Return on assets

Return on Assets (ROA) provides an indication of how efficiently a company manages its assets in order to generate earnings. It is calculated by measuring profit against total assets reported. As a measure, this number tends to be heavily influenced by the requirements of the industry in which the business operates.

Agriculture and manufacturing businesses for example, requiring significant amounts of property, plant and equipment, will typically have a much lower return on assets percentage than a software company.

Lotto NZ (29th) now holds the top spot for return on assets for the second year in a row after entering the Top 200 Index in 2019. It has improved on its previous ROA of 201.2 per cent in 2019 to have an ROA of 214.0 per cent in 2020. The high ROA is driven by a 25.5 per cent increase in profit after tax from $261m in 2019 to $333m in 2020, with total assets of $190m in 2020.

Holding the second spot for ROA is TAB (120th), despite a decrease in its ROA to 102.6 per cent from 109.4 per cent. This is driven by an increase in total assets from $130m in 2019 to $136m in 2020, and a decrease in profit after tax from $146m in 2019 to $137m in 2020.

The third place is held by A2 Milk (22nd), with a ROA of 31.6 per cent (compared to 34.2 per cent in 2019), moving up from placing sixth for return on assets in 2019.

Zespri (12th) placed fourth in terms of ROA, rising from seventh place in 2019. Zespri’s ROA has decreased from 29.9 per cent in 2019 to 23.0 per cent in 2020. This is due to net profit increasing from $180m in 2019 to $201m in 2020 with total assets also increasing from $677m to $1,070m.

The general trend of decreasing return on assets falls in line with the 36.9 per cent decrease in average profits, with second to 20th places for 2020 decreasing year-on-year against second to 20th places in 2019. Only the ROA for first place, held by Lotto NZ, improved year-on-year, resulting in a wider gap between first place and the remaining top placeholders.