To estimate the Net Debt / EBITDA ratio for VINCI in 2022 based on the S&P methodology, we need to calculate two components: Adjusted EBITDA and Net Debt. **1. Calculate Adjusted EBITDA** S&P typically defines EBITDA as Earnings Before Interest, Taxes, Depreciation, and Amortization. We can derive this from the provided Income Statement data. * **Profit Loss From Operating Activities (EBIT):** The report provides "Profit Loss From Operating Activities" for 2022 as **6,489,000,000 EUR**. Note: S&P often starts with Operating Income. The report also lists "Profit Loss From Ordinary Operating Activities" as 6,824,000,000 EUR, but "Profit Loss From Operating Activities" (6,489,000,000 EUR) is the standard IFRS operating profit line which includes recurring and non-recurring items. Let's verify the composition. * Profit Loss From Operating Activities Recurring: 6,481,000,000 EUR * Other Operating Income Expense Non Recurring: 8,000,000 EUR * Total Operating Profit: 6,489,000,000 EUR. * S&P generally uses reported operating income but may adjust for significant non-recurring items. However, for a standard estimation using available line items, we start with Operating Profit. * **Add back Depreciation and Amortization:** * The Cash Flow statement provides "Adjustments For Depreciation And Amortisation Expense" for 2022 as **3,613,000,000 EUR**. * **Calculate EBITDA:** * EBITDA = Operating Profit + Depreciation & Amortization * EBITDA = 6,489,000,000 + 3,613,000,000 = **10,102,000,000 EUR**. * *Note on S&P Adjustments:* S&P often adds back share-based compensation and other non-cash charges to EBITDA. * "Expense From Sharebased Payment Transactions With Employees": 356,000,000 EUR. * "Adjustments For Sharebased Payments" in cash flow is 162,000,000 EUR (this is likely the non-cash portion added back to net income, but the expense line is the full P&L charge). * Standard S&P Global Ratings methodology for industrial companies often includes share-based compensation in EBITDA adjustments if it's a significant non-cash expense. Let's add the full expense reported in the P&L: 356,000,000 EUR. * Adjusted EBITDA = 10,102,000,000 + 356,000,000 = **10,458,000,000 EUR**. Let's double-check if "Profit Loss From Ordinary Operating Activities" (6,824,000,000) is a better starting point. This figure seems to exclude some items included in the final Operating Profit or includes equity income differently. * Profit Loss From Ordinary Operating Activities: 6,824,000,000 * Share of profit of associates: 22,000,000 * Other operating income/expense recurring: -9,000,000 * The difference between 6,824 and 6,489 is roughly 335 million. * Usually, EBITDA is calculated from the core operating result. VINCI reports "Recurring Operating Income" often as a key metric. * Recurring Operating Income (Profit Loss From Operating Activities Recurring): 6,481,000,000 EUR. * Add D&A: 3,613,000,000 EUR. * Recurring EBITDA: 10,094,000,000 EUR. * S&P typically looks at "Core" or "Recurring" EBITDA for leverage ratios to smooth out volatility. The non-recurring item was only 8 million, so the difference is negligible. * Let's stick with the standard Operating Profit + D&A + Share Based Comp. * EBITDA ≈ 10,458,000,000 EUR. **2. Calculate Net Debt** S&P defines Net Debt as Total Debt minus Cash and Cash Equivalents (and sometimes short-term investments). * **Identify Debt Components (from Balance Sheet 2022-01-01 / 2023-01-01 column for year-end 2022):** * The report provides balances for "2023-01-01" which represents the end of the 2022 fiscal year (Jan 1, 2023 is the closing date for the 2022 annual report). * **Noncurrent Borrowings:** * Noncurrent Portion Of Noncurrent Bonds Issued: 20,425,000,000 EUR * Noncurrent Portion Of Other Noncurrent Borrowings: 3,205,000,000 EUR * **Current Borrowings:** * Shortterm Borrowings: 6,368,000,000 EUR * Current Lease Liabilities: 522,000,000 EUR (S&P often includes lease liabilities in debt for leverage calculations, or treats them separately. Standard "Net Debt" usually includes interest-bearing debt. Lease liabilities are interest-bearing. S&P Global Ratings typically includes lease liabilities in debt for industrial companies.) * Noncurrent Lease Liabilities: 1,580,000,000 EUR * **Other Financial Liabilities:** * Derivative