REG-Smurfit Kappa Group PLC Final Results <Origin Href="QuoteRef">SKG.I</Origin> - Part 2
07/02/2018 07:05
- Part 2: For the preceding part double click ID:nBw7Cy9DNa
Total comprehensive income for the financial year 205 253
Attributable to:
Owners of the parent 225 235
Non-controlling interests (20) 18
Total comprehensive income for the financial year 205 253
Consolidated Statement of Comprehensive Income – Fourth Quarter
3 months to 3 months to
31-Dec-17 31-Dec-16
Unaudited Unaudited
€m €m
Profit for the financial period 120 106
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss
Foreign currency translation adjustments:
- Arising in the financial period (57) 43
Effective portion of changes in fair value of cash flow hedges:
- Movement out of reserve 2 2
(55) 45
Items which will not be subsequently reclassified to profit or
loss
Defined benefit pension plans:
- Actuarial (loss)/profit (2) 43
- Movement in deferred tax - (5)
(2) 38
Total other comprehensive (expense)/income (57) 83
Total comprehensive income for the financial period 63 189
Attributable to:
Owners of the parent 65 179
Non-controlling interests (2) 10
Total comprehensive income for the financial period 63 189
Consolidated Balance Sheet
31-Dec-17 31-Dec-16
Unaudited Audited
€m €m
ASSETS
Non-current assets
Property, plant and equipment 3,242 3,261
Goodwill and intangible assets 2,427 2,478
Available-for-sale financial assets 21 21
Investment in associates 13 17
Biological assets 110 114
Trade and other receivables 27 29
Derivative financial instruments 3 42
Deferred income tax assets 200 190
6,043 6,152
Current assets
Inventories 838 779
Biological assets 11 10
Trade and other receivables 1,558 1,470
Derivative financial instruments 16 10
Restricted cash 9 7
Cash and cash equivalents 530 436
2,962 2,712
Total assets 9,005 8,864
EQUITY
Capital and reserves attributable to owners of the parent
Equity share capital - -
Share premium 1,984 1,983
Other reserves (678) (507)
Retained earnings 1,202 853
Total equity attributable to owners of the parent 2,508 2,329
Non-controlling interests 151 174
Total equity 2,659 2,503
LIABILITIES
Non-current liabilities
Borrowings 2,671 3,247
Employee benefits 848 884
Derivative financial instruments 26 12
Deferred income tax liabilities 148 183
Non-current income tax liabilities 33 30
Provisions for liabilities and charges 62 69
Capital grants 19 14
Other payables 17 13
3,824 4,452
Current liabilities
Borrowings 673 137
Trade and other payables 1,779 1,705
Current income tax liabilities 37 21
Derivative financial instruments 10 27
Provisions for liabilities and charges 23 19
2,522 1,909
Total liabilities 6,346 6,361
Total equity and liabilities 9,005 8,864
Consolidated Statement of Changes in Equity
Attributable to owners of the parent
Equitysharecapital Sharepremium Otherreserves Retainedearnings Total Non-controllinginterests Totalequity
€m €m €m €m €m €m €m
Unaudited
At 1 January 2017 - 1,983 (507) 853 2,329 174 2,503
Profit for the financial year - - - 417 417 6 423
Other comprehensive income
Foreign currency translationadjustments - - (189) - (189) (26) (215)
Defined benefit pension plans - - - (8) (8) - (8)
Effective portion of changes in fairvalue of cash flow hedges - - 5 - 5 - 5
Total comprehensive(expense)/income for thefinancial year - - (184) 409 225 (20) 205
Shares issued - 1 - - 1 - 1
Purchase of non-controllinginterests - - - - - (15) (15)
Hyperinflation adjustment - - - 131 131 16 147
Dividends paid - - - (191) (191) (4) (195)
Share-based payment - - 23 - 23 - 23
Net shares acquired by SKGEmployee Trust - - (10) - (10) - (10)
At 31 December 2017 - 1,984 (678) 1,202 2,508 151 2,659
Audited
At 1 January 2016 - 1,983 (425) 619 2,177 151 2,328
Profit for the financial year - - - 444 444 14 458
Other comprehensive income
Foreign currency translationadjustments - - (84) - (84) 4 (80)
Defined benefit pension plans - - - (125) (125) - (125)
Total comprehensive(expense)/income for thefinancial year - - (84) 319 235 18 253
Hyperinflation adjustment - - - 81 81 9 90
Dividends paid - - - (166) (166) (4) (170)
Share-based payment - - 12 - 12 - 12
Net shares acquired by SKGEmployee Trust - - (10) - (10) - (10)
At 31 December 2016 - 1,983 (507) 853 2,329 174 2,503
An analysis of the movements in Other reserves is provided in Note 13.
