Sonic’s 2018 annual report measures their ROIC hurdle at:
1. 8.3% where 110% must be achieved to obtain 100% of the entitlements attached to it, or over a 9.1% return.
2. Very Importantly-Income is measured as EBIT less cash taxes paid (divided by the sum of equity and net debt less deferred tax).
Primary’s ROIC is measured as:
1. 7.3%, as set out in the recent release, where Sonic’s management must achieve 25% higher returns on capital than the Primary team.
2. Income is measured at EBIT, with no reduction for taxes!!!
If this is as it reads in the Primary 2018 annual report, page 57, we are taking a hurdle that is relatively around 50% lower than Sonic’s.
Truly Shocking.
ROIC hurdle - is this a cruel joke?
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