Siemens 2008 Annual Report Download - page 210

114 Management’s discussion and analysis
Growth and financial performance
Our most important growth and nancial performance targets are summarized in the following paragraphs.
For more information on how we dene our nancial measures and how they relate to each other, see “Financial
performance measures.”
Growth. In scal 2009 we intend to increase our revenue by at least twice the rate of actual global GDP growth
in scal 2009. We believe we are well positioned to reach this target, in part due to new orders of approximately
€93.5 billion and a book-to-bill ratio of 1.21 in scal 2008. As noted above, most of our business is less exposed
to short-term economic cycles. In addition, we are investing in new solutions and supply-chain capabilities to
address opportunities in lower-end market segments, particularly in Asia.
Total Sectors prot. We aim to achieve Total Sectors prot between €8.0 and €8.5 billion in scal 2009, exclud-
ing impacts from restructuring and legal and regulatory matters. While we expect adverse macroeconomic con-
ditions to intensify market challenges for some of our businesses, we believe that the substantial organizational
changes we made in scal 2008 will enable our Sectors and regional organizations to compete effectively and
protably in the years ahead.
Income and EPS. We expect growth in income from continuing operations in scal 2009 to exceed growth in
Total Sectors prot. This excludes impacts from restructuring and legal and regulatory matters in scal 2009.
We anticipate that growth in net income in scal 2009 will be driven primarily by growth in income from con-
tinuing operations. At the same time, we expect to signicantly reduce the inuence on net income from discon-
tinued operations, having divested Siemens VDO Automotive (SV) and Siemens Enterprise Communications
(SEN) in scal 2008.
Cash generation and cash conversion. We expect free cash ow from continuing operations in scal 2009 to
include substantial cash outows stemming from €1.1 billion in severance charges and the provision of €1 bil-
lion associated with ongoing settlement negotiations regarding legal and regulatory matters, which were both
expensed in scal 2008 and mentioned above. As a result, we expect that in scal 2009, our cash conversion rate,
dened as the ratio of free cash ow to income, will come in below our mid-term target dened as 1 minus our
annual percentage growth in revenue.
We intend to maintain management attention on two key determinants of free cash ow in scal 2009: net work-
ing capital within operating activities, and capital expenditures. For scal 2009 we implemented a rigorous
approval process for capital expenditures, reaching up to the Managing Board level and taking into consider-
ation conditions in the macroeconomic environment. Our mid-term target range for additions to PPE and intan-
gible assets as a percentage of depreciation and amortization is 95%-115%. For more information regarding
expected future cash outows, see “Capital resources and requirements.”
Capital structure and ROCE. We calculate the target for our capital structure as adjusted industrial net debt
divided by earnings before interest expense, income taxes, depreciation, amortization and impairments
(EBITDA), also as adjusted. As a step toward optimizing this capital structure ratio, we conducted approximately
€4 billion in repurchases of Siemens shares in scal 2008, reducing shareholder dilution by approximately
53 million shares. The full share buyback plan is for up to €10 billion in share repurchases through 2010.
Our measure for return on capital employed (ROCE) is calculated as income from continuing operations (before
interest) divided by average net capital employed in continuing operations. We expect to improve ROCE in scal
2009 compared to scal 2008 on higher income from continuing operations.