APC 2013 Annual Report Download - page 26

1OVERVIEW OF THE GROUP'S STRATEGY, MARKETS AND BUSINESSES
AMBITIOUS LONG TERM FINANCIAL TARGETS FOR ATTRACTIVE SHAREHOLDER RETURNS
Ambitious long term financial 3.
targets forattractive shareholder
returns
Schneider Electric’s opportunities, strategy and business positioning have led its management to define ambitious long-term targets for the
company. Over the long term, the key priorities remain focused on profitable growth, cash conversion and capital efficiency.
2 sets of targets have been defined: business performance targets and capital efficiency targets.
Across the business cycle(1) performance targets:
Average organic revenue growth: GDP + 3 points.
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By offer types, revenues growth will be driven by Solutions with a targeted profile 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 profile 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;
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Cash conversion: ~100% of net profit converted into free cash flow.
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Across the business cycle capital efficiency targets:
ROCE(2): between 11% and 15%;
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Dividend: 50% payout of net income;
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Capital structure: retain a strong investment grade credit rating.
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At its Investor Day in February 2014, the company also highlighted Organic margin improvement will continue: Efficiency will be
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its growth initiatives and near term business focus. It will now focus generated through industrial productivity, support function cost
on integration, technology innovation in products and solutions and leverage and the generation of synergies from the Invensys
capture efficiency gains in order to pursue significant growth acquisition. This will support the organic improvement of the
opportunities and improve its returns. adjusted EBITA margin going forward, from the 2013 proforma
level including Invensys of ~14.0%.
Schneider Electric therefore reaffirmed the targets for performance
across the cycles. The company also set the focus for the next few
years on organic growth and on improving the returns on the
recent investments (organic and acquisitions). Hence the following
objectives were defined:
(1) Schneider Electric defines 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 can not
be forecasted.
(2) ROCE is defined as: adjusted EBITA after tax/Average Capital Employed. Capital Employed is defined as: shareholders’ equity +
Net financial debt + Adjustment for associates and financial assets. In the context of the Invensys acquisition, the tax rate will be adjusted for any
benefits of the Invensys-related tax shield that would not be captured in the P&L.
24 2013 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC