Corporate and Other

Corporate and Other comprises Group administration expenses for Group functions that cannot be directly allocated to the business sectors, such as Finance, Procurement, Legal, Communications, and Human Resources. Corporate costs additionally encompass expenses for central, non-allocated IT functions, including expenses related to the expansion and harmonization of IT systems within the Merck Group, as well as research and development costs not allocable to a single business sector.

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Corporate and other

Key figure

Change
€ million 2017 2016 € million in %
Operating result (EBIT)1 – 445 – 492 47 – 9.5%
EBITDA1 – 400 – 465 65 – 14.0%
EBITDA pre1 – 301 – 396 96 – 24.2%
Business free cash flow1 – 437 – 485 47 – 9.8%
1
Not defined by International Financial Reporting Standards (IFRS).

In 2017, administration expenses reported under Corporate and Other increased to € 298 million (2016: € 276 million). Research and development costs allocated to Corporate and Other amounted to € 42 million (2016: € 7 million) and included expenses for the Innovation Center (management of ideation), costs of the New Business Builder unit(entering innovation fields and conducting innovation projects), as well as costs of the Global Health Institute, which is responsible for developing health solutions in developing countries. These projects are initiatives with benefits for Merck as a whole. Other operating expenses (net) improved to € – 101 million (2016: € – 207 million). Among other things, this was attributable to lower currency losses. The operating result (EBIT) attributable to Corporate and Other amounted to € – 445 million (2016: € – 492 million) and EBITDA totaled € – 400 million (2016: € – 465 million). After eliminating adjustments, EBITDA pre amounted to € – 301 million (2016: € – 396 million).

The development of business free cash flow was positively impacted by the improvement in EBITDA pre. However, higher capital spending led to cash outflows, which negatively affected this key performance indicator. Overall, negative business free cash flow improved to € – 437 million (2016: € – 485 million).