INDEX TO THE FINANCIAL STATEMENTS

Ardagh Group S.A.

Audited Financial Statements

Report of Independent Registered Public Accounting Firm

F-2

Consolidated Income Statement for the years ended December 31, 2019, 2018 and 2017

F-4

Consolidated Statement of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017

F-5

Consolidated Statement of Financial Position at December 31, 2019 and 2018

F-6

Consolidated Statement of Changes in Equity for the years ended December 31, 2019, 2018 and 2017

F-7

Consolidated Statement of Cash Flows for the years ended December 31, 2019, 2018 and 2017

F-8

Notes to the Consolidated Financial Statements

F-9

Ardagh Group S.A.

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Ardagh Group S.A.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statement of financial position of Ardagh Group S.A.

and its subsidiaries (the "Company") as of December 31, 2019 and 2018, and the related consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019, the manner in which it accounts for revenues from contracts with customers in 2018 and the manner in which it accounts for financial instruments in 2018.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial

Ardagh Group S.A.

F-2

statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/PricewaterhouseCoopers Dublin, Ireland

February 20, 2020

We have served as the Company's auditor since at least 1968, which includes periods before the Company became subject to SEC reporting requirements in 2017. We have not been able to determine the specific year we began serving as auditor of the Company or its predecessors.

Ardagh Group S.A.

F-3

ARDAGH GROUP S.A.

CONSOLIDATED INCOME STATEMENT

Year ended December 31, 2019

Year ended December 31, 2018

Before

Before

exceptional

Exceptional

exceptional

Exceptional

items

Items

Total

items

Items

Total

Note

$'m

$'m

$'m

$'m

$'m

$'m

Note 4

Note 4

Revenue

3

6,660

-

6,660

6,676

-

6,676

Cost of sales

(5,595)

(2)

(5,597)

(5,623)

(108)

(5,731)

Gross profit

1,065

(2)

1,063

1,053

(108)

945

Sales, general and administration expenses

(311)

(51)

(362)

(300)

(17)

(317)

Intangible amortization and impairment

9

(233)

-

(233)

(237)

(186)

(423)

Operating profit

521

(53)

468

516

(311)

205

Net finance expense

5

(456)

(203)

(659)

(457)

(22)

(479)

Share of post-tax loss in equity accounted joint venture

12

(10)

(39)

(49)

-

-

-

Profit/(loss) before tax

55

(295)

(240)

59

(333)

(274)

Income tax (charge)/credit

6

(41)

(3)

(44)

(67)

49

(18)

Profit/(loss) from continuing operations

14

(298)

(284)

(8)

(284)

(292)

Profit from discontinued operation

25

215

1,527

1,742

211

(13)

198

Profit/(loss) for the year

229

1,229

1,458

203

(297)

(94)

Year ended December 31, 2017

Before

exceptional

Exceptional

items

Items

Total

$'m

$'m

$'m

Note 4

6,390

-

6,390

(5,309)

(78)

(5,387)

1,081

(78)

1,003

(286)

(45)

(331)

(237)

-

(237)

558

(123)

435

(506)

(132)

(638)

-

-

-

52

(255)

(203)

(47)

124

77

5

(131)

(126)

201

(12)

189

206

(143)

63

Profit/(loss) attributable to:

Equity holders

1,458

(94)

63

Non-controlling interests

-

-

-

Profit/(loss) for the year

1,458

(94)

63

Earnings/(loss) per share:

Basic and diluted earnings/(loss) for the year attributable to equity holders

7

$

6.17

$

(0.40)

$

0.27

Loss per share from continuing operations:

Basic and diluted loss per share from continuing operations attributable to

equity holders

7

$

(1.20)

$

(1.24)

$

(0.55)

The accompanying notes to the consolidated financial statements are an integral part of these consolidated financial statements.

Ardagh Group S.A.

F-4

ARDAGH GROUP S.A.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended December 31,

2019

2018

2017

Note

$'m

$'m

$'m

Profit/(loss) for the year

1,458

(94)

63

Other comprehensive income/(expense):

Items that may subsequently be reclassified to income statement

Foreign currency translation adjustments:

-Arising in the year

47

75

(178)

47

75

(178)

Effective portion of changes in fair value of cash flow hedges:

-New fair value adjustments into reserve

54

54

(254)

-Movement out of reserve to income statement

(10)

(73)

258

-Movement in deferred tax

1

5

1

45

(14)

5

(Loss)/gain recognized on cost of hedging:

-New fair value adjustments into reserve

(8)

15

-

-Movement out of reserve

(12)

(2)

-

(20)

13

-

Share of other comprehensive income in equity accounted joint venture

12

5

-

-

Items that will not be reclassified to income statement

-Re-measurement of employee benefit obligations

21

(140)

11

49

-Deferred tax movement on employee benefit obligations

32

(1)

(6)

(108)

10

43

Share of other comprehensive income in equity accounted joint venture

12

2

-

-

Total other comprehensive (expense)/income for the year

(29)

84

(130)

Total comprehensive income/(expense) for the year

1,429

(10)

(67)

Attributable to:

Equity holders

1,429

(10)

(67)

Non-controlling interests

-

-

-

Total comprehensive income/(expense) for the year

1,429

(10)

(67)

Attributable to equity holders:

Continuing operations

(312)

(173)

(370)

Discontinued operation

1,741

163

303

Total comprehensive income/(expense) for the year

1,429

(10)

(67)

The accompanying notes to the consolidated financial statements are an integral part of these consolidated financial statements.

Ardagh Group S.A.

F-5

ARDAGH GROUP S.A.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At December 31,

2019

2018

Note

$'m

$'m

Non-current assets

Intangible assets

9

2,884

3,601

Property, plant and equipment

10

2,677

3,388

Derivative financial instruments

20

4

11

Deferred tax assets

13

204

254

Investment in material joint venture

12

375

-

Other non-current assets

11

68

24

6,212

7,278

Current assets

Inventories

14

964

1,284

Trade and other receivables

15

734

1,053

Contract assets

16

151

160

Derivative financial instruments

20

3

9

Cash and cash equivalents

17

614

530

2,466

3,036

TOTAL ASSETS

8,678

10,314

Equity attributable to owners of the parent

Issued capital

18

23

23

Share premium

1,292

1,292

Capital contribution

485

485

Other reserves

165

45

Retained earnings

(2,181)

(3,355)

(216)

(1,510)

Non-controlling interests

1

1

TOTAL EQUITY

(215)

(1,509)

Non-current liabilities

Borrowings

20

5,524

7,729

Lease obligations

20

291

32

Employee benefit obligations

21

716

957

Derivative financial instruments

20

44

107

Deferred tax liabilities

13

344

543

Provisions

22

29

38

6,948

9,406

Current liabilities

Borrowings

20

22

114

Lease obligations

20

73

4

Interest payable

60

81

Derivative financial instruments

20

17

38

Trade and other payables

23

1,628

1,983

Income tax payable

97

114

Provisions

22

48

83

1,945

2,417

TOTAL LIABILITIES

8,893

11,823

TOTAL EQUITY and LIABILITIES

8,678

10,314

The accompanying notes to the consolidated financial statements are an integral part of these consolidated financial statements.

Ardagh Group S.A.

F-6

ARDAGH GROUP S.A.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to the owner of the parent

Foreign

currency

Cash flow

Cost of

Non‑

Share

Share

Capital

translation

hedge

hedging

Retained

controlling

Total

capital

premium

contribution

reserve

reserve

reserve

earnings

Total

interests

equity

$'m

$'m

$'m

$'m

$'m

$'m

$'m

$'m

$'m

$'m

Note 18

At January 1, 2017

-

274

485

189

(37)

-

(3,093)

(2,182)

3

(2,179)

Profit for the year

-

-

-

-

-

-

63

63

-

63

Other comprehensive (expense)/income

-

-

-

(178)

5

-

43

(130)

-

(130)

Share re-organization (Note 18)

23

(23)

-

-

-

-

-

-

-

-

Share issuance (Note 18)

-

323

-

-

-

-

-

323

-

323

Conversion of related party loan (Note 18)

-

716

-

-

-

-

-

716

-

716

Dividends paid (Note 26)

-

-

-

-

-

-

(165)

(165)

-

(165)

Non-controlling interest in disposed business

-

-

-

-

-

-

-

-

(2)

(2)

At December 31, 2017

23

1,290

485

11

(32)

-

(3,152)

(1,375)

1

(1,374)

At January 1, 2018 (i)

23

1,290

485

11

(48)

18

(3,139)

(1,360)

1

(1,359)

Loss for the year

-

-

-

-

-

-

(94)

(94)

-

(94)

Other comprehensive income/(expense)

-

-

-

75

(14)

13

10

84

-

84

Hedging gains transferred to cost of inventory

-

-

-

-

(10)

-

-

(10)

-

(10)

Share issuance

-

2

-

-

-

-

-

2

-

2

Dividends paid (Note 26)

-

-

-

-

-

-

(132)

(132)

-

(132)

At December 31, 2018

23

1,292

485

86

(72)

31

(3,355)

(1,510)

1

(1,509)

At January 1, 2019 (ii)

23

1,292

485

86

(72)

31

(3,401)

(1,556)

1

(1,555)

Profit for the year

-

-

-

-

-

-

1,458

1,458

-

1,458

Other comprehensive income/(expense)

-

-

-

52

45

(20)

(106)

(29)

-

(29)

Hedging losses transferred to cost of inventory

-

-

-

-

16

-

-

16

-

16

Recycle to income statement on disposal of subsidiary (Note 25)

-

-

-

27

-

-

-

27

-

27

Dividends paid (Note 26)

-

-

-

-

-

-

(132)

(132)

-

(132)

At December 31, 2019

23

1,292

485

165

(11)

11

(2,181)

(216)

1

(215)

The accompanying notes to the consolidated financial statements are an integral part of these consolidated financial statements.

  1. Retained earnings at January 1, 2018 were re-presented by $13 million reflecting $20 million in respect of the impact of the adoption of IFRS 15 "Revenue from contracts with customers", partly offset by $7 million in respect of the adoption of IFRS 9 "Financial instruments". Further, following the adoption of IFRS 9 "Financial instruments", the cash flow hedge reserve was re-presented by $16 million, and cost of hedging reserve was re-presented to $18 million.
  2. Retained earnings at January 1, 2019 have been re-presented by $46 million reflecting the impact of the adoption of IFRS 16 'Leases'. Please refer to Note 2 for further details in respect of the impact of this recently adopted accounting standard.

