Analysis of Net Debt

12 Months Ended

Dec. 31, 2019

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Analysis of Net Debt

23.  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 lease liabilities under IFRS 16, 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 24 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 2019				As at 31 December 2018
	Fair value* €m		Book value €m		Fair value* €m		Book value €m
Lease liabilities under IFRS 16 (note 22) (i)		(1,511)		(1,511)		-		-
Interest-bearing loans and borrowings (note 26) (ii)		(9,572)		(9,014)		(9,223)		(9,316)
Derivative financial instruments (net) (note 27)		65		65		(14)		(14)
Cash and cash equivalents (note 25)		3,755		3,755		2,346		2,346
Group net debt		(7,263)		(6,705)		(6,891)		(6,984)

Reconciliation of opening to closing net debt	2019 €m		2018 €m			2017 €m
At 1 January		(6,984)		(5,796)			(5,297)
Movement in year
Effect of adopting IFRS 16		(1,954)		-			-
Debt, including lease liabilities, in acquired companies (note 32)		(73)		(74)			(12)
Debt, including lease liabilities, in disposed companies		415		-			-
Increase in interest-bearing loans and borrowings		(91)		(1,434)			(1,010)
Net increase in lease liabilities under IFRS 16 (i)		(163)		-			-
Net cash flow arising from derivative financial instruments		36		(6)			(169)
Repayment of interest-bearing loans, borrowings and finance leases (ii)		572		246			343
Repayment of lease liabilities under IFRS 16 (i)		317		-			-
Mark-to-market adjustment		25		2			9
Translation adjustment on financing activities		(214)		(133)			654
Increase in liabilities from financing activities		(1,130)		(1,399	)		(185	)
Translation adjustment on cash and cash equivalents		27		17			(161	)
Increase/(decrease) in cash and cash equivalents		1,382		194			(153	)
At 31 December		(6,705)		(6,984)			(5,796)

Notes (i) and (ii) are set out overleaf.

The following table shows the effective interest rates on period-end fixed, gross and net debt:

	As at 31 December 2019						As at 31 December 2018
	€m		Interest rate		Weighted average fixed period Years		€m		Interest rate		Weighted average fixed period Years
Interest-bearing loans and borrowings nominal - fixed rate (iii)		(8,743)						(9,107)
Derivative financial instruments - fixed rate		1,599						1,726
Net fixed rate debt including derivatives		(7,144)		3.4%		9.2		(7,381)		3.5%		9.8
Interest-bearing loans and borrowings nominal - floating rate (iv)		(158)						(157)
Adjustment of debt from nominal to book value (iii)		(113)						(52)
Derivative financial instruments - currency floating rate		(1,534)						(1,740)
Gross debt including derivative financial instruments, excluding lease liabilities		(8,949)		3.3%				(9,330)		3.6%
Lease liabilities - fixed rate		(1,511)						-
Gross debt including derivative financial instruments, including lease liabilities		(10,460)						(9,330)
Cash and cash equivalents - floating rate (note 25)		3,755						2,346
Group net debt		(6,705)						(6,984)

(i) All leases capitalised under IFRS 16 have been included as lease liabilities in 2019.

(ii) Interest-bearing loans and borrowings in 2018 include finance leases previously capitalised under IAS 17.

(iii) Of the Group’s nominal fixed rate debt at 31 December 2019, €1,599 million (2018: €1,726 million) is hedged to floating rate using interest rate swaps.

