-view<br />
standards of Art. 264 par. 2(1) HGB and in line<br />
with international practice, transactions constituting<br />
economic units and whose collateralization<br />
is objectively interrelated are valued<br />
on an offset basis, i.e., within a position valued<br />
as a unit, losses from unsettled contracts are<br />
offset against, and up to the amount of, unrealized<br />
profits. The formation of separate valuation<br />
units is premised on currency identity, financialstanding<br />
identity (prime debtors exclusively),<br />
and substantially matching maturities.<br />
75
Comments on the consolidated balance sheet<br />
(6) Fixed assets<br />
Balance at<br />
Change in<br />
the group of<br />
consol. comp.<br />
Additions/<br />
In DM million<br />
Intangible assets<br />
1-1-1996 (Disposals)<br />
Franchises, concessions, industrial-property and similar rights and assets, 304.783 1.263<br />
as well as licenses thereto –<br />
Goodwill 2,576.032 –<br />
–<br />
Prepayments on intangibles 2.488 –<br />
–<br />
Tangible assets<br />
2,883.303 1.263<br />
–<br />
Land, equivalent titles, and buildings (including buildings 6,511.400 42.902<br />
on leased land and leasehold improvements) (9.386)<br />
Production plant and machinery 124.879 0.163<br />
–<br />
Other plant, factory and office equipment 3,362.449 21.472<br />
–<br />
Prepayments on tangibles, construction in progress 174.756 0.311<br />
(10.626)<br />
Financial assets<br />
10,173.484 64.848<br />
(20.012)<br />
Shares in nonconsolidated <strong>Group</strong> companies 73.420 0.610<br />
–<br />
Loans to nonconsolidated <strong>Group</strong> companies 14.339 –<br />
–<br />
Other investments 285.147 6.131<br />
(3.064)<br />
Investments in associated affiliates 225.322 –<br />
(147.111)<br />
Loans under investor/investee relations 25.163 57.210<br />
–<br />
Other long-term securities 61.411 0.050<br />
–<br />
Other long-term loans 138.890 –<br />
(0.911)<br />
823.692 64.001<br />
(151.086)<br />
Total 13,880.479 130.112<br />
(171.098)<br />
1) Amortization, depreciation, write-down, write-off<br />
**) Including net income prorated at DM 20.420 million (= addition), net loss prorated at DM 7.849 million and profits distributed at<br />
DM 1.770 million (= disposals)<br />
**) DM 34.492 million reclassified from long-term into short-term securities, as well as the DM 9.225 million reclassified from prepaid<br />
rentals into prepaid expenses and deferred charges resulted in a non-zero book transfer balance.<br />
76
At cost<br />
<strong>METRO</strong> <strong>AG</strong><br />
Notes<br />
Book Charges 1) Balance at Charged 1) in<br />
Additions transfers Disposals (accumulated) 12-31-1996 fiscal year<br />
126.015 1.414 54.072 221.217 158.186 79.413<br />
223.227 33.903 54.605 326.785 2,451.772 193.869<br />
0.543 (1.120) 0.425 – 1.486 –<br />
349.785 34.197 109.102 548.002 2,611.444 273.282<br />
579.218 147.074 220.882 2,150.022 4,900.304 315.147<br />
14.983 4.674 27.429 92.809 24.461 18.168<br />
760.362 5.753 592.960 2,216.654 1,340.422 604.864<br />
158.136 (144.367) 24.930 37.168 116.112 6.367<br />
1,512.699 13.134 866.201 4,496.653 6,381.299 944.546<br />
0.300 – 0.059 31.548 42.723 –<br />
– – 13.839 0.500 – –<br />
176.927 (11.556) 10.996 28.657 413.932 –<br />
61.968 *) (35.775) 15.301 *) 2.093 87.010 –<br />
3.405 – 14.056 50.825 20.897 –<br />
0.749 (26.147) 32.017 0.015 4.031 –<br />
44.901 (17.570) 42.289 10.899 112.122 0.345<br />
288.250 *) (91.048) 128.557 *) 124.537 680.715 0.345<br />
2,150.734 (43.717) **) 1,103.860 5,169.192 9,673.458 1,218.173<br />
77
The 1996 additions (excluding goodwill and<br />
financial assets) are allocable to the divisions<br />
as follows:<br />
In DM million<br />
Metro Wholesale 133.993<br />
Department Stores 290.461<br />
Hypermarkets 197.530<br />
Food Stores & Discounters 120.353<br />
Consumer Electronics Centers 111.953<br />
Home Improvements Centers 86.360<br />
Furniture Centers 31.488<br />
Computer Centers 53.389<br />
Fashion Centers 27.805<br />
Footwear Centers 10.138<br />
Mail Order 5.214<br />
Restaurant & Catering 17.566<br />
Real Estate 424.565<br />
Others 128.442<br />
(7) Intangible assets<br />
1,639.257<br />
Breakdown as of December 31, 1996, of the<br />
total goodwill of DM 2,451.772 million:<br />
DM 2,203.220 million net equity under cost<br />
from capital consolidation<br />
DM 122.270 million difference from inclusion<br />
at equity,<br />
DM 126.282 million goodwill carried over<br />
from individual financial statements.<br />
The additions to goodwill mainly result from<br />
the acquisition of Praktiker Dritte Baumärkte<br />
GmbH & Co KG (formerly Spar Bau- und Heimwerkermärkte<br />
GmbH), as well as from that of<br />
further Vobis Microcomputer <strong>AG</strong> stock.<br />
Besides goodwill, intangible assets basically<br />
include purchased software.<br />
Goodwill is amortized over the anticipated<br />
period of benefit, as a rule 15 years.<br />
78<br />
(8) Tangible assets<br />
When initially consolidating the shares in Kaufhof<br />
Holding <strong>AG</strong> and Asko Deutsche Kaufhaus<br />
<strong>AG</strong>, conservatively valued reserves hidden in<br />
land and buildings were disclosed.<br />
Depreciation of tangible assets includes writedown<br />
at DM 25.223 million and ACR charges of<br />
DM 2.009 million under the terms of Art. 4 German<br />
Economic Area Promotion Act (“FördG”).<br />
(9) Financial assets<br />
The additions to investments chiefly refer to<br />
capital spent on foreign companies which hold<br />
real property for expansion outside of Germany.<br />
The book value at December 31, 1996, largely<br />
reflects that of real-estate enterprises.<br />
The additions to investments in associated<br />
affiliates include DM 20.420 million of prorated<br />
