Financial Targets - Bertelsmann SE & Co. KGaA

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Financial Targets

  Target 2017 2016
Leverage factor: Economic debt/Operating EBITDA1) ≤ 2.5 2.5 2.5
Coverage ratio: Operating EBITDA/financial result1) > 4.0 11.2 9.7
Equity ratio: Equity to total assets (in percent) ≥ 25.0 38.5 41.6

1) After modifications.

     

Bertelsmann utilizes a financial control system employing quantitative financial targets concerning the Group’s economic debt and, to a lesser extent, its capital structure. One of the financial targets is a dynamic leverage factor limited to the defined maximum of 2.5. As of December 31, 2017, the leverage factor of Bertelsmann was 2.5, (December 31, 2016: 2.5), which is in line with the previous year’s level (see further explanation in the “Alternative Performance Measures” section, Annual Report 2017).

As of December 31, 2017, economic debt increased to €6,213 million from €5,913 million in the previous year, due to an increase in net financial debt. The latter increase to €3,479 million (December 31, 2016: €2,625 million) is largely attributable to the financing of the shareholding increase in Penguin Random House. Provisions for pensions and similar obligations fell to €1,685 million as of December 31, 2017 (December 31, 2016: €1,999 million), due to an increase in the interest rate.

Another financial target is the coverage ratio. This is calculated as the ratio of operating EBITDA (after modifications) to financial result, which is used to determine the leverage factor and is supposed to be above four. In the reporting period, the coverage ratio was 11.2 (previous year: 9.7). The Group’s equity ratio was 38.5 percent (December 31, 2016: 41.6 percent), which remains significantly above the selfimposed minimum of 25 percent. The decline is attributable to the purchase price payments for increases in shareholdings in the companies that are already fully consolidated, Penguin Random House and SpotX, as well as from dividend distributions to non-controlling interests, which also include the special dividend paid to the co-shareholder as part of the shareholding increase in Penguin Random House.