Performance

2. RESULTS OF OPERATIONS

Revenue Development

in million €20182017Change in
absolute figures
Change
in %
Retail Germany31,443.728,621.12,822.69.9
Retail International14,242.713,353.5889.26.7
Travel and Tourism4,880.04,649.6230.45.0
DIY Stores2,151.12,130.820.31.0
Other660.3669.3-9.0-1.3
Total53,377.849,424.33,953.58.0

Revenue increased by a total of 8.0 per cent in 2018.

The highest-volume business segment, Retail Germany, recorded a 9.9 per cent increase in revenue and was thus significantly higher than the industry trend in Germany. The positive revenue trend was supported by the development of REWE's own stores (including REWE To Go ) and the Penny stores, as well as by wholesale activities. Furthermore, the first-time inclusion of REWE Dortmund SE & Co. KG, Dortmund, over the entire year contributed significantly to the increase in revenue.

The Retail International business segment, with revenue of 14.2 billion euros, is the second-largest business segment in the REWE Group. The 6.7 per cent increase in revenue (+7.1 per cent adjusted for currency translation effects) was due primarily to the Full-Range stores segment in Central and Eastern Europe. Particularly high revenue increases were generated in the Czech Republic and Slovakia, due mainly to the positive performance of the existing stores and to expansion activities. Furthermore, UAB Palink, Vilnius, Lithuania, which was fully consolidated for the first time on 1 August 2018, contributed significantly to the increase in revenue. The Austrian Full-Range Stores segment reported a continued positive revenue trend, which was attributable mainly to food retail. Penny International's revenue also made a contribution to this positive development: this was caused by the revenue trend in the Czech Republic, Romania and Hungary in particular.

The Travel and Tourism Business Segment generated consolidated revenue of 4.9 billion euros (brokered travel revenue of 6.7 billion euros), up 5.0 per cent on the previous year. The newly developed source market, France, made a particular contribution to the growth in revenue. Significant revenue increases were also recorded in Central Europe and the target destination agencies. Overall, the recovery by the destinations Egypt, Tunisia and Turkey and the high demand for travel to Greece had a positive effect on the revenue trend.

In the DIY Stores business segment, revenue increased by 1.0 per cent. The increase in revenue at DIY stores was attributable mainly to the positive performance by the retail stores. Expansion activities as well as existing stores contributed to this growth.

Stores and Sales Areas

At the end of the year, the REWE Group's retail business segments operated 9,421 retail outlets with a total sales area of 9.2 million square metres.

Number of stores31 Dec. 201831 Dec. 2017Change in
absolute figures
Change
in %
Retail Germany4,0144,078-64-1.6
Retail International4,3524,0083448.6
Travel and Tourism760750101.3
DIY Stores29529320.7
Total9,4219,1292923.2

 

Sales area in m2 *31 Dec. 201831 Dec. 2017Change in
absolute figures
Change
in %
Retail Germany4,288,5514,387,104-98,553-2.2
Retail International2,969,8582,702,133267,7259.9
DIY Stores1,951,2911,935,23516,0560.8
Total9,209,7009,024,472185,2282.1
  • * No sales area is calculated in Travel and Tourism.

Results

in million €20182017Change in absolute figuresChange
in %
 Revenue53,377.849,424.33,953.58.0
 Cost of materials, incl. changes in inventories-40,378.2-36,948.6-3,429.6-9.3
Gross profit12,999.612,475.7523.94.2
 Gross profit ratio24.4%25.2%  
EBITDA1,843.11,594.9248.215.6
 Depreciation, amortisation and impairments/reversals of impairment losses and impairment losses (excl. goodwill)-1,234.6-1,103.5-131.1-11.9
EBITA608.5491.4117.123.8
 Goodwill impairments-10.40.0-10.40.0
EBIT598.1491.4106.721.7
 Financial result-14.6-16.62.012.0
EBT583.5474.8108.722.9
 Taxes on income-153.7-133.0-20.7-15.6
Results from continuing operations429.8341.888.025.7
 Results from discontinued operations0.0-4.04.0100.0
EAT/net income for the year429.8337.892.027.2

