Simon Power
2 June, 2010
Minister releases SOE financial performance measures
State Owned Enterprises Minister Simon Power today released a set of financial performance measures which SOEs will be expected to include in their Statements of Corporate Intent from 2010/11.
"The National-led Government has made a commitment to improve the transparency and accountability of the SOEs," Mr Power said.
"These companies represent a $25 billion investment on behalf of the taxpayer, and shareholding ministers have a duty to ensure that this investment delivers an appropriate return.
"As such, shareholding ministers asked officials to develop a suite of financial performance measures to provide more information about each SOE's performance.
"Following consultation with the SOEs, 11 measures have been agreed, and I expect these to be included in each company's Statement of Corporate Intent from 2010/11.
"This is another step towards providing taxpayers with the tools to assess how their investment in this portfolio is performing."
The financial performance measures cover shareholder returns, profitability and efficiency, and leverage and solvency. A full copy is attached.
Table 1: Shareholder Returns
|
Measure |
Description |
Calculation |
|
Total shareholder return |
Performance from an investor perspective - dividends and investment growth |
(Commercial valueend less 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 SOE's 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 |
Table 2: 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 [1] |
The efficiency and profitability of the company's electricity generation |
EBITDAF/MWh |
Table 3: 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 |