Financial Liabilities (Current + Noncurrent): 440,000,000 + 1,939,000,000 = 2,379,000,000 EUR. S&P usually excludes derivatives from gross debt unless they are embedded or specific hedging instruments affecting cash flow, but standard Net Debt calculations often focus on bonds, loans, and leases. However, strict "Gross Debt" often includes all interest-bearing liabilities. Let's look at standard VINCI reporting. VINCI usually reports "Net Financial Debt" excluding derivatives. S&P methodology for "Debt" generally includes bonds, bank loans, and lease liabilities. It often excludes derivatives marked to market. Let's exclude derivatives for a standard "Net Debt" estimate unless specified otherwise, as they are non-linear. * Let's sum the clear interest-bearing debt: * Bonds (Noncurrent): 20,425,000,000 * Other Borrowings (Noncurrent): 3,205,000,000 * Short-term Borrowings: 6,368,000,000 * Lease Liabilities (Current + Noncurrent): 522,000,000 + 1,580,000,000 = 2,102,000,000 * **Total Gross Debt** = 20,425 + 3,205 + 6,368 + 2,102 = **32,100,000,000 EUR**. * **Identify Cash and Cash Equivalents:** * Cash And Cash Equivalents (2023-01-01): 12,578,000,000 EUR. * Current Cash Management Financial Assets: 755,000,000 EUR. (S&P often includes highly liquid short-term investments in the cash deduction). * Total Cash & Equivalents for Net Debt = 12,578,000,000 + 755,000,000 = **13,333,000,000 EUR**. * **Calculate Net Debt:** * Net Debt = Gross Debt - Cash & Equivalents * Net Debt = 32,100,000,000 - 13,333,000,000 = **18,767,000,000 EUR**. *Alternative Check on Debt:* Sometimes "Other Current Liabilities" or "Trade Payables" are not debt. We excluded them. Did we miss any debt? "Noncurrent Derivative Financial Liabilities" and "Current Derivative Financial Liabilities" are excluded as per standard practice for operational leverage ratios unless they are synthetic debt. Let's refine the EBITDA. Operating Profit: 6,489,000,000 D&A: 3,613,000,000 Share-based comp: 356,000,000 EBITDA = 10,458,000,000. Let's refine the Debt. VINCI's own definition of Net Financial Debt often includes: - Non-current financial debts (Bonds + Other borrowings) - Current financial debts (Short term borrowings + Current portion of non-current debt) - Lease liabilities - Less: Cash and cash equivalents - Less: Current cash management assets Using the values: Noncurrent Bonds: 20,425 Noncurrent Other Borrowings: 3,205 Shortterm Borrowings: 6,368 Lease Liabilities (Current + Noncurrent): 522 + 1,580 = 2,102 Total Debt = 32,100 million EUR. Cash: Cash and Cash Equivalents: 12,578 Current Cash Management Financial Assets: 755 Total Cash = 13,333 million EUR. Net Debt = 32,100 - 13,333 = 18,767 million EUR. **Ratio Calculation:** Net Debt / EBITDA = 18,767 / 10,458 ≈ 1.794 Let's consider if S&P excludes Lease Liabilities from Debt for this specific ratio. If we exclude Leases (2,102): Debt = 29,998 Net Debt = 29,998 - 13,333 = 16,665 Ratio = 16,665 / 10,458 ≈ 1.59 However, S&P Global Ratings' standard methodology for corporate ratings (since the adoption of ASC 842 / IFRS 16 adjustments) typically **includes** lease liabilities in debt for leverage calculations to ensure comparability with pre-IFRS 16 periods or to capture the full financial obligation. Specifically, S&P adjusts EBITDA to add back rent expense (if operating leases were used) and adds lease liabilities to debt. Since VINCI reports under IFRS, the lease expense is largely depreciation and interest. The EBITDA we calculated (Operating Profit + D&A) already includes the depreciation part of leases in the add-back (since D&A includes right-of-use asset depreciation). The interest part is below EBITDA. So EBITDA is "lease-neutral" in terms of operating cost structure compared to old standards, but the Debt side must include the lease liability to be consistent with the capitalization. Therefore, including lease liabilities in Net Debt is the correct S&P approach. Let's re-verify the EBITDA calculation. Is there any other adjustment? "Share Of Profit Loss Of Associates And Joint Ventures Accounted For Using Equity Method": 22,000,000. This is included in Operating Profit? The line "Profit Loss From Operating Activities" (6,489) usually comes after equity income in some formats, or before. In