Summary
To rely on EBITA and highlight it to one's shareholders/bankers is at best misguided, at worst misleading.
Analysis
Companies, such as De Beers and their bankers, tend to make much of much of EBITA.
However, this measure of results is in my view misleading; companies, their shareholders and bankers cannot afford ignore (ie “sweep under the carpet”) interest, tax and amortisation.
In fact many companies align their directors’ KPI’s to EBITDA and gear their bonus payments accordingly.
These are erroneous targets; directors’ bonuses/KPI’s should be aligned towards sales, margins, net profit and cash flow.
To rely on EBITA and to highlight it to one's shareholders/bankers is at best misguided, at worst misleading.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
