2021-04-06 Services and Organisation Committee Meeting Agenda

SERVICES & ORGANISATION COMMITTEE MEETING AGENDA    6 APRIL 2021




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SERVICES & ORGANISATION COMMITTEE MEETING AGENDA                                                     6 APRIL 2021

       POLICY GUBDELINE - TENDERER FINANCIAL CAPACITY ASSESSMENT

        RELEVANT LEGISLATION

        Financia! Sustainability Policy
        Local Government Act 2009
        Loca! Government Regulation 20172
        Building Industry Faimess (Security of Payment) Act 2017
        Indicators and Definitions
        [Criteria&Indicator                    | Definition
          Revenue                                Company revenue is expected at 5 times the project value
                                                 to demonstrate company size and capacity to manage
                                                 multiple projects.
          Revenue Growth                         Positive annual growth is expected im core operational
                                                 revenues.
          EBIT (Performance and Growth)          EBIT is defined as operating revenue less operating
                                                 expenditure, excluding interest and taxation (i.e. net profit
                                                 before income tax plus gross interest expense). Positive
                                                 EBIT performance and growth is expected.
          Profit Margin (Profitability %)        The operating sales margin identifies the extent to which
                                                 sales are translated into profits. The higher the ratio, the
                                                 more efficient the company is in turning sales into profits.
                                                 The operating sales margin is determined by dividing EBIT
                                                 by sales revenue. A minimum operating sales margin of
                                                 5% should be expected.
          Dividend Payout Ratio                  The dividend payout ratio reflects the proportion of after-
                                                 tax profits paid out in dividends. The higher the ratio, the
                                                 more profits are paid a5 dividends to shareholders rather
                                                 than held as retained earnings within the company.
          Sustainable Growth                     The sustainable growth rate is a measure of how much a
                                                 company can grow its revenue without requiring access to
                                                 additional funds (Le. via reductions im cash holdings,
                                                 additional debt, additional equity raising, improved
                                                 profitability or reduced dividend payout ratio), and is
                                                 calculated as the extent of retained income divided by
                                                 opening equity.
          Asset Turnover                         Asset turnover compares the ratio of revenue to total net
                                                 assets (i.e. the extent of capital tied up in the operational
                                                 balance sheet). As the asset turnover ratio increases,
                                                 capital is freed up to grow the business, reduce debt or
                                                 increase returns to shareholders. A consistently low or
                                                 reducing asset turnover ratio could be a reflection of such
                                                 things as poor asset management policies, deciining cash
                                                 flows or declining sales.

          Working Capital Ratio                  The working capital ratio indicates whether a company has
                                                 enough short-term assets to cover its short-term debt.
                                                 Anything below 1 indicates negative working capital, while
                                                 3 score between 1 and 2 is considered efficient.
          Net Debt to Equity Ratio               The net debt to equity ratio identifies a company’s reliance
                                                 on debt as 3 means of financing, and is defined as net
                                                 debt divided by total equity.

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