net incomes. Disposals reflect profits distributed<br />
at DM 1.770 million and prorated net losses<br />
of DM 7.849 million. A major item included in<br />
the book value as of December 31, 1996, is the<br />
investment in Roller GmbH & Co KG.<br />
(10) Inventories<br />
In DM million 12-31-1996 1-1-1996<br />
Raw materials and supplies 145.005 153.727<br />
Work in process<br />
Finished products,<br />
12.526 43.081<br />
merchandise 6,338.461 6,383.387<br />
Prepayments made 48.723 53.126<br />
6,544.715 6,633.321
Breakdown of inventories by division as of<br />
December 31, 1996:<br />
In DM million<br />
Metro Wholesale 723.025<br />
Department Stores 1,691.236<br />
Hypermarkets 871.056<br />
Food Stores & Discounters 601.439<br />
Consumer Electronics Centers 810.635<br />
Home Improvements Centers 803.768<br />
Furniture Centers 299.076<br />
Computer Centers 279.864<br />
Fashion Centers 168.318<br />
Footwear Centers 143.595<br />
Mail Order 71.437<br />
Restaurant & Catering 5.290<br />
Others 75.976<br />
(11) Receivables and sundry assets<br />
6,544.715<br />
In DM million 12-31-1996 1-1-1996<br />
Trade receivables<br />
thereof with a remaining<br />
656.911 690.454<br />
term of more than 1 year<br />
Due from nonconsolidated<br />
[0.822]<br />
<strong>Group</strong> companies<br />
thereof with a remaining<br />
46.634 194.773<br />
term of more than 1 year [–]<br />
thereof from trading<br />
Receivable under investor/<br />
[26.127]<br />
investee relations<br />
thereof with a remaining<br />
118.942 112.339<br />
term of more than 1 year [–]<br />
thereof from trading [0.641]<br />
Sundry assets<br />
thereof with a remaining<br />
1,689.013 1,714.286<br />
term of more than 1 year [88.912]<br />
2,511.500 2,711.852<br />
Sundry assets are mainly short-term receivables<br />
typically disclosed at balance sheet date (creditors<br />
with debit balances, tax reclaims, rebates<br />
and similar credits receivable from merchandise<br />
management, and purchase price claims from<br />
the disposal of shares in subsidiaries).<br />
(12) Short-term securities and note loans<br />
In DM million<br />
Shares in nonconsolidated<br />
12-31-1996 1-1-1996<br />
<strong>Group</strong> companies 0.471 8.004<br />
Other short-term securities 231.634 247.719<br />
Note loans 114.690 109.902<br />
346.795 365.625<br />
The other short-term securities primarily include<br />
shares in Hapag-Lloyd <strong>AG</strong> stock. The note loans<br />
were granted to real-estate enterprises and are<br />
used to fund operating outlets within in the<br />
<strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>.<br />
(13) Prepaid expenses and<br />
deferred charges<br />
<strong>METRO</strong> <strong>AG</strong><br />
Notes<br />
These substantially include prepaid rentals.<br />
Loan discount of DM 0.808 million is amortized<br />
by systematic charges over the underlying<br />
liabilities’ term.<br />
79
(14) Equity<br />
The <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s equity presented the following changes since January 1, 1996:<br />
<strong>METRO</strong> <strong>AG</strong>’s Reserves<br />
Unappropriated<br />
reserve retained retained Third-party<br />
<strong>METRO</strong> <strong>AG</strong>’s from capital from earnings, equity<br />
In DM million capital stock surplus earnings <strong>Group</strong> shares Total<br />
Balance at Jan. 1, 1996 501.014 2,725.363 – – 1,114.900 4,341.277<br />
Exercise of option rights<br />
Unappropriated retained<br />
0.198 4.245 4.443<br />
earnings<br />
Transfer from net income<br />
to reserves retained from<br />
403.366 106.811 510.177<br />
earnings 207.037 207.037<br />
Currency translation<br />
Net equity under cost of<br />
8.446 8.446<br />
shares acquired<br />
Distribution to third parties<br />
(140.149) (140.149)<br />
from profit carried forward<br />
Distribution to third parties<br />
(92.504) (92.504)<br />
from 1996 profit (12.372) (12.372)<br />
Balance at Dec. 31, 1996 501.212 2,729.608 215.483 403.366 976.686 4,826.355<br />
(15) Capital stock<br />
<strong>METRO</strong> <strong>AG</strong>’s capital stock corresponds to the<br />
par value of stock issued. The exercise of<br />
option rights caused the capital stock to rise<br />
by DM 0.198 million to DM 501.212 million by<br />
December 31, 1996. The capital stock breaks<br />
down as follows:<br />
Par value<br />
Total<br />
par value<br />
Class Number per share DM million<br />
Common stock 90,658,539 DM 5 453.293<br />
Preferred stock I 7,963,880 DM 5 39.819<br />
Preferred stock II 1,620,000 DM 5 8.100<br />
Capital stock 100,242,419 DM 5 501.212<br />
As of December 31, 1996, a potential capital<br />
exists at DM 14.893 million to enable the Company<br />
to grant shares of <strong>METRO</strong> <strong>AG</strong> common<br />
stock to bondholders of Metro Finance B.V.’s<br />
2% DM Warrant Bond Issue of 1986/1998 upon<br />
exercise of their option rights.<br />
80<br />
(16) Reserve from capital surplus<br />
This reserve includes the stock premiums<br />
earned in the scope of the capital raise through<br />
the contribution in kind (contribution of the<br />
stakes held in Asko Deutsche Kaufhaus <strong>AG</strong>,<br />
Kaufhof Holding <strong>AG</strong> and the Metro Cash<br />
& Carry companies), the merger with Asko<br />
Deutsche Kaufhaus <strong>AG</strong>, Deutsche SB-Kauf<br />
<strong>AG</strong> and Kaufhof Holding <strong>AG</strong>, as well as the<br />
exercise of option rights.<br />
(17) Reserves retained from earnings<br />
These reserves disclose the 1996 profits<br />
(unless distributed) of companies included in<br />
the <strong>Group</strong> accounts. DM 211.070 million of<br />
these reserves represents earnings retained<br />
by <strong>METRO</strong> <strong>AG</strong>.
