We are once again reporting economic profit in addition to the EBIT performance indicator as part of our value-based Group management. With economic profit we measure the value that we generate for our shareholders from operations, taking into account the total cost of capital used to generate revenue and profits.
We use the Group’s weighted average net cost of interest-bearing debt and equity expressed as a percentage, taking into account division-specific risk factors, as the cost of capital. We then multiply this rate by the average net assets employed to determine the total cost of capital.
We calculate economic profit by deducting the total cost of capital from the net operating profit after taxes. The calculation is based on the consolidated financial statements for the “Postbank at equity” scenario and includes financial obligations from non-cancelable operating leases.
Economic profit increased very strongly compared with the restated prior-year figure, rising by 49.0% to €1,951 million. Exel did not impact these figures as a result of its inclusion at the year-end. Net operating profit after taxes in particular increased and the total cost of capital dropped. While average net assets employed fell as a result of the now fully effective changes made the previous year, the weighted average cost of capital after taxes at Group level was reduced to 5.9% (previous year: 6.2%) as a result of a further decline in the overall level of interest rates. The reclassifications in the consolidated financial statements were taken into account, and the actual tax rate was used to calculate taxes on net operating profit; the prior-period amounts were restated accordingly.
For fiscal year 2006, the weighted average cost of capital after taxes at Group level is set unchanged at 5.9%.
|Economic profit (Postbank at equity)|
|Net operating profit after taxes||2,510||3,063||22.0|
|Average net assets employed||19,371||18,851||–2.7|
|Total cost of capital||–1,201||–1,112||–7.4|