Value Based Management
EWE AG as the parent company has defined value goals for the measurement and management of company performance, with these goals securing corporate success in the long term. The integral parts of this overall objective are long-term value creation, the securing of financing on favourable terms, and the stabilisation of EWE’s external ratings. The EWE Group’s value goals are reflected in key performance ratios.
Of central importance to the Group management is the key ratio ROCE (Return on Capital Employed) as operative results before interest and taxation (Operating EBIT) represents return on capital invested (Capital Employed).
Operating EBIT is a measure of a company’s performance. It is equal to the EBIT, adjusted for one-off effects not relevant for management purposes such as valuation effects from derivatives, impairment charges recorded against property, plant and equipment, impairment charges against assets accounted for under the equity method and other shareholdings and the results from the disposal of investments.
Due to the fixed asset intensity of the EWE Group’s business, invested capital is for the most part tied up in property, plant and equipment. In order to determine values and long-term value trends independently of the respective useful lives used for depreciation purposes and the variability of investment cycles, fixed assets with finite useful lives are valued at half of the average historical costs and fixed assets with indefinite useful lives (including, among other items, goodwill and financial investments) at their average carrying values for the purposes of calculating the capital basis.
As an additional key performance indicator in the context of the Group’s controlling, the degree of indebtedness, as a ratio of net debt to operating EBITDA, is used to represent the EWE Group’s ability to service debts. Furthermore, financial stability should be supported by an adequate equity ratio. At the operating business area level, the focus on ROCE and operating EBIT is complemented by specific key indicators, e.g. gross earnings, profit contribution, free cash flow, and sales volumes). In addition, capital expenditure and its distribution among the individual business areas are another focus area in Group reporting.
The internal and external Group reporting is also continuously developed in response to the EWE Group’s management needs and in response to statutory requirements.