5.4 Presentation of the Lagardère SCA parent company financial statements

Comments on the Lagardère SCA parent company financial statements at 31 December 2020

5.4.1 INCOME STATEMENT

The condensed income statement is as follows:

(in millions of euros) 2020 2019
Operating revenues 50 71
Operating loss (40) (10)
Net financial income (30) 37
Earnings before tax and exceptional items (70) 27
Net exceptional income 4 -
Income tax benefit 36 51
Profit (loss) for the year (30) 78

In 2020, the Company reported an operating loss of €40 million, representing a decrease of €30 million on 2019. Operating income (loss) mainly represents the difference between the operating expenses of the holding company and the services billed to the Group’s divisions. This decrease is primarily attributable to the fall in services and fees billed to the divisions, particularly Lagardère Travel Retail, which was hard hit by the impacts of the Covid-19 pandemic.
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.

Net financial income (expense) breaks down as follows:

(in millions of euros) 2020 2019
Interest income from marketable securities and other 1 2
Net interest income on loans to subsidiaries 37 38
Interest and expenses on borrowings (50) (47)
Finance costs, net (12) (7)
Dividends received or receivable 9 48
Net (additions to) reversals of provisions (27) (4)
Other - -
Net financial income (expense) (30) 37

In 2020, the Company reported net financial expense of €30 million, a decrease of €67 million year on year.
The decrease in net financial income is attributable to the following factors:

  • stable interest received, at €37 million. Interest amounting to USD 860 million was received on loans granted to Lagardère North America for the acquisition of Paradies in 2015 and Hojeij Branded Foods (HBF) in 2018;
  • an increase of €3 million in interest and expenses on borrowings in line with the drawdowns made on the syndicated credit facility since late April 2020; the rise in the interest expense on the German private placement (Schuldscheindarlehen) was offset by foreign exchange gains;
  • a decrease of €39 million in dividends received. In 2020, Lagardère SCA received a dividend of €9 million from Lagardère Finance (€8 million in 2019). Lagardère Media did not make any dividend payouts in 2020 (€39 million dividend payout in 2019);
  • net additions to provisions totalling €27 million in 2020 versus €4 million in 2019. In 2020, movements in provisions mainly reflect: a €3 million addition relating to the adjustment made to the carrying amount of treasury shares delivered under free share plans in 2020;
    • a €23 million addition to 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.
      In 2019, the €4 million increase in provisions mainly reflected:
    • 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.

Exceptional items represented income of €4 million in 2020, primarily relating to reversals of provisions for risks (positive €1 million impact) and the €3 million rebate obtained in 2020 in connection with the sharing duty paid at the time of the Financière de Pichat liquidation. Shares held in the dormant company MNC were sold at their carrying amount.
The Company reported an income tax benefit of €36 million in 2020. This includes €1 million in tax income (including tax credits for the year and €35 million in tax consolidation relief. The corresponding figures for 2019 were income of €10 million and €41 million, respectively.

5.4.2 BALANCE SHEET AND CASH FLOWS

Assets

(in millions of euros) 31 Dec. 2020 31 Dec. 2019
Fixed assets 5,203 5,387
Trade receivables and other 120 63
Cash and cash equivalents 317 304
Total assets 5,640 5,754

Shareholders’ equity and liabilities

(in millions of euros) 31 Dec. 2020 31 Dec. 2019
Shareholders' equity 2,851 2,887
Provisions for risks and liabilities 54 32
Borrowings 2,665 2,774
Short-term bank loans - -
Other liabilities 70 61
Total liabilities and shareholders' equity 5,640 5,754

Cash flows

(in millions of euros) 2020 2019
Cash flow from operating activities 12 144
Cash used in investing activities 111 (29)
Cash from (used in) operations and investing activities 123 115
Cash from financing activities (110) 127
Change in cash and cash equivalents 13 242
Cash and cash equivalents at beginning of year 304 62
Cash and cash equivalents at end of year 317 304

In 2020, cash flow from operating activities amounted to €12 million. The €132 million year-on-year decrease is mainly attributable to the €39 million fall in dividends received and the €23 million decrease in amounts billed to the Group. In 2019, cash flow from operating activities amounted to €144 million and included the €83 million payment 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 from (used in) investing activities represented an inflow of €111 million, and included:

  • purchases and sales of treasury shares under the liquidity agreement, for €24 million and €29 million, respectively;
  • €105 million in proceeds from the sale of MNC SAS collected by Lagardère Participations;
  • a €1 million payment to FCPI Idinvest.

Financing activities generated a net cash outflow of €110 million and chiefly reflected:

  • the net €291 million decrease in amounts outstanding under shortand medium-term commercial paper programmes;
  • the net €300 million increase in amounts drawn down on the syndicated credit facility;
  • the €119 million decrease in amounts borrowed from Lagardère Finance;
  • no dividends were paid in 2020 in respect of 2019.

Net debt – which corresponds to cash and cash equivalents less borrowings – was as follows at 31 December 2020 and 2019:

(in millions of euros) 31 Dec. 2020 31 Dec. 2019
Net debt (2,348) (2,470)

Net debt decreased by €122 million in 2020.

5.4.3 OTHER INFORMATION

Payment terms
In application of the French Commercial Code (Code de commerce), all of Lagardère SCA’s trade payables at 31 December 2020 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:

Payment terms Invoices received but not settled at 31 Dec. 2020 of which due Invoices issued but not settled at 31 Dec. 2020 of which due
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 11   18 18   -
Total amount of invoices concerned (excl. VAT) (in thousands of euros) 32 2,896 175 - - 3,071 4,137 - - - - -
As a % of total purchases for the year (excl. VAT) 0 % 3 % 0 % 0 % 0 % 3 %  
As a % of revenue for the year   7 % 0 % 0 % 0 % 0 % 0 %
(B) Invoices excluded from (A) relating to contested or unrecognised payables and receivables
Number of invoices Excluded 1 -
Total amount of invoices excluded (excl. VAT) €38,000 €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

Other disclosures
The aggregate amount of non-deductible costs and expenses referred to in paragraph 4 of article 39 of the French Tax Code (Code général des impôts) totalled €23,826 in 2020. The tax charge borne as a result of those costs and expenses amounted to €0. The costs and expenses referred to in paragraph 5 of article 39 of the French Tax Code are not excessive and are incurred in the interest of the Company.
No overhead costs were added back to taxable profit further to the most recent tax reassessment.