21. Analysis of Net Debt
Components of net debt
Net debt is a non-GAAP measure which we provide to investors as we believe they find it useful. Net debt comprises cash and cash equivalents, derivative financial instrument assets and liabilities and interest-bearing loans and borrowings and enables investors to see the economic effects of these in total (see note 22 for details of the capital and risk management policies employed by the Group). Net debt is commonly used in computations such as net debt as a % of total equity and net debt as a % of market capitalisation.
| As at 31 December 2017 | As at 31 December 2016 | |||||||||||||||||||
|
Fair
value (i) |
Book
value |
Fair value (i) €m |
Book value €m |
|||||||||||||||||
|
Cash and cash equivalents (note 23) |
2,135 | 2,135 | 2,449 | 2,449 | ||||||||||||||||
|
Interest-bearing loans and borrowings (note 24) |
(8,421) | (7,981) | (8,236) | (7,790) | ||||||||||||||||
|
Derivative financial instruments (net) (note 25) |
50 | 50 | 44 | 44 | ||||||||||||||||
|
Group net debt |
(6,236) | (5,796) | (5,743) | (5,297) | ||||||||||||||||
| (i) | All interest-bearing loans and borrowings are Level 2 fair value measurements. |
| Reconciliation of opening to closing net debt |
2017 €m |
2016 €m |
2015 €m |
|||||||||
|
At 1 January |
(5,297) | (6,618) | (2,492) | |||||||||
|
Debt in acquired companies (note 31) |
(12) | (3) | (175) | |||||||||
|
Debt in disposed companies |
- | - | 20 | |||||||||
|
Increase in interest-bearing loans, borrowings and finance leases |
(1,010) | (600) | (5,633) | |||||||||
|
Net cash flow arising from derivative financial instruments |
(169) | 5 | (47) | |||||||||
|
Repayment of interest-bearing loans, borrowings and finance leases |
343 | 2,015 | 2,744 | |||||||||
|
Decrease in cash and cash equivalents |
(153) | (127) | (897) | |||||||||
|
Mark-to-market adjustment |
9 | 21 | (1) | |||||||||
|
Translation adjustment |
493 | 10 | (137) | |||||||||
|
At 31 December |
(5,796) | (5,297) | (6,618) | |||||||||
The following table shows the effective interest rates on period-end fixed, gross and net debt:
| As at 31 December 2017 | As at 31 December 2016 | |||||||||||||||||||||||||||
| €m | Interest rate |
Weighted average fixed period Years |
€m | Interest rate |
Weighted average fixed period Years |
|||||||||||||||||||||||
|
Interest-bearing loans and borrowings nominal - fixed rate (i) |
(7,844) | (7,417) | ||||||||||||||||||||||||||
|
Derivative financial instruments - fixed rate |
1,505 | 1,640 | ||||||||||||||||||||||||||
|
Net fixed rate debt including derivatives |
(6,339) | 3.3% | 9.2 | (5,777) | 3.5% | 8.7 | ||||||||||||||||||||||
|
Interest-bearing loans and borrowings nominal - floating rate (ii) |
(70) | (270) | ||||||||||||||||||||||||||
|
Adjustment of debt from nominal to book value (i) |
(67) | (103) | ||||||||||||||||||||||||||
|
Derivative financial instruments - currency floating rate |
(1,455) | (1,596) | ||||||||||||||||||||||||||
|
Gross debt including derivative financial instruments |
(7,931) | 4.2% | (7,746) | 4.1% | ||||||||||||||||||||||||
|
Cash and cash equivalents - floating rate |
2,135 | 2,449 | ||||||||||||||||||||||||||
|
Group net debt |
(5,796) | (5,297) | ||||||||||||||||||||||||||
|
Cash at bank and in hand reclassified as held for sale (note 23) |
(20) | - | ||||||||||||||||||||||||||
|
Bank overdrafts reclassified as held for sale (note 24) |
5 | - | ||||||||||||||||||||||||||
|
Group net debt excluding net debt reclassified as held for sale |
(5,811) | (5,297) | ||||||||||||||||||||||||||
| (i) | Of the Group’s nominal fixed rate debt at 31 December 2017, €1,505 million (2016: €1,640 million) is hedged to floating rate using interest rate swaps. |
| (ii) | Floating rate debt comprises bank borrowings and finance leases bearing interest at rates set in advance for periods ranging from overnight to less than one year largely by reference to inter-bank interest rates. |
