Management uses a number of measures to assess the performance of the Group that are not defined in IFRS, including core revenue, adjusted EBITDA, adjusted net income, adjusted earnings per share, net capital expenditure and free cash flow.

These alternative non-IFRS performance measures are presented as management believes that they are important supplemental measures of the Group’s performance. Management believes that they are useful and widely used in the markets in which the Group operates as a means of evaluating performance. In certain cases, these alternative performance measures are also used to determine compliance with covenants in the Group’s credit agreement and compensation of certain members of management. However, these alternative performance measures should not be considered as substitutes for the information contained elsewhere in these consolidated financial statements.

This note includes information about adjusted EBITDA and adjusted net income. Core revenue is presented in notes 6 and 7, adjusted earnings per share in note 10 and net capital expenditure and free cash flow in note 11.

Adjusted EBITDA

Adjusted EBITDA is used by management for business planning and to measure operational performance. Management believes that adjusted EBITDA provides investors with further transparency in the Group’s operational performance and facilitates comparison of the performance of the Group on a period-to-period basis and versus peers.

EBITDA is defined by the Group as profit or loss before net finance expense, income tax expense, depreciation of property, plant and equipment and right-of-use assets, and amortisation of intangible assets. Adjusted EBITDA is defined by the Group as EBITDA, adjusted to exclude certain non-cash transactions and items of a significant or unusual nature including, but not limited to, transaction- and acquisition-related costs, restructuring costs, unrealised gains or losses on derivatives, gains or losses on the sale of non-strategic assets, asset impairments and write-downs and share of profit or loss of joint ventures, and to include the cash impact of dividends received from joint ventures.

See note 5.2 for the impact on adjusted EBITDA of the adoption of IFRS 16 Leases on 1 January 2019.

The following table reconciles profit or loss to EBITDA and adjusted EBITDA.

(In € million)

 

Year ended
31 Dec. 2019

 

Year ended
31 Dec. 2018

Profit/(loss) for the period

 

106.9

 

(83.9)

Net finance expense

 

44.6

 

206.4

Income tax expense

 

41.1

 

0.9

Depreciation and amortisation

 

287.1

 

271.7

EBITDA

 

479.7

 

395.1

Adjustments to EBITDA:

 

 

 

 

Replacement of share of profit or loss of joint ventures with cash dividends received from joint ventures

 

5.3

 

14.8

Restructuring costs, net of reversals

 

1.8

 

4.3

Unrealised (gain)/loss on derivatives

 

(10.1)

 

23.1

Transaction- and acquisition-related costs

 

4.3

 

19.7

Other

 

4.4

 

4.5

Adjusted EBITDA

 

485.4

 

461.5

Transaction- and acquisition-related costs include IPO-related costs that relate to the listing of existing shares on SIX Swiss Exchange in September 2018, acquisition-related costs and costs for pursuing other initiatives. Costs incurred for the IPO that are directly attributable to the issue of new shares (€38.6 million) are recognised as a deduction from equity (see further note 24). IPO-related costs relating to both the issue of new shares and the listing of existing shares have been proportionally allocated between new shares and existing shares based on the total number of shares (new and existing). Payments of IPO-related costs for listing new and existing shares are presented as part of cash flows from financing activities. Payments of other transaction- and acquisition-related costs are presented as part of cash flows from operating activities.

The “Other” category for the year ended 31 December 2019 primarily includes operational process-related costs and impairment losses on property, plant and equipment. For the year ended 31 December 2018, “Other” primarily includes management fees and operational process-related costs. It also includes a gain of €0.7 million relating to the sale of a piece of land regarded as an investment property. The sale resulted in a cash inflow of €13.9 million.

Adjusted net income

Adjusted net income is used by management to measure performance. Management believes that adjusted net income is a meaningful measure because by removing certain non-recurring charges and non-cash expenses, the Group’s operating result directly associated with the period’s performance is presented. The use of adjusted net income may also be helpful to investors because it provides consistency and comparability with past performance and facilitates period-to-period comparisons of results of operations.

Adjusted net income is defined by the Group as profit or loss adjusted to exclude certain items of significant or unusual nature including, but not limited to, the non-cash foreign exchange impact of non-functional currency loans, amortisation of transaction costs, the net change in fair value of financing-related derivatives, purchase price allocation (“PPA”) depreciation and amortisation, adjustments made to reconcile EBITDA to adjusted EBITDA and the estimated tax impact of the foregoing adjustments. The PPA depreciation and amortisation arose due to the acquisition accounting that was performed when the SIG Group was acquired by Onex in 2015.

The following table reconciles profit or loss for the period to adjusted net income.

(In € million)

 

Year ended
31 Dec. 2019

 

Year ended
31 Dec. 2018

Profit/(loss) for the period

 

106.9

 

(83.9)

Non-cash foreign exchange impact of non-functional currency loans and realised foreign exchange impact due to refinancing

 

(1.2)

 

(58.8)

Amortisation of transaction costs

 

2.8

 

11.0

Net change in fair value of derivatives

 

1.5

 

7.4

Net effect of early redemption of notes

 

 

82.5

Net effect of early repayment of term loans

 

 

56.3

PPA depreciation and amortisation

 

136.5

 

140.1

Adjustments to EBITDA:

 

 

 

 

Replacement of share of profit or loss of joint ventures with cash dividends received from joint ventures

 

5.3

 

14.8

Restructuring costs, net of reversals

 

1.8

 

4.3

Unrealised (gain)/loss on derivatives

 

(10.1)

 

23.1

Transaction- and acquisition-related costs

 

4.3

 

19.7

Other

 

4.4

 

4.5

Tax effect on above items

 

(34.8)

 

(72.1)

Adjusted net income

 

217.4

 

148.9