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Owner's Expectations Manual

Annex 5: Financial performance measures

Shareholder's return

Shareholder's return
Measure Description Calculation
Total shareholder return Performance from an investor perspective - dividends and investment growth (Commercial valueendless Commercial valuebeg plus dividends paid less equity injected)/Commercial valuebeg
Dividend yield The cash return to the shareholder Dividends paid/Average commercial value
Dividend payout Proportion of an SOEs net operating cash flows less allowance for capital maintenance paid out as a dividend to the shareholder Dividends paid/Net cash flow from operating activities less depreciation expense
Return on equity How much profit a company generates with the funds the shareholder has invested in the company Net profit after tax/Average equity
Return on equity adjusted for IFRS fair value movements and asset revaluations Return on equity after removing the impact of IFRS fair value movements and asset revaluations Net profit after tax adjusted for IFRS fair value movements (net of tax)/Average of share capital plus retained earnings

Profitability/efficiency

Profitability/efficiency
Measure Description Calculation
Return on capital employed The efficiency and profitability of a company's capital from both debt and equity sources EBIT adjusted for IFRS fair value movements/Average capital employed
Operating margin The profitability of the company per dollar of revenue EBITDAF/Revenue
Generator efficiency[11] The efficiency and profitability of the company's electricity generation EBITDAF/MWh

Leverage/solvency

Leverage/solvency
Measure Description Calculation
Gearing ratio (net) Measure of financial leverage - the ratio of debt (liabilities on which a company is required to pay interest) less cash, to debt less cash plus equity Net debt/net debt plus equity
Interest cover The number of times that earnings can cover interest EBITDAF/Interest paid
Solvency Ability of the company to pay its debts as they fall due Current assets/current liabilities

Definitions of key terms used in calculations

Definitions of key terms used in calculations
Term Definition
Capital employed Interest-bearing debt plus share capital plus retained earnings
Capital expenditure Payments for the purchase of property, plant and equipment items taken from the cash flow statement
Commercial value This is the board's estimate of the current commercial value of the Crown's investment in the Group as per the company's SCI
Depreciation expense Depreciation expense per the profit and loss account
Dividends paid Dividends paid to the shareholder during the financial year per the cash flow statement
EBIT Earnings before interest and taxation
EBITDA Earnings before interest and taxation, depreciation and amortisation
EBITDAF Earnings before interest and taxation, depreciation and amortisation and fair value adjustments
Equity Total shareholder's equity taken from the balance sheet
Fair value adjustments Includes unrealised fair value gains/losses on derivatives or all fair value gains/losses on derivatives where the entity does not separately identify unrealised items. Also includes changes in the fair value of biological assets and investment properties
Interest paid Interest paid for the financial year on interest-bearing debt per the company's cash flow statement
Net cash flow from operating activities Taken directly from the cash flow statement - this is cash flows from operating activities less cash flows to operating activities. Ensure that interest paid is included in operating activities
Net debt Interest-bearing debt such as loans, bonds and commercial paper plus interest-bearing finance leases less cash
Retained earnings Profits retained in the business (ie, after dividends to the shareholder)
Revaluation reserve When an asset is re-valued to fair market value for accounting purposes the increase in the value of the asset is reflected in a revaluation reserve within equity
Revenue Revenue from the operations of the business. Interest revenue should be excluded
Share capital The amount of capital originally invested by the shareholder and any subsequent equity injections
Tax on fair value adjustments This is the tax effect relating to the changes in the fair values of financial instruments

Notes

  • [11]This measure is only applicable for Genesis, Meridian and Mighty River Power.
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