(18) Third-party equity shares<br />
The shares of outside stockholders in capital<br />
and reserves amount to DM 882.247 million.<br />
After distributions already made, equity includes<br />
DM 94.439 million as third-party P&L share.<br />
(19) Accruals<br />
In DM million 12-31-1996 1-1-1996<br />
Pension accruals 1,266.165 1,266.631<br />
Tax accruals 417.197 330.669<br />
Other accruals 2,375.113 2,492.366<br />
4,058.475 4,089.666<br />
Pension accruals provide for company-specific<br />
direct pension commitments, as well as for<br />
obligations under various pension schemes<br />
handled by independent pension and similar<br />
funds. The availability to newly recruited<br />
employees of benefits payable by these funds<br />
has been or will be excluded in the course of<br />
1997. The accruals fully provide for obligations.<br />
The tax accruals mainly provide for municipal<br />
trade taxes and include reasonable amounts to<br />
allow for risks from tax audits.<br />
The other accruals substantially provide for<br />
the following uncertain commitments and<br />
obligations:<br />
In DM million<br />
Rental obligations 522.173<br />
Personnel-related commitments 439.264<br />
Closedown and restructuring 401.767<br />
Commodity trade commitments<br />
Invoices outstanding for<br />
191.678<br />
capital expenditure and costs 182.669<br />
Deferred maintenance 64.331<br />
Suretyships, guaranties and warranties 54.334<br />
Litigation fees and risks 50.791<br />
Guaranty obligations 48.340<br />
Other 419.766<br />
2,375.113<br />
Long-term accruals, such as for deficient rental<br />
cover or employment anniversary allowance<br />
commitments, are disclosed at par, i.e. not discounted.<br />
(20) Liabilities<br />
In DM million 12-31-1996 1-1-1996<br />
Bonds 542.495 492.171<br />
Due to banks 1) Prepayments received<br />
643.556 851.767<br />
on orders 114.760 78.048<br />
Trade payables 7,335.366 6,686.938<br />
Notes payable<br />
Due to nonconsolidated<br />
1,300.039 539.934<br />
<strong>Group</strong> companies 2) Payable under investor/<br />
343.862 500.274<br />
investee relations 3) 30.948 196.448<br />
Sundry liabilities 1,127.654 1,342.824<br />
thereof for taxes [501.269]<br />
thereof from social security [218.711]<br />
1) incl. DM 246.838 million to finance real property<br />
2) incl. DM 75.313 million from trading<br />
3) incl. DM 0.847 million from trading<br />
<strong>METRO</strong> <strong>AG</strong><br />
Notes<br />
11,438.680 10,688.404<br />
81
The analysis below ages the liabilities as of December 31, 1996:<br />
12-31-1996 Remaining term of<br />
Thereof<br />
collateralized by<br />
1 year more than charges other<br />
In DM million Total or less 5 years on realty interests<br />
Bonds 542.495 60.213 134.282<br />
Due to banks 643.556 65.382 288.116 246.838 5.633<br />
Prepayments received on orders 114.760 105.475<br />
Trade payables 7,335.366 7,334.487<br />
Notes payable 1,300.039 1,300.039<br />
Due to nonconsolidated <strong>Group</strong> companies 343.862 201.405<br />
Payable under investor/investee relations 30.948 23.494 7.448<br />
Sundry liabilities 1,127.654 1,080.893 22.396 13.048 5.460<br />
The bonds have been floated by Metro Finance<br />
B.V. and guaranteed by <strong>METRO</strong> <strong>AG</strong>.<br />
The sundry liabilities chiefly include taxes payable,<br />
personnel-related obligations, pension<br />
commitments, interest payable, as well as<br />
miscellaneous borrowings to finance purchase<br />
prices.<br />
(21) Deferred income<br />
This caption basically reflects income from<br />
forfaiting and factoring within the leasing<br />
business.<br />
(22) Contingent liabilities<br />
In DM million 12-31-1996<br />
Suretyships and guaranties 450.683<br />
Notes endorsed and discounted 0.082<br />
Guaranty and warranty contracts 535.726<br />
82<br />
11,438.680 10,171.388 452.242 259.886 11.093<br />
986.491<br />
(23) Other financial obligations<br />
In DM million 12-31-1996<br />
Obligations from leases, rental and<br />
leasing contracts (per annum) 2,615.867<br />
thereof nonconsolidated<br />
<strong>Group</strong> companies [3.901]<br />
Commitments from share tender rights 922.187<br />
Purchasing commitments 132.860<br />
Liability as general partner 11.354<br />
All other 18.703<br />
3,700.971
(24) Derivative financial instruments<br />
At balance sheet date, the following derivatives<br />
were used to minimize risks:<br />
Volume Market<br />
at par (net value (net<br />
In DM million<br />
Interest rate transactions<br />
Listed products:<br />
positions) positions)<br />
3 months 549.000 (0.590)<br />
5 years 304.000 0.584<br />
10 years 611.250 6.679<br />
OTC products:<br />
1,464.250 6.673<br />
Interest rate swaps 854.160 38.576<br />
Swaptions 20.000 0.374<br />
Caps and collars 450.000 1.928<br />
Currency transactions<br />
OTC products:<br />
1,324.160 40.878<br />
Futures 488.356 6.714<br />
Interest rate/currency swaps 7.880 (8.005)<br />
Spread options 108.836 0.301<br />
Call options 11.500 0.071<br />
616.572 (0.919)<br />
3,404.982 46.632<br />
The volume at par is based on the net position<br />
of the buying and selling prices underlying the<br />
various transactions. The market value shown<br />
is the net balance of unrealized profits and<br />
losses from marking the positions to market.<br />
Accruals provide for negative market values.<br />
For details of derivatives accounting and valuation,<br />
see Note (5). Exchange futures exclusively<br />
mature within one year.<br />
Comments on the income statement<br />
(25) Sales<br />
Gross 1996 sales break down as follows:<br />
In DM million<br />
Metro Wholesale 11,033.102<br />
Department Stores 11,539.315<br />
Hypermarkets 10,721.634<br />
Food Stores & Discounters 7,858.960<br />
Consumer Electronics Centers 7,631.684<br />
Home Improvements Centers 4,303.958<br />
Furniture Centers 1,704.174<br />
Computer Centers 3,134.880<br />
Fashion Centers 1,417.201<br />
Footwear Centers 816.440<br />
Mail Order 494.589<br />
Restaurant & Catering 474.106<br />
Other 894.021<br />
62,024.064<br />
DM 3,014.567 million of sales is allocable to<br />
<strong>Group</strong> companies based outside of Germany.<br />
(26) Other operating income<br />
<strong>METRO</strong> <strong>AG</strong><br />
Notes<br />
In DM million<br />
Rentals 703.068<br />
Building/construction work 360.139<br />
Advertising services 306.631<br />
