5.4 Presentation of the Lagardère SCA parent company financial statements
Comments on the Lagardère SCA parent company financial statements at 31 December 2019.
5.4.1 INCOME STATEMENT
The condensed income statements are as follows:
| (in millions of euros) | 2019 | 2018 | |
| Operating revenues | 71 | 60 | |
| Operating loss | (10) | (10) | |
| Net financial income | 37 | 198 | |
| Earnings before tax and exceptional items | 27 | 188 | |
| Net exceptional income (expense) | - | (5) | |
| Income tax benefit | 51 | 95 | |
| Profit for the year | 78 | 278 | |
In 2019, the Company reported an operating loss of €10 million, on a par with 2018. Operating income (loss) mainly represents the difference between the operating expenses of the holding company and the services billed to the Group’s divisions.
Lagardère SCA is directly responsible for billing the Group’s operating divisions for assistance provided by corporate functions. It employs eight people who manage the corporate functions. These managers make use of Lagardère Ressources teams and resources, which the latter makes available to them and which they in turn continue to supervise. In consideration for the services provided to it, Lagardère SCA pays Lagardère Ressources a fee intended to cover the costs directly or indirectly incurred by the latter. The annual amount of this fee is calculated based on the actual costs booked in the accounts. Lagardère SCA directly bears any expenses relating to certain services provided at its request by external consultants.
Financial income and expenses break down as follows:
| (in millions of euros) | 2019 | 2018 | |
| Interest income from marketable securities and other | 2 | 2 | |
| Net interest income on loans to subsidiaries | 38 | 24 | |
| Interest and expenses on borrowings | (47) | (42) | |
| Finance costs, net | (7) | (16) | |
| Dividends received or receivable | 48 | 212 | |
| Net (additions to) reversals of provisions | (4) | 2 | |
| Other | - | - | |
| Net financial income | 37 | 198 | |
In 2019 the Company reported net financial income of €37 million, a decrease of €161 million year on year.
The decrease in net financial income is attributable to the following factors:
- a €14 million increase in interest received on loans granted to Lagardère North America, including the USD 330 million loan granted in connection with the acquisition in November 2018 of the Hojeij Branded Foods (HBF) group in the Travel Retail division. Interest expense on the USD 530 million loan relating to the acquisition of the Paradies group at the end of 2015 remained stable year on year at €24 million;
- a slight €1 million increase in financial expenses on borrowings, due mainly to the €253 million Schuldscheindarlehen German law private placement, of which €187 million due in June 2024 and €66 million in June 2026;
- a €4 million increase in financial expenses relating to the USD currency hedge taken out in respect of 50% of the amount of loans granted to Lagardère North America;
- a €164 million decrease in dividends received. In 2019, Lagardère SCA received dividends from Lagardère Media (€39 million, compared to €200 million in 2018) and Lagardère Finance (€8 million, compared to €12 million in 2018);
- net additions to provisions representing €4 million in 2019, versus net reversals of provisions totalling €2 million in 2018. In 2019, movements in provisions mainly reflect:
- a €1 million addition attributable to the adjustment made to the carrying amount of treasury shares based on the reference share price at 31 December 2019 (€19.55);
- a €3 million addition to the provision for investments in Lagardère Ressources.
In 2018, the €2 million change in provisions mainly reflected:
- a €10 million reversal of provisions for unrealised foreign exchange risks arising on the unhedged portion of the USD 530 million loan (financing for the Paradies acquisition) and the USD 330 million loan (financing for the HBF acquisition) with Lagardère North America;
- a €7 million addition attributable to the adjustment made to the carrying amount of treasury shares, breaking down as a mark-to‑market adjustment recorded against free shares at the delivery date for €2 million and an adjustment based on the reference share price at 31 December 2018 (€22.64) for €5 million.
Exceptional items represented a net amount of virtually nil in 2019 and mainly reflect additions to and reversals of provisions for risks as well as the €0.5 million loss on the disposal of Holpa by Lagardère Participations. This caption represented a net expense of €5 million in 2018.
The Company reported an income tax benefit of €51 million in 2019. This includes €10 million in tax income (including tax credits and €1 million relating to the refund of the 3% tax levied on dividends) and €41 million in tax consolidation relief. The corresponding figures for 2018 were an expense of €27 million and income of €122 million, respectively.
