Key Control Parameters

Leverage / Total Net Debt Cover

The key financing indicator is leverage, which is calculated as the ratio of EBITDA and net debt. It therefore describes how many time EBITDA is needed to pay off the net debt.

NORMA Group strives to stay in the banks' investment grade. Since acquisitions have been an integral part of corporate strategy in the past and are continuing with respect to Strategy 2025, a significant reduction in the ratio is a sign of low acquisition activity and therefore not intended. On the other hand, the financial liabilities are not intended to unduly burden the resources of NORMA, which is why leverage should not permanently rise above 2.5. A short-term crossing of the limit is, however, possible and also the covenants in the financing contracts only commence well above 2.5; at 3.25 there is a margin step-up and only at 3.75 is the default.

In addition, the margin payable in the syndicated bank loan depends on leverage. Steering and improvement of leverage, i.e. through Factoring is worthwhile.

FPO

Operating Cash Flow

Among the Company’s most important financial performance indicators is, among others, the net operating cash flow, which has a direct impact on value creation at NORMA Group. This key figure forms the so-called NORMA Value Added (NOVA) as a central strategic target figure.

In order to maintain the Group’s financial independence and solvency at all times, NORMA Group is guided by net operating cash flow in addition to the aforementioned key figures. Net operating cash flow includes the most important cash-effective items that can be influenced by the individual business units and provides information on whether NORMA Group can finance its operating business out of its cash flow. It is calculated based on the adjusted EBITDA plus changes in working capital minus capital expenditures.

Group Treasury uses various tools to help with this. ABS, factoring and reverse factoring can improve working capital as money for bills comes in earlier and liabilities are paid later. In addition, net debt is reduced, which in turn has a positive effect on leverage and thus also on financing costs.

FPO

1 – (Reverse-) Factoring and ABS programs
2 – in % of sales runrate of EUR 784 million including NDS sales on full year 2014 basis