Ardagh Group S.A.

F-7

ARDAGH GROUP S.A.

CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended December 31,

2019

2018

2017

Note

$'m

$'m

$'m

Cash flows from operating activities

Cash generated from continuing operations

24

1,179

991

1,185

Interest paid

(417)

(414)

(458)

Income tax paid

(64)

(97)

(95)

Net cash from operating activities - continuing operations

698

480

632

Net cash from operating activities - discontinued operation (i)

141

375

330

Net cash from operating activities

839

855

962

Cash flows from investing activities

Purchase of property, plant and equipment

(498)

(465)

(391)

Purchase of intangible assets

(10)

(12)

(13)

Proceeds from disposal of property, plant and equipment

3

10

4

Investing cash flows used in continuing operations

(505)

(467)

(400)

Proceeds from disposal of discontinued operation, net of cash disposed of

2,539

-

-

Investing cash flows used in discontinued operation

(107)

(108)

(92)

Net cash from/(used in) investing activities

1,927

(575)

(492)

Cash flows from financing activities

Repayment of borrowings

20

(4,088)

(442)

(4,384)

Proceeds from borrowings

20

1,806

110

3,730

Dividends paid

26

(132)

(132)

(165)

Consideration received/(paid) on extinguishment of derivative financial

instruments

20

9

(44)

46

Deferred debt issue costs paid

(14)

(5)

(38)

Lease payments

(78)

(4)

-

Early redemption premium paid

(165)

(7)

(91)

Proceeds from share issuance

-

-

326

Financing cash flows from continuing operations

(2,662)

(524)

(576)

Financing cash flows from discontinued operation

-

3

(1)

Net cash outflow from financing activities

(2,662)

(521)

(577)

Net increase/(decrease) in cash and cash equivalents

104

(241)

(107)

Cash and cash equivalents at the beginning of the year

17

530

784

813

Exchange (losses)/gains on cash and cash equivalents

(20)

(13)

78

Cash and cash equivalents at the end of the year

17

614

530

784

The accompanying notes to the consolidated financial statements are an integral part of these consolidated financial statements.

  1. Operating cash flows for discontinued operation for the year ended December 31, 2019, include interest and income tax payments of $6 million and $15 million respectively (2018: $2 million and $8 million, 2017: $nil and $8 million).

Ardagh Group S.A.

F-8

ARDAGH GROUP S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. General information

Ardagh Group S.A. (the "Company") was incorporated in Luxembourg on May 6, 2011. The Company's registered office is 56, rue Charles Martel, L-2134 Luxembourg, Luxembourg.

On March 20, 2017, the Company closed its initial public offering ("IPO") of 18,630,000 Class A common shares on the New York Stock Exchange ("NYSE").

Ardagh Group S.A. and its subsidiaries (together the "Group" or "Ardagh") is a leading supplier of sustainable innovative, value-added rigid packaging solutions. The Group's products include metal beverage cans, as well as glass containers primarily for beverage and food markets. End-use categories include beer, wine, spirits, carbonated soft drinks, energy drinks, juices and water, as well as food and pharmaceuticals. Ardagh also holds a stake of approximately 42% in Trivium Packaging B.V. ("Trivium"), a leading supplier of metal packaging in the form of cans and aerosol containers, serving a broad range of end-use categories, principally including food, seafood, pet food and nutrition, as well as beauty and personal care.

These consolidated financial statements reflect the consolidation of the legal entities forming the Group for the periods presented. The principal operating legal entities forming the Group are listed in Note 27.

The principal accounting policies that have been applied to the consolidated financial statements are described in

Note 2.

2. Summary of significant accounting policies Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with, and are in compliance with, International Financial Reporting Standards ("IFRS") and related interpretations as adopted by the International Accounting Standards Board ("IASB"). IFRS is comprised of standards and interpretations approved by the IASB and IFRS and interpretations approved by the predecessor International Accounting Standards Committee that have been subsequently approved by the IASB and remain in effect. References to IFRS hereafter should be construed as references to IFRS as adopted by the IASB.

On October 31, 2019, the Group completed the combination of its Food & Specialty Metal Packaging business ("Food & Specialty"), operating as part of the Metal Packaging Europe and Metal Packaging Americas segments, with the business of Exal Corporation ("Exal"), to form Trivium, a global leader in metal packaging. As consideration, Ardagh received a stake of approximately 42% in Trivium and approximately $2.6 billion in cash proceeds, subject to customary completion adjustments. The remaining approximate 58% is held by Ontario Teachers' Pension Plan Board ("Ontario Teachers"). Trivium is jointly controlled by Ardagh Group S.A. and Ontario Teachers. As a result of the completion of the transaction, Food & Specialty has been reported as a discontinued operation for the ten months period ended October 31, 2019 and previous years have been re-presented accordingly. Consequently, the Group's segments have been updated. Please refer to note 3, Segment analysis, for further details.

The consolidated financial statements, are presented in U.S. dollar, rounded to the nearest million and have been prepared under the historical cost convention except for the following:

  • derivative financial instruments are stated at fair value; and

Ardagh Group S.A.

F-9

  • employee benefit obligations are measured at the present value of the future estimated cash flows related to benefits earned and pension assets valued at fair value.

The preparation of consolidated financial information in conformity with IFRS requires the use of critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and income and expenses. It also requires management to exercise judgment in the process of applying Group accounting policies. These estimates, assumptions and judgments are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances and are subject to continual re-evaluation. However, actual outcomes may differ from these estimates. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are discussed in the critical accounting estimates, assumptions and judgments.

The consolidated financial statements for the Group were authorized for issue by the board of directors of Ardagh Group S.A. (the "Board") on February 19, 2020.

Recently adopted accounting standards and changes in accounting policies

IFRS 16 'Leases'

IFRS 16, 'Leases' ("IFRS 16") sets out the principles for the recognition, measurement, presentation and disclosure of leases. The objective is to ensure that lessees and lessors provide relevant information in a manner that appropriately represents those transactions. This information provides a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of the entity. IFRS 16 replaces IAS 17, 'Leases' ("IAS 17"), and later interpretations including IFRIC 4, 'Determining whether an Arrangement contains a Lease' ("IFRIC 4"), and has resulted in the majority of the Group's operating leases being recognized on the consolidated statement of financial position. Under IFRS 16, at the lease commencement date the Group recognizes a lease liability as the present value of expected future lease payments, excluding any amounts which are variable based on the usage of the underlying asset and a right-of-use asset generally at the same amount plus any directly attributable costs.

The Group adopted IFRS 16 effective January 1, 2019 applying the simplified approach, with the right-of-use assets being calculated as if IFRS 16 had always been applied and the lease liabilities being calculated as the present value of expected remaining future lease payments, discounted at the Group's incremental borrowing rate as at January 1, 2019, which resulted in the Group retaining prior period figures as reported under the previous standards and recognizing the cumulative effect of applying IFRS 16 as an adjustment to retained earnings as at the date of initial adoption. Upon adoption, the Group has availed of the practical expedients to use hindsight in determining the lease term where the contract contains options to extend or terminate the lease and has also elected not to apply IFRS 16 to contracts that were not identified before as containing a lease under IAS 17 and IFRIC 4. The Group has made an accounting policy election to combine lease and non-lease components.

The Group has completed its assessment of the impact of and subsequently adopted IFRS 16. This involved the establishment of a cross-functional project team to implement the new standard. The Group has gathered and assessed the data relating to approximately 2,000 leases to which the Group is party to and have designed and implemented a system solution and business process, with appropriate internal controls applied, in order to meet the new accounting and disclosure requirements post-adoption. The Group leases various types of assets, with lease terms being negotiated on an individual basis and subject to a wide range of different terms and conditions. Extension options or periods after termination options have been considered by management if it is reasonably certain that the lease will be extended or not terminated.

The principal impact on the consolidated statement of financial position as at the adoption date of January 1, 2019, was an increase in property, plant and equipment of $290 million due to the recognition of right-of-use assets, and an increase in borrowings of $349 million, as lease liabilities were recognized based on the new treatment. As a result of the aforementioned impact, deferred tax assets increased by $13 million.

Ardagh Group S.A.

F-10

Net cash from continuing operations for the year ended December 31, 2019 decreased by $74 million due to certain lease expenses no longer being recognized as operating cash outflows following the adoption of IFRS 16, however this is offset by a corresponding increase in cash used in financing activities due to repayments of the principal on lease liabilities.

In addition to the above impact, the adoption of IFRS 16 also had an impact on the consolidated income statement and certain of the Group's key financial metrics as a result of changes in the classification of charges recognized in the consolidated income statement. The application of the new standard decreased both cost of sales and operating costs (excluding depreciation) in the income statement, giving rise to an increase in Adjusted EBITDA of the continuing operations for the year ended December 31, 2019 of $83 million of which $63 million is related to such leases recognized as part of the initial adoption of IFRS 16, offset by increases in depreciation and net finance expense. Please refer to Note 3 for the reconciliation of Adjusted EBITDA.

The weighted average lessee's incremental borrowing rate applied to the lease liabilities recognized upon adoption of IFRS 16 was 5.4%. The total lease liability recognized at January 1, 2019 reconciles as follows to the total commitments under non-cancellable operating leases disclosed by the Group as of December 31, 2018:

$'m

Total commitments under non-cancellable operating leases as of December 31, 2018

364

Different treatment of extension and termination options and non-lease components

104

Impact from discounting

(119)

Lease liabilities due to initial adoption of IFRS 16 as of January 1, 2019

349

Finance lease obligations as of December 31, 2018

36

Total lease liabilities as of January 1, 2019

385

During 2019, the continuing operations of the Group incurred variable lease expense of $67 million, primarily related to warehouse leases.

Please refer to Notes 5, 10 and 20 for further information related to the Group's leasing obligations.

IFRIC 23 - Uncertainty over income tax treatments

The IFRS Interpretations Committee issued IFRIC 23 'Uncertainty over income tax treatments' ("IFRIC 23"), which clarifies how the recognition and measurement requirements of IAS 12 'Income taxes' are applied where there is uncertainty over income tax treatments.

The Group applied IFRIC 23 on its mandatory adoption date of January 1, 2019. The application of this interpretation did not have a material impact on the consolidated financial statements of the Group.