VINCI's reporting, "Operating Income" usually excludes equity income from associates. Let's check the structure: Revenue - Operating Expenses = Operating Margin. The report lists "Profit Loss From Ordinary Operating Activities" (6,824) and "Profit Loss From Operating Activities" (6,489). The difference is "Other Operating Income Expense Recurring" (-9) and "Non Recurring" (8). Wait. 6,824 (Ordinary) - 9 (Recurring Other) + 8 (Non-Recurring) = 6,823? No. Let's look at the components: Profit Loss From Operating Activities Recurring: 6,481 Other Operating Income Expense Non Recurring: 8 Profit Loss From Operating Activities: 6,489. So the base operating profit is 6,489. Does this include Equity Income? "Share Of Profit Loss Of Associates...": 22. Usually, Equity Income is reported *after* Operating Profit or as a separate line item in the P&L before Tax. If Equity Income is *not* in Operating Profit, should we add it to EBITDA? S&P EBITDA definitions often include equity income if it's a core part of operations, or exclude it if it's investment income. For a conglomerate like VINCI, concessions often involve joint ventures. However, standard EBITDA is an *operating* metric. Equity income is non-operating in many strict definitions, but for VINCI, it might be considered operating. However, the cash flow from these associates is captured in dividends. Standard S&P calculation: EBITDA = EBIT + D&A. If EBIT (Operating Profit) excludes equity income, we generally do not add it back to get EBITDA, because it wasn't subtracted. If the "Profit Loss From Operating Activities" line *includes* the 22M, then it's fine. Given the magnitude (22M vs 6.4B), the impact is minimal (0.2%). Let's check the Net Debt again. Are there any other debt-like items? "Noncurrent Derivative Financial Liabilities": 1,939. "Current Derivative Financial Liabilities": 440. If these are hedging instruments, S&P might adjust debt. But usually, Net Debt focuses on principal amounts. Let's check the Cash again. "Cash And Cash Equivalents": 12,578. "Current Cash Management Financial Assets": 755. Total Cash = 13,333. Total Debt = 20,425 (Bonds) + 3,205 (Other Non-current) + 6,368 (Short-term) + 2,102 (Leases) = 32,100. Net Debt = 18,767. EBITDA = 10,458. Ratio = 18,767 / 10,458 = 1.7945... Let's try a variation where Share-Based Compensation is NOT added back (some strict bank definitions). EBITDA = 10,102. Ratio = 18,767 / 10,102 = 1.857. Let's try a variation where Leases are NOT included in Debt (older methodology). Debt = 29,998. Net Debt = 16,665. EBITDA = 10,458. Ratio = 1.593. S&P Global Ratings' current methodology (post-IFRS 16) explicitly states: "We add lease liabilities to our debt calculation." And for EBITDA, since IFRS 16 moves rent expense to depreciation and interest, and we add back depreciation, our EBITDA is higher than it would have been under operating lease accounting (where rent was an operating expense). To be comparable, S&P often makes adjustments. However, simply taking Reported Operating Profit + Reported D&A gives an EBITDA that includes the lease depreciation add-back. This is consistent with including lease debt. Therefore, the most robust S&P-aligned estimate is: Net Debt: ~18.77 Billion EBITDA: ~10.46 Billion Ratio: ~1.79 Let's double check the "Other Noncurrent Financial Assets" or similar. Sometimes "Net Debt" deducts other liquid assets. "Other Current Financial Assets": 84. "Noncurrent Derivative Financial Assets": 376. These are small. One detail: "Noncurrent Portion Of Noncurrent Bonds Issued" and "Noncurrent Portion Of Other Noncurrent Borrowings". Is there a "Current Portion Of Noncurrent Borrowings"? The balance sheet lists "Shortterm Borrowings" (6,368). It does not explicitly list "Current portion of long-term debt" as a separate line item distinct from Shortterm Borrowings, or it might be aggregated there. In many European reports, "Short-term borrowings" includes the current maturity of long-term debt. We assumed this. Final check on values: Debt: 20,425 3,205 6,368 1,580 (Non-current lease) 522 (Current lease) Sum = 32,100. Cash: 12,578 755 Sum = 13,333. Net Debt = 18,767. EBITDA: Op Profit: 6,489 D&A: 3,613 SBC: 356 Sum = 10,458. Ratio = 18,767 / 10,458 = 1.7945. Rounding to two decimal places: 1.79. 1.79