wow vs wes roic

I am posting this in relation to a query by MM on another thread.

ROIC is a measure of how well a company has invested capital over time, specifically it shows whether the return is higher than the companies WACC. It is useful in comparing performance of businesses operating in the same sectors.

First it is necessary to define ROIC, because like most financial metrics there are different variations that are used.

For this purpose I will use what i consider to be the best definition of ROIC (some may disagree or have alternatives for various reasons).

IMO any calculation of ROIC should make allowance for the following;

1. Strip out assets not directly used in the core business such as cash or stock holdings.
2. Exclude free funding ie Trade creditors
3. Make adjustment (add back) any writedowns in assets that have occured over the last x years

The formula I will use is therefore as follows

ROIC = EBITA/(A-C+W)

A is interest bearing capital (total equity plus debt excluding non interest bearing liabilities)
C is cash holdings
W is intangibles write downs in prior years

WOW based on FY11 accounts

EBITA 3396.2
A = 12688.7 (7843.8+3373.8+1471.1)
C = 1519.6
W = immaterial (last 4 years)

=3396.2/(12688.7-1519.6)
= 30.4% ROIC

WES based on FY11 accounts

EBITA 3403
A = (25329+4613+266)
C = 897
W = immaterial(last 4 years)

=3403/(30208-897)
= 11.6% ROIC