Airbus 2015 Annual Report Download - page 243

AIRBUS GROUP FINANCIAL STATEMENTS 2015 l 61 l
Notes to the IFRSConsolidatedFinancialStatements
2.
2.7 Capital Structure and Financial Instruments
33. Capital Management
The Group seeks to maintain a strong financial profile to safeguard its going concern, financial flexibility as well as shareholders’,
credit investors’ and other stakeholders’ confidence in the Group. Consequently, operating liquidity is of great importance.
As part of its capital management, it is one of the Group’s objectives to maintain a strong credit rating by institutional rating
agencies. This enables the Group to contain its cost of capital which positively impacts its stakeholder value (entity value). Next
to other non-financial parameters, the credit rating is based on factors such as, cash flow ratios, profitability and liquidity ratios.
The Group monitors these ratios to keep them in a range compatible with a strong rating.
Rating agency Long-term rating Outlook Short-term rating
Standard and Poor’s Ave(1) Positi A-1
Moody’s Investors Services A2 Stable P-1
Fitch Ratings (unsolicited) A- Stable F-2
(1) The outlook with Standard and Poor’s has been changed to positive from stable in September2015.
The Group’s stand-alone ratings reflect the strong backlog
providing revenue visibility and Airbus’ leading market position,
the Group’s strong liquidity and improving credit metrics as well
as management’s focus on programmes execution, profitability
and cash generation improvement. The rating is constrained by
the Group’s exposure to structural currency risk.
In accordance with the Group’s conservative financial policy, a
strong rating is key to maintain a wide array of funding sources at
attractive conditions, to have broad access to long-term hedging
and to strengthen Airbus’ position as a solid counterparty for
its customers and suppliers.
Among other indicators, the Group uses a Value Based
Management approach in order to guide the Company towards
sustainable value creation by generating financial returns above
the cost of capital.
The key elements of the Value Based Management concept are:
 the definition of financial returns;
 the definition of the Company’s capital base; and
 the measurement of value creation derived from the two
above.
The Group uses Return on Capital Employed (“RoCE”) to
measure the value created by financial returns relative to
its capital base. RoCE, as defined by the Group, uses EBIT
pre-goodwill impairment and exceptionals for the numerator
and Average Capital Employed for the denominator. The
Average Capital Employed for the Group is defined as the
average of the annual opening and closing positions of Fixed
Assets plus Net Operating Working Capital plus operating cash
less Other Provisions.
Financial value is created if profits relative to the Group’s Capital
Employed exceed the Company’s cost of capital. Value can
be measured by comparing RoCE to the WACC. A five year
plan for a value creation ambition is constructed annually, and
is composed of (1)RoCE, (2)EBIT pre-goodwill impairment
and exceptionals, and (3) Free Cash Flow, which is defined
as Cash provided by operating activities and Cash used for
investing activities less Change of securities, Contribution to
plan assets for pensions and realised Treasury swaps. The
Company’s long-term aspiration is to reach the first quartile of
RoCE performance among our aerospace and defence peers.
The Group also monitors the level of dividends paid to its
shareholders.
The Group generally satisfies its obligations arising from
share-based payment plans by issuing new shares. In order
to avoid any dilution of its current shareholders out of these
share-based payment plans, the Group has accordingly decided
to buyback and cancel its own shares following the decisions
of the Board of Directors and approval of the Annual General
Meeting. Apart from this purpose, the Group generally does
not trade with treasury shares.
The Group complies with the capital requirements under
applicable law and its Articles of Association.
Financial Statements 2015
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Annual Report 2015 Financial Statements 2015
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