Other Disclosures

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39. Capital Management Disclosures

The purpose of financial management in the groups is to ensure a maximum degree of financial flexibility as well as sufficient scope for action regarding the operational, financial and strategic business development of the groups at all times. REWE Group is committed to maintaining a strong financial profile and a solid credit rating. In maintaining the financial profile, REWE Group focuses on internationally accepted, rating-relevant financial ratios. All strategic business decisions are reviewed with regard to their impact on these key figures.

A financial policy has been defined for REWE Group that specifies its most important key figure as follows:

The leverage factor is the ratio of net debt to rent-adjusted EBITDA (EBITDAR) of REWE Group. The definition of this key figure takes into account the liabilities recognised on the balance sheet and net rental obligations, multiplied by five. This factor implies the present value of net rental obligations. A maximum leverage factor of three has been specified for REWE Group. Should extraordinary market conditions force management to exceed this debt limit, measures must be developed to return the key ratio to the target level. As at 31 December 2017, this key figure stood at 2.6 (previous year: 1.9). The financing structure, liquidity and financial risk positions are managed centrally at REWE Group.

Based on capital market principles, long-range capital management is also guided by the decision with respect to variable and fixed-rate borrowing.

Short-term liquidity management for REWE Group is conducted on a monthly basis for the subsequent year and is updated continuously. The medium-term liquidity requirement is calculated for each calendar year based on the medium-term plan and thus serves as the basis for the financing strategy.

REWE Group has assigned a central treasury committee to manage financial risks (e.g. foreign exchange risks, interest rate risks and credit risks). Treasury committees also exist at the level of the business segments. These bodies serve to further the mutual exchange of information, shaping opinions and encouraging close consultation among the different corporate units on issues and strategies of overall importance.

Moreover, the expertise concentrated in REWE Group is used to advise and support domestic and international REWE Group companies in all relevant financial matters. Relevant issues range from fundamental considerations concerning the financing of acquisition and investment projects to on-site support for local financial officers of individual group companies in discussions with banks and financial services providers.