Consolidated Statement of Cash Flows
12 months to 12 months to
31-Dec-17 31-Dec-16
Unaudited Audited
€m €m
Cash flows from operating activities
Profit before income tax 576 654
Net finance costs 221 163
Depreciation charge 360 357
Impairment of assets 11 -
Amortisation of intangible assets 40 40
Amortisation of capital grants (2) (2)
Equity settled share-based payment expense 23 12
Profit on sale/purchase of assets and businesses (9) (13)
Share of associates’ profit (after tax) - (2)
Net movement in working capital (110) (94)
Change in biological assets (4) (4)
Change in employee benefits and other provisions (54) (87)
Other (primarily hyperinflation adjustments) 6 12
Cash generated from operations 1,058 1,036
Interest paid (161) (151)
Income taxes paid:
Irish corporation tax paid (14) (24)
Overseas corporation tax (net of tax refunds) paid (140) (127)
Net cash inflow from operating activities 743 734
Cash flows from investing activities
Interest received 3 3
Business disposals 4 4
Additions to property, plant and equipment and biological assets (442) (427)
Additions to intangible assets (16) (13)
Receipt of capital grants 4 3
Disposal of available-for-sale financial assets - 13
Increase in restricted cash (2) (2)
Disposal of property, plant and equipment 14 12
Disposal of associates 1 -
Dividends received from associates 1 1
Purchase of subsidiaries (49) (35)
Deferred consideration paid (3) (9)
Net cash outflow from investing activities (485) (450)
Cash flows from financing activities
Proceeds from issue of new ordinary shares 1 -
Proceeds from bond issue 500 -
Proceeds from other debt issues - 250
Purchase of own shares (net) (10) (10)
Purchase of non-controlling interests (7) -
Decrease in other interest-bearing borrowings (78) (65)
Repayment of finance leases (2) (3)
Repayment of borrowings (366) (169)
Derivative termination (payments)/receipts (6) 13
Deferred debt issue costs paid (10) (3)
Dividends paid to shareholders (191) (166)
Dividends paid to non-controlling interests (4) (4)
Net cash outflow from financing activities (173) (157)
Increase in cash and cash equivalents 85 127
Reconciliation of opening to closing cash and cash equivalents
Cash and cash equivalents at 1 January 402 263
Currency translation adjustment 16 12
Increase in cash and cash equivalents 85 127
Cash and cash equivalents at 31 December 503 402
An analysis of the Net movement in working capital is provided in Note 11.
Notes to the Consolidated Financial Statements
1. General Information
Smurfit Kappa Group plc (‘SKG plc’ or ‘the Company’) and its
subsidiaries (together ‘SKG’ or ‘the Group’) manufacture, distribute
and sell containerboard, corrugated containers and other paper-based packaging
products such as solidboard, graphicboard and bag-in-box. The Company is a
public limited company whose shares are publicly traded. It is incorporated
and domiciled in Ireland. The address of its registered office is Beech Hill,
Clonskeagh, Dublin 4, D04 N2R2, Ireland.
