Share capital
46. Financial instruments disclosures
31 December 2014 € million
Loans and receivables Financial liabilities at amortised cost
Assets and liabilities measured at fair value with changes recognised in profit or loss
Hedging transactions
Cash and cash equivalents 230.9
Current financial receivables 19.6
Other non-current financial assets 30.5
Trade receivables 313.6
Payables to banks (45.7)
Real estate lease payables (1.3)
Bonds (1,001.2)
Private placement (171.7)
Accrued interest on bonds (12.9)
Other financial liabilities (8.2)
Put option payables (4.6)
Trade payables (223.2)
Non-current assets for hedge derivatives
not reported using hedge accounting procedures 0.5 -
Current assets for hedge derivatives 2.7
Non-current liabilities for hedge derivatives (10.3)
Financial liabilities on hedging contracts (6.7)
Non-current liabilities for hedge derivatives, not
reported using hedge accounting procedures (0.1) -
Total 594.6 (1,468.8) 0.4 (14.3)
31 December 2013 € million
Loans and receivables Financial liabilities at amortised cost
Assets and liabilities measured at fair value with changes recognised in profit or loss
Hedging transactions
Cash and cash equivalents 444.2
Short-term financial receivables 30.1
Other non-current financial assets 9.8
Trade receivables 288.5
Payables to banks (122.8)
Real estate lease payables (1.3)
Bonds (976.2)
Private placement (179.7)
Accrued interest on bonds (12.3)
Other financial liabilities (0.5)
Put option payables (4.8)
Trade payables (198.1)
Current assets for hedge derivatives 1.4
Non-current liabilities for hedge derivatives (40.8)
Total 772.6 (1,495.7) - (39.4)
Fair value hedging
The Group has in place the following contracts that meet the definition of hedging instruments based on IAS 39.
Cross currency swap on Parent Company bond issued in 2003 (USD).
At the reporting date, the Group held a cross currency swap totalling a notional USD 300 million on the Parent Company’s bond issue denominated in US dollars.
This instrument has the same maturity as the underlying liability.
The derivative is valued at fair value and any changes are reported on the income statement; having established the effectiveness of the hedging transactions, the gain or loss on the hedged item attributable to the hedged risk is used to adjust the carrying amount of the underlying liability and is immediately reported on the income statement. At 31 December 2014, the Parent Company's cross currency swap had a negative fair value of € 8.7 million, reported under non-current financial liabilities.
The change in the fair value of these instruments reported on the income statement in 2014 was positive at € 29.4 million.
CONSOLIDATED FINANCIAL STATEMENTS 117 In relation to the hedged instrument, the valuation of the hedged risks led to the recognition of a total gain of € 6.9 million. The loss recorded on the hedged item in 2014 was € 28.7 million.
Foreign currency hedges
At 31 December 2014, certain Group subsidiaries held forward contracts on receivables and payables in currencies other than the euro in their accounts.
The contracts were negotiated to match maturities with projected incoming and outgoing cash flows resulting from sales and purchases in individual currencies.
The valuation of these contracts at the reporting date gave rise to the reporting of assets of € 1.3 million and liabilities of € 3.6 million.
In addition, in 2012, the Parent Company settled the interest rate swap on the bond issued in 2009, and thus the portion of underlying debt (€ 200.0 million) was reported at the original fixed rate.
Similarly, the amount resulting from the valuation of the contract on the settlement date was reclassified under financial receivables and will be collected over the remaining life of the underlying loan. Note 28 - Non-current financial assets and Note 32 - Current financial assets provide information on credit movements.
As regards the underlying debt, the change in fair value attributable to the risk hedged as shown at the time the cover ended is reflected in the income statement over the period of the loan. In 2014, this resulted in a gain of € 4.4 million. As the cancellation of the hedge resulted in the coupons paid to the shareholders being converted into fixed contractual rates, this positive effect is cancelled out in the income statement.
