Return on Capital (ROC)

The Group has two main Return on Capital (ROC) measures.

The first measure, Standard Return on Capital is primarily a Group measure. It is stated on a non-lease adjusted basis, although we also quote a lease adjusted number. The asset base includes goodwill.

The second measure, Lease adjusted ROC excluding Goodwill is used to monitor performance at a geographic divisional level.

Standard Return on Capital

For Standard ROC, Return is calculated as post-tax Retail Profit less central costs and excluding exceptional items, other than realised property profit. Return is then divided by a two point average of Invested Capital (calculated as Net Assets excluding Net Debt and Pension related items including related Deferred Tax). Return and Invested Capital have been restated to exclude Castorama Italy in 2008/09 for comparability to 2009/10.

The strong operating performance combined with improved asset turns has resulted in the Standard ROC performance increasing from 5.8% (restated 2008/09) to 8.3% in 2009/10 compared to the Group’s weighted average cost of capital (WACC) of 7.8%.

Lease adjusted ROC is based on the same definition except it excludes property lease costs, and Invested Capital is adjusted for lease costs capitalised at the long term property yield. Lease adjusted ROC has increased from 5.6% (restated 2008/09) to 6.8% in 2009/10.

Lease adjusted ROC excluding goodwill and property profit

Kingfisher’s underlying ROC by geographic division is set out below. Return is stated adjusted for property lease costs and before property profits. Invested Capital excludes goodwill but includes capitalised leases. 2008/09 results exclude Castorama Italy and Ireland has been moved to the UK & Ireland geographic division from the Other International division. Other International includes the Group’s share of Joint Venture and Associate income net of tax and Invested Capital.