Business report > Business and financial review
Targets and strategy
Value orientation aspects are applied in many areas of the Company.
The remuneration model for Group management as a whole involves a remuneration portion that is dependent on the company's performance and which is calculated on the basis of four equally weighted key figures – including the return on operating assets. In addition to the salary, there is an annual option plan for the Group Executive Board and other management members. For details see → Corporate Governance.
Investments in property, plant and equipment above a certain amount are only approved if strict criteria are met. In this context, it is mandatory that an investment return be achieved which exceeds the cost of capital plus a premium.
Also in the interests of value-oriented management, Group-relevant projects are tracked over the long term following project completion and the achievement of objectives is evaluated. To this end, a controlling report is presented twice annually to the Group Executive Board for discussion by this body.
Strategic success factors
The success of the Geberit Group is based on a series of success factors. The most important are:
- a clear, long-term strategy,
- significant sustainable growth drivers that enable many of the already existing Geberit markets which remain underpenetrated to be developed on the basis of the current innovative product range, the AquaClean product range and various organic growth initiatives (OGIs),
- an attractive competitive position, substantiated by the strong brand, comprehensive know-how in the sanitary market, relationships with decision-makers built up over years by the sales team, and the sizable field service team,
- an innovative and comprehensive product range, developed in accordance with the needs of the customers,
- a proven push-and-pull business model,
- and a lean, high-performance organization with optimized processes.
Ambitious medium-term goals
Geberit has made the setting of standards in sanitary technology worldwide its goal and aims to entrench these standards in the long term by acting sustainably. This approach is to be reflected among other things in sales growth that outstrips the industry average. Basically, Geberit is aiming to achieve its sales targets while at the same time maintaining its industry leadership in terms of profitability and the ability to generate high cashflows. Additional growth through acquisitions has not been ruled out. However, any potential acquisition will have to satisfy strict strategic and financial criteria. In the medium-term, average currency-adjusted sales growth of 4 to 6% and an operating cashflow margin of between 23 and 25% should be achieved annually.
Medium-term contributions to growth are to come from standard business activities, organic growth initiatives (OGIs), new product launches and from the Geberit AquaClean business. Overall, around one-third of growth should result from newly launched products and from Geberit AcquaClean.
OGls are organic growth initiatives in sales that are based on the existing product portfolio – albeit selectively adapted to local requirements. Additional financial and personnel resources are provided for these initiatives in order to achieve defined financial targets by means of an implementation plan. Value is placed on the intermediate and final targets being clearly measurable. Up to the end of 2012 a total of nine OGIs were underway: four in the European Sales Area (Nordic Countries, United Kingdom, France and Spain) and five in the International Sales Area (Russia, India, China, Australia and North America). The initiatives were on track at the end of the reporting year. From 2013, these growth initiatives will once again become an integral part of standard business and will no longer be measured and disclosed separately. In addition, at the beginning of 2009 a concerted internationalization strategy was launched for the Geberit AquaClean business with the objectives of establishing shower toilets as a product category in Europe and positioning Geberit as the market leader in this category. The goals set as part of the internationalization strategy have been exceeded to date. Group-wide, growth of the AcquaClean business since the start of the initiative has averaged between 15 and 20% per year.
Taken as a whole, these measures (OGIs and AquaClean) have a negative effect on operating margins. However, in the medium term these activities should generate substantial contributions to growth.
In order to be prepared for the expected growth, Geberit also intends to invest around CHF 100 million in property, plant and equipment in the coming years.
In accordance with its vision, Geberit aims to achieve sustained improvement in the quality of people's lives through innovative solutions in sanitary technology. Its proven, focused strategy for doing so is based on the four strategic pillars “Focus on sanitary technology”, “Commitment to innovation”, “Selective geographic expansion”, and “Continuous business process optimization”. These are practiced daily by the highly motivated and qualified employees.
Geberit concentrates on sanitary technology, focusing on those business areas in the sanitary industry for which in-depth know-how and core competencies are available within the company. Essentially, these are sanitary systems and piping systems for the transport of water in buildings. Here, superior quality, integrated, water-saving sanitary technology is offered.
Continuously optimizing and extending the product range is crucial for future success. Innovation strength is founded on basic research in areas such as hydraulics, statics, fire protection, hygiene and acoustics. The insights gained are systematically applied in the development of products and systems for the benefit of customers.
The accelerated penetration of markets such as France, the United Kingdom, the Nordic countries, Eastern Europe and the Iberian Peninsula is an important factor for long-term success. Outside Europe, Geberit concentrates on the most promising markets. These include North America, China, Southeast Asia, Australia, the Gulf region and India. With the exception of North America and Australia, the company mainly engages in project business in these regions. In this respect, the company always adheres strictly to the existing high standards in terms of quality and profitability.
A further strategic focus relates to the permanent optimization of business processes. This is intended to ensure a leading, competitive cost structure in the long term and is partly achieved through Group-wide projects and partly through employees identifying improvement potential in their day-to-day work, thus making a major contribution toward positive development.