Chapters
Annual Report 2019

4.3 Financial position

Summarized balance sheet

in millions of EUR

2019

2018

Property, plant and equipment

533

517

Right-of-use assets

1,443

-

Intangible assets

1,561

1,616

Other non-current assets

146

97

Non-current assets

3,683

2,229

Inventories

356

331

Other current assets

342

316

Cash and cash equivalents

163

138

Current assets

861

785

Total assets

4,544

3,014

Total equity

1,264

1,252

Borrowings

386

363

Lease liabilities

1,037

-

Other non-current liabilities

235

201

Non-current liabilities

1,659

564

Borrowings

517

515

Lease liabilities

373

-

Trade and other payables

660

621

Other current liabilities

71

61

Current liabilities

1,621

1,197

Total equity and liabilities

4,544

3,014

Following the adoption of IFRS 16 Leases, lease liabilities of €1,363 million and the right-of-use assets of €1,394 million were recognized on the balance sheet on 1 January, 2019 in relation to leases that were previously classified as ‘operating leases.’ The cumulative effect of historical depreciation of the right-of-use assets in the amount of €72 million is included in total equity.

For more details on IFRS 16 implementation, please see note 2.7.1 of the Financial Statements section.

Cash flows and liquidity

GrandVision’s liquidity requirements primarily relate to investments in existing and new stores and our global capabilities, the payment of interest, and the need to fund our working capital requirements and acquisitions. We primarily rely on cash flows from operating activities to finance our operations. In addition, we use different financing sources like the Revolving Credit Facility, the commercial paper program and various bilateral overdraft and money market facilities.

Cash flows

The following table shows the primary components of our cash flows.

Cash flow components

in millions of EUR

2019

2018

Net cash from operating activities

878

448

Net cash used in investing activities

- 362

- 239

Net cash used in financing activities

- 446

- 137

Inflow/(outflow) in cash and cash equivalents

70

70

Cash and cash equivalents at beginning of year

72

12

Inflow/(outflow) in cash and cash equivalents

70

70

Exchange gains/(losses) on cash and cash equivalents

- 7

- 10

Cash and cash equivalents at end of period

134

72

IFRS 16 had no impact on total amount of cash flows but changed the presentation. Lease payments were reclassified from cash from operating activities to cash from financing activities.

Net cash from operating activities increased to €878 million in 2019 compared to €448 million in 2018. Excluding the reclassification impact of IFRS 16, the increase was mainly driven by underlying EBITDA growth and improvements in working capital due to lower levels of inventories and receivables than in the previous year.

Net cash used in investing activities increased from €239 million in 2018 to €362 million in 2019. This was mainly driven by more acquisitions compared to the previous year, which was partially offset by lower capital expenditure. In total, cash outflows relating to acquisitions of companies was €154 million, reflecting the increase of acquisitions in 2019, particularly Óptica2000 in Spain, Charlie Temple in The Netherlands and McOptic in Switzerland.

Net cash used in financing activities was an outflow of €446 million in 2019, compared to an outflow of €137 million in 2018, which mainly reflects the reclassification impact of IFRS 16.

Capital expenditure

in millions of EUR

2019

2018

Capital expenditure (not related to acquisitions)

198

210

Store capital expenditure

127

162

Non-store capital expenditure

70

48

Capital expenditure not related to acquisitions decreased by €12 million to €198 million (4.9% of revenue) in 2019, compared with €210 million (5.6% of revenue) in 2018. The majority of capital expenditure was dedicated to optimizing our store network.

Store capital expenditure decreased from €162 million in 2018 to €127 million in 2019 due to the higher level of refurbishments in the previous year related to the integration and refurbishment of the Tesco Opticians business in the U.K., as well as fewer store openings in 2019.

Non-store capital expenditure increased to €70 million in 2019 compared to €48 million in 2018 mainly due to the roll-out of our omnichannel platform in eight markets throughout the year.

Free cash flow and cash conversion

2019

2018

Free cash flow (€ million)

296

238

Cash conversion (%)

54.6%

42.8%

Free cash flow increased to €296 million in 2019, compared to €238 million in 2018. The increase in free cash flow was mainly driven by improvements in working capital as well as lower capital expenditure.

Cash conversion, calculated as Free Cash Flow divided by EBITDA, increased from 42.8% in 2018 to 54.6% in 2019. Following the implementation of IFRS 16, the calculation is based on EBITDA less depreciation of right-of-use assets and net financial result on lease liabilities and receivables.

Financial indebtedness

Throughout 2019, GrandVision maintained a financial position with sufficient liquidity to fund our strategy and pursue our growth ambitions. In addition to utilizing our own cash flow, we can draw on various financing sources, like our Revolving Credit Facility, the commercial paper program and various bilateral credit facilities.

In July 2019, we successfully refinanced the current Revolving Credit Facility of €1.2 billion with a group of our close relationship banks. The new Facility has a maturity until 2024 and can be extended two times by one year at the end of the first and second anniversary (5 + 1 + 1). The new Facility has the same size and similar terms to the previous facility that would have matured in 2021. In addition, a sustainability feature has been added to the Facility, whereby the margins are linked to our sustainability performance.

Net debt and leverage

GrandVision aims to maintain a leverage ratio (net debt over EBITDA-covenants for the last 12 months) of equal to or less than 2.0, excluding the impact of any borrowings associated with, and any adjusted EBITDA amounts attributable to any major acquisitions.

In order to monitor the financial covenants, we use the following definitions of Net Debt and EBITDA-covenants: Net debt consists of GrandVision's borrowings, derivatives and cash and cash equivalents, excluding lease liabilities. EBITDA-covenants is calculated as adjusted EBITDA less depreciation of right-of-use assets and net financial result on lease liabilities and receivables (following the application of IFRS 16 as of 1 January, 2019).

This table shows GrandVision’s net debt, as well as our net debt leverage as of 31 December, 2019:

Borrowings

in millions of EUR
(unless stated otherwise)

2019

2018

Total borrowings

903

878

Cash and cash equivalents

- 163

- 138

Derivatives (liabilities)

14

7

Derivatives (assets)

- 2

- 3

Net debt

753

743

EBITDA - covenants

605

576

Net debt leverage (times)

1.2

1.3

At year-end 2019, our net debt increased slightly from €743 million in 2018 to €753 million in 2019, as strong cash flow generation was offset by acquisitions Óptica2000, Charlie Temple and McOptic during the period.

The net debt leverage ratio year-end 2019 was 1.2x, compared to 1.3x at the end of 2018.