Glossary of terms – Alternative Performance Measures (APMs) continued
Closest equivalent IFRS measure
Adjustments to reconcile to IFRS measure
Note reference for reconciliation
Definition, purpose and considerations made by the Directors
APM
Balance Sheet measure: Net cash/(debt) excluding lease liabilities
3 Represents total borrowings (excluding lease liabilities) offset by cash and cash equivalents. It is a useful measure of the progress in generating cash, strengthening of the Group Balance Sheet position, overall net indebtedness and gearing on a like-for-like basis. Net cash/(debt), when compared to available borrowing facilities, also gives an indication of available financial resources to fund potential future business investment decisions and/or potential acquisitions. 3 Represents total borrowings (including lease liabilities) offset by cash and cash equivalents. It is a useful measure of the progress in generating cash, strengthening of the Group Balance Sheet position, overall net indebtedness and gearing including lease liabilities. Net cash/(debt), when compared to available borrowing facilities, also gives an indication of available financial resources to fund potential future business investment decisions and/or potential acquisitions. 3 The cash conversion ratio is a measure of how effectively operating profit is converted into cash and effectively highlights both non-cash accounting items within operating profit and also movements in working capital. It is calculated as net cash flow from operating activities before interest and taxation (as disclosed on the face of the Cash Flow Statement) divided by EBITDA for continued and discontinued activities. The cash conversion ratio is a measure widely used by various stakeholders and hence is disclosed to show the quality of cash generation and also to allow comparison to other similar companies.
Total borrowings (excluding lease liabilities) offset by cash and cash equivalents
Net cash/(debt)
Total borrowings (including lease liabilities) offset by cash and cash equivalents
Cash flow measure: Cash conversion ratio
Ratio % of net cash flow from operating activities before interest and tax divided by EBITDA
Ratio % of net cash flow from operating activities before interest and tax divided by operating profit
Constant currency and local currency revenue measures: The Group also reports certain geographic regions on a constant currency basis to reflect the underlying performance taking into account constant foreign exchange rates year on year. This involves translating comparative numbers to current year rates for comparability to enable a growth factor to be calculated. In addition, the Group also reports these regions on a local currency basis to demonstrate the revenue performance on a local basis. As these measures are not statutory revenue numbers, management considers these to be APMs.
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NCC Group plc — Annual report and accounts for the year ended 31 May 2021
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