Gains and losses on the hedged and hedging instruments used in all the Group's fair value hedges, corresponding to the above-mentioned contracts, are summarised below.
€ million 31 December 2014 31 December 2013
Gains on hedging instruments 29.4 -
Losses on hedging instruments (0.5) (12.2)
Total gains (losses) on hedging instruments 28.9 (12.2)
Gains on hedged items 4.4 16.6
Losses on hedged items (28.7) -
Total gains (losses) on hedged items (24.3) 16.6
Derivatives used for cash flow hedging
The Group uses the following contracts to hedge its cash flows.
Interest rate swap on Parent Company bond issued in 2003 (USD)
The Group has put in place various interest rate swaps involving the payment of an average fixed rate of 3.20% on total underlyings of USD 50 million (maturing in 2015) and USD 150 million (maturing in 2018).
Since these hedging transactions met the requirements for effectiveness, an appropriate shareholders’ equity reserve equal to a liability was recorded for a gross value of € 4.6 million.
As required by IAS 39, the cash flow hedge reserve for these contracts will be recycled to the income statement at the same maturity dates as the cash flows related to the liability.
During the period, an unrealised charge of € 1.1 million was posted to the reserve, together with the corresponding deferred tax effect of € 0.3 million.
Moreover, the realisation of the hedged cash flows generated the release of the cash flow hedge reserve, which had a positive impact on the income statement of the period of € 0.9 million.
Interest rate swap on Parent Company bond issued in 2009 (Eurobond)
Just before the allocation of the Eurobond, the Parent Company negotiated interest rate hedges which, on the date that the loan was listed, generated a financial outlay of € 3.0 million that was included in shareholders’ equity.
This reserve, which was released in step with the cash flows generated by the underlying debt, in 2014 produced a liability of € 0.4 million on the income statement.
Hedging of future purchases and sales of foreign currencies
At 31 December 2014, the Group held forward currency contracts, designated as hedging instruments, on expected future sales and purchases based on its own 2015 estimates. These transactions are highly probable.
Contracts were negotiated to match maturities with projected cash inflows and outflows resulting from sales and purchases in individual currencies.
At 31 December 2014, existing hedges on sales had an insignificant nominal value. These hedges met the requirements for effectiveness, and a net asset of € 0.04 million was suspended in shareholders' equity reserves.
All cash flows concerned will materialise in 2015.
The following table shows when the Group expects to receive the hedged cash flows, as of 31 December 2014.
The breakdown includes the cash flows arising from the Parent Company's interest rate swap involving the fixed rate interest payments on the bond issued in 2003 (in USD).
These cash flows only relate to interest and have not been discounted to present value.
The breakdown also shows the cash flows arising from forward foreign exchange contracts in respect of future currency sales/purchases.
31 December 2014 Within one year 1-5 years total
€ million € million € million
Cash outflows 6.8 13.7 20.5
Cash inflows 7.1 14.3 21.4
Net cash flows 0.3 0.6 0.9
31 December 2013 Within one year 1-5 years total
€ million € million € million
Cash outflows 7.7 23.7 31.5
Cash inflows 7.1 21.7 28.8
Net cash flows (0.7) (2.0) (2.7)
The overall changes in the cash flow hedge reserve and the associated deferred taxes are shown below.
31 December 2014 Gross amount Tax effect Net amount
€ million € million € million
Opening balance (3.6) 1.0 (2.6)
Booked to the income statement during the period (0.5) 0.1 (0.4)
Recognised in equity during the period (1.4) 0.4 (1.0)
Amount allocated to reserves at 30 June 2014 (5.5) 1.5 (4.0)
31 December 2013 Gross amount Tax effect Net amount
€ million € million € million
Opening balance (4.1) 1.1 (3.0)
Booked to the income statement during the period (1.3) 0.4 (0.9)
Recognised in equity during the period 1.7 (0.5) 1.2
Amount allocated to reserves at 31 December 2013 (3.7) 1.0 (2.7)