Release of accruals 192.526<br />
General services 175.096<br />
Central A/P clearing for divisions 151.415<br />
Gains from fixed-asset disposals 108.932<br />
Sundry 435.388<br />
2,433.195<br />
Income from building/construction work contrasts<br />
with approximately equivalent expenses.<br />
83
The income from the release of accruals refers<br />
to a large number of transactions in numerous<br />
companies, including (without being limited<br />
thereto) accruals for deficient rental, closedowns<br />
and restructuring, invoices outstanding for<br />
costs, litigation risks, as well as for warranties.<br />
The income from central A/P clearing for divisions<br />
is related with the settlement of trade<br />
payables via a central clearing office.<br />
(27) Cost of materials<br />
In DM million<br />
Raw materials, supplies,<br />
merchandise purchased 39,819.431<br />
Services purchased 41.272<br />
(28) Personnel expenses<br />
In DM million<br />
39,860.703<br />
Wages and salaries<br />
Social security taxes, expenses for<br />
6,435.341<br />
pensions and related fringe benefits 1,328.441<br />
thereof pension expense [101.299]<br />
7,763.782<br />
In the year under review, expenses for social<br />
plans under restructuring programs were<br />
incurred at DM 102.168 million.<br />
84<br />
(29) Amortization of intangible and<br />
depreciation of tangible assets<br />
In DM million<br />
Amortization of goodwill<br />
from capital consolidation 154.502<br />
Amortization of goodwill<br />
from inclusion at equity 8.733<br />
Amortization of goodwill from<br />
individual annual accounts 30.634<br />
Amortization of other intangible assets 79.413<br />
Depreciation of tangible assets 944.699<br />
1,217.981<br />
The amortization of goodwill carried over from<br />
the individual to the consolidated financial<br />
statements includes write-down at DM 8.884<br />
million. Depreciation of tangible assets also<br />
covers ACR charges of DM 27.232 million.<br />
The application of different currency translation<br />
rates in balance sheet and income statement<br />
produced a difference of DM 0.153 million in<br />
the fixed-asset analysis.
(30) Other operating expenses<br />
In DM million<br />
Rentals 2,486.822<br />
Advertising and promotion 1,399.879<br />
Maintenance 470.659<br />
Energy 450.962<br />
Building/construction work 330.157<br />
Transportation of goods 294.517<br />
Personnel-related expenses 292.859<br />
Cleaning/waste disposal 230.732<br />
Materials consumption 185.854<br />
Postages and related expenses 138.117<br />
Legal, audit and similar fees 128.342<br />
Closedown and restructuring expenses 109.107<br />
Insurances 77.544<br />
Sundry 978.254<br />
7,573.805<br />
The sundry other operating expenses largely<br />
involve administrative, EDP, vigilance and payment<br />
transaction expenses.<br />
(31) Income from investments<br />
In DM million<br />
Net P/L from associated affiliates 16.991<br />
Income from other investments 2.408<br />
19.399<br />
(32) Net financial result<br />
In DM million<br />
Other interest and similar income<br />
thereof from nonconsolidated<br />
182.932<br />
<strong>Group</strong> companies [2.017]<br />
Other financial income 103.826<br />
Income from other long-term<br />
securities and loans 7.503<br />
Write-down of financial assets and<br />
short-term securities (1.056)<br />
Other financial expenses (103.906)<br />
Interest and similar expenses<br />
thereof to nonconsolidated<br />
(261.294)<br />
<strong>Group</strong> companies [(18.974)]<br />
(33) Income taxes<br />
In DM million<br />
(71.995)<br />
Corporation income tax 150.153<br />
Municipal trade tax on income 112.310<br />
Non-German income taxes 2.420<br />
264.883<br />
Deferred taxes 9.603<br />
274.486<br />
At December 31, 1996, tax loss carryovers<br />
existed within the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> at DM 3.8<br />
billion for corporation income tax purposes<br />
and at DM 3.5 billion as credit against municipal<br />
trade tax on income. Such loss carryovers<br />
can be applied for an indefinite period of time.<br />
(34) Net income<br />
<strong>METRO</strong> <strong>AG</strong><br />
Notes<br />
<strong>METRO</strong> <strong>AG</strong>’s net income amounts to DM<br />
614.436 million, the <strong>Group</strong>’s to DM 717.214<br />
million. Major reasons for the difference are<br />
the DM 106.811 million third-party P&L shares,<br />
as well as consolidation effects.<br />
The <strong>Group</strong>’s net income is affected by accelerated<br />
cost recovery (ACR) charges to an insignificant<br />
extent only.<br />
85
(35) Third-party shares in net income<br />
The third-party shares in profit and loss amount<br />
to DM 142.488 million and DM 35.677 million,<br />
respectively.<br />
(36) Additional data<br />
Average number of employees 1996<br />
White-collar 135,722<br />
Blue-collar 33,075<br />
Apprentices/trainees 7,721<br />
The figures include 75,364 part-timers per<br />
capita.<br />
86<br />
176,518<br />
(37) Supervisory and Executive Boards<br />
For their activities on behalf of <strong>METRO</strong> <strong>AG</strong>,<br />
Supervisory Board members received DM<br />
0.775 million. Up to the date of registration of<br />
the merger, former Asko Deutsche Kaufhaus<br />
<strong>AG</strong>, Deutsche SB-Kauf <strong>AG</strong> and Kaufhof Holding<br />
<strong>AG</strong> paid total emoluments of DM 2.151 million<br />
to their Supervisory Board members, whose<br />
total remuneration thus came to DM 2.926<br />
million.<br />
The emoluments paid to the Executive Board<br />
members for their services on behalf of <strong>METRO</strong><br />
<strong>AG</strong> from January 1 through December 31,<br />
1996, totaled DM 15.611 million. For the period<br />
from January 1, 1996, up to July 19, 1996, the<br />
date of merger registration, the remuneration<br />
paid to the other Executive Board members<br />
of Asko Deutsche Kaufhaus <strong>AG</strong>, Deutsche<br />
SB-Kauf <strong>AG</strong> and Kaufhof Holding <strong>AG</strong> totaled<br />
DM 6.717 million.<br />
Former Executive Board members of the<br />
companies absorbed by <strong>METRO</strong> <strong>AG</strong> and their<br />
surviving dependants received DM 6.458 million;<br />
<strong>METRO</strong> <strong>AG</strong> provided a total DM 75.569<br />
million for their accrued pensions.