EBITDA increased by 248.2 million euros: The increase in gross profit by 523.9 million euros and the in other operating income (+436.2 million euros; excl. reversals of impairment losses) was offset by an increase of 346.6 million euros in other operating expenses and 365.3 million euros in personnel expenses. The sharper increase in cost of materials as compared to revenue, particularly in the Retail Germany, Travel and Tourism and DIY Stores business segments, resulted in a decrease in the gross profit margin to 24.4 per cent (previous year: 25.2 per cent).

The increase in other operating income was attributable primarily to higher income from advertising services, rental income, income from the reversal of provisions and income from additional services for goods traffic. The increase in income from advertising services is attributable to increased advertising activities in radio and television, print media, outdoor advertising and the increased use of advertising material in the Retail Germany and Retail International business segments. Furthermore, the first-time inclusion of REWE Dortmund SE & Co. KG, Dortmund, over the entire year also had a significant effect for the Retail Germany business segment.

Rental income increased mainly in the Retail Germany business segment. This was due to the increase in the number of partner stores and the higher sales-based rents due to increased revenue. Income also increased due to the first-time inclusion of REWE Dortmund SE & Co. KG, Dortmund, over the entire year.

The increase in income from the reversal of provisions related primarily to the reversal of provisions for expected losses from onerous contracts.

Some of these items of income are closely related to the corresponding expenses. Corresponding to the increases in rental income and income from additional services for goods traffic, the related expenses also rose. Expenses for maintenance and consumables as well as for the vehicle fleet and freight also increased.

The expenses for the vehicle fleet and freight increased primarily in the Retail Germany and Retail International business segments. The increase in the Retail Germany business segment resulted among other things from the increase in the use of third-party logistics services in the context of expanding the Group's business activities.

The increase in rental and lease expenses related primarily to the Retail Germany business segment and is attributable in part to the first-time inclusion of REWE Dortmund SE & Co. KG, Dortmund, over the entire year. In addition, the increase in rental and lease expenses resulted from the increase in the number of leased properties which were sub-leased to partners. The first-time inclusion of UAB Palink, Vilnius, Lithuania, also led to a significant increase in the Retail International business segment.

The increase in expenses for maintenance and consumables related mainly to the Retail Germany business segment. This was due in part to construction work in connection with restructuring measures.

The increase in personnel expenses (5.4 per cent) was attributable to factors including the first-time inclusion of REWE Dortmund SE & Co. KG, Dortmund, over the entire year, the first-time consolidation of UAB Palink, Vilnius, Lithuania, and the pay scale increases in 2018.

EBITA was 608.5 million euros in 2018, 117.1 million euros higher than in the previous year (491.4 million euros).

The financial result improved by 2.0 million euros: the 17.6-million-euro increase in the result from companies accounted for using the equity method and the 6.8-million-euro increase in the result from the measurement of derivative financial instruments were partly offset by the 11.8-million-euro decline in the interest result and the 10.6-million-euro decrease in the other financial result. The improvement in the result from companies accounted for using the equity method was attributable primarily to the reclassification of UAB Palink, Vilnius, Lithuania, which had been classified as a held for sale in the previous year. The recognised income relates to the pro rata result up to the date of first-time consolidation from 1 August 2018. The interest result is offset by higher interest income from taxes and higher interest expenses from financing activities.

Taxes on income resulted in an expense of 153.7 million euros (previous year: 133.0 million euros). This amount consists of a current tax expense of 134.3 million euros (previous year: 136.4 million euros) as well as deferred tax expense of 19.4 million euros (previous year: income of 3.4 million euros). The current tax expense includes income of 23.1 million euros (previous year: 1.3 million euros) from taxes for previous years.