Management review

Return on capital employed

The financial return obtained from the capital employed by the group is a key measure of financial performance, and is monitored monthly. The definition of Return on Capital Employed (ROCE) used by the group is the last 12 months’ operating profit, before goodwill impairment and intangible asset amortisation (excluding the impact of pension finance charges or credits), expressed as a percentage of the weighted monthly average total tangible assets less liabilities (excluding borrowings, deferred tax liabilities and retirement benefit obligations) ignoring derivatives. The ROCE on this basis for 2007, reported in the group’s December 2007 management accounts, was 16.7 per cent (2006: 15.9 per cent).