Supervisory Board members<br />
Erwin Conradi<br />
Chairman<br />
Baar/Switzerland<br />
Executive Board chairman<br />
of Metro Holding <strong>AG</strong><br />
Klaus Bruns<br />
Vice-chairman<br />
Oberhausen<br />
Kaufhof Warenhaus <strong>AG</strong><br />
as from Aug. 14, 1996<br />
Hans-Dieter Cleven<br />
Baar/Switzerland<br />
Executive Board vice-chairman<br />
of Metro Holding <strong>AG</strong><br />
Holger Grape<br />
Hamburg<br />
Head of the Trade & Private Services<br />
occupational group of the D<strong>AG</strong> union<br />
as from Aug. 14, 1996<br />
Prof. Dr. Erich Greipl<br />
Düsseldorf<br />
Management Board member<br />
of Metro Vermögensverwaltung<br />
GmbH & Co KG<br />
as from June 21, 1996<br />
Sven Gronostay<br />
Düsseldorf<br />
Metro Vermögensverwaltung<br />
GmbH & Co KG<br />
from June 21 to Sep. 12, 1996<br />
Hubert Haselhoff<br />
Dortmund<br />
DSBK-Handels <strong>AG</strong><br />
as from Aug. 14, 1996<br />
Hanns-Jürgen Hengst<br />
Cologne<br />
Kaufhof Warenhaus <strong>AG</strong><br />
as from Aug. 14, 1996<br />
Gerhard Herbst<br />
Frankfurt/Main<br />
State district head of the NGG union<br />
as from Aug. 14, 1996<br />
Hermann Hesse<br />
Düsseldorf<br />
Kaufhof Warenhaus <strong>AG</strong><br />
as from Aug. 14, 1996<br />
Angelika Hünerbein<br />
Düsseldorf<br />
Metro Vermögensverwaltung<br />
GmbH & Co KG<br />
from June 21 to Sep. 12, 1996<br />
Ingeborg Janz<br />
Goslar<br />
Real SB-Warenhaus GmbH<br />
as from Aug. 14, 1996<br />
Renata Jungo<br />
Baar/Switzerland<br />
Metro Holding <strong>AG</strong><br />
from June 21 to Sep. 13, 1996<br />
Dr. Hermann Krämer<br />
Düsseldorf<br />
Executive Board member<br />
of Veba <strong>AG</strong><br />
as from Sep. 30, 1996<br />
Bernd Kreft<br />
Baar/Switzerland<br />
Metro Holding <strong>AG</strong><br />
from June 21 to Sep. 13, 1996<br />
Dr. Klaus Liesen<br />
Essen<br />
Supervisory Board chairman<br />
of Ruhrgas <strong>AG</strong><br />
as from Sep. 30, 1996<br />
Dr. Karlheinz Marth<br />
Düsseldorf<br />
Secretary to the Central Executive Committee<br />
of the HBV union<br />
as from Aug. 14, 1996<br />
Gustav-Adolf Munkert<br />
Cologne<br />
Kaufhof Warenhaus <strong>AG</strong><br />
as from Aug. 14, 1996<br />
Prof. Dr. Helmut Schlesinger<br />
Oberursel<br />
Former president of Deutsche Bundesbank<br />
as from Sep. 30, 1996<br />
<strong>METRO</strong> <strong>AG</strong><br />
Notes<br />
87
Dr. Manfred Schneider<br />
Leverkusen<br />
Executive Board chairman<br />
of Bayer <strong>AG</strong><br />
as from Sep. 30, 1996<br />
Hans Peter Schreib<br />
Düsseldorf<br />
Chief executive officer<br />
of Deutsche Schutzvereinigung<br />
für Wertpapierbesitz e.V.<br />
as from Sep. 30, 1996<br />
Dr. Henning Schulte-Noelle<br />
Munich<br />
Executive Board chairman<br />
of Allianz <strong>AG</strong><br />
as from Sep. 30, 1996<br />
Peter Seuberling<br />
Kirkel<br />
Praktiker Bau- und Heimwerkermärkte <strong>AG</strong><br />
as from Aug. 14, 1996<br />
Dr. Joachim Theye<br />
Bremen<br />
Lawyer and notary public<br />
as from Sep. 30, 1996<br />
Hugo Trütsch<br />
Baar/Switzerland<br />
Metro Holding <strong>AG</strong><br />
from June 21 to Sep. 13, 1996<br />
Dr. Stephan Ulrich<br />
Baar/Switzerland<br />
Metro Holding <strong>AG</strong><br />
up to Sep. 12, 1996<br />
Heinz-Jürgen Weber<br />
Baar/Switzerland<br />
Metro Holding <strong>AG</strong><br />
from June 21 to Sep. 12, 1996<br />
88<br />
Executive Board members<br />
Wolfgang Urban<br />
Spokesman<br />
as from July 1, 1996<br />
Klaus Wiegandt<br />
Spokesman<br />
as from July 1, 1996<br />
Prof. Dr. Erich Greipl<br />
up to June 21, 1996<br />
Siegfried Kaske<br />
as from July 1, 1996<br />
Dr. Hans-Joachim Körber<br />
as from July 1, 1996<br />
Dr. Wolf-Dietrich Loose<br />
as from July 1, 1996<br />
Joachim Suhr<br />
as from Dec. 5, 1995<br />
Cologne, April 29, 1997<br />
THE EXECUTIVE BOARD<br />
Urban Wiegandt<br />
Kaske Dr. Körber<br />
Dr. Loose Suhr
Report of the Supervisory Board<br />
The past fiscal year was marked by a fundamental<br />
restructuring process affecting the key<br />
companies of today’s <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> and<br />
by their integration into <strong>METRO</strong> <strong>AG</strong>.<br />
The <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong> was formed by Metro<br />
Vermögensverwaltung GmbH & Co KG contributing<br />
in March 1996 to Steba Beteiligungs <strong>AG</strong><br />
(a company acquired in late 1995 and renamed<br />
<strong>METRO</strong> <strong>AG</strong>) the controlling interests held<br />
in Asko Deutsche Kaufhaus <strong>AG</strong> and Kaufhof<br />
Holding <strong>AG</strong>, along with its interest in Metro<br />
SB-Grossmärkte GmbH & Co KG and various<br />
other companies. Such contributions in kind<br />
took economic effect at January 1, 1996, which<br />
is hence the date of the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s<br />