(iv) Floating rate debt comprises bank borrowings 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 2019 and 31 December 2018 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
Lease liabilities under IFRS 16 (note 22) (ii)		(255)		(752)		(223)		(151)		(11)		(27)		(48)		(44)		(1,511)
Cash and cash equivalents (note 25)		1,935		863		238		175		34		105		168		237		3,755
Interest-bearing loans and borrowings (note 26)		(3,310)		(4,444)		(469)		(9)		(439)		-		(303)		(40)		(9,014)
Derivative financial instruments (net) (note 27)		1,438		93		(391)		(676)		(38)		(150)		-		(211)		65
Net debt by major currency including derivative financial instruments		(192)		(4,240)		(845)		(661)		(454)		(72)		(183)		(58)		(6,705)
Non-debt assets and liabilities analysed as follows:
Non-current assets		4,242		14,340		2,783		1,741		1,507		331		459		1,541		26,944
Current assets		1,256		3,315		788		499		150		138		71		312		6,529
Non-current liabilities		(672)		(2,417)		(314)		(205)		(150)		(19)		(121)		(112)		(4,010)
Current liabilities		(1,442)		(1,995)		(837)		(320)		(183)		(147)		(77)		(277)		(5,278)
Non-controlling interests		(48)		(50)		-		-		(414)		-		(6)		(22)		(540)
Capital and reserves attributable to the Company’s equity holders		3,144		8,953		1,575		1,054		456		231		143		1,384		16,940
The equivalent disclosure for the prior year is as follows:
Cash and cash equivalents (note 25)		1,077		646		214		69		13		90		81		156		2,346
Interest-bearing loans and borrowings (note 26)		(3,824)		(4,332)		(495)		(2)		(354)		-		(302)		(7)		(9,316)
Derivative financial instruments (net) (note 27)		1,826		(399)		(340)		(440)		(60)		(198)		(299)		(104)		(14)
Net debt by major currency including derivative financial instruments		(921)		(4,085)		(621)		(373)		(401)		(108)		(520)		45		(6,984)
Non-debt assets and liabilities analysed as follows:
Non-current assets		4,650		13,007		2,461		1,375		1,352		283		741		1,763		25,632
Current assets		1,884		3,222		746		458		117		142		297		284		7,150
Non-current liabilities		(669)		(2,275)		(276)		(203)		(137)		(5)		(164)		(95)		(3,824)
Current liabilities		(1,696)		(1,820)		(836)		(309)		(156)		(136)		(182)		(285)		(5,420)
Non-controlling interests		(51)		(61)		-		-		(384)		-		(11)		(18)		(525)
Capital and reserves attributable to the Company’s equity holders		3,197		7,988		1,474		948		391		176		161		1,694		16,029

(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.

(ii) All leases capitalised under IFRS 16 have been included as lease liabilities in 2019.

Liquidity and capital resources

The following table provides certain information related to our cash generation and changes in our cash and cash equivalents position:

	2019 €m		2018 €m		2017 €m
Net cash inflow from operating activities		3,466		1,899		2,189
Net cash inflow/(outflow) from investing activities		195		(1,592)		(2,685)
Net cash (outflow)/inflow from financing activities		(2,279)		(113)		343
Increase/(decrease) in cash and cash equivalents		1,382		194		(153)
Cash and cash equivalents at beginning of year, excluding overdrafts (note 25)		2,346		2,135		2,449
Effect of exchange rate changes		27		17		(161)
Cash and cash equivalents at end of year, excluding overdrafts (note 25)		3,755		2,346		2,135
Lease liabilities under IFRS 16		(1,511)		-		-
Bank overdrafts		(41)		(113)		(71)
Borrowings		(8,973)		(9,203)		(7,910)
Derivative financial instruments		65		(14)		50
Total liabilities from financing activities		(10,460)		(9,330)		(7,931)
Net debt at end of year		(6,705)		(6,984)		(5,796)
Cash at bank and in hand reclassified as held for sale		-		-		(20)
Bank overdrafts reclassified as held for sale		-		-		5
Group net debt excluding net debt reclassified as held for sale		(6,705)		(6,984)		(5,811)

The Group believes that its financial resources (operating cash together with cash and cash equivalents of €3.8 billion and undrawn committed loan facilities of €3.6 billion) will be sufficient to cover the Group’s cash requirements.

At 31 December 2019, euro and US Dollar denominated cash and cash equivalents represented 52% (2018: 46%) and 23% (2018: 27%) 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 external bonds were outstanding as at 31 December 2019:

	Annual coupons	Outstanding millions		Final maturity
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
US Dollar bonds	3.950%		US$900	2028
euro bonds	1.375%		€600	2028
Pound Sterling bonds	4.125%		£400	2029
US Dollar bonds (i)	6.400%		US$213	2033
US Dollar bonds	5.125%		US$500	2045
US Dollar bonds	4.400%		US$400	2047
US Dollar bonds	4.500%		US$600	2048

(i) The US$300 million bond was issued in September 2003, and at time of issuance the bond was partially swapped to floating interest rates. 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 and the interest rate hedge was closed out. At 31 December 2019, the remaining fair value on the hedged item on the Consolidated Balance Sheet was US$42 millon (2018: US$45 million).