Home » APC Annual Reports » 2015 Annual Report - page 26

APC 2015 Annual Report Download - page 26

Download and view the complete annual report

Please find page 26 of the 2015 APC annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

2015 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC24

OVERVIEW OF THE GROUP’S STRATEGY, MARKETS AND BUSINESSES

1AMBITIOUS LONG-TERM FINANCIAL TARGETS FORATTRACTIVE SHAREHOLDER RETURNS

3. Ambitious long- term financial

targets forattractive shareholder

returns

Schneider Electric’s opportunities, strategy and business positioning have led its management to deﬁ ne ambitious long-term targets for the

company. Over the long term, the key priorities remain focused on proﬁ table growth, cash conversion and capital efﬁ ciency.

Two sets of targets have been deﬁ ned: business performance targets and capital efﬁ ciency targets.

(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 can not be

forecasted.

Across the economic cycle(1) performance targets:

•Average organic revenue growth: 3 to 6% across the cycle

•Adjusted EBITA: margin between 13% and 17% of revenues

•Cash conversion: c.100% of net proﬁ t converted into free cash ﬂ ow

Across the business cycle capital efficiency targets:

•ROCE(2): between 11% and 15%

•Dividend: payout c.50% of net income

•Capital structure: retain a strong investment grade credit rating

(2) ROCE is deﬁ ned as: adjusted EBITA after tax/Average c apital e mployed. Capital e mployed is deﬁ ned as: shareholders’ equity +Net ﬁ nancial

debt +Adjustment for associates and ﬁ nancial assets . T he tax rate will be adjusted for any tax advantages related to Invensys that ar not

included in the income statement.

At its Investor Day in February2015, the company also highlighted

its growth initiatives and near term business focus. The focus will be

on organic growth, improving the returns on the recent investments

and optimizing the portfolio and capital structure.

Hence the following objectives were deﬁ ned:

•Margin improvement targeted:

The Group conﬁ rms its 13-17% long-term adjusted EBITA margin

range and targets a margin improvement over the 3 years (2015-

2017) driven by operating leverage and efﬁ ciency initiatives (3 )

highlighted in the new company program.

•Profitable growth and capital efficiency will drive strong EPS

growth:

Strong EPS growth is targeted during the new company program

coming from the organic growth objective and efﬁ ciency initiatives

described in the program, a share buyback(4 ) of EUR 1.5billion by

the end of 2016 and bolt-on M&A in our core and most proﬁ table

businesses with strong EPS accretion and return on investment.

•Progressive dividend policy:

In line with the objective of strong EPS growth, a progressive

dividend policy is set with no year-on-year decline of dividend,

showing the Group’s conﬁ dence on its future growth prospects.

The dividend payout ratio will remain c.50% of Net income. The

base of calculation will exclude one offs such as capital gains or

losses and, or assets impairments.

•Objective to improve ROCE in the next 2-3 years:

The Group has set as an objective the ROCE improvement

compared to the 2013 proforma ROCE including Invensys of

10.9%. In 2015, the ROCE reached 11.0%.

(3 ) Includes industrial productivity and gross savings on support function costs .

(4 ) Share buyback including share buyback in order to cover employees share plans.