Barclays 2006 Annual Report Download - page 21

Barclays PLC
Annual Report 2006 17
Operating review
1
Barclays Wealth profit before tax rose 28% to £213m.
This reflected broadly based income growth and favourable market
conditions, partially offset by a significant increase in investment
in people and infrastructure to build a platform for future growth.
Total client assets increased 19% to £93bn. The cost:income ratio
improved three percentage points to 79%.
In Head office functions and other operations the loss before tax
decreased £64m to £259m, reflecting the Head office relocation
costs incurred in 2005.
Goals
Barclays primary focus is to deliver superior value to its shareholders.
The primary goal remains to achieve top quartile total shareholder
return (TSR) relative to a peer group of 11 other UK and
international financial services institutions. TSR is defined as the
value created for shareholders through share price appreciation,
plus reinvested dividend payments. In 2004, we announced a new
performance cycle TSR goal for the 2004 to 2007 period.
The TSR peer group is reviewed annually to ensure it aligns with our
business mix and the direction and scale of our ambition. The peer
group for 2006 was: ABN Amro, BBVA, BNP Paribas, Citigroup,
Deutsche Bank, HBOS, HSBC, JP Morgan Chase, Lloyds TSB, Royal
Bank of Scotland and UBS. For 2007 the peer group is unchanged.
For the first three years of the new goal period, from 31st December
2003 to 31st December 2006, Barclays was positioned sixth within
its peer group, which is second quartile TSR performance.
In addition, economic profit (EP) is used to support the pursuit of
the top quartile TSR goal. The strategies we follow and the actions
we take are aligned to value creation for all stakeholders. Barclays
uses EP, a non-IFRS measure, as a key indicator of performance
because it believes that it provides important discipline in decision-
making. Barclays believes that EP encourages both profitable
growth and the efficient use of capital. More information on the
reconciliation of EP to profit before tax can be found on page 51.
At the time of setting the TSR goal, we estimated that achieving top
quartile TSR would require the achievement of compound annual
growth in economic profit of 10% to 13% per annum (£6.5bn to
£7.0bn cumulative economic profit) over the 2004 to 2007 goal
period. Economic profit for 2006 was £2.7bn, which, added to the
£3.3bn generated in 2004 and 2005, delivered a cumulative total
of £6.0bn for the goal period to date. This equates to compound
annual growth in economic profit of 28% per annum for the goal
period to date.