Management and monitoring
The management of the Wilo Group is the responsibility of the Executive Board of WILO SE, which since 1 December 2016 has consisted of five members. The new Executive Board position of CFO was created for tasks relating to finance, internal auditing and IT, for which the CEO previously shared responsibility. The schedule of responsibilities below shows the new allocation of functional responsibilities within the Executive Board.
The Supervisory Board of WILO SE appoints, controls and monitors the Executive Board. The Supervisory Board, which comprises a total of six ordinary members, is appointed by the Annual General Meeting. Two members of the Supervisory Board are employee representatives appointed at the proposal of the European Works Council of WILO SE. Detailed information on the cooperation between the Executive Board and the Supervisory Board can be found in the Report of the Supervisory Board in this Annual Report.
In order to manage the Wilo Group, the Executive Board focuses in particular on the development of net sales and earnings power. Earnings power is based on operating earnings, i.e. earnings before interest and taxes (EBIT), and the EBIT margin. Management at Group level and at the level of the three organisational and management dimensions of the Wilo Group, (regions, market segments and product divisions) is always performed according to these key performance indicators.
Net sales, EBIT and the EBIT margin are the central performance indicators for the Wilo Group; accordingly, they are included in the analysis of the course of business, the assessment of the position of the Group and the outlook for the purposes of external financial reporting in accordance with GAS 20.
Another key performance indicator at Group level is free cash flow, which reflects the excess liquidity generated. A positive free cash flow at all times serves to ensure the financial independence of the Wilo Group and its liquidity. The main levers for improving free cash flow are increases in net sales and EBIT. The development of free cash flow is also aided by the systematic management of working capital and a coordinated investment policy.
The Wilo Group is also required to maintain standard financial ratios (financial covenants) under the terms of its long-term financing agreements. In particular, these include leverage, i.e. the ratio of consolidated net debt to consolidated EBITDA (earnings before interest, taxes, depreciation and amortisation), the equity ratio and the interest cover ratio, defined as the ratio of consolidated EBITDA to consolidated interest expenses. These ratios are also regularly reviewed and reported to the Executive Board in order to ensure compliance with the required minimum values at all times. The Wilo Group continued to comply with the agreed financial ratios in the 2016 reporting year.
Furthermore, non-financial aspects also play an important role in the Wilo Group’s successful business development. Accordingly, these are fundamentally relevant for the strategic and operational management of the Wilo Group, albeit to a lesser extent than the key financial performance indicators described above.