BMW 2007 Annual Report Download - page 51

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Revenue growth was spread across all regions.
Group revenues increased by 12.4 % in Germany
and by 21.4 % in the rest of Europe. Revenues for the
Americas region rose by 5.5 %. For the Africa, Asia
and Oceania regions, they grew in total by 14.0 %,
mainly as a result of the sharp sales volume increase
recorded in China. Cost of sales went up 2.1 per-
centage points faster than revenues. This develop-
ment reflected the impact of additional costs which
the BMW Group has reported on since the begin-
ning of 2007, namely the effect of less favourable ex-
change rates and higher raw material prices. Despite
these adverse factors, gross profit increased in ab-
solute terms by 7.5 %, giving a gross profit percent-
age of 21.8 % (2006: 23.1 %). The gross profit per-
centage for Industrial Operations was down by 0.5
percentage points and that of Financial Operations
by 1.1 percentage points. Information regarding the
composition of these sub-groups is provided in
Note [1].
Sales and administrative costs increased by
5.7 % due to the high level of business volumes; the
increase was, however, lower than that of revenues.
They represented 9.4 % of revenues and were there-
fore 0.7 percentage points lower on a year-to-year
comparison.
Research and development costs were 14.8 %
higher than in 2006, unchanged as a percentage of
revenues at 5.2 %. They include amortisation of cap-
italised development costs amounting to euro 1,109
million (2006: euro 872 million). Total research and
development costs amounted to euro 3,144 million
(2006: euro 3,208 million). This figure comprises
research costs, development costs not recognised
as assets and capitalised development costs. The
research and development expenditure ratio for 2007
was 5.6 % (2006: 6.5 %).
Depreciation and amortisation of property, plant
and equipment and intangible assets included in
cost of sales, sales and administrative costs and re-
search and development costs amounted to euro
3,683 million (2006: euro 3,272 million).
Pension obligations decreased as a result of
the Retirement Age Amendment Act passed in
2007 which raised the statutory retirement age for
the state pension scheme in Germany. The euro
103 million positive impact on earnings is spread
over the relevant income statement cost lines by
function.
Long-term creation of value
The overall target set for earnings is continuous
growth, whereby the relevant performance indicators
are measured against the Group’s minimum rate of
return. These periodic targets are supplementary to
project and programme targets.
In order to implement this comprehensive target
and management system, whilst at the same time
satisfying periodic reporting and accounting require-
ments, the model analyses show for each project
decision reached the impact of cash flows on the
NPV and on the model rate of return as well as the
impact on periodic earnings. This approach enables
the BMW Group to analyse the effect of each project-
based decision on business value (quantified in
terms of the NPV of the project programme) as well
as on earnings and rates of return. Multi-project
planning data gleaned from these procedures al-
lows ongoing comparison between dynamic multi-
period targets and periodic performance.
Strategic realignment
The BMW Group’s strategic realignment will also
bring with it changes to the Group internal manage-
ment system. In future, the BMW Group intends
to focus even more on profitability and increasing
business value in the long-term. This means that
the efficient use of capital at a project, segment and
Group level will play an even greater role.
Earnings Performance
The BMW Group recorded a net profit of euro
3,134 million (2006: euro 2,874 million) for the finan-
cial year 2007. The post-tax return on sales was
5.6 % (2006: 5.9 %). Earnings per share of common
and preferred stock were euro 4.78 and euro 4.80
respectively.
Group revenues rose by 14.3 % compared to
the previous year. Excluding exchange rate factors,
Group revenues would have increased by 17.6 % or
euro 8,397 million. Revenues from the sale of BMW,
MINI and Rolls-Royce brand cars went up by 11.8 %.
Revenues from motorcycles business fell by 2.5 %.
Revenues from financial services business climbed
by 26.5 % on the back of volume growth. Revenues
from other activities of the Group amounted to euro
214 million and related mainly to the Cirquent Group
(previously: softlab Group). The comparable figure
for the previous year was euro 193 million.