formal inception.<br />
Members of <strong>METRO</strong> <strong>AG</strong>’s Supervisory Board<br />
were as from December 5, 1995, Mr. Erwin<br />
Conradi, Mr. Hans-Dieter Cleven and Dr. Stephan<br />
Ulrich. On December 5, 1995, the Supervisory<br />
Board appointed Prof. Dr. Erich Greipl and Mr.<br />
Joachim Suhr as the Company’s Executive<br />
Board members.<br />
After the aforesaid financial interests had been<br />
contributed to <strong>METRO</strong> <strong>AG</strong> on March 14, 1996,<br />
the Company aimed to merge Asko Deutsche<br />
Kaufhaus <strong>AG</strong>, Deutsche SB-Kauf <strong>AG</strong> (in which<br />
Asko then held a 79-percent stake), and Kaufhof<br />
Holding <strong>AG</strong> each into <strong>METRO</strong> <strong>AG</strong>. The Supervisory<br />
Boards of Asko, DSBK and Kaufhof dealt<br />
in detail with this structural decision and the<br />
required steps and actions; on March 27 and<br />
29, 1996, respectively, they unanimously<br />
advocated the envisaged mergers. The stockholders’<br />
meetings of Asko Deutsche Kaufhaus<br />
<strong>AG</strong>, Deutsche SB-Kauf <strong>AG</strong> and Kaufhof Holding<br />
<strong>AG</strong> voted in favor of the corresponding merger<br />
agreements with <strong>METRO</strong> <strong>AG</strong> on May 24, 28<br />
and 30, 1996, respectively, all with a majority<br />
of more than 99 percent. The resolution approving<br />
the merger agreements was adopted by<br />
<strong>METRO</strong> <strong>AG</strong>’s stockholders’ meeting of June 21,<br />
1996.<br />
<strong>METRO</strong> <strong>AG</strong><br />
Due to the mergers, <strong>METRO</strong> <strong>AG</strong> required<br />
a Supervisory Board in conformity with the<br />
German Codetermination Act 1976. On June<br />
21, 1996, <strong>METRO</strong> <strong>AG</strong>’s stockholders’ meeting<br />
elected the following ten Supervisory Board<br />
members as the stockholder representatives:<br />
Mr. Erwin Conradi, Mr. Hans-Dieter Cleven,<br />
Prof. Dr. Erich Greipl (who prior to the election<br />
had stepped down from the Executive Board),<br />
Mr. Sven Gronostay, Ms. Angelika Hünerbein,<br />
Ms. Renata Jungo, Mr. Bernd Kreft, Mr. Hugo<br />
Trütsch, Dr. Stephan Ulrich, and Mr. Heinz-<br />
Jürgen Weber.<br />
It proved impossible at short notice to abide<br />
by the highly complex procedure prescribed by<br />
the Codetermination Act for electing an equal<br />
number of employee representatives; therefore,<br />
these members had to be appointed by<br />
the court pursuant to Art. 104(4) AktG. On<br />
August 14, 1996, the following employee representatives<br />
were elected Supervisory Board<br />
members of <strong>METRO</strong> <strong>AG</strong>: Mr. Klaus Bruns,<br />
Mr. Holger Grape, Mr. Hubert Haselhoff, Mr.<br />
Hanns-Jürgen Hengst, Mr. Gerhard Herbst,<br />
Mr. Hermann Hesse, Ms. Ingeborg Janz, Dr.<br />
Karlheinz Marth, Mr. Gustav-Adolf Munkert,<br />
and Mr. Peter Seuberling.<br />
On June 21, 1996, and with effect from July 1,<br />
1996, the Supervisory Board appointed Mr.<br />
Wolfgang Urban, Mr. Klaus Wiegandt, Mr.<br />
Siegfried Kaske, Dr. Hans-Joachim Körber,<br />
Dr. Wolf-Dietrich Loose and Mr. Joachim Suhr<br />
as <strong>METRO</strong> <strong>AG</strong>’s Executive Board members for<br />
a term of 5 years. At the same time, Mr. Urban<br />
and Mr. Wiegandt were appointed Executive<br />
Board spokesmen.<br />
Concurrently with the entries in <strong>METRO</strong> <strong>AG</strong>’s<br />
Commercial Register on July 18 and 19, 1996,<br />
the mergers of Asko Deutsche Kaufhaus <strong>AG</strong>,<br />
Deutsche SB-Kauf <strong>AG</strong> and Kaufhof Holding <strong>AG</strong><br />
took effect. The three original mergees had<br />
thus become defunct, their stockholders thenceforth<br />
being owners of <strong>METRO</strong> <strong>AG</strong>.<br />
89
Ms. Hünerbein, Mr. Gronostay, Dr. Ulrich and<br />
Mr. Weber stepped down from the Supervisory<br />
Board as of September 12, and so did Ms.<br />
Jungo, Mr. Kreft and Mr. Trütsch as of September<br />
13, 1996. At September 30, 1996, the<br />
Local Court of Registration then appointed<br />
the following stockholder representatives as<br />
Supervisory Board members: Dr. Hermann<br />
Krämer, Dr. Klaus Liesen, Prof. Dr. Helmut<br />
Schlesinger, Dr. Manfred Schneider, Mr. Hans<br />
Peter Schreib, Dr. Henning Schulte-Noelle,<br />
and Dr. Joachim Theye.<br />
The Supervisory Board elected Mr. Erwin<br />
Conradi and Mr. Klaus Bruns its chairman<br />
and vice-chairman, respectively.<br />
Thereupon, the Supervisory Board established<br />
three committees with parity representation,<br />
viz. the so-called Supervisory Board presidential/staff<br />
committee, the slate submittal committee<br />
pursuant to Art. 27(3) Codetermination<br />
Act, and a financial audit commmittee.<br />
*<br />
In the fiscal year 1996, <strong>METRO</strong> <strong>AG</strong>’s Supervisory<br />
Board monitored, and provided advice for, the<br />
