ONE ROOF

For further information on our
use of RONA as a measure of
return on capital, please see
our website,
www.hochtief.com.
*For a detailed calculation of
cost of capital, please see
www.hochtief.com/rona.
60 Annual Report 2009
Measuring Return on Capital: Return on Net
Assets
• Value-driven strategy holds its own in critical
market environment
• RONA once again well above cost of capital
• Value created strong at EUR 224 million
• Group expects to continue creating value in
2010
Financial control system creates Group-wide
transparency
We run the HOCHTIEF Group on the basis of a valuedriven
management system. Our management objective
is sustained growth in Group value.
Our return on net assets (RONA) performance metric
makes value growth measurable. It is integrated into all
Group company planning and reporting systems to ensure
transparency throughout the Group. It also provides
the basis for assessing the profitability of investment
decisions. Value-based performance measures are used
alongside indicators focusing on earnings and cash
flow as key components of our management system.
Value-driven management is fostered by ensuring that
performance-linked compensation for HOCHTIEF management
is closely tied to the attainment of targets for
value created.
Return on net assets (RONA)
The two main control parameters relating to return on
capital are RONA and value created.
If RONA exceeds weighted average cost of capital
(WACC), value created is positive, which means the
Group is generating value. Expressed in absolute
terms, value created is RONA, minus WACC, times
average net assets.
RONA is return as a percentage of net assets and indi-
cates how well HOCHTIEF’s assets are performing as
an investment. Return is defined for this purpose as
operating earnings (EBITA, shown in the Operational
Statement of Earnings) plus interest income from the
Group’s financial assets. The net assets figure reflects
the total capital commitment from which returns are to
be generated. Net assets can be calculated starting
from the assets side or the liabilities side of the balance
sheet.
For divisional management purposes, net assets are
determined starting from the assets side by taking total
assets and deducting non-interest-bearing liabilities.
The assets-side calculation of net assets is useful in
monitoring operating activities as it specifically highlights
accounting parameters that operational managers
can influence, such as trade accounts receivable,
liquidity and trade accounts payable.
For the HOCHTIEF Group’s external reporting purposes,
net assets are determined from figures on the liabilities
side of the balance sheet. Net assets are obtained in a
simple and easy-to-follow calculation by adding interest-bearing
liabilities items on the published balance
sheet (shareholders’ equity, pension provisions, and
financial liabilities). Since RONA is calculated on a pretax
basis, deferred taxes are eliminated from the net
assets figure to remove tax effects.
Cost of capital*
Cost of capital is calculated on a weighted average basis.
Putting the relevant parameters into the cost of capital
equation, the HOCHTIEF Group’s cost of capital stands
at ten percent before tax. The factors affecting cost of
capital are regularly checked and revised in line with
any significant changes in the market environment.