Control System

The consistent focus of all business activities on the central Group objectives is reflected in our internal control system, which relies on both financial and non-financial control parameters.

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 EBITA and adjusted EBIT as well as 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 growth, profitability, liquidity and capital efficiency.

20202019201820172016201520142013
Group sales (in EUR million)952.21,100.11,084.11,017.1894.9889.6694.7635.5
Adjusted EBITA54.6144.8173.2174.5157.5156.3121.5112.6
Adjusted EBITA margin (in %)5.713.216.017.217.617.617.517.7
Adjusted EBIT45.3136.1164.5166.0147.7147.9116.2107.7
Adjusted EBIT margin (in %)4.812.415.216.316.516.616.716.9
Net operating cash flow (in EUR million)78.3122.9124.4132.9148.5134.7109.2103.9
NORMA Value Added (NOVA) (in EUR million)– 46.4 17.360.854.8n/an/an/an/a

The most important financial control parameters for NORMA Group include the following value-oriented indicators that are directly related to value creation at NORMA Group: Group sales, profitability (adjusted EBITA margin) and net operating cash flow.

Group sales
As a growth-oriented company, NORMA Group attaches particular importance to profitable sales growth. 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 revenues from newly acquired companies are reported separately within the first 12 months of initial consolidation (sales revenues from acquisitions).

Operating earnings figures
Adjusted EBITA (EBITA before special items) is an important internal and external control figure with regard to ongoing operating activities and is the basis for incentivizing NORMA Group‘s workforce.

The adjusted EBITA margin, which shows adjusted EBITA in relation to sales, provides information on the profitability of the business activities. In order to maintain the adjusted EBITA margin and thus profitability at a high level, NORMA Group works continuously on optimizing its corporate processes and structures and focuses on reducing key cost factors.

Adjusted EBIT forms the basis for the remuneration of the Management Board under the fundamentally revised and restructured Management Board contracts effective January 1, 2020, and was therefore newly included in the control system in the 2020 fiscal year. From 2021 on, only adjusted EBIT and adjusted EBIT margin will serve as key earnings and profitability indicators. The incentive bases in the workforce contracts will be changed to these target figures in 2021 in line with the Management Board contracts.

For long-term comparison and for a better understanding of the business development, NORMA Group adjusts the operating result for certain expenses. In a departure from previous years, since the 2020 financial year, only those expenses that are related to the acquisition of subsidiaries are adjusted.

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 addition to the aforementioned key figures. Net operating cash flow includes 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 the adjusted EBITDA plus changes in working capital minus capital expenditures. The key approaches to improving net operating cash flow are therefore to increase sales, to improve the adjusted operating result (adjusted EBITDA) and to engage in sustained value-enhancing investment activity. In addition, consistent management of working capital focusing on constant optimization also has a positive effect on net operating cash flow.

NORMA Value Added (NOVA)
NORMA Group’s goal is to use the capital provided by its shareholders and lenders as efficiently as possible in order to secure the Group’s long-term positive development. In order to manage this, NORMA Group determines the annual value creation in the form of NORMA Value Added (NOVA), which is calculated on the basis of adjusted EBIT, the tax rate and the cost of capital. The cost of capital is defined by the weighted average cost of capital (WACC) and capital employed (equity plus net debt).

Non-financial Control Parameters

The most important non-financial control parameters for NORMA Group include CO2 emissions, the Group’s power of innovation, the problem-solving behavior of its employees and the sustainable overall development of NORMA Group as a whole.

20202019201820172016201520142013
Number of invention applications *22223233n/an/an/an/a
Defective parts per million (PPM)5.16.171632211724
CO2 emissions (Scope 1 and 2 in t CO2e) **49,81354,49451,018n/an/an/an/an/a

CO2 emissions
Compliance with applicable environmental protection requirements and the avoidance of environmental risks have a high priority for NORMA Group. The company is guided by international standards and guidelines in this regard. Climate-relevant CO2 emissions are a significant non-financial performance indicator in the area of the environment that has also been part of the Management Board’s remuneration system since January 2020. NORMA Group records the greenhouse gas emissions of all production sites resulting from gas consumption (Scope 1) and the purchase of electricity and district heating (Scope 2) and strives to continuously reduce these CO2 emissions. For its own production processes, NORMA Group has set itself the target of reducing emissions by around 19.5% by 2024 (reference year 2017). This target is based, among other things, on calculations of the Science-Based Targets Initiative.

Power of innovation
The Group considers ensuring an environment of sustainable innovation a key driver of future growth. NORMA Group therefore measures the number of annual invention applications. NORMA Group employees submit invention applications as part of an internal formalized process upstream of the external process of new patent applications. By establishing targeted internal incentive systems, NORMA Group promotes its employees’ innovative thinking.

Quality figure
NORMA Group strives for high reliability and service quality. The reputation of its brands and reliability of its products are key factors in the company’s success. In developing and manufacturing products, the Group therefore relies on high quality standards. In order to minimize production losses and maximize customer satisfaction, NORMA Group measures and manages the problem solving behavior of its employees by tracking the number of defective parts per million of manufactured parts (parts per million / PPM). This metric is collected and aggregated at the Group level on a monthly basis.

Sustainable overall development
We consider it to be our main responsibility to bring the effects of our business activities into balance with the expectations and needs of society. For this reason, operational decisions are based on the principles of responsible company management and sustainable actions. Our strategy and goals are influenced by our corporate responsibility (CR) policies and described in detail on our Corporate Responsibility website and anchored in our CR roadmap.

* – The number of invention applications has served as a key control parameter for measuring the Group’s innovative ability since mid-2016, replacing the number of patent applications, a figure that had lost significance in light of changes in the patent strategy. As the number of invention applications was recorded for the first time in fiscal year 2017, there are no comparative figures for 2016.

** – Since 2017, CO2 emissions have been reported according to the requirements of the Greenhouse Gas Protocol. The figures relating to the years 2019 and before are audited with “limited assurance.”

Questions?

Get in touch with us for more support.

Contact Us

To top