Recent accounting pronouncements

The impact of new standards, amendments to existing standards and interpretations issued and effective for annual periods beginning on or after January 1, 2019 have been assessed by the Board and, with the exception of those identified above, no new standards or amendments to existing standards effective January 1, 2019 are currently relevant for the Group. The Board's assessment of the impact of new standards, which are not yet effective and which have not been early adopted by the Group, on the consolidated financial statements and disclosures is on-going.

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Basis of consolidation

(i) Subsidiaries

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date on which control ceases. Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is the consideration given in exchange for control of the identifiable assets, liabilities and contingent liabilities of the acquired legal entities. Directly attributable transaction costs are expensed and included as exceptional items within sales, general and administration expenses. The acquired net assets are initially measured at fair value. The excess of the cost of acquisition over the fair value of the identifiable net assets acquired is recorded as goodwill. Any goodwill and fair value adjustments are recorded as assets and liabilities of the acquired legal entity in the currency of the primary economic environment in which the legal entity operates (the "functional currency"). If the cost of acquisition is less than the fair value of the Group's share of the net assets of the legal entity acquired, the difference is recognized directly in the consolidated income statement. The Group considers obligations of the acquiree in a business combination that arise as a result of the change in control, to be cash flows arising from obtaining control of the controlled entity, and classifies these obligations as investing activities in the consolidated statement of cash flows.

(ii) Non-controlling interests

Non-controlling interests represent the portion of the equity of a subsidiary which is not attributable to the Group. Non-controlling interests are presented separately in the consolidated financial statements. Changes in ownership of a subsidiary which do not result in a change in control are treated as equity transactions.

(iii) Transactions eliminated on consolidation

Transactions, balances and unrealized gains or losses on transactions between Group companies are eliminated. Subsidiaries' accounting policies have been changed where necessary to ensure consistency with the policies adopted by the Group.

Foreign currency

(i) Functional and presentation currency

The functional currency of the Company is euro. The consolidated financial statements are presented in U.S. dollar which is the Group's presentation currency.

(ii) Foreign currency transactions

Items included in the financial statements of each of the Group's entities are measured using the functional currency of that entity.

Transactions in foreign currencies are translated into the functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognized in the consolidated income statement, except: (i) differences on foreign currency borrowings that provide an effective hedge against a net investment in a foreign entity ("net investment hedges"), which are taken to other comprehensive income until the disposal of the net investment, at which time they are recognized in the consolidated

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income statement; and (ii) differences on certain derivative financial instruments discussed under "Derivative financial instruments" below. Net investment hedges are accounted for in a similar manner to cash flow hedges. The gain or loss relating to the ineffective portion of a net investment hedge is recognized immediately in the consolidated income statement within finance income or expense.

(iii) Financial statements of foreign operations

The assets and liabilities of foreign operations are translated into euro at foreign exchange rates ruling at the reporting date. The revenues and expenses of foreign operations are translated to euro at average exchange rates for the year. Foreign exchange differences arising on retranslation and settlement of such transactions are recognized in other comprehensive income. Gains or losses accumulated in other comprehensive income are recycled to the consolidated income statement when the foreign operation is disposed of.

Non-monetary items measured at fair value in foreign currency are translated using the exchange rates as at the date when the fair value is determined.

Business combinations and goodwill

All business combinations are accounted for by applying the acquisition method of accounting. This involves measuring the cost of the business combination and allocating, at the acquisition date, the cost of the business combination to the assets acquired and liabilities assumed. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred and included in sales, general and administration expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

Any contingent consideration is recognized at fair value at the acquisition date.

Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets of the acquired subsidiary at the date of acquisition.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to those groups of cash-generating units ("CGUs") that are expected to benefit from the business combination in which the goodwill arose for the purpose of assessing impairment. Goodwill is tested annually for impairment.

Where goodwill has been allocated to a CGU and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.

Joint ventures

The Group participates in a number of joint ventures where control is shared with one or more other parties. The Group's investment and share of results of joint ventures are shown within single line items in the consolidated statement

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of financial position and consolidated income statement respectively. The Group uses the equity method of accounting to account for its joint ventures. See note 12 "Investment in material joint venture" to the consolidated financial statements.

Discontinued Operations

A discontinued operation is a component of the Group's business that represents a separate major line of the business, geographical area of operations or is material to revenue or operating profit and has been disposed of or is held for sale. When an operation is classified as a discontinued operation, the comparative income statement is restated as if the operation had been discontinued from the start of the earliest period presented. Cash flows relating to discontinued operations are presented as a separate line item within each of the operating, investing and financing cash flow.

Intangible assets

Intangible assets are initially recognized at cost.

Intangible assets acquired as part of a business combination are capitalized separately from goodwill if the intangible asset is separable or arises from contractual or other legal rights. They are initially recognized at cost which, for intangible assets arising in a business combination, is their fair value at the date of acquisition.

Subsequent to initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. The carrying values of intangible assets with finite useful lives are reviewed for indicators of impairment at each reporting date and are subject to impairment testing when events or changes in circumstances indicate that the carrying values may not be recoverable.

The amortization of intangible assets is calculated to write off the book value of finite lived intangible assets over their useful lives on a straight-line basis on the assumption of zero residual value as follows:

Computer software

2

-

7

years

Customer relationships

5

- 15 years

Technology

8

-

15

years

(i) Computer software

Computer software development costs are recognized as assets. Costs associated with maintaining computer software programs are recognized as an expense as incurred.

(ii) Customer relationships

Customer relationships acquired in a business combination are recognized at fair value at the acquisition date. Customer relationships have a finite useful economic life and are carried at cost less accumulated amortization.

(iii) Technology

Technology based intangibles acquired in a business combination are recognized at fair value at the acquisition date and reflect the Group's ability to add value through accumulated technological expertise surrounding product and process development.

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(iv) Research and development costs

Research costs are expensed as incurred. Development costs relating to new products are capitalized if the new product is technically and commercially feasible. All other development costs are expensed as incurred.

Property, plant and equipment

(i) Owned assets

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, except for land which is shown at cost less impairment. Spare parts which form an integral part of plant and machinery and which have an estimated useful economic life greater than one year are capitalized. Spare parts which do not form an integral part of plant and machinery and which have an estimated useful economic life less than one year are included as consumables within inventory and expensed when utilized.

Where components of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

  1. Leased assets
    Effective January 1, 2019 on adoption of IFRS 16

At the lease commencement date or the effective date of a lease modification, the Group recognizes a lease liability as the present value of expected future lease payments, discounted at the Group's incremental borrowing rate unless the rate implicit in the lease is readily determinable, excluding any amounts which are variable based on the usage of the underlying asset and a right-of-use asset generally at the same amount plus any directly attributable costs. The Group combines lease and non-lease components and accounts for them as a single lease component. Extension options or periods after termination options are considered by management if it is reasonably certain that the lease will be extended or not terminated.

Effective prior to adoption of IFRS 16 on January 1, 2019

The determination of whether an arrangement is, or contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets, and the arrangement conveys a right to use the asset.

Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases.

Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated income statement on a straight-line basis over the period of the lease.

(iii) Subsequent costs

The Group recognizes in the carrying amount of an item of property, plant and equipment, the cost of replacing the component of such an item when that cost is incurred, if it is probable that the future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. When a component is replaced the old component is de-recognized in the period. All other costs are recognized in the consolidated income statement as an expense as incurred. When a major overhaul is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria above are met.

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(iv) Depreciation

Depreciation is charged to the consolidated income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows:

Buildings

30

-

40

years

Plant and machinery

3

- 40

years

Molds

2

-

3

years

Office equipment and vehicles

3

- 10

years

Assets' useful lives and residual values are adjusted if appropriate, at each balance sheet date.

Impairment of non-financial assets

Assets that have an indefinite useful economic life are not subject to amortization and are tested annually for impairment or whenever indicators suggest that impairment may have occurred. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount.

For the purposes of assessing impairment, assets excluding goodwill and long lived intangible assets, are grouped at the lowest levels at which cash flows are separately identifiable. Goodwill and long lived intangible assets are allocated to groups of CGUs. The groupings represent the lowest level at which the related assets are monitored for internal management purposes.

Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

The recoverable amount of other assets is the greater of their value in use and fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value, using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the CGU to which the asset belongs.

Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-in,first-out basis and includes expenditure incurred in acquiring the inventories and bringing them to their current location and condition. In the case of finished goods and work-in-progress, cost includes direct materials, direct labor and attributable overheads based on normal operating capacity.

Net realizable value is the estimated proceeds of sale less all further costs to completion, and less all costs to be incurred in marketing, selling and distribution.

Spare parts which are deemed to be of a consumable nature, are included within inventories and expensed when

utilized.

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Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, borrowings and trade and other payables. Non-derivative financial instruments are recognized initially at fair value plus any directly attributable transaction costs, except as described below. Subsequent to initial recognition, non-derivative financial instruments are measured as described below.

(i) Trade and other receivables

Effective January 1, 2018 on adoption of IFRS 9

Trade and other receivables are recognized initially at fair value and are thereafter measured at amortized cost using the effective interest rate method less any provision for impairment, in accordance with the Group's held to collect business model. A provision for impairment of specific trade receivables is recognized when there is evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. For all other trade receivables, the Group will use an allowance matrix to measure the expected credit loss, based on historical actual credit loss experiences, adjusted for forward-looking information.

Effective prior to adoption of IFRS 9 on January 1, 2018

Trade and other receivables are recognized initially at fair value and are thereafter measured at amortized cost using the effective interest rate method, less any provision for impairment. A provision for impairment of trade receivables is recognized when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.

(ii) Securitized assets

The Group has entered into securitization transactions involving certain of its trade receivables. The securitized assets are recognized on the consolidated statement of financial position, until all of the rights to the cash flows from those assets have expired or have been fully transferred outside the Group, or until substantially all of the related risks, rewards and control of the related assets have been transferred to a third party.

The Group has also entered into a Global Asset Based Loan Facility ("ABL") involving certain of its trade receivables and inventory. The lenders under the ABL have security over those receivables, inventory and the bank accounts where the associated cash flows are received. The risks, rewards and control of these assets are still retained by the Group and are, therefore, recognized on the statement of financial position.

(iii) Contract assets

Contract assets represent revenue required to be accelerated or recognized over time based on production completed in accordance with the Group's revenue recognition policy (as set out below). A provision for impairment of a contract asset will be recognized when there is evidence that the revenue recognized will not be recoverable. The provision is measured based on an allowance matrix to measure the expected credit loss, based on historical actual credit loss experiences, adjusted for forward-looking information.

