Sitz der Gesellschaft/Registered Office: Bad Homburg
Handelsregister/Commercial Register: Amtsgericht Bad Homburg – HRA 3143

Persönlich haftender Gesellschafter/General Partner: Fresenius Immobilien-Verwaltungs-GmbH
Sitz der Gesellschaft/Registered Office: Bad Homburg
Handelsregister/Commercial Register: Bad Homburg, HRB 5726
Geschäftsführer/Managing Director: Andreas Neukam, Tjerk Schlufter

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The Management Board makes strategic and operational management decisions based on our Group-wide performance indicators for growth, profitability, liquidity, capital efficiency, and capital management. The most important financial performance indicators for us are explained below. The Management Board has revised the financial management system for the fiscal year 2023. As part of the new Fresenius Financial Framework, we have defined ambition levels (growth bands, amongst others EBIT margin) for the business segments. These serve as an ambition level for the internal management of our business sectors and are benchmarked against leading competitors. The new Fresenius Financial Framework will be rolled out in fiscal year 2023.

Growth

For Fresenius, currency-adjusted revenue growth, in particular organic revenue growth in the Group and in the business segments, is of central importance for managing revenue growth. It shows the growth of our business that comes from our own resources and not from acquisitions, divestitures, or currency translation effects. Currency translation effects are the difference between revenue in the reporting period at the exchange rates of the reporting period, less revenues in the reporting period at the exchange rates of the comparative period.

A portfolio effect takes place in the case of an acquisition or divestment. Any portfolio effect is excluded for 12 months after the end of the relevant transaction in the reporting or comparative period, after which both current and prior periods fully reflect the portfolio change.

In the new Fresenius Financial Framework, organic revenue growth represents the key performance indicator for the Group’s growth and that of the business segments. With the new Fresenius Financial Framework, we have defined annual organic revenue growth ranges (ambition levels) for the operating companies. No annual ambition levels were defined for organic sales growth of the investment companies.

Profitability

We measured the earnings performance of the segments in fiscal year 2022 using earnings before interest and taxes (EBIT) and EBIT growth in constant currency. At Group level, we primarily used net income^1,2 and its currency-adjusted growth.

In order to better compare operating performance over several periods, we have adjusted the earnings figures for special items where appropriate.

As part of the new Fresenius financial framework, we have defined annual margin bands (ambition levels) for the business segments. These serve as an ambition level for the internal management of our business sectors and are benchmarked against leading competitors. The annual EBIT margin is defined as earnings before interest and taxes divided by revenue. To improve comparability of operating performance over several periods, the earnings figure is adjusted for special items where necessary.

For Fresenius Medical Care and Fresenius Vamed, we present the annual margin band that reflects our expectation as the major shareholder. 

At Group level, we primarily use earnings before interest and taxes (EBIT) and EBIT growth in constant currency. To improve comparability of operating performance over several periods, the earnings figure is adjusted for special items where necessary.

1  Net income attributable to the shareholders of Fresenius SE&Co. KGaA

2  Before special items

Liquidity and Dividend

Within the Group, cash flow margin is used as the main liquidity indicator in fiscal year 2022.

With the new Fresenius Financial Framework, we will in future manage our business according to the cash conversion rate (CCR), which is defined as the ratio of adjusted free cash flow (cash flow before acquisitions and dividends; before interest, tax, and special items) to operating income (EBIT) before special items. This allows us to assess our ability to generate cash and pay dividends, among other things. The ambition level for the CCR is around 1.0, considering the growth profile of the respective year.

With the new Fresenius Financial Framework Fresenius aims to generate attractive and predictable dividend yields. In line with its progressive dividend policy, the Company aims to increase the dividend in line with earnings per share growth (before special items, in constant currency) but at least maintain the dividend at the prior-year's level. For fiscal year 2022, we will propose to the Annual General Meeting a dividend at the prior-year level of €0.92 per share (2021: €0.92). The payout to the shareholders of Fresenius SE & Co. KGaA will amount to €518 million or 30% of consolidated net income. Based on this proposal and the year-end share price, the dividend yield is 3.5%.

Capital efficiency

We work as profitably and efficiently as possible with the capital provided to us by shareholders and lenders. In order to manage this, we primarily calculate the return on invested capital (ROIC) and the return on operating assets (ROOA) for fiscal year 2022.

Under the new Fresenius Financial Framework, the Group's capital efficiency will in future be managed on the basis of return on invested capital (ROIC). This serves as an ambition level for the internal management of our Group. We aim to achieve a ROIC of between 6% and 8%.

Capital management

We use the ratio of net debt and EBITDA as the key parameter for managing the capital structure. This measure indicates the degree to which a company is able to meet its payment obligations. Our business segments usually hold leading positions in growing and mostly non-cyclical markets. Since the majority of our customers are of high credit quality, they generate mainly stable, predictable cash flows. According to the management assessment, the Group is therefore able to use debt to finance its growth to a greater extent than companies in other industries.

