Key Performance Indicators
Key performance indicators for fiscal 2010
The Board has set the following key performance indicators which reflect market conditions and the Group’s focus on risk reduction and cash generation:
- Maintenance of gross merchandise margin at a level similar to fiscal 2009;
- Cost savings of $100 million excluding underlying inflation and any change in net bad debt provision;
- Reduction in inventory of about $100 million;
- Capital expenditure of about $55 million; and
- Reduction in net debt, excluding exchange adjustment and issue or purchase of Common Shares, of between $175 million and $225 million.
While performance data continues to be collected by management for many purposes, including training, performance appraisal of individuals, customer service, employment or environmental monitoring, and supply chain performance, none were selected as key performance indicators.
Definition of each historic key performance indicator is given below:
Same store sales performance
The change in same store sales is determined by comparison of sales in stores that were open in both the current and the prior year. Sales from stores that have been open for less than 12 months are excluded from the comparison until their 12 month anniversary. Sales from the 12 month anniversary onward are compared against the equivalent prior period sales within the same store sales comparison. Stores closed in the current financial period are included up to the date of closure and the comparative period is correspondingly adjusted. Stores that have been relocated or expanded, but remain within the same local geographic market, are included within the comparison with no adjustment to either the current or comparative period. Stores that have been refurbished are also included within the comparison except for the period when the refurbishment is taking place, when those stores are excluded from the comparison both for the current year and for the comparative period. Comparisons at the divisional level are made in the local currency and consolidated Group comparisons are made at constant exchange rates and exclude the effect of exchange rate movements by recalculating the prior period results as if they had been generated at the weighted average exchange rate for the current period.
Change in net store space
Net change in store space is the percentage change in store selling space over the prior year measured as at the year end. Store selling space is the area that is open to the consumer and excludes staff rest areas, storage areas and unused space. All stores open on the last day of the financial year are included in the calculation.
Change in total sales at constant exchange rates
See Principal accounting policies Note 1d Revenue recognition in Item 18 “Financial Statements” on page 122 of form 20-F for fiscal 2009 for a definition of sales. The Group comparison is made at constant exchange rates and excludes the effect of exchange rate movements by recalculating the prior period results as if they had been generated at the weighted average exchange rate for the current period.
Change in net operating income at constant exchange rates
Net operating income is the total Group sales less cost of sales and administrative expenses, plus other operating income, all at constant exchange rates. Cost of sales and administrative expenses are defined on page 123 of form 20-F for fiscal 2009.
Return on capital employed (“ROCE”)
ROCE is calculated by dividing the annual operating income by the average monthly capital employed excluding goodwill for that year, expressed as a percentage. Capital employed includes other intangible assets, property, plant and equipment, other non-current receivables, inventories, trade and other receivables; less trade and other payables, deferred income and retirement benefit obligations.
Movement in net debt excluding exchange adjustments and issue or purchase of Common Shares
Movement in net debt is defined as the difference between net debt at the end of the period and that at the beginning of the period, excluding exchange adjustments, and the net movement in equity capital (proceeds from issue of shares less purchase of own shares). Net debt is the total of loans, overdrafts and long term debt less cash and cash equivalents.
Historic key performance indicators
The key performance indicators, set out below, were judged by the Board to be most useful in measuring the effectiveness of management in delivering the Group’s former growth strategy and managing the business. In the current extremely challenging market conditions the Board does not believe that the historic key performance indicators, and in particular the related targets, are appropriate in judging the progress of the Group.
| Historic key performance indicator | Target over economic cycle | Performance over last 5 years |
|---|---|---|
| Change in same store sales | up mid single digits | 0.5% |
| Change in net store space | up 5% to 7% | 6.2% |
| Change in total sales at constant exchange rates(1) | up 7% to 10% | 4.1% |
| Change in operating income at constant exchange rates(1) | up 7% to 9% | (11.4)% |
| Return on capital employed, excluding goodwill | over 20% | 19.6% |
| Target in fiscal 2009 | Performance in fiscal 2009 | |
|---|---|---|
| Movement in net debt excluding exchange adjustments and issue or purchase of Common Shares | an increase in net debt of between $40 million and $80 million | increase of $72.7 million |
(1) Click here for reconciliation of fiscal 2009 GAAP numbers, and below for definitions.