(iv) Cash and cash equivalents

Cash and cash equivalents include cash on hand and call deposits held with banks and restricted cash. Cash and cash equivalents are carried at amortized cost.

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Short term bank deposits of greater than three months' maturity which do not meet the definition of cash and cash equivalents are classified as financial assets within current assets and stated at amortized cost.

Restricted cash comprises cash held by the Group but which is ring-fenced or used as security for specific financing arrangements, and to which the Group does not have unfettered access. Restricted cash is measured at amortized cost.

(v) Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the Group's consolidated income statement over the period of the borrowings using the effective interest rate method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

(vi) Trade and other payables

Trade and other payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method.

Derivative financial instruments

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

The fair values of various derivative instruments used for hedging purposes are disclosed in Note 20. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.

(i) Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in other comprehensive income, allocated between cash flow hedge gains or losses and cost of hedging gains or losses. For cash flow hedges which subsequently result in the recognition of a non-financial asset, the amounts accumulated in the cash flow hedge reserve are reclassified to the asset in order to adjust its carrying value. Amounts accumulated in the cash flow hedge reserve and cost of hedging reserve, or as adjustments to carrying value of non-financial assets, are recycled to the consolidated income statement in the periods when the hedged item will affect profit or loss.

The gain or loss relating to the ineffective portion is recognized immediately in the consolidated income statement. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing at that time remains in equity and is recognized in the consolidated income statement when the forecast cash flow arises. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the consolidated income statement.

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(ii) Net investment hedges

Derivative financial instruments are classified as net investment hedges when they hedge changes in the Group's net investments in its subsidiaries due to exposure to foreign currency. Net investment hedges are accounted for in a similar manner to cash flow hedges.

(iii) Fair value hedges

Derivative financial instruments are classified as fair value hedges when they hedge the Group's exposure to changes in the fair value of a recognized asset or liability. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the Group's consolidated income statement, together with any changes in the fair value of the hedged item that is attributable to the hedged risk. Changes in the fair value of derivatives relating to the cost of hedging are recognized in other comprehensive income.

The gain or loss relating to the effective portion of derivatives with fair value hedge accounting is recognized in the consolidated income statement within "net finance expense". The gain or loss relating to the ineffective portion is also recognized in the consolidated income statement within "net finance expense". If a hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest rate method is used is amortized to profit or loss over the period to maturity.

When a hedging instrument expires or is sold, or when a fair value hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing at that time remains in equity and is recognized in the consolidated income statement when the forecast cash flow arises. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the consolidated income statement.

Fair value measurement

The Group measures financial instruments such as derivatives and pension assets at fair value at each balance sheet date. Fair value related disclosures for financial instruments and pension assets that are measured at fair value or where fair values are disclosed, are summarized in the following notes:

  • Disclosures for valuation methods, significant estimates and assumptions (Notes 20 and 21)
  • Quantitative disclosures of fair value measurement hierarchy (Note 20)
  • Financial instruments (including those carried at amortized cost) (Note 20)

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

  • in the principal market for the asset or liability; or
  • in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

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A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

Employee benefits

(i) Defined benefit pension plans

Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognized in the consolidated statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the reporting date less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past service costs are recognized immediately in the consolidated income statement.

(ii) Multi-employer pension plans

Multi-employer craft or industry based pension schemes ("multi-employer schemes") have arrangements similar to those of defined benefit schemes. In each case it is not possible to identify the Group's share of the underlying assets and liabilities of the multi-employer schemes and therefore in accordance with IAS 19(R), the Group has taken the exemption for multi-employer pension schemes to account for them as defined contribution schemes recognizing the contributions payable in each period in the consolidated income statement.

(iii) Other long term employee benefits

The Group's obligation in respect of other long term employee benefit plans represents the amount of future benefit that employees have earned in return for service in the current and prior periods for post-retirement medical schemes, partial retirement contracts and long service awards. These are included in the category of employee benefit obligations on the consolidated statement of financial position. The obligation is computed on the basis of the projected unit credit method and is discounted to present value using a discount rate equating to the market yield at the reporting date on high quality corporate bonds of a currency and term consistent with the currency and estimated term of the obligations. Actuarial gains and losses are recognized in full in the Group's consolidated statement of comprehensive income in the period in which they arise.

(iv) Defined contribution plans

A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The contributions are recognized as employee benefit expense when they are due.

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Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and the amount can be reliably estimated.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.

Revenue recognition

Effective January 1, 2018 on adoption of IFRS 15

Our products include metal and glass containers primarily for food and beverage markets. consumer-driven demand. In addition to metal containers, within the Metal Beverage Europe and Metal Beverage Americas reportable segments, the Group manufactures and supplies a wide range of can ends. Containers and ends are usually distinct items and can be sold separately from each other. A significant portion of our sales volumes are supplied under contracts which include input cost pass-through provisions.

The Group usually enters into framework agreements with its customers, which establish the terms under which individual orders to purchase goods or services may be placed. As the framework agreements do not identify each party's rights regarding the goods or services to be transferred, they do not create enforceable rights and obligations on a stand- alone basis. Therefore, the Group has concluded that only individual purchase orders create enforceable rights and obligations and meet the definition of a contract in IFRS 15. The individual purchase orders have, in general, a duration of one year or less and, as such, the Group does not disclose any information about remaining performance obligations under these contracts. The Group's payment terms are in line with customary business practice, which can vary by customer and region. The Group has availed of the practical expedient from considering the existence of a significant financing component as, based on past experience, we expect that, at contract inception, the period between when a promised good is transferred to the customer and when the customer pays for that good will be one year or less.

Revenue is recognized when control of a good or service has transferred to the customer. For certain contracts in the Metal Beverage Europe and Metal Beverage Americas reportable segment, the Group manufactures products for customers that have no alternative use and for which the Group has an enforceable right to payment for production completed to date. Therefore, the Group will recognize revenue over time such that a portion of revenue, net of any related estimated rebates and cash discounts, excluding sales or value added tax, will be recognized prior to the dispatch of goods as the Group satisfies the contractual performance obligations for those contracts. For all other contracts, the Group will continue to recognize revenue primarily on dispatch of the goods, net of any related customer rebates and cash discounts, excluding sales and value added taxes.

Effective prior to adoption of IFRS 15 on January 1, 2018

Revenue from the sale of goods is recognized in the consolidated income statement when the significant risks and rewards of ownership have been transferred to the buyer, primarily on dispatch of the goods. Allowances for customer rebates are provided for in the same period as the related revenues are recorded. Revenue is presented net of such rebates as well as cash discounts and value added tax.

Exceptional items

The Group's consolidated income statement, cash flow and segmental analysis separately identify results before specific items. Specific items are those that in management's judgment need to be disclosed by virtue of their size, nature

Ardagh Group S.A.

F-21

or incidence to provide additional information. Such items include, where significant, restructuring, redundancy and other costs relating to permanent capacity realignment or footprint reorganization, directly attributable acquisition costs and acquisition integration costs, and other transaction-related costs, profit or loss on disposal or termination of operations, start-up costs incurred in relation to and associated with plant builds, significant new line investments or furnaces, major litigation costs and settlements and impairments of non-current assets. In this regard the determination of "significant" as included in our definition uses qualitative and quantitative factors. Judgment is used by the Group in assessing the particular items, which by virtue of their scale and nature, are disclosed in the Group's consolidated income statement, and related notes as exceptional items. Management considers columnar presentation to be appropriate in the consolidated income statement as it provides useful additional information and is consistent with the way that financial performance is measured by management and presented to the Board. Exceptional restructuring costs are classified as restructuring provisions and all other exceptional costs when outstanding at the balance sheet date are classified as exceptional items payable.

Finance income and expense

Finance income comprises interest income on funds invested, gains on disposal of financial assets, ineffective portions of derivative instruments designated as hedging instruments and gains on derivative instruments that are not designated as hedging instruments and are recognized in profit or loss.

Finance expense comprises interest expense on borrowings (including amortization of deferred debt issuance costs), finance lease expenses, certain net foreign currency translation related to financing, net interest cost on net pension plan liabilities, losses on extinguishment of borrowings, ineffective portions of derivative instruments designated as hedging instruments, losses on derivative instruments that are not designated as hedging instruments and are recognized in profit or loss, and other finance expense.

The Group capitalizes borrowing costs directly attributable to the acquisition, construction or production of manufacturing plants that require a substantial period of time to build that would have been avoided if the expenditure on the qualifying asset had not been made.

Costs related to the issuance of new debt are deferred and amortized within finance expense over the expected terms of the related debt agreements by using the effective interest rate method.

Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognized in the consolidated income statement except to the extent that it relates to items recognized in other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years.

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are generally not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where the timing

Ardagh Group S.A.

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of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Segment reporting

The Board has been identified as the Chief Operating Decision Maker ("CODM") for the Group.

Operating segments are identified on the basis of the internal reporting provided to the Board in order to allocate resources to the segment and assess its performance.

Critical accounting estimates, assumptions and judgments

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Estimated impairment of goodwill and other long lived assets

In accordance with IAS 36 "Impairment of assets" ("IAS 36"), the Group tests whether goodwill and other long lived assets have suffered any impairment in accordance with the accounting policies stated. The determination of the recoverable amounts of goodwill requires the use of estimates as outlined in Note 9. The Group's judgments relating to the impairment of goodwill and other long lived assets are included in Notes 9 and 10.

(ii) Establishing lives for the purposes of depreciation and amortization of property, plant and equipment and intangibles

Long lived assets, consisting primarily of property, plant and equipment, customer intangibles and technology intangibles, comprise a significant portion of the Group's total assets. The annual depreciation and amortization charges depend primarily on the estimated lives of each type of asset and, in certain circumstances, estimates of fair values and residual values. The Board regularly review these asset lives and change them as necessary to reflect current thinking on remaining lives in light of technological change, prospective economic utilization and physical condition of the assets concerned. Changes in asset lives can have a significant impact on the depreciation and amortization charges for the period. It is not practical to quantify the impact of changes in asset lives on an overall basis, as asset lives are individually determined and there are a significant number of asset lives in use.

(iii) Lease term

Several lease agreements include renewal and termination options. The Group assesses all facts and circumstances that create an economic incentive to exercise a renewal option, or not exercise a termination option. Renewal options (or periods after termination options) are only included in the lease term if the conclusion is that the lease is reasonably certain to be renewed (or not terminated). The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the Group.

