Adidas 2005 Annual Report Download - page 109
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105
Focused Capital Expenditure
We are committed to further improving the effectiveness of
the Group’s capital expenditure. Therefore, we limit capital
expenditure levels through disciplined budget control and
focusing expenditure on our core strategies. Amongst others,
these include the expansion of our own-retail activities and
the optimization of the Group’s IT systems supporting our
business processes.
Outstanding Financial Achievements in 2005
In 2005, we achieved all our major financial and non-financial
targets (see Inside Front Cover). Operating margin increased
0.7 percentage points to reach 10.7%, the highest level ever.
Average operating working capital as a percentage of sales
was reduced by 2.4 percentage points to 26.0% in 2005 from
28.4% in the prior year, reflecting our efforts to maintain tight
working capital management. In addition, capital expenditure
control was successful with an investment level of € 211 mil-
lion in 2005, at the lower end of the initially planned range of
between € 200 and € 250 million.
Order Backlogs as Performance Indicators
The best indicator of future development of the Group’s
revenues are our order backlogs which comprise the orders
received up to six months in advance of the actual sale.
Information concerning the ongoing development of our order
backlogs compared to the previous year’s level, together with
adidas’ own-retail expectations (which are not included in our
backlog calculation) as well as feedback from retailers, is
contained in this annual report (see Outlook). We also publish
regular updates on the development of our order book in our
quarterly reports. In addition, the development of key perfor-
mance measures and financial ratios can be monitored in the
Group’s quarterly statements.
Internal Management System
Key Financial Metrics – 2005 Results
Gross margin = Gross profit x 100 = 48.2%
Net sales
Operating expenses (% of net sales) = Operating expenses x 100 = 38.2%
Net sales
Operating margin = Operating profit x 100 = 10.7%
Net sales
Average operating working capital1) (€ in millions) = Sum of operating working capital at quarter-end = 1,819
4
Operating working capital1) (% of net sales) = Average operating working capital x 100 = 26.0%
Net sales
Capital expenditure1) 2) (€ in millions) = Additions of property, plant and equipment plus intangible assets = 211
1) Including discontinued operations
2) Excluding goodwill and financial leases