Currency profile
The currency profile of the Group’s net debt and net worth (capital and reserves attributable to the Company’s equity holders) as at 31 December 2017 and 31 December 2016 is as follows:
| euro €m |
US Dollar €m |
Pound Sterling €m |
Canadian Dollar €m |
Philippine Peso €m |
Polish Zloty €m |
Swiss Franc €m |
Other (i) €m |
Total €m |
||||||||||||||||||||||||||||
|
Cash and cash equivalents (note 23)* |
743 | 714 | 215 | 140 | 43 | 99 | 61 | 100 | 2,115 | |||||||||||||||||||||||||||
|
Interest-bearing loans and borrowings (note 24)* |
(3,827) | (3,097) | (465) | (2) | (293) | - | (281) | (11) | (7,976) | |||||||||||||||||||||||||||
|
Derivative financial instruments (net) (note 25) |
2,078 | (908) | (157) | (480) | (17) | (171) | (247) | (48) | 50 | |||||||||||||||||||||||||||
| Net debt* by major currency including derivative financial instruments | (1,006) | (3,291) | (407) | (342) | (267) | (72) | (467) | 41 | (5,811) | |||||||||||||||||||||||||||
| Non-debt assets and liabilities (including cash and bank overdrafts reclassified as held for sale) analysed as follows: | ||||||||||||||||||||||||||||||||||||
|
Non-current assets |
5,030 | 8,815 | 2,400 | 1,466 | 1,292 | 310 | 715 | 1,804 | 21,832 | |||||||||||||||||||||||||||
|
Current assets |
1,935 | 3,718 | 692 | 454 | 110 | 138 | 302 | 273 | 7,622 | |||||||||||||||||||||||||||
|
Non-current liabilities |
(713) | (1,311) | (295) | (206) | (153) | (5) | (181) | (98) | (2,962) | |||||||||||||||||||||||||||
|
Current liabilities |
(1,745) | (2,093) | (806) | (322) | (137) | (130) | (186) | (285) | (5,704) | |||||||||||||||||||||||||||
|
Non-controlling interests |
(49) | (14) | - | - | (391) | - | (11) | (21) | (486) | |||||||||||||||||||||||||||
| Capital and reserves attributable to the Company’s equity holders |
3,452 | 5,824 | 1,584 | 1,050 | 454 | 241 | 172 | 1,714 | 14,491 | |||||||||||||||||||||||||||
|
The equivalent disclosure for the prior year is as follows: |
||||||||||||||||||||||||||||||||||||
|
Cash and cash equivalents (note 23) |
690 | 1,284 | 72 | 145 | 16 | 21 | 89 | 132 | 2,449 | |||||||||||||||||||||||||||
|
Interest-bearing loans and borrowings (note 24) |
(3,840) | (2,957) | (464) | (1) | (197) | (1) | (306) | (24) | (7,790) | |||||||||||||||||||||||||||
|
Derivative financial instruments (net) (note 25) |
2,397 | (1,246) | (208) | (612) | - | (80) | (209) | 2 | 44 | |||||||||||||||||||||||||||
| Net debt by major currency including derivative financial instruments | (753) | (2,919) | (600) | (468) | (181) | (60) | (426) | 110 | (5,297) | |||||||||||||||||||||||||||
|
Non-debt assets and liabilities analysed as follows: |
||||||||||||||||||||||||||||||||||||
|
Non-current assets |
4,476 | 9,311 | 2,485 | 1,541 | 1,459 | 288 | 797 | 1,790 | 22,147 | |||||||||||||||||||||||||||
|
Current assets |
1,809 | 3,064 | 749 | 471 | 97 | 149 | 325 | 258 | 6,922 | |||||||||||||||||||||||||||
|
Non-current liabilities |
(641) | (1,885) | (276) | (247) | (238) | (4) | (350) | (97) | (3,738) | |||||||||||||||||||||||||||
|
Current liabilities |
(1,610) | (2,059) | (892) | (320) | (125) | (118) | (199) | (268) | (5,591) | |||||||||||||||||||||||||||
|
Non-controlling interests |
(46) | (16) | - | - | (472) | (1) | (12) | (1) | (548) | |||||||||||||||||||||||||||
| Capital and reserves attributable to the Company’s equity holders |
3,235 | 5,496 | 1,466 | 977 | 540 | 254 | 135 | 1,792 | 13,895 | |||||||||||||||||||||||||||
| (i) | The principal currencies included in this category are the Chinese Renminbi, the Romanian Leu, the Indian Rupee, the Ukrainian Hryvnia and the Serbian Dinar. |
* Excluding €20 million cash and €5 million bank overdrafts reclassified as held for sale which are analysed by major currency in current assets and liabilities above.