Executive Board’s conduct of business. The<br />
Supervisory Board regularly obtained information<br />
on the <strong>Group</strong>’s position and business<br />
development, and received and discussed the<br />
pertinent reports from the Executive Board.<br />
All actions requiring the Supervisory Board’s<br />
approval were deliberated on in detail.<br />
The Supervisory Board chairman maintained<br />
constant contact with the Executive Board and<br />
was provided with ongoing information about<br />
material transactions and the financial position.<br />
90<br />
The Supervisory Board’s deliberations concerned<br />
fundamental business policy matters<br />
and major individual transactions, sales trends,<br />
income situation and financial position of<br />
<strong>Group</strong> companies. Additionally on the agenda<br />
were measures for sharpening the Company’s<br />
competitive edge and strengthening its market<br />
position, as well as preinvestment and financial<br />
planning discussions.<br />
Focal points at the October meeting were<br />
<strong>METRO</strong> <strong>AG</strong>’s financing with its accounting<br />
effects and the international expansion of<br />
certain subsidiaries.<br />
The accounting, the annual financial statements<br />
(including the notes thereto) as of December<br />
31, 1996, and the combined Management<br />
Report on the Company and the <strong>Group</strong> were<br />
examined by the statutory auditors, Duisburgbased<br />
Fasselt-Mette & Partner Wirtschaftsprüfungsgesellschaft,<br />
who issued their unqualified<br />
opinion thereon. The Supervisory Board concurs<br />
with the audit results, which do not contain<br />
any findings or exceptions. The statutory<br />
auditors’ reports were submitted to all the<br />
Supervisory Board members and discussed<br />
at the Supervisory Board’s annual earnings<br />
meeting in the presence of the statutory<br />
auditors.<br />
The Executive Board submitted to the Supervisory<br />
Board the consolidated accounts, the<br />
<strong>Group</strong> Management Report and the report of<br />
the statutory <strong>Group</strong> auditors. The Supervisory<br />
Board approved of the <strong>Group</strong> accounts including<br />
the <strong>Group</strong> Management Report.<br />
The Supervisory Board examined and approved<br />
the annual accounts as of December 31, 1996,<br />
including the combined Management Report<br />
on the Company and the <strong>Group</strong>, all as submitted<br />
by the Executive Board; the annual<br />
accounts are thus adopted. The Supervisory<br />
Board agrees to the appropriation of net earnings<br />
as proposed by the Executive Board.
In addition, the Executive Board prepared a<br />
dependency report on the Company’s affiliation<br />
in fiscal 1996 pursuant to Art. 312 AktG.<br />
The statutory auditors examined said report,<br />
too, laid down the results of their audit in writing<br />
and issued the following opinion thereon:<br />
“According to our audit, which we performed<br />
with due care and to professional standards, it<br />
is our opinion that<br />
(1) the facts stated in the report are valid,<br />
(2) the consideration paid by the Company<br />
for the legal transactions mentioned in the<br />
report was not unreasonably high.”<br />
According to the final result of its own examination,<br />
the Supervisory Board has no objections,<br />
either to the representations of the Executive<br />
Board in the report the latter prepared under<br />
the terms of Art. 312 AktG, or to the auditors’<br />
opinion issued thereon.<br />
Cologne, May 1997<br />
THE SUPERVISORY BOARD<br />
Erwin Conradi<br />
Chairman<br />
<strong>METRO</strong> <strong>AG</strong><br />
Report of the Supervisory Board<br />
91
Summary of major <strong>Group</strong> companies<br />
% held Equity in<br />
Name Reg. office by <strong>Group</strong> DM million<br />
<strong>METRO</strong> <strong>AG</strong> Cologne 3,845.256<br />
Metro Wholesale<br />
Metro International Management GmbH Düsseldorf 100.00 264.958<br />
Metro Grosshandelsgesellschaft mbH Düsseldorf 100.00 53.782<br />
Department Stores<br />
Kaufhof Warenhaus <strong>AG</strong> Cologne 87.50 330.000<br />
Kaufhalle <strong>AG</strong> Cologne 84.23 382.152<br />
Hypermarkets<br />
Real SB-Warenhaus Holding GmbH Alzey 100.00 414.041<br />
Real SB-Warenhaus GmbH & Co Vertriebs-KG Bochum 100.00 191.775<br />
Real SB-Warenhaus GmbH Hannover 100.00 76.400<br />
Real SB-Warenhaus GmbH & Co Vertriebs-KG Mutterstadt 100.00 24.433<br />
Real SB-Warenhaus GmbH & Co Süd KG Fürth 100.00 (13.497)<br />
Massa <strong>AG</strong> Alzey 96.20 197.214 1)<br />
Food Stores & Discounters<br />
Deutsche SB-Kauf Handelsgesellschaft mbH Sarstedt 100.00 171.113<br />
Deutsche SB-Kauf Handels <strong>AG</strong> Kamen 100.00 73.838<br />
Extra SB-Warenhaus GmbH Vertriebsgesellschaft im Münsterland Mülheim/Ruhr 100.00 50.309<br />
Extra Verbrauchermarkt GmbH & Co Betriebs-KG Sarstedt 100.00 39.820<br />