2. Basis of Preparation and Accounting Policies
The consolidated financial statements of the Group are prepared in accordance
with International Financial Reporting Standards (‘IFRS’) issued by the
International Accounting Standards Board (‘IASB’) as adopted by the
European Union (‘EU’); and those parts of the Companies Act 2014
applicable to companies reporting under IFRS.
The financial information in this report has been prepared in accordance with
the Group’s accounting policies. Full details of the accounting policies
adopted by the Group are contained in the consolidated financial statements
included in the Group’s annual report for the year ended 31 December 2016
which is available on the Group’s website; smurfitkappa.com
(http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.smurfitkappa.com&esheet=51754764&newsitemid=20180206006558&lan=en-US&anchor=smurfitkappa.com&index=6&md5=8f53fd64b0632911ff01e44c8bb6366d)
. The accounting policies and methods of computation and presentation adopted
in the preparation of the Group financial information are consistent with
those described and applied in the annual report for the year ended 31
December 2016. There are no new IFRS standards effective from 1 January 2017
which had a material effect on the financial information included in this
report.
The financial information includes all adjustments that management considers
necessary for a fair presentation of such financial information. All such
adjustments are of a normal recurring nature. Certain tables in the financial
information may not add precisely due to rounding.
The financial information presented in this preliminary release does not
constitute full statutory financial statements. The preliminary release was
approved by the Board of Directors. The annual report and financial statements
will be approved by the Board of Directors and reported on by the auditors in
due course. The annual financial statements reported on by the auditors will
not contain quarterly information. Accordingly, the financial information is
unaudited. Full statutory financial statements for the year ended 31 December
2016 have been filed with the Irish Registrar of Companies. The audit report
on those statutory financial statements was unqualified.
3. Segmental Analyses
The Group has determined operating segments based on the manner in which
reports are reviewed by the chief operating decision maker (‘CODM’). The
CODM is determined to be the executive management team responsible for
assessing performance, allocating resources and making strategic decisions.
The Group has identified two operating segments: 1) Europe and 2) The
Americas.
The Europe segment is highly integrated. It includes a system of mills and
plants that primarily produces a full line of containerboard that is converted
into corrugated containers. The Americas segment comprises all forestry,
paper, corrugated and folding carton activities in a number of Latin American
countries and the United States. Inter-segment revenue is not material. No
operating segments have been aggregated for disclosure purposes.
Segment profit is measured based on EBITDA((1))
12 months to 31-Dec-17 12 months to 31-Dec-16
Europe TheAmericas Total Europe TheAmericas Total
€m €m €m €m €m €m
Revenue and results
Revenue 6,404 2,158 8,562 6,146 2,013 8,159
EBITDA before exceptional items 955 311 1,266 928 339 1,267
Segment exceptional items - (12) (12) - (15) (15)
EBITDA after exceptional items 955 299 1,254 928 324 1,252
Unallocated centre costs (26) (31)
Share-based payment expense (24) (13)
Depreciation and depletion (net) (356) (353)
Amortisation (40) (40)
Impairment of assets (11) -
Finance costs (250) (215)
Finance income 29 52
Share of associates’ profit (after tax) - 2
Profit before income tax 576 654
Income tax expense (153) (196)
Profit for the financial year 423 458
(1) EBITDA is defined within Alternative Performance Measures set out in
Supplementary Financial Information.