Liquidity and capital resources
The following table provides certain information related to our cash generation and changes in our cash and cash equivalents position:
|
2017 €m |
2016 €m |
2015 €m |
||||||||||
|
Net cash inflow from operating activities |
2,189 | 2,340 | 2,247 | |||||||||
|
Net cash outflow from investing activities |
(2,685) | (735) | (7,306) | |||||||||
|
Net cash inflow/(outflow) from financing activities |
343 | (1,732) | 4,162 | |||||||||
|
Decrease in cash and cash equivalents |
(153) | (127) | (897) | |||||||||
|
Cash and cash equivalents at beginning of year, excluding overdrafts (note 23) |
2,449 | 2,518 | 3,295 | |||||||||
|
Effect of exchange rate changes |
(161) | 58 | 120 | |||||||||
|
Cash and cash equivalents at end of year, excluding overdrafts (note 23) |
2,135 | 2,449 | 2,518 | |||||||||
|
Bank overdrafts |
(71) | (78) | (117) | |||||||||
|
Borrowings |
(7,910) | (7,712) | (9,104) | |||||||||
|
Derivative financial instruments |
50 | 44 | 85 | |||||||||
|
Total liabilities from financing activities |
(7,931) | (7,746) | (9,136) | |||||||||
|
Net debt at end of year |
(5,796) | (5,297) | (6,618) | |||||||||
|
Cash at bank and in hand reclassified as held for sale (note 23) |
(20) | - | - | |||||||||
|
Bank overdrafts reclassified as held for sale (note 24) |
5 | - | - | |||||||||
|
Group net debt excluding net debt reclassified as held for sale |
(5,811) | (5,297) | (6,618) | |||||||||
Part of the Group’s financing strategy objectives include maintenance of adequate financial resources and liquidity. During 2017 the Group’s total net cash inflow from operating activities of €2.2 billion plus net cash inflow from financing activities of €0.3 billion funded investing activities of €2.7 billion.
The Group believes that its financial resources (operating cash together with cash and cash equivalents of €2.1 billion and undrawn committed loan facilities of €3.6 billion) will be sufficient to cover the Group’s cash requirements.
At 31 December 2017, euro and US Dollar denominated cash and cash equivalents represented 35% (2016: 28%) and 34% (2016: 52%) of total cash and cash equivalents respectively.
Significant borrowings
The main sources of Group debt funding are public bond markets in Europe and North America. The following bonds were outstanding as at 31 December 2017:
| Annual coupons |
Outstanding millions |
Final maturity |
||||||||
|
US Dollar bonds (i) |
8.125% | US$288 | 2018 | |||||||
|
euro bonds |
5.000% | €500 | 2019 | |||||||
|
euro bonds |
2.750% | €750 | 2020 | |||||||
|
US Dollar bonds |
5.750% | US$400 | 2021 | |||||||
|
euro bonds |
1.750% | €600 | 2021 | |||||||
|
Swiss Franc bonds |
1.375% | CHF330 | 2022 | |||||||
|
euro bonds |
3.125% | €750 | 2023 | |||||||
|
euro bonds |
1.875% | €600 | 2024 | |||||||
|
US Dollar bonds |
3.875% | US$1,250 | 2025 | |||||||
|
US Dollar bonds |
3.400% | US$600 | 2027 | |||||||
|
euro bonds |
1.375% | €600 | 2028 | |||||||
|
Pound Sterling bonds |
4.125% | £400 | 2029 | |||||||
|
US Dollar bonds (ii) |
6.400% | US$213 | 2033 | |||||||
|
US Dollar bonds |
5.125% | US$500 | 2045 | |||||||
|
US Dollar bonds |
4.400% | US$400 | 2047 | |||||||
| (i) | Originally issued as a US$650 million bond in July 2008. In May 2017, US$362.13 million of the issued notes were redeemed by the issuer as part of liability management exercise. |
| (ii) | Originally issued as a US$300 million bond in September 2003. In August 2009 and December 2010, US$87.445 million of the issued notes were acquired by CRH plc as part of liability management exercises undertaken. |