Extra Handelsgesellschaft mbH Betriebsgesellschaft Sarstedt 100.00 22.077<br />
Tip Discount Handels GmbH & Co KG Sarstedt 100.00 22.146<br />
Consumer Electronics Centers<br />
Media-Saturn-Holding GmbH Ingolstadt 71.69 312.719<br />
Home Improvements Centers<br />
Praktiker Bau- und Heimwerkermärkte <strong>AG</strong> Kirkel 75.00 834.102 1)<br />
Furniture Centers<br />
Möbel Unger GmbH Goslar 100.00 207.498<br />
Computer Centers<br />
Vobis Microcomputer <strong>AG</strong> Würselen 90.00 141.592<br />
Maxdata Computer GmbH Marl 45.90 45.431<br />
Fashion Centers<br />
Adler Modemärkte GmbH Haibach 100.00 66.000<br />
Footwear Centers<br />
Reno Versandhandel GmbH Thaleischweiler- 75.00 60.948<br />
Fröschen<br />
Mail Order<br />
Oppermann Versand <strong>AG</strong> Neumünster 67.75 52.913<br />
Hanseatisches Wein- und Sekt-Kontor Hawesko GmbH Hamburg 75.00 19.680<br />
Restaurant & Catering<br />
Dinea Gastronomie GmbH Cologne 100.00 10.000<br />
Real Estate<br />
Metro Immobilien Holding GmbH Saarbrücken 100.00 378.207<br />
Asset Immobilien GmbH & Co KG Cologne 100.00 545.533<br />
Horten <strong>AG</strong> Düsseldorf 87.46 433.460<br />
Others<br />
Metro MGE Einkauf GmbH Düsseldorf 100.00 26.712<br />
1) Fiscal year from Oct. 1, 1995, to Sep. 30, 1996<br />
The full listing of the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s shareholdings will be deposited with the Commercial Register of the Cologne Local Court<br />
under no. HRB 26888 and may also be obtained directly from <strong>METRO</strong> <strong>AG</strong>.<br />
92
“The consolidated accounts, which we examined<br />
with due professional care, comply with<br />
the law. The consolidated accounts, which are<br />
in accordance with generally accepted accounting<br />
principles, present a true and fair view of<br />
the <strong>METRO</strong> <strong>AG</strong> <strong>Group</strong>’s net-asset, financial<br />
and income position. The <strong>Group</strong> Management<br />
Report, which is combined with that on <strong>METRO</strong><br />
<strong>AG</strong>, is in conformity with the consolidated<br />
accounts.”<br />
Duisburg, April 30, 1997<br />
FASSELT-METTE & PARTNER<br />
WIRTSCHAFTSPRÜFUNGSGESELLSCHAFT<br />
Dr. H. Herrmann Dr. P. Schöneberger<br />
Wirtschaftsprüfer Wirtschaftsprüfer<br />
<strong>METRO</strong> <strong>AG</strong><br />
93
<strong>METRO</strong> <strong>AG</strong> <strong>Group</strong><br />
Balance sheet as of December 31, 1996<br />
Income statement for the year ended December 31, 1996
<strong>METRO</strong> <strong>AG</strong> <strong>Group</strong><br />
Balance sheet as of December 31, 1996<br />
Assets<br />
Note Balance at Balance at<br />
In DM million no. 12-31-1996 1-1-1996<br />
Fixed assets 6<br />
Intangible assets 7 2,611.444 2,537.499<br />
Tangible assets 8 6,381.299 5,988.512<br />
Financial assets 9 680.715 745.416<br />
Current assets<br />
9,673.458 9,271.427<br />
Inventories 10 6,544.715 6,633.321<br />
Receivables and sundry assets 11 2,511.500 2,711.852<br />
Short-term securities and note loans 12 346.795 365.625<br />
Cash on hand and in bank 1,603.336 451.917<br />
11,006.346 10,162.715<br />
Prepaid expenses and deferred charges 13 97.585 75.449<br />
20,777.389 19,509.591<br />
Stockholders’ equity and liabilities<br />
Note Balance at Balance at<br />
In DM million no. 12-31-1996 1-1-1996<br />
Equity 14<br />
Capital stock 15 501.212 501.014<br />
Reserve from capital surplus 16 2,729.608 2,725.363<br />
Reserves retained from earnings 17 215.483 –<br />
Unappropriated retained earnings, <strong>Group</strong> 403.366 –<br />
Third-party equity shares 18 976.686 1,114.900<br />
4,826.355 4,341.277<br />
Untaxed/special reserves 17.205 –<br />
Accruals 19 4,058.475 4,089.666<br />
Liabilities 20 11,438.680 10,688.404<br />
Deferred income 21 436.674 390.244<br />
94<br />
20,777.389 19,509.591
<strong>METRO</strong> <strong>AG</strong> <strong>Group</strong><br />
Income statement for the year ended December 31, 1996<br />
Note<br />
In DM million no. 1996<br />
Gross sales (incl. VAT) 25 62,024.064<br />
Value-added tax (6,990.164)<br />
Net sales 55,033.900<br />
Change in inventories of finished products and work in process 57.013<br />
Other work and material capitalized 6.793<br />
Other operating income 26 2,433.195<br />
Total operating performance 57,530.901<br />
Cost of materials 27 (39,860.703)<br />
Personnel expenses 28 (7,763.782)<br />
Amortization of intangible and depreciation of tangible assets 29 (1,217.981)<br />
Other operating expenses 30 (7,573.805)<br />
Operating result 1,114.630<br />
Income from investments 31 19.399<br />
Net financial result 32 (71.995)<br />
Result from ordinary operations 1,062.034<br />
Income taxes 33 (274.486)<br />
Other taxes (70.334)<br />
Net income 34 717.214<br />
Third-party shares in net income 35 (106.811)<br />
Transfer to reserves retained from earnings (207.037)<br />
Net earnings, <strong>Group</strong> 403.366<br />
95