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Definition of Alternative Performance Measures (APMs) not defined under IFRS

The Company applies the Guidelines on Alternative Performance Measures published by the European Securities and Markets Authority (ESMA). The guidelines are aimed at making the alternative performance measures (APMs) used in financial reports more comprehensible and comparable, and therefore more usable.

According to the guidelines the APMs are a financial measure of historical or future financial performance, financial position, financial results or cash flows, other than those defined or specified in the applicable financial reporting framework: IFRS and the Swedish Annual Accounts Act.

The guidelines must be followed for financial reports published after 3 July 2016. Fagerhult has made the assessment that these alternative performance measures provide a better understanding of the Company’s financial trends and that they are widely used by the Company’s management team, investors, securities analysts and other stakeholders to supplement other performance measures.

These APMs, as defined by Fagerhult, are not to be compared with other alternative performance measures with similar names used by other companies. This is because the above-mentioned performance measures are not always defined in the same way and other companies may calculate them in a different way to Fagerhult. For definitions and an explanation of the reason for using financial performance measures see below.

Performance measureDefinitionExplanation
Return on equityNet profit for the year according to the income statement as a percentage of average equity.Return on equity shows the total recognised return on the shareholders’ equity and reflects effects of both an entity’s profitability as well as its financial leverage. This measure is mainly used to analyse profitability for shareholders over time.
Return on capital employedProfit before tax plus financial expense as a percentage of average capital employed.This ratio is presented to show the return generated by capital employed and is used to monitor an entity’s profitability and capital efficiency.
EBITDAOperating profit or loss before depreciation/amortisation, impairment, financial items and income tax.A component in the calculation of net debt/EBITDA. See Net debt.
Equity per shareEquity divided by the number of outstanding shares.This ratio is used to describe the size of the entity’s net value per share.
Sales growthAnnual growth in net sales calculated as increase in net sales compared with the previous year, expressed as a percentage.Sales growth makes it possible to compare growth between different periods and with the market in general and the competitors.
Average equityOpening equity + closing equity divided by two.A component in the calculation of return on equity.
Cash flow per shareCash flow for the year from operating activities divided by the average number of outstanding shares.This ratio measures cash flow generated by the entity per share before capital investments and cash flow from the entity’s financing activity.
Cash ratioCash and cash equivalents as a percentage of current liabilities.This ratio shows an entity’s ability to pay off its current liabilities.
Cash and cash equivalentsCash and bank balances as well as short-term investments.A component in the calculation of net debt/EBITDA. See Net debt.
Net investments in non-current assetsInvestments in property, plant and equipment less income from divestment of non-current assets.Used to show the effect on cash of investments made, since some investments can be considered investments to replace assets.
Net debtInterest-bearing liabilities lesscash and cash equivalents.Creditors, credit rating institutes and other stakeholders use net debt and associated measures in their analysis of the Fagerhult Group and we therefore report these alternative performance measures.
Net debt/EBITDANet debt in relation to EBITDA.The Company considers this performance measure relevant as it is a measure of how many years it would take with the current earnings to pay off the Company’s debts.
Operating marginOperating profit/loss in relation to net sales.The measure reflects the profitability of the Company’s operations. An important component combined with sales growth and capital turnover rate to monitor the Company’s value creation.
Equity/assets ratioEquity in relation to total assets.This measure reflects the Company’s financial position. A good equity/assets ratio enables the Company to handle periods when the economy is weak and to be financially prepared for growth.
Capital employedSum of non-interest-bearing assets less non-interest-bearing liabilities.Due to the need to optimise cash generation to create growth for the shareholders, management is focusing on capital employed.
Growth in profit after financial itemsAnnual growth in pre-tax profit calculated as the increase in pre-tax profit compared with the previous year, expressed as a percentage.Growth in profit after financial items makes it possible for the Company to compare growth in pre-tax profits between periods and with the market in general and the competitors.
Growth in operating profitAnnual growth in operating profit calculated as the increase in operating profit compared with the previous year, expressed as a percentage.Growth in operating profit makes it possible for the Company to compare growth in operating profit between periods and with the market in general and competitors.
Profit marginProfit after financial items as a percentage of net sales.Used to assess how effective an entity’s operations are before tax as the tax expense is difficult to influence.
Organic growthGrowth adjusted for foreign exchange rate effects as well as acquisitions and divestments.The measure reflects the business's operational growth.
Operating profit, EBITEarnings before financial items and taxes.The measure reflects the operational profitability of the business.