BMW 2015 Annual Report Download - page 21

21 COMBINED MANAGEMENT REPORT
Capital employed corresponds to the sum of all current
and non-current operational assets, less liabilities that
do not incur interest (e. g. trade payables). Non-interest-
bearing liabilities are those capital shares which are
available to the operative business without interest. These
include, for example, trade payables.
Due to the key importance of the Automotive segment
for the Group as a whole, consideration is also given
to additional key performance indicators, with varying
degrees of detail, which have a significant impact on
RoCE and hence on segment performance. The most
important of these value drivers are deliveries to cus-
tomers, segment revenues and – as the key performance
indicator for segment profitability – the operating re-
turn on sales. Average carbon emissions for the fleet
are also taken into account, reflecting their potential
impact on earnings in the short term in the form of
ongoing development expenses, and, in the long term,
the consequences of meeting regulatory requirements.
For these purposes, “carbon emissions for the fleet”
corresponds to average emissions of CO
2
for new cars
sold in the EU-28
countries.
Managing the business on the basis of key value drivers
makes it easier to identify the reasons for changes in
RoCE and to define suitable measures to influence its
development.
Motorcycles segment
As with the Automotive segment, operating performance
for the Motorcycles segment is managed on the basis of
RoCE. Capital employed is measured using the same
procedures as in the Automotive segment. The strategic
target for the Motorcycles segment’s RoCE is 26 %.
Profit before financial result
RoCE Motorcycles = Capital employed
The number of vehicles delivered to customers is also
taken into account as a non-financial value driver.
Financial Services segment
As is common practice in the banking sector, the per-
formance of the Financial Services segment is measured
on the basis of return on equity. RoE is defined as seg-
ment profit before taxes, divided by the average
amount
of equity capital attributable to the Financial Services
segment. The target is a sustainable return on equity
of
at least 18 %.
RoE Financial
Profit before tax
Services =
Equity capital
Strategic management at Group level
Strategic management, including quantification of the
financial impact of strategic issues on long-term
fore-
casting, is performed primarily at Group level. The
most significant performance indicators for these pur-
poses are Group profit before tax and the size of the
Group’s workforce at the year-end. Group profit before
tax is a good overall measure of the Group’s perfor-
mance after consolidation procedures, and provides a
transparent basis for comparing performance, particu-
larly over time. The size of the Group’s workforce is
monitored as an additional key non-financial perfor-
mance
indicator.
Information provided by these two key performance in-
dicators is supplemented by the measurement of value
added. This highly aggregated performance indicator
provides an insight into capital efficiency and the (op-
portunity)
cost of capital required to generate Group
profit. Value added corresponds to the amount of earn-
ings over and above the cost of capital and gives an in-
dication of whether the Group is meeting the minimum
requirements for the rate of return expected by capital
providers. A positive value added means that a com-
pany is generating more additional value than the cost
of capital.
Value added Group = earnings amount – cost of capital
= earnings amount – (cost of capital rate ×
capital employed)
Capital employed comprises the average amount of
Group equity employed during the year as a whole, the
financial liabilities of the Automotive and Motorcycles
segments, and pension provisions. “Earnings amount”
for these purposes corresponds to Group profit before
tax, adjusted for interest expense incurred in conjunc-
tion with the pension provision and on the financial
liabilities of the Automotive and Motorcycles segments
(earnings before interest expense and taxes).
in € million Earnings amount Cost of capital (EC + DC) Value added Group
2015 2014 2015 2014 2015 2014
BMW Group 9,723 9,051 6,040 5,212 3,683 3,839