3. Segmental Analyses (continued)
3 months to 31-Dec-17 3 months to 31-Dec-16
Europe TheAmericas Total Europe TheAmericas Total
€m €m €m €m €m €m
Revenue and results
Revenue 1,630 578 2,208 1,506 554 2,060
EBITDA before exceptional items 269 87 356 228 98 326
Segment exceptional items - (12) (12) - (15) (15)
EBITDA after exceptional items 269 75 344 228 83 311
Unallocated centre costs (5) (6)
Share-based payment expense (11) -
Depreciation and depletion (net) (84) (85)
Amortisation (10) (14)
Impairment of assets (11) -
Finance costs (70) (54)
Finance income 8 3
Profit before income tax 161 155
Income tax expense (41) (49)
Profit for the financial period 120 106
4. Exceptional Items
12 months to 12 months to
The following items are regarded as exceptional in nature: 31-Dec-17 31-Dec-16
€m €m
Impairment of assets 11 -
Reorganisation and restructuring costs 12 15
Exceptional items included in operating profit 23 15
Exceptional finance costs 2 -
Exceptional finance income - (12)
Exceptional items included in net finance costs 2 (12)
Total exceptional items 25 3
Exceptional items charged within operating profit in the year ended to
December 2017 amounted to €23 million. These were reported in the fourth
quarter and comprised impairment losses of €11 million relating to property,
plant and equipment in one of our European mills and a corrugated plant in the
Americas. The remaining €12 million related to reorganisation and
restructuring costs in the Americas. In 2016, we charged €15 million in the
fourth quarter in respect of reorganisation and restructuring costs in the
Americas.
Exceptional finance costs of €2 million arose in the first quarter of 2017
and represented the accelerated amortisation of the issue costs relating to
the debt within our senior credit facility which was paid down with the
proceeds of January's €500 million bond issue. The exceptional finance
income in 2016 related to the gain of €12 million on the sale of our
shareholding in the Swedish company, IL Recycling, in the second quarter.
5. Finance Costs and Income
12 months to 12 months to
31-Dec-17 31-Dec-16
€m €m
Finance costs:
Interest payable on bank loans and overdrafts 52 56
Interest payable on finance leases and hire purchase contracts 1 -
Interest payable on other borrowings 119 106
Exceptional finance costs associated with debt restructuring 2 -
Unwinding discount element of provision 1 1
Foreign currency translation loss on debt 27 12
Fair value loss on derivatives not designated as hedges - 17
Net interest cost on net pension liability 24 23
Net monetary loss - hyperinflation 24 -
Total finance costs 250 215
Finance income:
Other interest receivable (3) (3)
Foreign currency translation gain on debt (14) (28)
Exceptional gain on sale of investment - (12)
Fair value gain on derivatives not designated as hedges (12) (5)
Net monetary gain - hyperinflation - (4)
Total finance income (29) (52)
Net finance costs 221 163
6. Income Tax Expense
Income tax expense recognised in the Consolidated Income Statement
12 months to 12 months to
31-Dec-17 31-Dec-16
€m €m
Current tax:
Europe 143 87
The Americas 48 69
191 156
Deferred tax (38) 40
Income tax expense 153 196
Current tax is analysed as follows:
Ireland 20 14
Foreign 171 142
191 156
Income tax recognised in the Consolidated Statement of Comprehensive Income
12 months to 12 months to
31-Dec-17 31-Dec-16
€m €m
Arising on defined benefit plans (1) (23)
The income tax expense in 2017 is €43 million lower than in the comparable
period in 2016.
The current tax expense has increased by €35 million compared to the prior
period. In Europe the current tax expense is €56 million higher. The
Group’s historic tax losses have now been fully utilised in a number of
countries and the impact of this, together with other timing items, is
included in the increased current tax expense in 2017. In the Americas, the
current tax expense is €21 million lower and this reflects the tax effects
of lower profitability.
There is a deferred tax credit of €38 million in 2017 compared to a deferred
tax charge of €40 million in 2016. The movement in deferred tax includes the
effects of the reversal of timing differences on which deferred tax
liabilities were previously recognised, other credits and the use and
recognition of tax losses.
The income tax expense includes a €6 million tax credit in respect of
exceptional items compared to a
€3 million credit in 2016.
7. Employee Benefits – Defined Benefit Plans
The table below sets out the components of the defined benefit cost for the
year:
12 months to 12 months to
31-Dec-17 31-Dec-16
€m €m
Current service cost 28 29
Past service cost - (21)
Gain on settlement - (5)
Actuarial loss arising on other long-term employee benefits 1 1
Net interest cost on net pension liability 18 22
Defined benefit cost 47 26
Included in cost of sales, distribution costs and administrative expenses is a
defined benefit cost of €29 million (2016: cost of €4 million). Net
interest cost on net pension liability of €18 million (2016: €22 million)
is included in finance costs in the Consolidated Income Statement.