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F-23

(iv) Income taxes

The Group is subject to income taxes in numerous jurisdictions and judgment is therefore required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit matters based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

(v) Measurement of employee benefit obligations

The Group follows guidance of IAS 19(R) to determine the present value of its obligations to current and past employees in respect of defined benefit pension obligations, other long term employee benefits, and other end of service employee benefits which are subject to similar fluctuations in value in the long term. The Group values its liabilities, with the assistance of professional actuaries, to ensure consistency in the quality of the key assumptions underlying the valuations. The critical assumptions and estimates applied are discussed in detail in Note 21.

(vi) Exceptional items

The consolidated income statement and segment analysis separately identify results before exceptional items. Exceptional items are those that in our judgment need to be disclosed by virtue of their size, nature or incidence.

The Group believes that this presentation provides additional analysis as it highlights exceptional items. The determination of "significant" as included in our definition uses qualitative and quantitative factors which remain consistent from period to period. Management uses judgment in assessing the particular items, which by virtue of their scale and nature, are disclosed in the consolidated income statement and related notes as exceptional items. Management considers the consolidated income statement presentation of exceptional items to be appropriate as it provides useful additional information and is consistent with the way that financial information is measured by management and presented to the Board. In that regard, management believes it to be consistent with paragraph 85 of IAS 1 "Presentation of financial statements" ("IAS 1"), which permits the inclusion of line items and subtotals that improve the understanding of performance.

(vii) Revenue recognition

Revenue is recognized when control of a good or service has transferred to the customer. For certain contracts, the Group manufactures products for customers that have no alternative use and for which the Group has an enforceable right to payment for production completed to date. The determination of goods or contracts having no alternative use and the enforceable right to payment involves and relies upon management judgment, and can result in the Group accelerating the recognition of revenue over time as the Group satisfies the contractual performance obligations for those contracts.

(viii) Business combinations and goodwill

Goodwill only arises in business combinations. The amount of goodwill initially recognized is dependent on the allocation of the purchase price to the fair value of the identifiable assets acquired and the liabilities assumed. The determination of the fair value of the assets and liabilities is based, to a considerable extent, on management's judgment. Allocation of the purchase price affects the results of the Group as finite lived intangible assets are amortized, whereas indefinite lived intangible assets, including goodwill, are not amortized and could result in differing amortization charges based on the allocation to indefinite lived and finite lived intangible assets.

Ardagh Group S.A.

F-24

3. Segment analysis

Following the Group's announcement to combine Food & Specialty with Exal to form Trivium, the composition of the Group's operating and reporting segments changed. Food & Specialty has been classified as a discontinued operation. This reflects the basis on which the Group performance is reviewed by management and presented to the Board, which has been identified as the Chief Operating Decision Maker ("CODM") for the Group. The comparative amounts have been restated in accordance with the requirements of IFRS 8. The following are the Group's four operating and reportable segments:

  • Metal Beverage Packaging Europe
  • Metal Beverage Packaging Americas
  • Glass Packaging Europe
  • Glass Packaging North America.

Performance of the business is assessed based on Adjusted EBITDA. Adjusted EBITDA is the profit or loss for the period before income tax charge or credit, net finance expense, depreciation and amortization, exceptional operating items and share of profit or loss in equity accounted joint venture. Other items are not allocated to segments, as these are reviewed by the CODM on a group-wide basis. Segmental revenues are derived from sales to external customers. Inter- segment revenue and revenue with joint ventures are not material.

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

Loss from continuing operations

(284)

(292)

(126)

Income tax charge/(credit) (Note 6)

44

18

(77)

Net finance expense (Note 5)

659

479

638

Depreciation and amortization (Notes 9, 10)

652

599

583

Exceptional operating items (Note 4)

53

311

123

Share of post-tax loss in equity accounted joint venture (Note 12)

49

-

-

Adjusted EBITDA from continuing operations

1,173

1,115

1,141

Profit from discontinued operation (Note 25)

1,742

198

189

Income tax charge (Note 25)

19

26

37

Net finance expense (Note 5)

4

6

11

Depreciation and amortization (Notes 9, 10)

71

115

104

Exceptional operating items

(1,510)

18

26

Adjusted EBITDA from discontinued operation

326

363

367

Adjusted EBITDA

1,499

1,478

1,508

Segment assets consist of intangible assets, property, plant and equipment, derivative financial instrument assets, deferred tax assets, other non-current assets, inventories, contract assets, trade and other receivables and cash and cash equivalents. The accounting policies of the segments are the same as those in the consolidated financial statements of the Group as set out in Note 2.

Ardagh Group S.A.

F-25

Segment results for the year ended December 31, 2019 are:

Metal

Metal

Beverage

Beverage

Glass

Glass

Packaging

Packaging

Packaging

Packaging

Continuing

Discontinued

Europe

Americas

Europe

North America

Operations

Operation

Group

$'m

$'m

$'m

$'m

$'m

$'m

$'m

Revenue

1,556

1,816

1,613

1,675

6,660

2,003

8,663

Adjusted EBITDA

253

250

391

279

1,173

326

1,499

Capital expenditure

95

110

163

137

505

107

612

Segment assets (excluding Investment

in material joint venture)

2,360

1,725

1,977

2,241

8,303

-

8,303

Segment results for the year ended December 31, 2018 are:

Metal

Metal

Beverage

Beverage

Glass

Glass

Packaging

Packaging

Packaging

Packaging

Continuing

Discontinued

Europe

Americas

Europe

North America

Operations

Operation

Group

$'m

$'m

$'m

$'m

$'m

$'m

$'m

Revenue

1,616

1,742

1,623

1,695

6,676

2,421

9,097

Adjusted EBITDA

270

230

358

257

1,115

363

1,478

Capital expenditure

103

79

151

134

467

108

575

Segment assets

2,274

1,549

1,916

2,197

7,936

2,378

10,314

Segment results for the year ended December 31, 2017 are:

Metal

Metal

Beverage

Beverage

Glass

Glass

Packaging

Packaging

Packaging

Packaging

Continuing

Discontinued

Europe

Americas

Europe

North America

Operations

Operation

Group

$'m

$'m

$'m

$'m

$'m

$'m

$'m

Revenue

1,535

1,529

1,549

1,777

6,390

2,206

8,596

Adjusted EBITDA

257

195

340

349

1,141

367

1,508

Capital expenditure

95

69

110

126

400

92

492

Segment assets

2,392

1,425

2,187

2,622

8,626

2,526

11,152

Capital expenditure is the sum of purchases of property, plant and equipment and software and other intangibles, net of proceeds from disposal of property, plant and equipment, as per the consolidated statement of cash flows.

One customer accounted for greater than 10% of total revenue from continuing operations in 2019 (2018: none;

2017: one).

Ardagh Group S.A.

F-26

Total revenue from continuing operations and non-current assets, excluding derivative financial instruments, taxes, pensions and goodwill arising on acquisitions, in countries which account for more than 10% of total revenue or non-current assets, in the current or prior years presented, are as follows:

Year ended December 31,

2019

2018

2017

Revenue

$'m

$'m

$'m

U.S.

2,974

2,911

2,852

United Kingdom

736

778

702

At December 31,

2019

2018

Non-current assets

$'m

$'m

U.S.

2,100

2,190

Germany

713

847

United Kingdom

665

659

The revenue above is attributed to countries on a destination basis.

The Company is domiciled in Luxembourg. During the year the continuing operations had revenues of $2 million

(2018: $2 million, 2017: $2 million) with customers in Luxembourg. Non-current assets located in Luxembourg were $nil

(2018: $nil).

Within each reportable segment our respective packaging containers have similar production processes and classes of customers. Further, they have similar economic characteristics, as evidenced by similar profit margins, similar degrees of risk and similar opportunities for growth. Based on the foregoing, we do not consider that they constitute separate product lines and therefore additional disclosures relating to product lines is not necessary.

The following illustrates the disaggregation of revenue by destination for the year ended December 31, 2019:

North

Rest of the

Europe

America

world

Total

$'m

$'m

$'m

$'m

Metal Beverage Packaging Europe

1,541

5

10

1,556

Metal Beverage Packaging Americas

2

1,419

395

1,816

Glass Packaging Europe

1,554

7

52

1,613

Glass Packaging North America

-

1,674

1

1,675

Continuing operations

3,097

3,105

458

6,660

Discontinued operation

1,480

389

134

2,003

Group

4,577

3,494

592

8,663

Ardagh Group S.A.

F-27

The following illustrates the disaggregation of revenue by destination for the year ended December 31, 2018:

North

Rest of the

Europe

America

world

Total

$'m

$'m

$'m

$'m

Metal Beverage Packaging Europe

1,601

2

13

1,616

Metal Beverage Packaging Americas

1

1,339

402

1,742

Glass Packaging Europe

1,572

9

42

1,623

Glass Packaging North America

-

1,687

8

1,695

Continuing operations

3,174

3,037

465

6,676

Discontinued operation

1,795

447

179

2,421

Group

4,969

3,484

644

9,097

4. Exceptional items

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

Legal matter

15

-

-

Start-up related costs

13

48

8

Restructuring and other costs

6

50

32

Impairment - property, plant and equipment

5

5

38

Past service (credit)/charge

(37)

5

-

Exceptional items - cost of sales

2

108

78

Transaction-related costs

51

17

45

Exceptional items - SGA expenses

51

17

45

Impairment - goodwill

-

186

-

Exceptional items - impairment of intangible assets

-

186

-

Debt refinancing and settlement costs

200

16

117

Loss on derivative financial instruments

3

6

15

Exceptional items - finance expense

203

22

132

Share of exceptional items in material joint venture

39

-

-

Exceptional items from continuing operations

295

333

255

Exceptional income tax charge/(credit)

3

(49)

(124)

Exceptional items from continuing operations, net of tax

298

284

131

Exceptional items from discontinued operation, net of tax

(1,527)

13

12

Total exceptional (credit)/charge, net of tax

(1,229)

297

143

Exceptional items are those that in management's judgment need to be disclosed by virtue of their size, nature or incidence.

2019

Exceptional items of $1,229 million have been recognized for the year ending December 31, 2019, primarily comprising:

  • $15 million related to a legal matter as described in Note 28 of the consolidated financial statements.
  • $24 million related to the Group's capacity realignment programs, including start-up related costs ($13 million), restructuring costs ($6 million), property, plant and equipment impairment charges ($5 million). These costs were

Ardagh Group S.A.

F-28

incurred in Glass Packaging North America ($15 million), Glass Packaging Europe ($5 million), Metal Beverage Packaging America ($2 million) and Metal Beverage Packaging Europe ($2 million).

