APC 2006 Annual Report Download - page 95

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5. Outlook for 2007
Revised targets for
the new2Company Program
In light of the success of the new2company program’s
action plans, the Group has set new financial targets
for 2007-2008:
Organic revenue growth of more than 6% per year
(compared with 5% previously), due in particular to
additional growth from APC.
An EBITA margin of between 13% and 15% (com-
pared with 12.5% and 14.5% previously). This corre-
sponds to a potential improvement of 1 to 1.5 points
(compared with the pro forma 2006 margin including
APC but without non-recurring costs of 13.7%) in sim-
ilar economic conditions.
A 2-point increase in return on capital employed
(ROCE) (compared with the pro forma 2006 figure
including APC of 9.3% and the initial target of a 2- to
4-point increase between 2005 and 2008).
The Group’s aim is to surpass global GDP growth by 3
points on average. Historical data shows that global
GDP grows by around 3% a year over an average
period.
EBITA is defined as Earning Before Interest, Taxes and
Amortization of purchase accounting intangibles.
ROCE is defined as Return On Capital Employed.
Capital employed is the quarterly average of capital,
the net debt and non standard provisions.
As from 2007, the Group has decided to change its
indicator for measuring operating performance from
EBIT margin to EBITA margin. EBITA margin excludes
the amortization charge related to business combina-
tions, because the amount of this charge does not
have a direct link to the company’s performance. The
charge results from the decision to allocate goodwill to
certain intangible assets and makes it difficult to com-
pare a company acquired from another. The dividends
distribution plan determined by new2has not changed.
The amortization charge for intangibles resulting from
acquisitions came to 13 million in 2005 and 18 mil-
lion in 2006. Measured in terms of EBITA margin, the
new2program’s original target would have been
between 12.6% and 14.6%.
Assumptions
used to prepare forecasts
The forecasts and targets presented above are based
primarily on the following assumptions:
Full consolidation of APC from February 15, 2007
Aside from the consolidation of APC, forward-looking
data is based on the current scope of consolidation.
Exchange rate assumptions have been determined
at Group level. In particular, a US dollar/euro exchange
rate of 1.32 has been used for 2007.
Anticipated revenue growth has been calculated
based on world economic growth projections (GDP).
Certain price changes have been anticipated to off-
set higher raw material costs, notably for copper.
The Group anticipates a negative margin impact
from changes in its geographic and business mix.
On the other hand, its ongoing strategy to control
base costs, improve industrial productivity and rebal-
ance costs should have a positive margin impact.
Some of these amounts, assumptions and estimates
are based or partly based on the expectations or deci-
sions of the Management of the Group and its sub-
sidiaries that may change or be altered.
The forecasts, targets and forward-looking statements
and information summarized above are based on data,
assumptions and estimates discussed earlier that the
Group considers reasonable.
Forward-looking statements depend on present expec-
tations of future events. They are not historical facts
and should not be construed as guaranteeing that the
forecasts and/or objectives will be met. These
amounts, assumptions and estimates, as well as all
the factors taken into account to determine targets, for-
ward-looking statements and information, are subject
to various uncertainties concerning the Group’s busi-
ness, financial and competitive environment that could
cause actual results to differ materially from those
described in the forward-looking statements.
In addition, the occurrence of certain risks described in
Chapter 1 (pages 28-31) of this document could have
an impact on the Group’s business and the achieve-
ment of the targets and forward-looking statements
and information presented above.