The negative past service cost of €21 million in 2016 relates to the change
from defined benefit to defined contribution arrangements in a number of
countries in Europe.
The amounts recognised in the Consolidated Balance Sheet were as follows:
31-Dec-17 31-Dec-16
€m €m
Present value of funded or partially funded obligations (2,282) (2,320)
Fair value of plan assets 1,953 1,954
Deficit in funded or partially funded plans (329) (366)
Present value of wholly unfunded obligations (517) (517)
Amounts not recognised as assets due to asset ceiling (2) (1)
Net pension liability (848) (884)
The employee benefits provision has reduced from €884 million at 31 December
2016 to €848 million at 31 December 2017, mainly as a result of Group cash
contributions in excess of liability accrual and positive asset performance.
8. Earnings per Share
Basic
Basic earnings per share is calculated by dividing the profit attributable to
owners of the parent by the weighted average number of ordinary shares in
issue during the year less own shares.
12 months to 12 months to
31-Dec-17 31-Dec-16
Profit attributable to owners of the parent (€ million) 417 444
Weighted average number of ordinary shares in issue (million) 235 235
Basic earnings per share (cent) 177.2 189.4
Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. These comprise convertible shares issued under the
Share Incentive Plan, which were based on performance and the passage of time,
deferred shares held in trust, which are based on the passage of time, and
matching shares, which are performance-based in addition to the passage of
time. Both deferred shares held in trust and matching shares are issued under
the Deferred Annual Bonus Plan. Where the conditions governing exercisability
of these shares have been satisfied as at the end of the reporting period,
they are included in the computation of diluted earnings per ordinary share.
12 months to 12 months to
31-Dec-17 31-Dec-16
Profit attributable to owners of the parent (€ million) 417 444
Weighted average number of ordinary shares in issue (million) 235 235
Potential dilutive ordinary shares assumed (million) 2 2
Diluted weighted average ordinary shares (million) 237 237
Diluted earnings per share (cent) 175.8 187.5
Pre-exceptional
12 months to 12 months to
31-Dec-17 31-Dec-16
Profit attributable to owners of the parent (€ million) 417 444
Exceptional items included in profit before income tax (Note 4) (€ 25 3
million)
Income tax on exceptional items (€ million) (6) (3)
Pre-exceptional profit attributable to owners of the parent (€ 436 444
million)
Weighted average number of ordinary shares in issue (million) 235 235
Pre-exceptional basic earnings per share (cent) 185.3 189.4
Diluted weighted average ordinary shares (million) 237 237
Pre-exceptional diluted earnings per share (cent) 183.8 187.6
9. Dividends
In May 2017, the final dividend for 2016 of 57.6 cent per share was paid to
the holders of ordinary shares. In October 2017, an interim dividend for 2017
of 23.1 cent per share was paid to the holders of ordinary shares.
The Board is recommending a final dividend of 64.5 cent per share for 2017
subject to the approval of the shareholders at the AGM. It is proposed to pay
the final dividend on 11 May 2018 to all ordinary shareholders on the share
register at the close of business on 13 April 2018. The final dividend and
interim dividend are paid in May and October in each year.
