APC 2012 Annual Report Download - page 28

2012 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC26
OVERVIEW OF THEGROUP’S STRATEGY, MARKETS AND BUSINESSES
1COMPANY HISTORY AND DEVELOPMENT
Connect: Key financial targets for2012-2014
With Connect, Schneider Electric expects Group performance to reach a new level of excellence by 2014.
Key targets By 2014
Services growth Outgrow the rest of Group by more than 5points (on organic basis)
Solutions profi tability At least 2points improvement on the adjusted EBITA margin
Industrial productivity EUR0.9bn to EUR1.1bn of cumulated gross productivity
Support functions effi ciency
At least 1point decrease of support functions costs/revenues ratio*
(excl. scope and currency, net of investments)
Inventory effi ciency Inventory / revenues ratio reduced by ~2points
* Assuming no severe disruption of the global economy.
During 2012, and despite diffi cult business conditions, these
indicators have been showing progress on the whole:
•Services recorded a positive start with organic growth of 4%, or
5points above the rest of the Group;
•Solutions saw their profi tability improve by 1  point, to ~10 %
versus ~9% in2011;
•Industrial productivity reached EUR 289  million, a performance
in line with expectations, taking into account the negative
production volume recorded;
•the s upport functions costs/revenues ratio posted a decrease
of 0.2 point, excluding scope and currency;
•Inventory effi ciency improved with a 1 point drop in inventory to
revenues ratio .
Ambitious long term financial targets
forattractive shareholder returns
Over the long term, the key Company priorities remain
focused on profi table growth, cash conversion and capital
effi ciency. The management views the Connect program as
another opportunity to improve the Group’s through cycle
performance on those metrics.
Across the business cycle(1) performance targets:
•Revenues: average organic growth of GDP +3points.
By offer types, revenues growth will be driven by Solutions
with a targeted profi le at GDP +3 to 5points. The Group
intends to maintain solid Products growth, at a rate of GDP
+1 to 3points.
By geographies, growth will continue to be driven by New
Economies with a targeted growth profi le at GDP + 6 to
8points.
For each of these indicators, the reference basis is
world GDP growth on a real basis and at market foreign
exchange rates;
•Adjusted EBITA: margin between 13% and 17% of
revenues;
•Cash conversion: ~100% of net profi t converted into free
cash fl ow.
Across the business cycle capital effi ciency targets:
•ROCE**: between 11% and 15%;
•Dividend: 50% payout of net income;
•Capital structure: retain a strong investment grade credit
rating.
Capital Employed is defi ned as: shareholders’ equity + Net
fi nancial debt + Adjustment for associates and fi nancial
assets.
(1) Schneider Electric defi nes a business cycle as a period including a slowdown and an expansion, or a period in between.
This concept allows investors to estimate the Group’s long-term growth potential across a business cycle. The length of a business cycle
canvary and cannot beforecasted.
** ROCE is defined as: adjusted EBITA after tax/Average Capital Employed.