Value-based management

Bertelsmann Value Added (BVA)

Bertelsmann’s primary financial objective is to enhance the enterprise value by steadily increasing its profitabilty. The key performance indicator for assessing the profitability of business operations and the return on invested capital is Bertelsmann Value Added (BVA). This focus on enterprise value is reflected in the management of Group operations and of its strategic investments and portfolios; as an element within the management compensation system, it is integral to all business activities.

BVA is calculated as the difference between net operating profit after tax (NOPAT) and the cost of capital. NOPAT is defined as operating EBIT less a uniform tax charge of 33 percent in the Group. Cost of capital is the product of the weighted average cost of capital and the level of capital invested. The uniform weighted average cost of capital after taxes is 8 percent. Invested capital is calculated on the basis of the Group’s operating assets less non-interest-bearing operating liabilities. The present value of operating leases is also factored into invested capital. In fiscal year 2009, BVA from continuing operations decreased from €90 million to €26 million. The main reason for the decline in BVA, although this was partly offset by lower invested capital and the associated reduction in the cost of capital, was the lower operating result.