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) €m		Book value €m		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.