10. Property, Plant and Equipment
Land andbuildings Plant andequipment Total
€m €m €m
Year ended 31 December 2017
Opening net book amount 1,004 2,257 3,261
Reclassifications 56 (57) (1)
Additions 1 401 402
Acquisitions 23 15 38
Depreciation charge (49) (311) (360)
Impairments - (11) (11)
Retirements and disposals (3) (1) (4)
Hyperinflation adjustment 42 34 76
Foreign currency translation adjustment (51) (108) (159)
At 31 December 2017 1,023 2,219 3,242
Year ended 31 December 2016
Opening net book amount 988 2,115 3,103
Reclassifications 42 (43) (1)
Additions 11 465 476
Acquisitions 10 56 66
Depreciation charge (48) (309) (357)
Retirements and disposals (1) (11) (12)
Hyperinflation adjustment 25 21 46
Foreign currency translation adjustment (23) (37) (60)
At 31 December 2016 1,004 2,257 3,261
11. Net Movement in Working Capital
12 months to 12 months to
31-Dec-17 31-Dec-16
€m €m
Change in inventories (112) (60)
Change in trade and other receivables (136) (51)
Change in trade and other payables 138 17
Net movement in working capital (110) (94)
12. Analysis of Net Debt
31-Dec-17 31-Dec-16
€m €m
Senior credit facility:
Revolving credit facility((1) )– interest at relevant 2 1
interbank rate + 1.35%((6))
Term loan facility((2) )– interest at relevant interbank 485 741
rate + 1.60%((6))
US$292.3 million 7.50% senior debentures due 2025 (including accrued 245 279
interest)
Bank loans and overdrafts 154 167
Cash (539) (443)
2019 receivables securitisation variable funding notes 88 182
2022 receivables securitisation variable funding notes (including 4 114
accrued interest)((3))
2018 senior notes (including accrued interest)((4)) 455 488
€400 million 4.125% senior notes due 2020 (including accrued 405 404
interest)
€250 million senior floating rate notes due 2020 (including accrued 250 249
interest)((5))
€500 million 3.25% senior notes due 2021 (including accrued interest) 497 496
€500 million 2.375% senior notes due 2024 (including accrued 498 -
interest)
€250 million 2.75% senior notes due 2025 (including accrued interest) 249 249
Net debt before finance leases 2,793 2,927
Finance leases 12 14
Net debt including leases 2,805 2,941
(1) Revolving credit facility ('RCF') of €845 million (available under the
senior credit facility) to be repaid in 2020. The RCF wasincreased by €220
million in February 2017. (a) Revolver loans - €6 million, (b) drawn under
ancillary facilities and facilitiessupported by letters of credit – nil and
(c) other operational facilities including letters of credit - €5 million.
(2) Term loan facility due to be repaid in certain instalments from 2018 to 2020.
In January and February 2017, the Group prepaid€260 million of drawings
under the term loan facility.
(3) In May 2017, the €175 million receivables securitisation programme was
amended and restated, extending the maturity to 2022and reducing the variable
funding notes margin from 1.70% to 1.375%.
(4) €200 million 5.125% senior notes due 2018 and US$300 million 4.875%
senior notes due 2018.
(5) Interest at EURIBOR + 3.5%.
(6) The margins applicable under the senior credit facility are
determined as follows:
Net debt/EBITDA ratio RCF Term Loan Facility
Greater than 3.0 : 1 1.85% 2.10%
3.0 : 1 or less but more than 2.5 : 1 1.35% 1.60%
2.5 : 1 or less but more than 2.0 : 1 1.10% 1.35%
2.0 : 1 or less 0.85% 1.10%
13. Other Reserves
Other reserves included in the Consolidated Statement of Changes in Equity are
comprised of the following:
Reverseacquisitionreserve Cash flowhedgingreserve Foreigncurrencytranslationreserve Share-basedpaymentreserve Ownshares Available-for-salereserve
Total
€m €m €m €m €m €m €m
At 1 January 2017 575 (22) (1,193) 165 (33) 1 (507)
Other comprehensiveincome
- More to follow, for following part double click ID:nBw7Cy9DNcRecent news on Smurfit Kappa
See all newsREG - Smurfit Kappa Group Goldman Sachs Group. - Holding(s) in Company
AnnouncementREG - Smurfit Kappa Group - Holding(s) in Company
AnnouncementREG - Smurfit Kappa Group - Holding(s) in Company
AnnouncementREG-Smurfit Kappa Group PLC Trading Statement
AnnouncementREG - Smurfit Kappa Group Goldman Sachs Group. - Holding(s) in Company
Announcement