Value-based management

The KION Group's strategy, which centres on value and growth, is reflected in how the Company is managed. KION uses six key performance indicators (KPIs) to continuously monitor the market success, profitability, financial strength and liquidity of both the Group and the individual segments. The performance targets of the Group and the segments are based on selected financial KPIs, as is the performance-based remuneration paid to managers (see note 43). Each month, the KPIs are measured and made available to the Executive Board as part of a comprehensive report. This enables the management team to take prompt corrective action in the event of discrepancies.

KPIs related to business volume

Order intake and revenue are broken down by region, segment and product group in the KION Group's management reporting so that growth drivers and pertinent revenue trends can be identified and analysed in a timely fashion. Order intake is a leading indicator for revenue. The length of time between receipt and invoicing of an order varies between business units and product groups.

KPIs related to earnings

Adjusted EBIT: The key figure used for the operational management and analysis of financial performance is adjusted earnings before interest and taxes (EBIT). It is calculated in the same way as EBIT, except that it does not take account of the KION purchase price allocation (see note 18) or any non-recurring items. Adjusted EBIT corresponds to the KPI used in internal management reporting called EBIT. Another important indicator used to measure the KION Group's operational efficiency is the adjusted EBIT margin, which is the ratio of adjusted EBIT to revenue.

Adjusted EBITDA: Unlike EBIT, the EBITDA figure is shown before deduction of depreciation, amortisation, impairments and reversals to non-current assets. Adjusted EBITDA also excludes effects from the KION purchase price allocation (see note 18) and non-recurring items. Adjusted EBITDA constitutes an approximation of the cash flow KPI and provides information on the Company's long-term financial performance.

KPIs related to liquidity

Net financial debt: Net financial debt is defined as the difference between the financial liabilities and cash and cash equivalents shown on the balance sheet. It serves as a measure of performance and is only used at Group level.

Free cash flow: Free cash flow is another relevant KPI for managing leverage and liquidity. It is determined solely by the KION Group's operating and investing activities. Free cash flow does not include interest arising from financing activities. The performance measurement of free cash flow is supported by the carefully targeted management of working capital and by detailed planning of capital expenditure.

KION also analyses non-financial key performance indicators. These essentially relate to customers, employees, sustainability and technology. Some of them are used operationally as leading indicators for the financial KPIs. The non-financial KPIs are described in detail in the Non-financial performance indicators section.