BPP Greenwood – Analysing statements – ROCE calculation and Capital Employed

I generally understand the ratio’s and analysis questions however, am still having hiccups when trying to understand the capital employed required within the ratio’s calculations.

In particular, I can’t figure out how to arrive at the ROCE figures for the question detailed below. I have searched for this one and found someone with the same question as me who clearly either figured it out or was too lazy to give you the question in full (they just gave the question name without details!).

(Apologies – it’s a long informative one but I’ve explained my misunderstanding and problems at the end! Thank you in advance!)
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258 Greenwood (from BPP Practice and revision kit 2018)

Greenwood is a public listed company. On 31 March 20X7 Greenwood sold its 80%-owned subsidiary – Deadwood – for $6 million. The directors have been advised that the disposal qualifies as a discontinued operation and it has been accounted for accordingly. The disposal proceeds were not collected until after the year end.

Extracts from Greenwood’s financial statements are set out below.

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS FOR THE YEAR ENDED 31 MARCH
20X7 20X6
$’000 $’000
Revenue 27,500 21,200
Cost of sales (19,500) (15,000)
Gross profit 8,000 6,200
Operating expenses (2,900) (2,450)
5,100 3,750
Finance costs (600) (250)
Profit before taxation 4,500 3,500
Income tax expense (1,000) (800)
Profit for the year from continuing operations 3,500 2,700
Profit/(loss) from discontinued operations (1,500) 320
Profit for the year 2,000 3,020
Profit attributable to:
Owners of Greenwood 2,300 2,956
Non-controlling interest (300) 64
2,000 3,020
Analysis of discontinued operation:
Revenue 7,500 9,000
Cost of sales (8,500) (8,000)
Gross profit/(loss) (1,000) 1,000
Operating expenses (400) (550)
Profit/(loss) before tax (1,400) 450
Tax (expense)/relief 300 (130)
(1,100) 320
Loss on measurement to FV of disposal group (500) –
Tax relief on disposal group 100 –
Profit/(loss) from discontinued operations (1,500) 320

STATEMENTS OF FINANCIAL POSITION AS AT 31 MARCH
20X7 20X6
$’000 $’000 $’000 $’000
Property, plant and equipment 17,500 17,600
Goodwill 1,500
Current assets
Inventory 1,500 1,350
Trade receivables 2,000 2,300
Due on sale of subsidiary 6,000 nil
Bank nil 9,500 50 3,700
Total assets 27,000 22,800

Equity and liabilities
Equity shares of $1 each 10,000 10,000
Retained earnings 4,500 2,750
14,500 12,750
Non-controlling interest 1,250
14,000
Non-current liabilities
5% loan notes 8,000 5,000
Current liabilities
Bank overdraft 1,150 nil
Trade payables 2,400 2,800
Current tax payable 950 4,500 1,000 3,800
Total equity and liabilities 27,000 22,800

Note. The carrying amount of the assets of Deadwood at 31 March 20X6 was $6.25 million. Greenwood measures non-controlling interest at share of net assets.
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My understanding is: ROCE = PBIT/Capital employed, where
capital employed = total assets – current liabilities = equity + non-current liabilities

Trying either of these directly isn’t making any sense in my head and I’m feeling pretty lost with it!

For X6, my attempts at calculations were….

assets = 22800
current liabilities = 3800
capital employed = 19000

or

equity = 12750
non-current liabilities = 5000
capital employed = 17750

Neither are correct obviously so, I went to the answer (in attempt to understand)… the calculation given is:

ROCE 20X6 = (3,750/(12,750 + 5,000 – 6,250))
Are you able to explain where the 6250 comes from please?

The answer for the ROCE 20X7 is also confusing me…
ROCE 20X7 = (4,500 + 400*)/(14,500 + 8,000 – 6,000)
I am not sure why we add the 400 to the PBIT? The notes say it relates to interest from loan notes but I’m not really getting my head around why the PBIT isn’t 4500 +600 where 600 is the finance costs stated in the SPLOCI.
(I at least understand that we are taking the 6000 off from equity and NC-L’s because it’s a one-off and would obscure the analysis!)

I really appreciate any help you can give… especially with the exams so close now! Thank you!!!! 🙂