PI's: Operating Margin (Overall)
Regulator for Social Housing: Operating Margin (Overall)
RSH 101: Operating margin (overall)
Rationale, Definition & Worked Example
Below you can find information regarding the rationale, definition and formula for this performance indicator. This includes a worked example to demonstrate how this indicator should be calculated.
Rationale
The Operating Margin demonstrates the profitability of operating assets before exceptional expenses are taken into account. Increasing margins are one way to improve the financial efficiency of a business. When the regulator assesses this ratio, consideration is given to registered providers purpose and objectives (including their social objectives). Further consideration is also given to specialist providers who tend to have lower margins than average.
Definition
Gain/loss on disposal of property, plant and equipment is not included in operating surplus. Similarly, results of JVs are not included in either turnover or operating surplus.
Formula
(A / B) * 100
A = Overall operating surplus/(deficit), not including any Gain/(loss) on disposal of fixed assets (housing properties). Similarly, results of JVs are not included in either turnover or operating surplus.
B = Turnover (overall)
A = Overall operating surplus/(deficit), not including any Gain/(loss) on disposal of fixed assets (housing properties). Similarly, results of JVs are not included in either turnover or operating surplus.
B = Turnover (overall)
Worked Example
Operating surplus (excluding disposals and JVs) = £2,500,000
Total turnover = £10,000,000
Calculation:
£2,500,000 ÷ £10,000,000 × 100 = 25%