Non-GAAP measures reconciliations
These non-GAAP measures, also known as alternative performance measures, are financial measures other than those defined in International Financial Reporting Standards, which Shell considers provide useful information.
Earnings on a current cost of supplies basis
Segment earnings are presented on a current cost of supplies basis (CCS earnings), which is the earnings measure used by the Chief Executive Officer for the purposes of making decisions about allocating resources and assessing performance. On this basis, the purchase price of volumes sold during the period is based on the current cost of supplies during the same period after making allowance for the tax effect. CCS earnings therefore exclude the effect of changes in the oil price on inventory carrying amounts. The current cost of supplies adjustment does not impact cash flow from operating activities in the “Consolidated Statement of Cash Flows”.
|
|
|
$ million |
---|---|---|---|
|
2021 |
2020 |
2019 |
Income/(loss) attributable to Shell plc shareholders |
20,101 |
(21,680) |
15,842 |
Income/(loss) attributable to non-controlling interest |
529 |
146 |
590 |
Income/(loss) for the period |
20,630 |
(21,534) |
16,432 |
Current cost of supplies adjustment |
(3,148) |
1,833 |
(605) |
Of which: |
|
|
|
Attributable to Shell plc shareholders |
(3,029) |
1,759 |
(572) |
Attributable to non-controlling interest |
(119) |
74 |
(33) |
CCS earnings |
17,482 |
(19,701) |
15,827 |
Of which: |
|
|
|
Attributable to Shell plc shareholders |
17,072 |
(19,921) |
15,270 |
Attributable to non-controlling interest |
410 |
220 |
557 |
Adjusted earnings and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA)
The “Adjusted Earnings” measure aims to facilitate a comparative understanding of Shell’s financial performance from period to period by removing the effects of oil price changes on inventory carrying amounts and removing the effects of identified items. These items are in some cases driven by external factors and may, either individually or collectively, hinder the comparative understanding of Shell’s financial results from period to period.
The “Adjusted EBITDA (CCS basis)” and “Adjusted EBITDA (FIFO basis)” measures are introduced with effect from January 1, 2021. Management uses both measures to evaluate Shell’s performance in the period and over time. We define “Adjusted EBITDA (CCS basis)” as “Income/(loss) for the period” adjusted for current cost of supplies; identified items; tax charge/(credit); depreciation, amortisation and depletion; exploration well write-offs and net interest expense. All items include the non-controlling interest component. We define “Adjusted EBITDA (FIFO basis)” as “Income/(loss) for the period adjusted for identified items; tax charge/ (credit); depreciation, amortisation and depletion; exploration well write-offs and net interest expense. All items include the non-controlling interest component.
|
|
|
$ million |
---|---|---|---|
|
2021 |
2020 |
2019 |
Income/(loss) attributable to Shell PLC shareholders |
20,101 |
(21,680) |
15,842 |
Add: Current cost of supplies adjustment attributable to Shell plc shareholders |
(3,029) |
1,759 |
(572) |
Less: Identified items attributable to Shell plc shareholders |
(2,216) |
(24,767) |
(1,192) |
Adjusted Earnings |
19,289 |
4,846 |
16,462 |
Of which: |
|
|
|
Integrated Gas |
8,757 |
4,383 |
8,955 |
Upstream |
7,950 |
(2,852) |
4,452 |
Oil Products |
3,944 |
5,995 |
6,231 |
Chemicals |
1,753 |
962 |
741 |
Corporate |
(2,686) |
(3,412) |
(3,383) |
less: Non-controlling interest |
(429) |
(230) |
(535) |
|
|
|
$ million |
---|---|---|---|
|
2021 |
2020 |
2019 |
Adjusted Earnings |
19,289 |
4,846 |
16,462 |
Add: Non-controlling interest |
429 |
230 |
535 |
Add: Taxation charge/(credit) excluding tax impact of identified items |
8,482 |
2,252 |
9,533 |
Add: Depreciation, depletion and amortisation excluding impairments |
23,071 |
24,981 |
25,108 |
Add: Exploration well write-offs |
639 |
815 |
1,218 |
Add: Interest expense excluding identified items |
3,607 |
4,088 |
4,687 |
Less: Interest income |
510 |
679 |
899 |
Adjusted EBITDA (CCS basis) |
55,004 |
36,533 |
56,644 |
Of which: |
|
|
|
Integrated Gas |
16,421 |
11,668 |
16,719 |
Upstream |
27,358 |
13,247 |
27,034 |
Oil Products |
8,821 |
10,421 |
11,779 |
Chemicals |
2,959 |
2,131 |
1,891 |
Corporate |
(554) |
(933) |
(780) |
Less: Current cost of supplies adjustment |
(3,148) |
1,833 |
(605) |
Add: Current cost of supplies adjustment to taxation charge/(credit) |
808 |
(585) |
194 |
Adjusted EBITDA (FIFO basis) |
58,960 |
34,114 |
57,443 |
Of which: |
|
|
|
Integrated Gas |
16,421 |
11,668 |
16,719 |
Upstream |
27,358 |
13,247 |
27,034 |
Oil Products |
12,267 |
8,288 |
12,674 |
Chemicals |
3,470 |
1,847 |
1,796 |
Corporate |
(554) |
(933) |
(780) |
Identified Items
The objective of identified items is to remove material impacts on net income/loss arising from transactions which are generally uncontrollable and unusual (infrequent or non-recurring) in nature or giving rise to a mismatch of accounting and economic results, or certain transactions that are generally excluded from underlying results in the industry.
