LEGRAND / 2018 Registration document

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MANAGEMENT REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2018

CAPITAL EXPENDITURE

R 5.5.1.3 NET CASH FROM FINANCING ACTIVITIES Net cash used by financing activities amounted to €152.2 million in 2018, including primarily the payment of dividends in an amount of €336.8 million and repayment of borrowings in an amount of €400.5 million, partially offset by a €249.2 million increase in short- term financing and a 418.7 million increase in long-term financing.

The amount of acquisitions of subsidiaries (net of cash acquired) totaled €394.4 million in 2018 (compared with €1,638.0 million in 2017). Capital expenditure and capitalized development costs amounted to €184.3 million for the period ended December 31, 2018 (including €33.7 million in capitalized development costs), representing a 3.4% rise compared with investments and capitalized development costs of €178.2 million in the period ending December 31, 2017 (of which €33.6 million in capitalized development costs).

5.5.2 – Debt

Gross debt (defined as the sum of long-term and short-term borrowings, including commercial paper and bank overdrafts) came to €3,319.1 million at December 31, 2018 compared to €3,042.5 million at December 31, 2017. Cash and cash equivalents and marketable securities amounted to €1,022.5 million at December 31, 2018 compared to €823.0 million at December 31, 2017. Net debt (defined as gross debt less cash and cash equivalents and marketable securities) totaled €2,296.6 million at December 31, 2018 compared to €2,219.5 million at December 31, 2017. The ratio of consolidated net debt to consolidated shareholders’ equity was around 50% at December 31, 2018 compared with around 54% at December 31, 2017. At December 31, 2018, the Group’s gross debt consisted of the following: W €2,500.0 million in bonds issued in April 2012 (€400 million), December 2015 (€300 million), July 2017 (€1,000 million), October 2017 (€400 million) and March 2018 (€400 million);

W €340.4 million in Yankee bonds; and W €478.7 million in other debt, consisting mainly of bank borrowings, overdrafts and debt related to acquisitions, net of debt issuance costs. The repayment schedule for the non-current portion of this borrowing appears in note 4.6.1 to the consolidated financial statements referred to in chapter 8 of this Registration Document. Cash and cash equivalents (€1,022.5 million at December 31, 2018 and €823.0 million at December 31, 2017) consist primarily of very short-term bank deposits and so, counterparty risk is monitored very closely. A description of credit facility contracts is presented in note 4.6.1 to the consolidated financial statements referred to in chapter 8 of this Registration Document.

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5.6 – CAPITAL EXPENDITURE

Capital expenditure takes into account the capitalization of some development costs pursuant to IAS 38. In 2018, capital expenditure and capitalized development expense amounted to €184.3 million or 3.1% of consolidated net sales, compared with €178.2 million or 3.2% in 2017.

Capital expenditure consists mainly of investment in new products, in productivity and in commercial means. Meanwhile, the Group is pursuing many ongoing initiatives in its production operations to control capital employed.

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LEGRAND

REGISTRATION DOCUMENT 2018

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