The Group assesses its performance using a variety of alternative performance measures which are not defined under IFRS and are therefore termed “non-GAAP” measures. These measures provide additional useful information on the underlying trends, performance and position of the Group. The non-GAAP measures we used are:
- 52 Weeks Comparative for the 2017 Financial Year;
- Gross Sales;
- Segment Revenue;
- Exceptional Items;
- Segment Administrative Costs and Distribution Costs;
- Segment EBITDA;
- External Gross Debt; and
- Net Debt.
A reconciliation from these non-GAAP measures to the nearest measure prepared in accordance with IFRS is presented below. The alternative performance measures used may not be directly comparable with similarly titled measures used by other companies.
52 Week Comparative for the 2017 Financial Year
As a predominately retail business, the business has a 53 week financial year every 5-6 years. The business have removed the last trading week of the 2017 financial year to aid comparability for the users. These comparable numbers are not highlighted throughout the report.
Gross Sales is a measure of reported revenue before excluding value added tax and relevant vouchers and offers. Gross Sales is a common measure used by investors and analysts to evaluate the operating financial performance of companies within the retail sector.
A reconciliation from reported revenue to Gross Sales can be found in Note 2.3 to the consolidated financial statements.
Segment Revenue/Revenue (Retail)/Revenue (Solutions)
Segment revenue is a measure of reported revenue for the Group's Retail and Solutions segments. A reconciliation of revenue for the segments to revenue for the Group can be found in Note 2.2 to the consolidated financial statements.
The Group’s Consolidated Income Statement separately identifies trading results before exceptional items. The Directors believe that presentation of the Group’s results in this way is relevant to an understanding of the Group’s financial performance. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and assists in providing a meaningful analysis of the trading results of the Group. This also facilitates comparison with prior periods to assess trends in financial performance more readily.
The Group applies judgement in identifying significant non-recurring items of income and expense that are recognised as exceptional to help provide an indication of the Group’s underlying business. In determining whether an event or transaction is exceptional in nature, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence.
Examples of items that the Group considers exceptional include, but are not limited to, material costs relating to the opening of a new warehouse, corporate reorganisations, material litigation, and any material costs, outside of the normal course of business as determined by management.
Exceptional items are disclosed in Note 2.7 to the consolidated financial statements.
Segment Administrative Costs and Distribution Costs
Segment distribution and administrative costs are measures which seek to reflect the performance of the Group’s segments in relation to the long-term sustainable growth of the Group. These measures exclude the impact of certain costs that are not allocated to a segment; depreciation, amortisation, impairment and other central costs.
A reconciliation from reported distribution and administrative costs, the most directly comparable IFRS measures, to the segment distribution and administrative costs, is set out below.
|Retail distribution and administrative costs||356.1||301.4|
|Solutions distribution and administrative costs||115.1||93.9|
|Unsegmented distribution and administrative costs||80.7||71.0|
|Reported distribution costs||434.2||365.7|
|Reported administrative costs||117.7||100.6|
In addition to measuring its financial performance based on operating profit, the Group also measures performance based on EBITDA. EBITDA is defined as the Group earnings before depreciation, amortisation, impairment, net finance expense, taxation and exceptional items. EBITDA is a common measure used by investors and analysts to evaluate the operating financial performance of companies.
The Group considers EBITDA to be a useful measure of its operating performance because it approximates the underlying operating cash flow by eliminating depreciation and amortisation. EBITDA is not a direct measure of liquidity, which is shown by the cash flow statement, and needs to be considered in the context of the Group's financial commitments.
A reconciliation from operating profit to EBITDA can be found on the face of the Consolidated Income Statement.
Segment EBITDA/EBITDA (Retail)/EBITDA (Solutions)
The financial performance of the Group's segments is measured based on EBITDA, as reported internally.
A reconciliation of EBITDA for the segments to EBITDA for the Group can be found in Note 2.2 to the consolidated financial statements.
External gross debt
External gross debt consists of loans and other borrowings (both current and non-current), less finance leases payable to joint venture interests of the Group.
External gross debt is a measure of the Group’s indebtedness to third parties which are not considered a related party to the Group.
A reconciliation from external gross debt to gross debt can be found below.
|External gross debt||283.9||107.1|
|Finance leases relating to joint ventures||94.1||108.7|
Net debt consists of loans and other borrowings (both current and non-current), less cash and cash equivalents. Loans and other borrowings are measured as the net proceeds raised, adjusted to amortise any discount over the term of the debt.
Net debt is a measure of the Group’s net indebtedness that provides an indicator of the overall balance sheet strength. It is also a single measure that can be used to assess the combined impact of the Group’s cash position and its indebtedness. The use of the term “net debt” does not necessarily mean that the cash included in the net debt calculation is available to settle the liabilities included in this measure.
Net debt is considered to be an alternative performance measure as it is not defined in IFRS. The most directly comparable IFRS measure is the aggregate of loans and other borrowings (current and non-current) and cash and cash equivalents. A reconciliation from these measures to net debt can be found in Note 4.4 in the consolidated financial statements.