In the context of the new Fresenius Financial Framework, we will continue to manage our capital structure using the ratio of net debt to EBITDA. The self-imposed target corridor for the leverage ratio remains unchanged at 3.0× to 3.5×.

Non-financial performance targets

In fiscal year 2022, sustainability was included as a nonfinancial performance target in the Management Board compensation system. Based on the ESG key performance indicators (KPIs) identified in fiscal year 2021, the business segments worked on transparent reporting, performance measurement, and target setting to manage sustainability performance in future. The focus continued to be on the topics of quality, employees, innovation, compliance and the environment, which are essential for Fresenius. These are derived from the company’s materiality analysis. We use a proprietary ESG scoring methodology to qualitatively measure the achievement of targets for the Management Board compensation. From fiscal year 2023, the qualitative measurement of fiscal years 2021 and 2022 will be replaced by quantitative ESG KPIs in the Management Board short-term variable remuneration (Short-term Incentive -- STI). The KPIs cover the key sustainability topics of medical quality / patient satisfaction and employees.

The topic of employees is measured with the key figure of the Employee Engagement Index (EEI) for the Fresenius Group. The indicator measures how positively employees identify with their employer, how committed they feel, and how engaged they are at work. The key figure can be reported in relation to a business segment or for the entire Group. The EEI of the Fresenius Group is weighted according to the number of employees in the business segments The EEI is measured on a scale between 1 and 6.

The Medical Quality / Patient Satisfaction topic is made up of four equally weighted key performance indicators defined at business segment level. The four key figures are based on their respective materiality for the business model.

• Fresenius Medical Care: Net Promoter Score
• Fresenius Kabi: Audit & Inspection Score
• Fresenius Helios: Inpatient Quality Indicator
• Fresenius Vamed: Patient Satisfaction Score

The patient Net Promoter Score (NPS) is designed to ensure that Fresenius Medical Care maintains excellent patient relationships and that the opinions of patients are used to provide strategic insights to improve patient relationships. Improving the Net Promoter Score leads to better service, higher quality of care, improved quality of life and loyalty to Fresenius Medical Care as the provider of choice. The patient Net Promoter Score is measured on a scale between -100 and +100 points.

The Audit & Inspection Score at Fresenius Kabi is based on the number of critical and serious non-conformances from regulatory GMP inspections and the number of serious non-conformances from TUV ISO 9001 audits in relation to the total number of inspections and audits performed. The score shows how many deviations were identified on average during the inspections and audits considered. The Audit & Inspection Score is measured as a percentage (scale >0%).

The Inpatient Quality Indicator at Fresenius Helios comprises the measurement of a set of standardized German inpatient quality indicators (G-IQI). These are based on routinely
collected hospital billing data from hospital information systems. The number of indicators achieved compared to the total number of indicators is calculated to measure the overall success rate. There is individual target setting and measurement of target achievement in the two Helios segments Helios Germany and Helios Spain. Subsequently, target achievement is consolidated at Helios company level with equal weighting (50% each) for Executive Board compensation. The Inpatient Quality Indicator is measured on a scale of 0% to 100%.

Fresenius Vamed measures the level of patient satisfaction in the Vamed healthcare facilities and the overall patient satisfaction with the services offered in the Vamed
healthcare facilities. At or immediately after the point of discharge, each patient receives a questionnaire, which contains 16 standardized questions that are evaluated for the patient satisfaction target. Patient Satisfaction is measured on a scale from 1 (very satisfied) to 5 (not satisfied).

Investment and acquisition process

Against the backdrop of debt, Fresenius pursues a targeted capital allocation with a focus on deleveraging. Our investments and acquisitions are carried out using a detailed coordination and evaluation process. As a first step, the Management Board sets the Group’s investment targets and the budget based on investment proposals. In the next step, the respective business segments and the internal Acquisition & Investment Council (AIC) determine the proposed projects and measures, taking into account the overall strategy, the total investment budget, and the required and potential return on investment. We evaluate investment projects based on commonly used methods, such as internal rate of return (IRR) and net present value (NPV). Within the framework of the due diligence process, opportunities and risks associated with the potential acquisition target are analyzed and assessed. To this end, we review the business model, the key financial figures and tax issues, and the resulting company valuation. In addition, we comprehensively analyze the market and competitive environment, the regulatory framework and the legal aspects. The audit also covers various issues relating to compliance, production, research and development, quality, information technology, human resources, and the environment. Based on investment volume, a project is submitted for approval to the executive committees or respective managements of the business segments, to the Group Management Board of Fresenius Management SE, and / or, if applicable, also additionally the consent of its Supervisory Board.

You can also find more details on our key performance indicators in our interactive tool at www.fresenius.com/interactive-tool.

Group and segment outlook 2024

Fresenius raises its outlook for FY/24¹ based on the excellent first quarter and improved prospects for the ramainder of the year.