Items appearing in the Annual Financial Report are cross‑referenced with the following symbol AFR
5.4.2 BALANCE SHEET AND CASH FLOWS
Assets
| (in millions of euros) | 31 Dec. 2019 | 31 Dec. 2018 | |
| Fixed assets | 5 387 | 5 362 | |
| Trade receivables and other | 63 | 133 | |
| Cash and cash equivalents | 304 | 62 | |
| Total assets | 5 754 | 5 557 | |
Liabilities and shareholders’ equity
| (in millions of euros) | 31 Dec. 2019 | 31 Dec. 2018 | |
| Shareholders’ equity | 2 887 | 2 995 | |
| Provisions for risks and liabilities | 32 | 31 | |
| Borrowings | 2 774 | 2 472 | |
| Short-term bank loans | - | - | |
| Other liabilities | 61 | 59 | |
| Total liabilities and shareholders’ equity | 5 754 | 5 557 | |
Cash flows
| (in millions of euros) | 2019 | 2018 | |
| Cash flow from operating activities | 144 | 224 | |
| Cash used in investing activities | (29) | (293) | |
| Cash from (used in) operations and investing activities | 115 | (69) | |
| Cash from financing activities | 127 | 123 | |
| Change in cash and cash equivalents | 242 | 54 | |
| Cash and cash equivalents at beginning of year | 62 | 8 | |
| Cash and cash equivalents at end of year | 304 | 62 | |
In 2019, cash from operating activities amounted to €144 million, down €80 million compared to 2018. The change in this item was mainly attributable to the decrease in dividends received in 2019 to €48 million from €212 million one year earlier, partially offset by the €83 million payment in 2019 by Europe 1 Immobilier of the tax charge in respect of the sale of the office building at rue François 1er to the tax consolidation group.
Net cash used in investing activities represented an outflow of €29 million, and included:
- purchases of treasury shares for allocation to free share plans for €29 million;
- purchases and sales of treasury shares under the liquidity agreement, for €23 million and €22 million, respectively;
- €3 million in proceeds from the sale of Holpa SAS collected by Lagardère Participations;
- a €2 million payment to FCPI Idinvest.
Financing activities generated a net cash inflow of €127 million and chiefly reflected:
- an outflow of €500 million due to the redemption of the September 10, 2014 bond issue at maturity on 19 September 2019;
- an inflow of €500 million due to a new bond issue in October 2019, redeemable at maturity on 16 October 2026 and paying fixedrate interest of 2.125%;
- a €172 million cash outflow due to payment of the dividend;
- an inflow of €253 million relating to a Schuldscheindarlehen German law private placement on 26 June 2019;
- the continuation of the short- and medium-term commercial paper programmes, under which a net €16 million was issued in 2019;
- an increase in amounts borrowed from Lagardère Finance (€33 million).
Net debt – which corresponds to cash and cash equivalents less borrowings – was as follows at 31 December 2019 and 2018:
| (in millions of euros) | 31 Dec. 2019 | 31 Dec. 2018 | ||||||||||
| Net debt | (2 470) | (2 410) | ||||||||||
Net debt increased by €60 million in 2019.
Payment terms
In application of the French Commercial Code (Code de commerce), all of Lagardère SCA’s trade payables at 31 December 2019 are due within 30 days.
The following table sets out the disclosures concerning payment terms for payables and receivables required by article D. 441-4 of the French Commercial Code:
| Invoices received but not settled at 31 Dec. 2019 of which due |
Invoices issued but not settled at 31 Dec. 2019 of which due |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Payment terms | 0 days | 1 to 30 days |
31 to 60 days |
61 to 90 days |
More than 90 days |
Total (1 or more days) |
0 days | 1 to 30 days |
31 to 60 days |
61 to 90 days |
More than 90 days |
Total (1 or more days) |
| (A) Days late | ||||||||||||
| Number of invoices | - | 18 | 18 | - | ||||||||
| Total amount of invoices concerned (excl. VAT) (in thousands of euros |
- | 267 | - | - | - | 267 | 12 778 | - | - | - | - | - |
| As a % of total purchases for the year (excl. VAT) |
0 % | 0 % | 0 % | 0 % | 0 % | 0 % | ||||||
| As a % of revenue for the year |
16 % | 0 % | 0 % | 0 % | 0 % | 0 % | ||||||
| (B) Invoices excluded from (A) relating to contested or unrecognised payables and receivables | ||||||||||||
| Number of invoices excluded |
- | - | ||||||||||
| Total amount of invoices excluded (excl. VAT) |
0 % | 0 % | ||||||||||
| (C) Reference payment terms used (contractual or legal – article L. 441-6 or article L. 443-1 of the French Commercial Code) | ||||||||||||
| Reference payment terms used to calculate late payments |
Contractual terms: 30 days | Contractual terms: 0 days | ||||||||||