Control system and key performance indicators
The consistent focus on the Group objectives mentioned is also reflected in the internal control system at NORMA Group, which relies on both financial and non-financial control parameters.
Important financial control parameters
NORMA Group’s most important financial performance indicators include the following value- and growth-oriented key figures, which have a direct impact on NORMA Group’s value creation: organic Group sales growth, adjusted EBIT (until 2021 also adjusted EBITA) and net operating cash flow. These key figures lead to the NORMA Value Added (NOVA) as the primary strategic performance indicator. NORMA Group uses these key figures to continuously monitor its success in terms of growth, profitability, liquidity and capital efficiency.
Organic sales growth
As a growth-oriented company, NORMA Group attaches particular importance to profitable sales growth. Here, the Group seeks to achieve short- and medium-term growth above the market average. This refers to internal growth excluding currency effects. In addition, sales from newly acquired companies are reported separately within the first 12 months of initial consolidation (revenues from acquisitions).
Due to the broad market structure in the area of joining technology, the Management Board is guided by internal analyses as well as studies by leading economic research institutes on the development of the gross domestic product of the respective regions and on the production and sales figures of the relevant customer industries in developing the forecast on the expected development of sales. In addition, the management includes certain early indicators, such as customer order patterns in the retail business (Standardized Joining Technology) and the order backlog in the Engineered Joining Technology (EJT) segment.
Operating earnings indicators
Adjusted operating earnings (earnings before interest and taxes, EBIT) represent an important internal management and valuation indicator of the Group’s ongoing operating activities. The adjusted EBIT margin, which shows adjusted EBIT in relation to sales, provides information on the profitability of the business activities. In order to maintain the Group’s profitability at a high level, NORMA Group constantly strives to optimize its company processes and structures. In doing so, the company focuses primarily on sustainably reducing key cost factors.
In addition, adjusted EBIT forms the basis for the remuneration of the Management Board and the incentives for non-pay-scale employees.
For long-term comparison and for a better understanding of how the business is developing, NORMA Group adjusts the operating result for certain expenses. In contrast to previous years, since fiscal year 2020, only those expenses that relate to the acquisition of subsidiaries are adjusted. ADJUSTMENTS
Net operating cash flow
In order to maintain the Group’s financial independence and solvency at all times, NORMA Group is also guided by net operating cash flow in managing the company. This comprises the most important cash-effective items that can be influenced by the individual business units and provides information on whether NORMA Group can finance its operating business out of its cash flow. It is calculated on the basis of adjusted EBITDA plus changes in working capital, less investments from operations. The main starting points for improving net operating cash flow are therefore to increase sales, to improve the operating result (EBITDA) adjusted for special effects and to engage in sustained value-enhancing investment activity. In addition, consistent management of working capital focusing on continuous optimization also has a positive impact on net operating cash flow.
NORMA Value Added (NOVA)
NORMA Group’s objective is to use the capital provided to it by shareholders and lenders as efficiently as possible in order to ensure the long-term positive development of the Group. In order to manage this, NORMA Group determines the annual increase in value in the form of the so-called NORMA Value Added (NOVA). NOVA is calculated as adjusted EBIT less tax expenses and the cost of capital. The cost of capital is defined by the weighted average cost of capital (WACC) and the capital employed (equity plus net debt).
These contents are part of the Non-financial Group Report and were subject to a separate limited assurance examination.