REG-Smurfit Kappa Group PLC Final Results <Origin Href="QuoteRef">SKG.I</Origin> - Part 3
07/02/2018 07:05
- Part 3: For the preceding part double click ID:nBw7Cy9DNb
Foreign currencytranslation adjustments - - (189) - - - (189)
Effective portion ofchanges in fair value ofcash flow hedges - 5 - - - - 5
Total othercomprehensiveincome/(expense) - 5 (189) - - - (184)
Share-based payment - - - 23 - - 23
Net shares acquired bySKG Employee Trust - - - - (10) - (10)
Shares distributed by SKGEmployee Trust - - - (12) 12 - -
At 31 December 2017 575 (17) (1,382) 176 (31) 1 (678)
At 1 January 2016 575 (22) (1,109) 168 (38) 1 (425)
Other comprehensiveincome
Foreign currencytranslation adjustments - - (84) - - - (84)
Total othercomprehensive expense - - (84) - - - (84)
Share-based payment - - - 12 - - 12
Net shares acquired bySKG Employee Trust - - - - (10) - (10)
Shares distributed by SKGEmployee Trust - - - (15) 15 - -
At 31 December 2016 575 (22) (1,193) 165 (33) 1 (507)
14. Venezuela
Hyperinflation
As discussed more fully in the 2016 annual report, Venezuela became
hyperinflationary during 2009 when its cumulative inflation rate for the past
three years exceeded 100%. As a result, the Group applied the
hyperinflationary accounting requirements of IAS 29 – Financial Reporting in
Hyperinflationary Economies to its Venezuelan operations at 31 December 2009
and for all subsequent accounting periods.
In 2017 and 2016, management engaged an independent expert to determine an
estimate of the annual inflation rate. The estimated level of inflation for
the year ended 2017 was 971% (2016: 333%).
As a result of the entries recorded in respect of hyperinflationary accounting
under IFRS, the Consolidated Income Statement is impacted as follows: Revenue
€30 million increase (2016: €62 million increase), EBITDA €13 million
decrease (2016: €6 million increase) and profit after taxation €47 million
decrease (2016: €29 million decrease). In 2017, a net monetary loss of
€24 million (2016: €4 million net monetary gain) was recorded in the
Consolidated Income Statement. The impact on our net assets and our total
equity is an increase of €197 million (2016: €64 million increase).
Exchange Control
The Group consolidates its Venezuelan operations at the variable DICOM rate.
The Group believes that DICOM is the most appropriate rate for accounting and
consolidation, as it believes that this is the rate at which the Group
extracts economic benefit. On this basis, in accordance with IFRS, the
financial statements of the Group’s operations in Venezuela were translated
at 31 December 2017 using the DICOM rate of VEF 3,345.00 per US dollar and the
closing euro/US dollar rate of 1 euro = US$1.1993.
Control
The nationalisation of foreign owned companies or assets by the Venezuelan
government remains a risk. Market value compensation is either negotiated or
arbitrated under applicable laws or treaties in these cases. However, the
amount and timing of such compensation is necessarily uncertain.
The Group continues to control operations in Venezuela and, as a result,
continues to consolidate all of the results and net assets of these operations
at the year-end in accordance with the requirements of IFRS 10.
In 2017, the Group’s operations in Venezuela represented approximately 2%
(2016: 3%) of its EBITDA, 3% (2016: 2%) of its total assets and 5% (2016: 4%)
of its net assets. Cumulative foreign translation losses arising on its net
investment in these operations amounting to €1,081 million (2016: €987
million) are included in the foreign currency translation reserve.
Supplementary Financial Information
Alternative Performance Measures
Certain financial measures set out in this report are not defined under
International Financial Reporting Standards (‘IFRS’). An explanation for
the use of these Alternative Performance Measures (‘APMs’) is set out
within Financial Key Performance Indicators on pages 40-42 of the Group’s
2016 annual report. The key APMs of the Group are set out below.
APM Description
EBITDA Earnings before exceptional items, share-based paymentexpense, share of
associates’ profit (after tax), net financecosts, income tax expense,
depreciation and depletion (net),impairment of assets and intangible assets
amortisation.
EBITDA Margin % EBITDA____________ X 100Revenue
Pre-exceptional Basic EPS (cent) Profit attributable to owners of the parent, adjustedfor exceptional items
included in profit before tax andincome tax on exceptional
items____________________________________________x 100
Weighted average number of ordinary shares inissue
Return on Capital Employed % Last twelve months (‘LTM’) pre-exceptional operatingprofit plus share of
associates’ profit (after tax)_____________________________________________x
100
Average capital employed (where capital employedis the average of total equity
and net debt at thebeginning and end of the LTM)
Free Cash Flow Free cash flow is the result of the cash inflows and outflowsfrom our
operating activities, and is before those arising fromacquisition and disposal
activities.
Free cash flow (APM) and a reconciliation of free cash flow tocash generated
from operations (IFRS measure) are includedin the management commentary. The
IFRS cash flow isincluded in the Consolidated Financial Statements.
Net Debt Net debt is comprised of borrowings net of cash and cashequivalents and
restricted cash.
Net Debt to EBITDA (LTM) times Net debt
____________EBITDA (LTM)
Reconciliation of Profit to EBITDA
3 months to 3 months to 12 months to 12 months to
31-Dec-17 31-Dec-16 31-Dec-17 31-Dec-16
€m €m €m €m
Profit for the financial period 120 106 423 458
Income tax expense 41 49 153 196
Exceptional items charged in operating profit 23 15 23 15
Share of associates’ profit (after tax) - - - (2)
Net finance costs (after exceptional items) 62 51 221 163
Share-based payment expense 11 - 24 13
Depreciation, depletion (net) and amortisation 94 99 396 393
EBITDA 351 320 1,240 1,236
Return on Capital Employed
Q4, 2017 Q4, 2016 Q3, 2017
€m €m €m
Pre-exceptional operating profit plus share of associates’ profit 820 832 795
(after tax) (LTM)
Total equity – current period end 2,659 2,503 2,575
Net debt – current period end 2,805 2,941 2,839
Capital employed – current period end 5,464 5,444 5,414
Total equity – prior period end 2,503 2,328 2,356
Net debt – prior period end 2,941 3,048 2,953
Capital employed – prior period end 5,444 5,376 5,309
Average capital employed 5,454 5,410 5,361
Return on capital employed 15.0% 15.4% 14.8%
Supplementary Historical Financial Information
€m FY, 2016 Q1, 2017 Q2, 2017 Q3, 2017 Q4, 2017 FY, 2017
Group and third party revenue 13,521 3,573 3,590 3,667 3,828 14,659
Third party revenue 8,159 2,129 2,104 2,121 2,208 8,562
EBITDA 1,236 278 292 320 351 1,240
EBITDA margin 15.1% 13.0% 13.9% 15.1% 15.9% 14.5%
Operating profit 815 168 190 216 223 797
Profit before income tax 654 109 136 170 161 576
Free cash flow 303 16 30 152 109 307
Basic earnings per share - cent 189.4 31.5 42.8 52.7 50.2 177.2
Weighted average number of shares used inEPS calculation (million) 235 235 235 235 235 235
Net debt 2,941 2,931 2,985 2,839 2,805 2,805
EBITDA (LTM) 1,236 1,233 1,212 1,209 1,240 1,240
Net debt to EBITDA (LTM) 2.38 2.38 2.46 2.35 2.26 2.26
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