  • $37 million pension service credit recognized in Glass Packaging North America following amendments to a pension scheme.
  • $51 million transaction-related costs, primarily comprising costs relating to the combination of the Group's Food & Specialty Metal Packaging business with the business of Exal Corporation to form Trivium.
  • $200 million debt refinancing and settlement costs related to the redemption of notes in August and November 2019 as described in Note 20, premium payable on the early redemption of the notes of $165 million, accelerated amortization of deferred finance costs, and include interest charges from the call date to date of redemption and $3 million exceptional loss on the termination of derivative financial instruments.
  • $39 million from the share of exceptional items in the Trivium joint venture.
  • $3 million from tax charge, as described in Note 6.
  • $1,527 million from discontinued operation, net of tax, primarily related to the gain, net of directly attributable disposal costs, on the disposal of the Food & Specialty Metal Packaging business.

2018

Exceptional items of $297 million have been recognized for the year ending December 31, 2018, primarily comprising:

  • $103 million related to the Group's capacity realignment programs, including start-up related costs ($48 million) restructuring costs ($50 million), property, plant and equipment impairment charges ($5 million). These costs were incurred in Glass Packaging North America ($78 million), Metal Beverage Packaging Europe ($24 million), Glass Packaging Europe ($5 million) and a cost reduction in Metal Beverage Packaging Americas ($4 million).
  • $5 million pension service cost recognized in Metal Beverage Packaging Europe and Glass Packaging Europe following a High Court ruling in the U.K. in October 2018 in respect of GMP equalization (Note 21).
  • $17 million transaction-related costs, primarily comprised of costs relating to acquisition, integration and other transactions.
  • $186 million impairment of goodwill in Glass Packaging North America.
  • $16 million debt refinancing and settlement costs primarily relating to the redemption of the Group's $440 million 6.000% Senior Notes due 2021 in July 2018, principally comprising an early redemption premium and accelerated amortization of deferred finance costs.
  • $6 million exceptional loss on the termination of the Group's $440 million U.S. dollar to euro CCIRS in July 2018.
  • $49 million from tax credits, as described in Note 6.
  • $13 million related to exceptional items from discontinued operation, net of tax.

Ardagh Group S.A.

F-29

2017

Exceptional items of $143 million have been recognized for the year ending December 31, 2017, primarily comprising:

  • $78 million related to the Group's capacity realignment programs, including restructuring costs ($32 million), start-up related costs ($8 million) and property, plant and equipment impairment charges ($38 million). These costs were incurred in Glass Packaging North America ($43 million), Metal Beverage Packaging Europe ($33 million) and Metal Beverage Packaging Americas ($2 million).
  • $45 million transaction related costs, primarily comprised of costs directly attributable to the Beverage Can Acquisition and integration of that business and other IPO and transaction-related costs.
  • $117 million debt refinancing and settlement costs relating to the notes and loans redeemed and repaid in January, March, April, June, and August 2017, principally comprising premiums payable on the early redemption of the notes and accelerated amortization of deferred finance costs and issue discounts.
  • $15 million exceptional loss on the termination in June 2017, of $500 million of the Group's U.S. dollar to British pound CCIRS, of which $12 million relates to cumulative losses recycled from other comprehensive income.
  • $124 million from tax credits, as described in Note 6.
  • $12 million related to exceptional items from discontinued operation, net of tax.

5. Finance income and expense

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

Senior secured and senior notes

367

421

431

Other interest expense

40

22

5

Term loan

-

-

5

Interest expense

407

443

441

Net pension interest cost (Note 21)

18

16

18

Foreign currency translation losses

27

8

21

Loss/(gain) on derivative financial instruments

9

(10)

27

Other finance income

(5)

-

(1)

Finance expense before exceptional items

456

457

506

Exceptional finance expense (Note 4)

203

22

132

Net finance expense from continuing operations

659

479

638

Net finance expense from discontinued operation

4

6

11

Net finance expense

663

485

649

During the year ended December 31, 2019, the continuing operations of the Group recognized $19 million related to lease liabilities within other interest expense and interest paid in cash used in operating activities.

Ardagh Group S.A.

F-30

6. Income tax

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

Current tax:

Current tax for the year

70

73

60

Adjustments in respect of prior years

7

11

1

Total current tax

77

84

61

Deferred tax:

Deferred tax for the year

(31)

(58)

(133)

Adjustments in respect of prior years

(2)

(8)

(5)

Total deferred tax

(33)

(66)

(138)

Income tax charge/(credit)

44

18

(77)

Reconciliation of income tax charge/(credit) and the loss before tax multiplied by the Group's domestic tax rate for 2019, 2018 and 2017 is as follows:

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

Loss before tax

(240)

(274)

(203)

Loss before tax multiplied by the standard rate of Luxembourg

corporation tax: 24.94% (2018: 26.01%; 2017: 27.08%)

(60)

(71)

(55)

Tax losses for which no deferred income tax asset was recognized

32

-

-

Re-measurement of deferred taxes

(2)

1

(69)

Adjustment in respect of prior years

5

3

(4)

Income subject to state and other local income taxes

11

12

12

Income taxed at rates other than standard tax rates

7

5

(6)

Non-deductible items

48

55

42

Other

3

13

3

Income tax charge/(credit)

44

18

(77)

The total income tax charge/(credit) outlined above for each year includes a tax charge of $3 million in 2019 (2018 tax credit of $49 million; 2017 tax credit of $124 million) in respect of exceptional items, being the tax effect of the items set out in Note 4. The $124 million exceptional income tax credit recognized in the year ended December 31, 2017 includes a credit of $71 million on remeasurement of deferred tax positions following the enactment of the Tax Cuts and Jobs Act of 2017 ("TCJA") in the United States of America.

Tax losses for which no deferred income tax asset was recognized relates to tax losses incurred in Ireland in respect of exceptional finance expense, in addition to the carry-forward of interest expense in certain jurisdictions.

Non-deductible items principally relate to non-deductible interest expense in Ireland and Luxembourg, in addition to the elimination of intercompany recharges and finance expense relating to discontinued operations. Income taxed at non-standard rates takes account of foreign tax rate differences (versus the Luxembourg standard 24.94% rate) on earnings.

The tax charge associated with discontinued operation is recognized separately in the results of discontinued operation. See note 25 for further details.

Ardagh Group S.A.

F-31

7. Earnings per share

Basic earnings per share ("EPS") is calculated by dividing the profit/(loss) for the year attributable to equity holders by the weighted average number of common shares outstanding during the year.

The following table reflects the income statement profit/(loss) and share data used in the basic EPS calculations:

Profit/(loss) attributable to equity holders

Weighted average number of common shares for EPS (millions) Earnings/(loss) per share

Loss from continuing operations attributable to equity holders Weighted average number of common shares for EPS (millions) Loss per share from continuing operations

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

1,458

(94)

63

236.4

236.3

229.6

$

6.17

$

(0.40)

$

0.27

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

(284)

(292)

(126)

236.4

236.3

229.6

$

(1.20)

$

(1.24)

$

(0.55)

Diluted earnings per share is consistent with basic earnings per share as there are no dilutive potential common

shares.

Please refer to Note 18 for details of transactions involving ordinary shares for the years ended December 31, 2019 and 2018. See Note 25 for basic and diluted earnings per share from discontinued operation.

There have been no material transactions involving common shares or potential ordinary shares between the reporting date and the authorization of these financial statements.

8. Employee costs

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

Wages and salaries

1,048

962

1,028

Social security costs

155

154

139

Defined benefit plan pension costs (Note 21)

31

42

36

Defined benefit past service (credit)/charge (Note 21)

(54)

6

-

Defined contribution plan pension costs (Note 21)

40

32

30

Net employee costs from continuing operations

1,220

1,196

1,233

Net employee costs from discontinued operation

370

424

392

Group employee costs

1,590

1,620

1,625

At December 31,

Employees

2019

2018

2017

Production

14,463

14,666

14,809

Administration

1,877

1,986

1,924

Continuing operations

16,340

16,652

16,733

Discontinued operation

-

6,775

6,758

Group

16,340

23,427

23,491

Ardagh Group S.A.

F-32

9. Intangible assets

Customer

Technology

Goodwill

relationships

and other

Software

Total

$'m

$'m

$'m

$'m

$'m

Cost

At January 1, 2018

2,201

2,355

251

88

4,895

Additions

-

-

12

25

37

Impairment (i)

(186)

-

-

-

(186)

Exchange

(45)

(55)

(8)

(3)

(111)

At December 31, 2018

1,970

2,300

255

110

4,635

Amortization

At January 1, 2018

(607)

(126)

(58)

(791)

Charge for the year

(227)

(30)

(8)

(265)

Exchange

17

3

2

22

At December 31, 2018

(817)

(153)

(64)

(1,034)

Net book value

At December 31, 2018

1,970

1,483

102

46

3,601

Cost

At January 1, 2019

1,970

2,300

255

110

4,635

Additions

-

-

12

13

25

Disposal of Food & Specialty

(328)

(203)

(103)

(44)

(678)

Disposal

-

-

-

(1)

(1)

Transfers

-

-

(11)

11

-

Exchange

(18)

(14)

(3)

(2)

(37)

At December 31, 2019

1,624

2,083

150

87

3,944

Amortization

At January 1, 2019

(817)

(153)

(64)

(1,034)

Charge for the year

(214)

(27)

(8)

(249)

Disposal of Food & Specialty

146

60

6

212

Disposal

-

-

1

1

Exchange

5

3

2

10

At December 31, 2019

(880)

(117)

(63)

(1,060)

Net book value

At December 31, 2019

1,624

1,203

33

24

2,884

Amortization expense of $233 million (2018: $237 million, 2017: $237 million) has been charged to the consolidated income statement of the Group in respect of continuing operations. An amortization expense of $16 million (2018: $28 million, 2017: $27 million) has been charged to the consolidated income statement of the Group in respect of the discontinued operation.

  1. An impairment charge of $186 million, before the impact of deferred tax, was recognized in the year ended December 31, 2018 in respect of the goodwill in Glass Packaging North America. The impairment testing performed used a FVLCTS calculation for the Glass Packaging North America CGU.

Goodwill

Allocation of goodwill

Goodwill has been allocated to groups of CGUs for the purpose of impairment testing. The groupings represent the lowest level at which the related goodwill is monitored for internal management purposes. Goodwill acquired through

Ardagh Group S.A.