|
|
|
$ million |
---|---|---|---|
|
2021 |
2020 |
2019 |
Identified items before tax |
|
|
|
Of which: |
|
|
|
Divestment gains/(losses) |
5,996 |
316 |
2,611 |
Impairments |
(3,884) |
(28,061) |
(4,155) |
Redundancy and restructuring |
(227) |
(883) |
(132) |
Provisions for onerous contracts |
(340) |
(1,392) |
— |
Fair value accounting of commodity derivatives and certain gas contracts |
(3,249) |
(1,151) |
602 |
Other |
(621) |
(706) |
(770) |
Total identified items before tax |
(2,326) |
(31,877) |
(1,844) |
Tax impact |
91 |
7,100 |
674 |
Identified items after tax |
(2,235) |
(24,777) |
(1,170) |
Of which: |
|
|
|
Divestment gains/(losses) |
4,632 |
4 |
2,170 |
Impairments |
(2,993) |
(21,267) |
(3,162) |
Redundancy and restructuring |
(140) |
(644) |
(89) |
Provisions for onerous contracts |
(299) |
(1,120) |
— |
Fair value accounting of commodity derivatives and certain gas contracts |
(2,764) |
(1,034) |
650 |
Impact of exchange rate movements on tax balances |
(128) |
(240) |
(69) |
Other |
(543) |
(475) |
(670) |
Impact on CCS earnings |
(2,235) |
(24,777) |
(1,170) |
Of which: |
|
|
|
Integrated Gas |
(2,417) |
(10,661) |
(326) |
Upstream |
1,745 |
(7,933) |
(598) |
Oil Products |
(1,280) |
(6,489) |
(93) |
Chemicals |
(364) |
(154) |
(263) |
Corporate |
81 |
460 |
109 |
Identified items attributable to Shell plc shareholders |
(2,216) |
(24,767) |
(1,192) |
Identified items attributable to Non-controlling interest |
(19) |
(10) |
22 |
Cash capital expenditure
Cash capital expenditure monitors investing activities on a cash basis, excluding items such as lease additions which do not necessarily result in cash outflows in the period. The measure comprises the following lines from the Consolidated Statement of Cash flows: Capital expenditure, Investments in joint ventures and associates and Investments in equity securities.
The reconciliation of “Capital expenditure” to “Cash capital expenditure” is as follows.
|
|
|
$ million |
||
---|---|---|---|---|---|
|
2021 |
2020 |
2019 |
||
Capital expenditure [A] |
19,000 |
16,585 |
22,971 |
||
Investments in joint ventures and associates [A] |
479 |
1,024 |
743 |
||
Investments in equity securities [A] |
218 |
218 |
205 |
||
Cash capital expenditure |
19,698 |
17,827 |
23,919 |
||
Of which: |
|
|
|
||
Integrated Gas |
5,767 |
4,301 |
4,299 |
||
Upstream |
6,269 |
7,296 |
10,205 |
||
Oil Products |
3,868 |
3,328 |
4,907 |
||
Chemicals |
3,573 |
2,640 |
4,090 |
||
Corporate |
221 |
262 |
418 |
||
|
Operating expenses and underlying operating expenses
Operating expenses is a measure of Shell’s cost management performance, comprising the following items from the “Consolidated Statement of Income”: production and manufacturing expenses; selling, distribution and administrative expenses; and research and development expenses.
