Today, Randstad publishes the comparable full-year and quarterly 2018 financial statements, following the implementation of IFRS 16 ‘Leases’. This new financial reporting standard for lease accounting came into effect on January 1, 2019. Randstad leases a significant number of its branches and other assets, such as company cars and equipment. Randstad applies the standard retrospectively for all previous periods.
IFRS 16 will have no economic or cash impact on the group or on the way our business is managed.
This standard requires us to recognize a 'right of use' asset, representing our right to use the underlying asset and a lease liability, representing our obligation to make future lease payments. As a result, our net debt increases.
The impact on the income statement is that current operating lease expenses will be replaced by depreciation on the right of use assets and interest expense related to the lease liability; as a result, operating profit and EBIT(D)A will increase.
The detailed impact on the 2018 financial results is as follows:
There is no impact on revenues, gross profit and underlying diluted EPS.
There is no impact on net cash flow or the ending cash and cash equivalents amount. Our adjusted definition of free cash flow now includes repayments of lease liabilities and remains unchanged at € 627 million for FY 2018.
Net debt at end of 2018 increases by € 655 million to € 1,640 million. Underlying EBITA 2018 increases by € 23 million to € 1,131 million and EBITDA 2018 by € 234 million to € 1,355 million.
Our leverage ratio (net debt/EBITDA) at the end of 2018 increases from 0.8 to 1.2. We reiterate that this accounting effect will have no impact on our capital allocation strategy going forward.
There is no impact on our funding structure and bank covenants.