sustainabilitymatrixmontagetechnikmkc102

Economic performance

SFS is aiming for further significant value generation by 2025. Each stakeholder group’s share of value generated should remain stable throughout the period.

GRI 103: MANAGEMENT APPROACH 2016

GRI 103-1 Explanation of the material topic and its boundary

SFS’ economic performance and the value it generates for all stakeholders is at the center of its business operations and decisions. The value it creates on behalf of its stakeholder groups – customers, suppliers, employees, investors and the state or political communities in which the company is active – is reflected, for example, in the form of wages, dividends or tax revenues. SFS refrains from harmful tax practices and arrangements and it pays taxes in the jurisdictions where it generates economic value. SFS Group has reported the amount of taxes it has paid in foreign countries to the Federal Tax Administration since 2017 within the framework of country-by-country reports. Two factors contributed to the significant reduction in total taxes effectively paid in fiscal 2019 from the previous fiscal year. One was a change in Switzerland’s tax system that led to a lower tax rate for SFS and the other concerned one-time effects in the United States that led to a decline in the amount of taxes paid there. The decline in taxes paid in 2019 was therefore not the result of a change in the company’s tax practices. SFS expects its future effective tax rate to be about 17.5%.

See also Financial Report ("Information for shareholders", p. 104 et seq.)

GRI 103-2 The management approach and its components

Sustainable and mutually beneficial partnerships are important to SFS. Maintaining a fair and balanced distribution of economic value generated among the various stakeholder groups is therefore vitally important.

SFS’ net economic value generated increased by 12.1% during the period from 2015 to 2019. The share of economic value distributed to employees increased significantly by 9.9% annually over the same period. The relative shares of net economic value distributed to the other stakeholder groups remained mostly stable. Declining tax payments due to the reasons mentioned above, which led, among other things, to an increase in economic value retained by the company, was the one exception.

Due to SFS Group's initial public offering in the spring of 2014 and financial market expectations, the dividend payout was increased. The distribution to shareholders has increased at an attractive rate of 8.8% annually. In congruence with SFS Group’s financial policy, the distribution to shareholders will range between 35–50% of consolidated net income. On a comparable basis, the payout ratio ranged from 36.9–40.8% of consolidated net income between 2015 and 2019.

As a sign of solidarity in light of the COVID-19 pandemic, which calls for prudent and responsible action, the Board of Directors of SFS Group proposed a 10% reduction in the dividend from the previous year. This proposal was overwhelmingly approved at the 2020 Annual General Meeting.

Besides qualitative parameters, key financial targets were also defined during the formulation of the medium-term business plan for 2020 to 2025. Despite the currently challenging general environment, SFS expects to its sales to grow by 3–6% p.a. (in local currencies, including changes in the scope of consolidation) in the coming years thanks to its healthy and growing project pipeline.

SFS’ EBIT margin target of 13–16% for the period indicates further continuous value generation going forward to 2025. Every stakeholder group’s share of value generated should remain relatively stable throughout the period.

GRI 103-3 Evaluation of the management approach

An above-average growth rate over the long term is in the interests of all SFS stakeholders. Adherence to the principles of good corporate governances while achieving that growth will ensure the necessary transparency and an adequate balance between management and control. Strategic control is in the hands of the Board of Directors; operational management and control is the responsibility of the Group Executive Board. SFS publishes financial reports every half year. The consolidated financial statements for every fiscal year are examined by external auditors in accordance with Swiss GAAP FER.

GRI 201: ECONOMIC PERFORMANCE 2016

GRI 201-1 Direct economic value generated and distributed

SFS generates sustainable value for its stakeholders. SFS stakeholders are its customers, suppliers, shareholders and employees and the states or political communities in which the company operates. While part of the economic value generated is distributed directly to the various stakeholders, the company retains some of the value generated to ensure the ongoing development of new innovations and technologies, or to finance acquisitions or fixed investment.

The following table provides an overview of the economic value generated during the past five years and the share distributed to the various stakeholders as a percent of net economic value generated:

Development and distribution of value added
in CHF million
2019 2018 2017 2016 2015
Value added gross
As a % of net sales
884.9
49.7%
853.0
49.1%
814.4
49.8%
721.2
50.2%
641.8
46.8%
Depreciation/amortization
As a % of net sales
-95.4
-10.8%
-89.7
-10.55
-125.8
-15.4%
-146.4
-20.3%
-142.3
-22.2%
Value added net
As a % of net sales
789.5
44.3%
763.3
43.9%
688.5
42.1%
574.8
40.0%
499.5
36.4%
Development and distribution of value added
in CHF million
2019 2018 2017 2016 2015
Employees
Personal expenses
69.7%*
550.4
68.0%
519.3
69.8%
480.6
71.6%
411.8
76.6%
377.5
Government
Income taxes, fees
3.5%*
27.8
6.0%
45.8
6.4%
44.0
6.1%
35.2
5.8%
29.0
Capital provider
Dividends to shareholders
Interest expenses
9.2%*
67.5
4.8
10.4%
75.0
4.3
11.0%
71.3
4.9
12.0%
65.6
3.0
11.9%
56.3
3.2
Company
Retained earnings
17.6%*
139.0
15.6%
118.9
12.8%
87.8
10.3%
59.2
6.7%
33.5

*in % of net value added

Additional indicators of the economic value generated and distributed as defined by GRI Standards can be found in the Financial Report 2019.