Underlying operating expenses is a measure aimed at facilitating a comparative understanding of performance from period to period by removing the effects of identified items, which, either individually or collectively, can cause volatility, in some cases driven by external factors.
|
|
|
$ million |
---|---|---|---|
|
2021 |
2020 |
2019 |
Production and manufacturing expenses |
23,822 |
24,001 |
26,438 |
Selling, distribution and administrative expenses |
11,328 |
9,881 |
10,493 |
Research and development |
815 |
907 |
962 |
Total |
35,964 |
34,789 |
37,893 |
Of which |
|
|
|
Integrated Gas |
7,126 |
6,555 |
6,667 |
Upstream |
10,604 |
10,983 |
11,582 |
Oil Products |
14,376 |
13,511 |
15,730 |
Chemicals |
3,335 |
3,235 |
3,430 |
Corporate |
524 |
505 |
486 |
Identified Items, of which: |
|
|
|
Redundancy and restructuring (charges)/reversal |
(226) |
(872) |
(123) |
(Provisions)/reversal |
(254) |
(1,415) |
(639) |
Other |
(175) |
— |
(131) |
Underlying operating expenses |
35,309 |
32,502 |
37,000 |
Of which: |
|
|
|
Integrated Gas |
6,892 |
5,769 |
6,534 |
Upstream |
10,362 |
10,227 |
11,284 |
Oil Products |
14,272 |
12,970 |
15,590 |
Chemicals |
3,256 |
3,035 |
3,104 |
Corporate |
527 |
501 |
488 |
Return on average capital employed
Return on average capital employed (ROACE) measures the efficiency of our utilisation of the capital that we employ. In this calculation, ROACE is defined as income for the period, adjusted for after-tax interest expense, as a percentage of the average capital employed for the period. Capital employed consists of total equity, current debt and non-current debt.
|
|
|
$ million |
---|---|---|---|
|
2021 |
2020 |
2019 |
Income for the period |
20,630 |
(21,534) |
16,432 |
Interest expense after tax |
2,741 |
2,822 |
3,024 |
Income before interest expense |
23,371 |
(18,712) |
19,456 |
Capital employed – opening |
266,551 |
286,887 |
295,398 |
Capital employed – closing |
264,413 |
266,551 |
286,887 |
Capital employed – average |
265,482 |
276,719 |
291,142 |
ROACE |
8.8% |
(6.8)% |
6.7% |
Net debt and gearing
Net debt is defined as the sum of current and non-current debt, less cash and cash equivalents, adjusted for the fair value of derivative financial instruments used to hedge foreign exchange and interest rate risk relating to debt, and associated collateral balances.
Gearing is a measure of Shell’s capital structure and is defined as net debt (total debt less cash and cash equivalents) as a percentage of total capital (net debt plus total equity).
Also refer to Note 15 to the Consolidated Financial Statements.
Free cash flow and organic free cash flow
Free cash flow is used to evaluate cash available for financing activities, including shareholder distributions and debt servicing, after investment in maintaining and growing our business.
Organic free cash flow is defined as Free cash flow excluding the cash flows from acquisition and divestment activities. It is a measure used by management to evaluate generation of cash flow without these activities.
|
|
|
$ million |
||||
---|---|---|---|---|---|---|---|
|
2021 |
2020 |
2019 |
||||
Cash flow from operating activities |
45,104 |
34,105 |
42,178 |
||||
Cash flow from investing activities |
(4,761) |
(13,278) |
(15,779) |
||||
Free cash flow |
40,343 |
20,828 |
26,399 |
||||
Less: Cash inflows related to divestments [A] |
15,113 |
4,010 |
7,871 |
||||
Add: Tax paid on divestments |
188 |
— |
187 |
||||
Add: Cash outflows related to inorganic capital expenditure [B] |
1,658 |
817 |
1,400 |
||||
Organic free cash flow |
27,076 |
17,634 |
20,116 |
||||
|
Shareholder distribution
Shareholder distribution is used to evaluate the level of cash distribution to shareholders. It is defined as the sum of Cash dividends paid to Shell plc shareholders and Repurchases of shares, both of which are reported in the Consolidated Statement of Cash Flows.
|
|
|
$ million |
---|---|---|---|
|
2021 |
2020 |
2019 |
Cash dividends paid to Shell plc shareholders |
(6,253) |
(7,424) |
(15,198) |
Repurchases of shares |
(2,889) |
(1,702) |
(10,188) |
Shareholder distribution |
(9,142) |
(9,126) |
(25,386) |
Divestment proceeds
Divestment proceeds represent cash received from divestment activities in the period. Management regularly monitors this measure as a key lever to deliver sustainable cash flow.
|
|
|
$ million |
||
---|---|---|---|---|---|
|
2021 |
2020 |
2019 |
||
Proceeds from sale of property, plant and equipment and businesses |
14,233 |
2,489 |
4,803 |
||
Proceeds from joint ventures and associates from sale, capital reduction and repayment of long-term loans [A] |
584 |
1,240 |
2,599 |
||
Proceeds from sale of equity securities |
296 |
281 |
469 |
||
Divestment proceeds |
15,113 |
4,010 |
7,871 |
||
Of which: |
|
|
|
||
Integrated Gas |
3,195 |
503 |
723 |
||
Upstream |
10,930 |
1,909 |
5,384 |
||
Oil Products |
935 |
1,368 |
1,517 |
||
Chemicals |
10 |
26 |
22 |
||
Corporate |
44 |
205 |
225 |
||
|