APMs are the way that financial performance is measured by management, reported to the Board, the basis of financial measures for senior management's compensation schemes and provides supplementary information that assists the user in understanding the underlying trading results.

APMClosest equivalent IFRS measureAdjustments to reconcile to IFRS measureNote reference for reconciliationDefinition, purpose and considerations made by the Directors
Income Statement measure – continuing operations:

Adjusted operating profit (EBIT)

Operating profit or loss

Operating profit or loss before adjusting items

Adjusting items represent amortisation of acquired intangibles, discount unwind on acquisition consideration, profit on the disposal of investments, individually significant items and share-based payments

3

Represents operating profit before adjusting items to assist in the understanding of the Group's performance. Adjusting items represent amortisation of acquired intangibles, discount unwind on acquis on consideration, profit on the disposal of investments, individually significant items, and share-based payments.

The Directors consider amortisation of acquired intangibles is a non-cash accounting charge inherently linked to losses associated with historical acquisitions of businesses in accordance with the Group's adjusting items accounting policy. This APM's purpose is to allow the user to understand the Group's underlying financial performance as measured by management, reported to the Board and used as a financial measure in senior management's compensation schemes. An alternative view could be that the charge should be included in underlying results to reflect the 'cost' of an acquisition in the Income Statement. All things considered, including the similar treatment by comparator companies, the Directors have concluded that this item is an adjusting item. The same principles apply to non-cash unwind of discounts on deferred and contingent acquisition consideration and the profit on the disposal of investments.

Individually significant items are items that are considered unusual by nature or scale, and are of such significance that separate disclosure is relevant to understanding the Group's financial performance and therefore requires separate presentation in the financial statements in order to fairly present the financial performance of the Group.

The Directors consider share-based payments to be an adjusting item on the basis that fair values are volatile due to movements in share price, which may not be reflective of the underlying performance of the Group.

Earnings before interest, tax, depreciation and amortisation (EBITDA)

Operating profit or loss

Operating profit or loss, before depreciation and amortisation, net finance costs and taxation

3

Represents operating profit before depreciation and amortisation.

EBITDA is disclosed as this is a measure widely used by various stakeholders.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA)

Operating profit or loss

Operating profit or loss before adjusting items, depreciation and amortisation, net finance costs and taxation

3

Represents operating profit before adjusting items, depreciation and amortisation to assist in the understanding of the Group's performance.

Adjusted EBITDA is disclosed as this is a measure widely used by various stakeholders and used by the Group to measure the cash conversion ratio noted below.

Adjusted Profit before taxation

Profit before taxation

Profit before taxation before adjusting items

3

Represents profit before taxation before adjusting items and provides supplementary information on the Group's profitability before taxation.

Adjusted basic EPS

Basic EPS

Basic EPS excluding adjusting items12Represents Basic EPS excluding adjusting items and provides supplementary information that assists the user in understanding the underlying trading results.
Balance sheet measure

Net debt

Total borrowings offset by cash and cash equivalents

Total borrowings offset by cash and cash equivalents

3

Represents total borrowings 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.
Net 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.

Cash flow measure

Cash conversion ratio

Ratio % of net cash flow from operating activities before interest and taxation divided by operating profit

Ratio % of net cash flow from operating activities before interest and taxation divided by adjusted EBITDA

3

The cash conversion ratio is a measure of how effectively adjusted operating profit (as detailed above) 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 adjusted 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.