We monitor progress against the delivery of our strategic goals via four key performance indicators. In 2009, the adverse market conditions severely curtailed our ability to make progress on our KPIs.
Sales
Sales growth is a measure of how we are growing our business organically. We aim to achieve year-on-year growth in sales, on a like-for-like basis, which excludes the effects of currency translation and acquisitions or divestments.
Return on sales
Return on sales is a measure of improving profitability in our business. Return on sales is defined as adjusted operating profit as a percentage of sales. Our intention is to achieve a mid-teens return on sales margin on average throughout the cycle. This was achieved in 2007. Our aim is to sustain or improve margins over time.
In 2009, the impact of the downturn in the automotive market severely impacted performance in the Test and Measurement segment. Excepting this segment, return on sales was 15.0%.
Cash conversion
We focus on cash generation and use cash conversion as a performance measure as we believe cash represents an effective measure of the quality of our earnings. Our target is to deliver high cash conversion of operating profit in each financial year. Cash conversion is defined as operating cash flow as a percentage of adjusted operating profit.
Earnings per share
Earnings per share is a commonly used measure of financial performance for shareholders. We aim to achieve growth in adjusted earnings per share. Adjusted earnings excludes certain non-operational items as defined by management in
Note 3.
Adjusted earnings per share is defined as the ratio of adjusted net profit for the year to the weighted average number of ordinary shares outstanding during the year.
