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Dutch listed firms enter the COVID-19 crisis with healthy balance sheets

Despite year-on-year increasing capital distributions by Dutch publicly listed corporates, the aggregate leverage ratio remains sound. 2019 net debt remains below 2.0x EBITDA.

Dutch firms in general have a conservative balance sheet with a five-year average just above 1.5x EBITDA (see note 1). The increase to 1.9x EBITDA in 2019 is largely attributable to the new IFRS guidelines. IFRS 16, the new leases standard, came into effect on January 1st 2019.

As a result of IFRS 16 off-balance leases, e.g. rental and lease contracts, are capitalized resulting in higher reported assets and debt. Rent expense is replaced by depreciation and interest expense in the income statement (similar to finance leases). As a result EBITDA will also increase.

The impact of IFRS 16 on Dutch publicly traded corporates is illustrated below. The 2019 reported figures include the restated 2018 figures for comparison purposes. The original 2018 reported debt amounts EUR 79bn and was actually a bit lower than 2017 reported debt (EUR 81bn). Due to IFRS 16 2018 restated debt increased by EUR 17bn to EUR 96bn (see note 2). Comparing the restated 2018 debt figures (EUR 96bn) to 2019 (EUR 97bn) shows hardly any increase. Restated 2018 EBITDA increased by EUR 3bn to EUR 42bn. Cash and cash equivalents are not impacted by IFRS 16 and remain at a level of EUR 23bn for the period 2017-2019 (see note 3).

Overall, the IFRS 16 impact on leverage in 2018 amounts to +0.3x (see figure below). The like-for-like increase from 1.7x in 2018 to 1.9x in 2019 is modest. This increase can attributed to a lower EBITDA in 2019 (EUR 40bn) compared to EUR 42bn in 2018. Net debt, interest bearing debt minus cash, remains pretty much flat. Net debt 2018 (after restatement) amounts EUR 73bn versus a reported net debt of EUR 74bn in 2019.

Concluding remarks

Dutch listed firms, despite record dividends and share buy-backs in the last couple of years, have maintained conservative leverage ratios (below 2.0x EBITDA). The increase reported in 2019 is largely attributable to IFRS 16. As such, Dutch publicly traded firms have entered the COVID-19 crisis with healthy balance sheets.

A cautionary note should be made. One lesson from the previous financial crisis and Eurozone crisis is that (net) debt levels tend to be sticky and that a (sudden) drop in EBITDA is the factor that brings firms into financial distress. 2020 EBITDA developments will be closely monitored and this is something we will touch upon later this year.

For now, thanks for reading, and please contact us if you have any further questions or comments.

Dennis van Uden (Consultant), Mark van ’t Klooster (Analyst) and Nicolai Knop (Partner)


1. Our sample contains 34 Dutch Corporates listed on the Euronext Amsterdam Stock Exchange that comply with the following criteria: Dutch legal entities, no financial institutions and real estate investment trusts, minimum sales and total assets of EUR 250m.

2. The IFRS impact is based on the 15 firms with the largest reported debt, representing 94% of total debt of this sample.

3. Akzo Nobel’s 2018 cash and cash equivalents has been normalized for net (cash) impact of proceeds from the sale of the Specialty Chemicals division. Please note that Akzo Nobel eventually distributed the vast majority of these proceeds back to shareholders. A special cash dividend of EUR 1bn was paid in December 2017 as advance proceeds. Furthermore, Akzo Nobel initiated a capital repayment and share consolidation of EUR 2bn (completed in January 2019), a special cash dividend of EUR 1bn (paid in Feb 2019) and a EUR 2.5bn share buyback in 2019.

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