F-33

business combination activity is allocated to CGUs that are expected to benefit from synergies arising from that combination.

The lowest level within the Group at which the goodwill is monitored for internal management purposes and consequently the CGUs to which goodwill is allocated is set out below. The Group changed the composition of its operating and reporting segments following the disposal of its Food & Specialty Metal Packaging business which completed on October 31, 2019. On this basis the Group's CGUs are identified as follows:

At December 31,

2019

2018

$'m

$'m

Metal Beverage Packaging Europe

566

577

Metal Beverage Packaging Americas

437

437

Glass Packaging Europe

61

62

Glass Packaging North America

560

560

Total Goodwill from continuing operations

1,624

1,636

Discontinued operation Europe

-

305

Discontinued operation North America

-

29

Total Goodwill

1,624

1,970

Impairment tests for goodwill

The Group performs its impairment test of goodwill annually following approval of the annual budget.

Recoverable amount and carrying amount

The Group used the value in use ("VIU") model for the purposes of goodwill impairment testing, as this reflects the Group's intention to hold and operate the assets. However, if an impairment indicator exists for a CGU, the Group uses both the VIU model and the fair value less costs to sell ("FVLCTS") model to establish the higher of the recoverable amount.

Value in use

The VIU model used the 2020 budget approved by the Board and a two year forecast for 2021 to 2022. The budget and forecast results were then extended for a further two-year period (2018: two-year period) making certain assumptions, including that long-term depreciation equals capital expenditure and that any increase in input cost will be passed through to customers, in line with historic practice and contractual terms.

Cash flows considered in the VIU model included the cash inflows and outflows related to the continuing use of the assets over their remaining useful lives, expected earnings, required maintenance capital expenditure, depreciation and working capital.

The discount rate applied to cash flows in the VIU model was estimated using our weighted average cost of capital as determined by the Capital Asset Pricing Model with regard to the risks associated with the cash flows being considered (country, market and specific risks of the asset).

The modelled cash flows take into account the Group's established history of earnings, cash flow generation and the nature of the markets in which we operate, where product obsolescence is low. The key assumptions employed in modelling estimates of future cash flows are subjective and include projected Adjusted EBITDA, discount rates and growth rates, replacement capital expenditure requirements, rates of customer retention and the ability to maintain margin through the pass through of input cost inflation.

Ardagh Group S.A.

F-34

The terminal value assumed long-term growth based on a combination of factors including long-term inflation in addition to industry and market specific factors. The range of growth rates applied by management in respect of the terminal values applicable to all groups of CGU's were 1.0% - 1.5% (2018: 1.5%).

A sensitivity analysis was performed reflecting potential variations in terminal growth rate and discount rate assumptions. In all cases the recoverable values calculated were in excess of the carrying values of the CGUs. The variation applied to terminal value growth rates and discount rates was a 50 basis points decrease and increase respectively and represents a reasonably possible change to the key assumptions of the VIU model. Further, a reasonably possible change to the operating cash flows would not reduce the recoverable amounts below the carrying value of the CGUs.

The FVLCTS calculation in the prior year for the Glass Packaging North America CGU resulted in a higher recoverable amount than the VIU model. The FVLCTS calculation used the 2019 projected Adjusted EBITDA multiplied by an earnings multiple of 6.7x, based on comparable market transactions, and adjusted for selling costs.

The additional disclosures required under IAS 36 in relation to significant goodwill amounts arising in the groups of CGUs are as follows:

Metal

Metal

Glass

Beverage

Beverage

Glass

Packaging

Packaging

Packaging

Packaging

North

Europe

Americas

Europe

America

$'m/%

$'m/%

$'m/%

$'m/%

2019

Carrying amount of goodwill

566

437

61

560

Excess of recoverable amount

2,109

1,581

3,842

158

Pre-tax discount rate applied

5.1

8.5

6.5

7.2

2018

Carrying amount of goodwill

577

437

62

560

Excess of recoverable amount

1,673

1,085

2,222

N/A

Pre-tax discount rate applied

6.7

9.6

8.5

N/A

2017

Carrying amount of goodwill

604

437

65

746

Excess of recoverable amount

1,650

786

2,907

859

Pre-tax discount rate applied

7.4

9.6

8.2

9.1

Ardagh Group S.A.

F-35

10. Property, plant and equipment

Office

equipment,

Land and

Plant and

vehicles

buildings

machinery

and other

Total

$'m

$'m

$'m

$'m

Cost

At January 1, 2018

1,094

4,142

71

5,307

Additions

15

539

37

591

Disposals

(16)

(190)

(11)

(217)

Impairment (Note 4)

-

(11)

-

(11)

Transfers

-

-

5

5

Exchange

(49)

(182)

(8)

(239)

At December 31, 2018

1,044

4,298

94

5,436

Depreciation

At January 1, 2018

(258)

(1,656)

(25)

(1,939)

Charge for the year

(37)

(388)

(24)

(449)

Disposals

10

187

9

206

Exchange

21

107

6

134

At December 31, 2018

(264)

(1,750)

(34)

(2,048)

Net book value

At December 31, 2018

780

2,548

60

3,388

Cost

At January 1, 2019, as reported

1,044

4,298

94

5,436

Impact of adoption of IFRS 16 on January 1, 2019 (Note 2)

193

78

19

290

At January 1, 2019

1,237

4,376

113

5,726

Additions

148

528

60

736

Disposals

(21)

(194)

(8)

(223)

Disposal of Food & Specialty

(337)

(1,443)

(39)

(1,819)

Impairment (Note 4)

-

(5)

-

(5)

Exchange

(9)

(26)

-

(35)

At December 31, 2019

1,018

3,236

126

4,380

Depreciation

At January 1, 2019

(264)

(1,750)

(34)

(2,048)

Charge for the year

(75)

(363)

(36)

(474)

Disposals

6

190

8

204

Disposal of Food & Specialty

55

530

21

606

Exchange

2

7

-

9

At December 31, 2019

(276)

(1,386)

(41)

(1,703)

Net book value

At December 31, 2019

742

1,850

85

2,677

Depreciation expense of $408 million (2018: $354 million; 2017: $340 million) has been charged in cost of sales and $11 million (2018: $8 million; 2017: $6 million) in sales, general and administration expenses in respect of the continuing operations of the Group. Depreciation expense of $53 million (2018: $86 million, 2017: $76 million) has been charged in cost of sales and $2 million (2018: $1 million. 2017: $1 million) in sales, general and administration expenses in respect of the discontinued operation of the Group.

Construction in progress at December 31, 2019 was $173 million (2018: $254 million).

Included in property, plant and equipment is an amount for land of $185 million (2018: $213 million).

Ardagh Group S.A.

F-36

Substantially all of the Group's property, plant and equipment is pledged as security under the terms and conditions of the Group's financing arrangements. No interest was capitalized in the year (2018: $nil).

Impairment

The Board has considered the carrying value of the Group's property, plant and equipment and assessed the indicators of impairment as at December 31, 2019 in accordance with IAS 36. In the year ended December 31, 2019 an impairment charge of $5 million (2018: $11 million) has been recognized, which relates to the impairment of plant and machinery in Glass Packaging North America. In 2018, the Group recognized an impairment charge of $11 million, of which $4 million related to the impairment of plant and machinery in Glass Packaging North America, $1 million related to the impairment of plant and machinery in Metal Beverage Packaging Europe and $6 million related to the impairment of plant and machinery in the discontinued operation.

Right of Use assets - Net Book Value and depreciation

At December 31, 2019 the following right-of-use assets were included in property, plant and equipment:

Office

equipment,

Land and

Plant and

vehicles

buildings

machinery

and other

Total

Net book value

$'m

$'m

$'m

$'m

At December 31, 2019

178

71

66

315

The net carrying amount of the right-of use assets at December 31, 2019 is primarily the result of existing finance leases as at December 31, 2018 of $29 million, the impact of adoption of IFRS 16 on January 1, 2019 of $290 million, total additions to the right-of-use assets during the year ended December 31, 2019 of $169 million, offset by an amount of $74 million de-recognized on the disposal of Food & Specialty and a depreciation charge of $76 million (Land and buildings: $41 million, Plant and machinery: $21 million, Office equipment, vehicles and other: $14 million).

Operating lease commitments

The Group adopted IFRS 16 effective January 1, 2019, resulting in the majority of the Group's operating leases being recognized on the consolidated statement of financial position. Please refer to Note 2 for more details.

During 2018 and 2017, the expense in respect of operating lease commitments was as follows:

Year ended December 31,

2018

2017

$'m

$'m

Plant and machinery

22

21

Land and buildings

51

38

Office equipment and vehicles

17

9

90

68

Ardagh Group S.A.

F-37

At December 31, 2018 and 2017, the Group had total commitments under non-cancellable operating leases which

expire:

At December 31,

2018

2017

$'m

$'m

Not later than one year

67

64

Later than one year and not later than five years

150

132

Later than five years

147

106

364

302

Capital commitments

The following capital commitments in relation to property, plant and equipment were authorized by management, but have not been provided for in the consolidated financial statements:

At December 31,

2019

2018

2017

$'m

$'m

$'m

Contracted for

77

118

101

Not contracted for

82

76

14

159

194

115

11. Other non-current assets

At December 31, 2019, other non-current assets of $68 million includes the receivable for the tax adjusted indemnity as set out in Note 28.

Other non-current assets also includes $6 million relating to certain of the Group's investment in its joint ventures, excluding the investment in Trivium Packaging B.V., which is further discussed in Note 12.

Ardagh Group S.A.

F-38

12. Investment in material joint venture

Investment in material joint venture is comprised of the Group's approximate 42% investment in Trivium which is a global leader in metal packaging in the form of cans and aerosol containers, serving a broad range of end-use categories, including food, seafood, pet food and nutrition, as well as beauty and personal care. The Group investment in Trivium arose from the combination of its Food & Specialty Metal Packaging business with that of Exal, a leading producer of aluminum containers. The remaining approximate 58% is held by Ontario Teachers. As the Group jointly controls both the financial and operating policy decisions of Trivium, the investment is accounted for under the equity method. The shareholders of Trivium have entered into a Shareholders Agreement, dated October 31, 2019, which governs their relationship as owners of Trivium, including in respect of the governance of Trivium and its subsidiaries, their ability to transfer their shares in Trivium and other customary matters. Trivium Packaging B.V. is incorporated in the Netherlands, with corporate offices in Amsterdam.

