— Financial reporting — Consolidated financial statements — Alternative performance measures
Alternative performance measures (APM)
The financial information included in this report includes certain alternative performance measures (APMs), which are not accounting measures as defined by IFRS. These APMs should not be used instead of, or considered as alternatives to, the group’s financial results based on IFRS. These APMs may not be comparable to similarly titled measures disclosed by other companies. All APMs presented relate to the performance of the current reporting period and comparative periods.
Definition of alternative performance measures (APM)
Business area cost of goods sold
Business area cost of goods sold is the part of cost of goods sold that is assigned to a business area. Business area cost of goods sold is used to monitor the costs of a business area.
Business area gross profit
Business area gross profit is the part of gross profit that is assigned to a business area. Business area gross profit is used to monitor the gross profit of a business area.
Business area gross profit margin
Business area gross profit margin is the part of the gross profit margin that is assigned to a business area. Business area gross profit margin is used to monitor the margin of a business area.
Other cost of goods sold
Other cost of goods sold is the part of cost of goods sold that is not assigned to a business area. Other cost of goods sold is used to reconcile the business area gross profit to the gross profit of the group.
EBITDA (earnings before interest, taxes, depreciation and amortization)
EBITDA is defined as net income before income tax expenses, other financial income and expenses, net, interest expenses, interest and securities income, depreciation, amortization and impairments on tangible and intangible assets. In other words, EBITDA is defined as EBIT before depreciation, amortization and impairments on tangible and intangible assets. EBITDA is used to determine the net debt/EBITDA ratio.
Adjusted EBITDA is defined as net income before income tax expenses, other financial income and expenses, net, interest expenses, interest and securities income, depreciation, amortization, impairments on tangible and intangible assets, restructuring expenses and other non-operational items, which include significant acquisition-related expenses, gains and losses from the sale of businesses or real estate, and certain non-operational items that are non-recurring or do not occur in similar magnitude. Adjusted EBITDA is used to determine the profitability of the business and to determine the net debt/adjusted EBITDA ratio.
Adjusted EBITDA margin
The adjusted EBITDA margin is calculated by dividing adjusted EBITDA by revenue. The adjusted EBITDA margin measures how the group turns revenue into adjusted EBITDA.
Free cash flow (FCF)
FCF is used to assess the group’s ability to generate the cash required to conduct and maintain its operations. It also indicates the group’s ability to generate cash to finance dividend payments, repay debt and to undertake merger and acquisition activities. FCF is calculated based on the IFRS cash flow from operating activities and adjusted for capital expenditures (investments in property, plant and equipment and intangible assets).
Net debt is used to monitor the group’s overall short- and long-term liquidity. Net debt is calculated as the sum of total current and non-current borrowings and lease liabilities less cash and cash equivalents and current financial assets.
Net debt/adjusted EBITDA ratio
Net debt/adjusted EBITDA is a ratio measuring the amount of income generated and available to pay down debt before covering interest, taxes, depreciations and amortization expenses without considering impairments, restructuring expenses and other non-operational items. The net debt/adjusted EBITDA ratio is used as a measurement of adjusted leverage. It is calculated as net debt divided by adjusted EBITDA.
Certain percentage changes in the financial review and the business review divisions have been calculated using constant exchange rates, which allow for an assessment of the group’s financial performance with the effects of exchange rate fluctuations eliminated. The currency-adjusted growth is calculated by applying the previous year’s exchange rates for the current year and calculating the growth without currency effects.
Organic growth measures changes with the same period in the previous year after adjusting for effects arising from acquisitions, divestments and foreign exchange differences.
The impact of the organic growth is determined as follows:
- Currency-adjusted growth as described above
- For the current-year acquisitions, by deducting the currency-adjusted amount generated during the current year by the acquired entities
- For prior-year acquisitions, by deducting the currency-adjusted amount generated over the months during which the acquired entities were not consolidated in the previous year
- For current-year disposals, by adding the currency-adjusted amount generated by the divested entities in the previous year over the months during which those entities were no longer consolidated in the current year
- For the prior-year disposals, by adding for the current year the currency-adjusted amount generated in the previous year by the divested entities
Reconciliation statements for alternative performance measures (APM)
For the reconciliation statements of business area gross profit, business area gross profit margin, EBITDA, adjusted EBITDA and adjusted EBITDA margin, please refer to note 3, for net debt and net debt/adjusted EBITDA ratio to note 6 and for the free cash flow to the section financial review.