For 2024, Group organic revenue growth² is now expected to grow between 4% to 7% (previous: 3% to 6%). Group constant currency EBIT^3,4 is expected to grow in the rage of 6% to 10% (previous: 4% to 8%). 

Fresenius Kabi now expects organic revenue growth in a mid-to high-single-digit percentage range in 2024 (previous: mid-single-digit percentage range). The EBIT margin⁴ is now expected to be in a range of 15% to 16% (previously: around 15%) (structural margin band: 14% to 17%). 

Improved Fresenius Helios outlook for FY/24: Following our Capital Markets Day in June 2024, Fresenius Helios now expects organic revenue to grow in a mid-single-digit percentage range in 2024 (previous: in a low to mid-single digit percentage range). The EBIT margin⁴ is now expected to be in a range of 10% to 11% (previous: within the structural margin band of 9% to 11%). 

The adjustment of the Group outlook also reflects the fact that the forecast is now given without Fresenius Vamed, i.e. exclusively for the Operating Companies Fresenius Kabi and Fresenius Helios. Following the announcement of the planned divestment of Fresenius Vamed's rehabilitation business, Fresenius has initiated its structured exit from its Investment Company Fresenius Vamed.

 ¹ For the prior-year basis please see table “Basis for Guidance for 2024"
 ² 2023 base: €20,307 million
 ³ 2023 base: €2,266 million 
 ⁴ Before special items

 

Fresenius is a global healthcare group, comprised of the Operating Companies Fresenius Kabi and Fresenius Helios (each with 100% ownership share) and the Investment Companies Fresenius Medical Care and Fresenius Vamed¹.  

Our Operating Companies put our focus on system-critical healthcare products and services for leading therapies into effect and are geared towards profitability optimization and growth. In line with the role of Fresenius as significant shareholder, our Investment Companies will be focused on financial value management.

 

¹ Fresenius announced a structured exit from its Investment Company Vamed; as of Q2 2024, Vamed will no longer be a reporting segment of Fresenius.

At Fresenius, we are at the heart of healthcare. We offer system-critical products and services for therapies of care for critically and chronically ill patients. We continuously improve the quality and efficiency of healthcare, giving a growing number of people access to world-class therapies. We are always looking for even better solutions and thus contribute to medical progress.
 

Megatrends in Healthcare

In doing so, we take advantage of significant paradigm shifts in the healthcare environment with regards to biologic products and therapies, technological change and new forms of data generation, processing and usage. The healthcare sector is one of the world’s largest industries and we are convinced that it demonstrates excellent growth opportunities. We want to be at the forefront of these trends and have thus charted our course to continued system relevance in our businesses.

Advancing patient care

The health and well-being of patients is Fresenius‘ top priority. We have been saving and improving the lives of critically and chronically ill people for more than 100 years. 

Our goal is to expand Fresenius’ position as a leading global provider of therapies for critically and chronically ill people. At the same time, we want to grow profitably and use our capital efficiently, in order to create value for our stakeholders and enable us to continue investing in better medicine. 

In 2023, we have executed a comprehensive diagnosis of our Group portfolio at sub-segment level, in order to highlight growth opportunities aligned with market trends. As part of this process, we further refined our management approach for each of our businesses and identified areas to strengthen our portfolio focus. Going forward, we want to increasingly orient our portfolio to three platforms: 

• (Bio)Pharma including clinical nutrition
• MedTech 
• Care Provision

With these platforms, we cater to major trends in healthcare and become a more therapy-focused company. The health and quality of life of our patients who we serve with high-quality, affordable products and services is at the core. At the same time, our platforms address attractive value pools in healthcare, which will provide opportunities for future profitable growth.

Our path to #FutureFresenius

In 2022, we launched #FutureFresenius to embark on a transformative journey and provide a clear direction for the next decades. We made great progress over 2023, particularly in the structural progression of the Group. With the deconsolidation of Fresenius Medical Care and targeted divestments, we sharpened the focus of the portfolio and achieved structural simplification. Our new corporate structure places a clear focus on our Operating Companies Fresenius Kabi and Fresenius Helios. Both businesses have attractive market positions and excellent opportunities for profitable growth. Clear structures and responsibilities were also defined with the initiation of a new operating model. Our new Fresenius Financial Framework will enable us to monitor and improve performance in a more targeted manner. 

• RESET: As a first step of this journey, we simplified our group structure, optimized our financial management system, and created change momentum across the organization.
• REVITALIZE: Now we want to gear up for continuous portfolio optimization and the pursuit of growth verticals. 
• REJUVENATE: At this stage we will make use of value-generating growth verticals to reinforce and expand our platforms. 
• REIMAGINE: Our further enhanced capabilities will allow us to actively shape the future of healthcare in the REIMAGINE phase.

 

¹ OECD, Long-term Economic Scenarios (2023)² UN Ageing & Health (2021)³ OECD Health at a Glance (2019)⁴ McKinsey & Co. (2023)⁵ WHO Triple Billion Progress