The following table provides aggregated financial information for Trivium as it relates to the amounts recognized in the income statement, statement of comprehensive income and statement of financial position.

Year ended

December 31,

2019

$'m

Investment in joint venture

375

Loss for the period

(49)

Other comprehensive income

7

Total comprehensive loss

(42)

Summarized financial information for Trivium for the two months ended and as at December 31, 2019 is set out

below.

Revenue

Expenses

Operating loss Net finance expense

Loss before tax Income tax

Loss after tax1

Period ended December 31,

2019

$'m

351

(408)

(57)

(56)

(113)

(1)

(114)

1. The income statement for the two month period ended December 31, 2019 includes $92 million in relation to exceptional items of which $31 million is in respect of exceptional interest expense. Also included is $25 million of non-exceptional interest expense.

Ardagh Group S.A.

F-39

At December 31,

2019

$'m

Non-current assets

4,109

Current assets

924

Total assets

5,033

Total equity

875

Non-current liabilities

3,444

Current liabilities

714

Total liabilities

4,158

Total equity and liabilities

5,033

As at December 31, 2019, Trivium had net debt of $2.8 billion.

Trivium management have included a provisional estimate of the fair values at the acquisition date in the above information.

The reconciliation of summarized financial information presented to the carrying amount of the Group's interest in Trivium is set out below.

2019

$'m

Group's interest in net assets of joint venture - November 12

412

Share of total comprehensive loss

(42)

Exchange

5

Carrying amount of interest in joint venture - December 31

375

  • The Group used a comparable market multiples approach including Adjusted EBITDA multiplied by an earnings multiple (based on comparable market transactions) as adjusted for debt in order to assess the fair value of its 42% initial equity investment in Trivium of $412 million.

Mutual Services Agreement ("MSA")

The Group has entered into an MSA, with Trivium pursuant to which the Group and Trivium provide services to each other. The Services generally relate to administrative support in respect of treasury activities, tax reporting, procurement and logistics, R&D, product development and certain IT services. The MSA provides for the sharing of certain facilities leased by the Group in connection with the provision of Services, with appropriate segregations in place between the Group's entities, on the one hand, and Trivium, on the other hand.

Ardagh Group S.A.

F-40

13. Deferred income tax

The movement in deferred tax assets and liabilities during the year was as follows:

Assets

Liabilities

Total

$'m

$'m

$'m

At January 1, 2018

428

(790)

(362)

Credited to the income statement (Note 6)

49

17

66

(Charged)/credited to the income statement (Discontinued operation)

(13)

12

(1)

Credited/(charged) to other comprehensive income

7

(3)

4

Reclassification

(36)

36

-

Exchange

(3)

7

4

At December 31, 2018

432

(721)

(289)

IFRS 16

14

(1)

13

Credited to the income statement (Note 6)

17

16

33

Charged to the income statement (Discontinued operation)

(12)

(1)

(13)

Credited to other comprehensive income

30

3

33

Exchange

1

3

4

Disposal of Food & Specialty

(76)

155

79

At December 31, 2019

406

(546)

(140)

The components of deferred income tax assets and liabilities are as follows:

At December 31,

2019

2018

$'m

$'m

Tax losses

40

49

Employee benefit obligations

142

179

Depreciation timing differences

84

83

Provisions

74

69

Other

66

52

406

432

Available for offset

(202)

(178)

Deferred tax assets

204

254

Intangible assets

(295)

(344)

Accelerated depreciation and other fair value adjustments

(206)

(343)

Other

(45)

(34)

(546)

(721)

Available for offset

202

178

Deferred tax liabilities

(344)

(543)

Ardagh Group S.A.

F-41

The tax credit recognized in the consolidated income statement is analyzed as follows:

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

Tax losses

(4)

18

(2)

Employee benefit obligations

(11)

3

(21)

Depreciation timing differences

21

4

(6)

Provisions

(2)

(1)

(26)

Other deferred tax assets

1

12

(12)

Intangible assets

19

52

155

Accelerated depreciation and other fair value adjustments

(12)

(20)

29

Other deferred tax liabilities

8

(3)

23

20

65

140

Deferred tax assets are only recognized on tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable based on management's forecasts. The Group did not recognize deferred tax assets of $37 million (2018: $32 million) in respect of tax losses amounting to $146 million (2018: $145 million) that can be carried forward against future taxable income due to uncertainty regarding their utilization.

No provision has been made for temporary differences applicable to investments in subsidiaries as the Group is in a position to control the timing of reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Given that exemptions and tax credits would be available in the context of the Group's investments in subsidiaries in the majority of jurisdictions in which it operates, the aggregate amount of temporary differences in respect of which deferred tax liabilities have not been recognized would not be material.

14. Inventories

At December 31,

2019

2018

$'m

$'m

Raw materials and consumables

299

389

Mold parts

50

51

Work-in-progress

19

114

Finished goods

596

730

964

1,284

Certain inventories held by the Group have been pledged as security under the Group's Global Asset Based Loan Facility (Note 20). The amount recognized as a write down in inventories or as a reversal of a write down in the year ended December 31, 2019 was not material.

At December 31, 2019, the hedging loss included in the carrying value of inventories, which will be recognized in the income statement when the related finished goods have been sold, is not material.

Ardagh Group S.A.

F-42

15. Trade and other receivables

At December 31,

2019

2018

$'m

$'m

Trade receivables

516

823

Other receivables and prepayments

178

230

Related party receivables

40

-

734

1,053

The fair values of trade and other receivables approximate the amounts shown above.

Movements on the provision for impairment of trade receivables are as follows:

2019

2018

2017

$'m

$'m

$'m

At January 1, as reported

17

23

15

Impact of adoption of IFRS 9 on January 1, 2018

-

(4)

-

At January 1,

17

19

15

Provision for receivables impairment

7

2

6

Receivables written off during the year as uncollectible

-

(3)

-

Disposal of Food & Specialty

(18)

-

-

Exchange

-

(1)

2

At December 31,

6

17

23

The majority of the provision above relates to balances which are more than six months past due. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable set out above.

Provisions against specific balances

Significant balances are assessed for evidence of increased credit risk. Examples of factors considered are high probability of bankruptcy, breaches of contract or major concession being sought by the customer. Instances of significant single customer related bad debts are rare and there is no significant concentration of risk associated with particular customers.

Providing against the remaining population of customers

The Group monitors actual historical credit losses and adjusts for forward-looking information to measure the level of expected losses. Adverse changes in the payment status of customers of the Group, or national or local economic conditions that correlate with defaults on receivables owing to the Group, may also provide a basis for an increase in the level of provision above historic loss experience.

As of December 31, 2019, trade receivables of $34 million (2018: $68 million) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:

At December 31,

2019

2018

$'m

$'m

Up to three months past due

28

56

Three to six months past due

1

5

Over six months past due

5

7

34

68

Ardagh Group S.A.

F-43

16. Contract assets

The following table provides information about significant changes in contract assets:

2019

2018

$'m

$'m

At January 1,

160

168

Transfers from contract assets recognized at beginning of year to receivables

(155)

(168)

Increases as a result of new contract assets recognized during the year

175

157

Decrease due to disposal of Food & Specialty

(32)

-

Other

3

3

At December 31,

151

160

17. Cash and cash equivalents

At December 31,

2019

2018

$'m

$'m

Cash at bank and in hand

598

494

Short term bank deposits

11

26

Restricted cash

5

10

614

530

Within cash and cash equivalents, the Group had $5 million of restricted cash at December 31, 2019 (2018: $10

million).

18. Issued capital and reserves Share capital

Issued and fully paid shares:

Class A

Class B

common shares

common shares

(par value €0.01)

(par value €0.10)

Total shares

Total

(million)

(million)

(million)

$'m

At December 31, 2018

18.65

217.70

236.35

23

Share issuance

0.01

-

0.01

-

At December 31, 2019

18.66

217.70

236.36

23

2019

There were no material share transactions in the year ended December 31, 2019 or the year ended December 31,

2018.

Ardagh Group S.A.

F-44

19. Financial risk factors

The Group's activities expose it to a variety of financial risks: capital risk, interest rate risk, currency exchange risk, commodity price risk, credit risk, and liquidity risk.

Capital structure and risk

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and provide returns to its shareholders. The Group funds its operations primarily from the following sources of capital: borrowings, cash flow and shareholders' capital. The Group aims to achieve a capital structure that results in an appropriate cost of capital to accommodate material investments or acquisitions, while providing flexibility in short and medium term funding. The Group also aims to maintain a strong balance sheet and to provide continuity of financing by having a range of maturities and borrowing from a variety of sources.

The Group's overall treasury objectives are to ensure sufficient funds are available for the Group to carry out its strategy and to manage certain financial risks to which the Group is exposed, details of which are provided below.

Financial risks are managed on the advice of Group Treasury and senior management. The Group does not permit the use of treasury instruments for speculative purposes, under any circumstances. Group Treasury regularly reviews the level of cash and debt facilities required to fund the Group's activities, plans for repayment and refinancing of debt, and identifies an appropriate amount of headroom to provide a reserve against unexpected funding requirements.

Additionally, financial instruments, including derivative financial instruments, are used to hedge exposure to interest rate, currency exchange risk and commodity price risk.

One of the Group's key metrics has been the ratio of consolidated external net debt as a multiple of Adjusted EBITDA. Adjusted EBITDA is the profit or loss for the period before income tax charge or credit, net finance expense, depreciation and amortization, exceptional operating items and share of profit or loss in equity accounted joint venture. As at December 31, 2019 the ratio was 4.5x (2018: 5.0x; 2017: 5.2x).

Interest rate risk

The Board's policy, in the management of interest rate risk, is to strike the right balance between the Group's fixed and floating rate financial instruments, which occasionally includes the use of CCIRS. The balance struck by the Board is dependent on prevailing interest rate markets at any point in time.

At December 31, 2019, the Group's external borrowings were 88.1% (2018: 90.1%) fixed, with a weighted average interest rate of 4.6% (2018: 5.4%; 2017: 5.5%). The weighted average interest rate for the Group for the year ended December 31, 2019 was 4.0% (2018: 5.0%; 2017: 4.9%).

Holding all other variables constant, including levels of the Group's external indebtedness, at December 31, 2019 a one percentage point increase in variable interest rates would increase interest payable by approximately $11 million (2018: $9 million).

Currency exchange risk

The Group presents its consolidated financial information in U.S. dollar. The functional currency of the Company will continue to be the euro.

The Group operates in 12 countries, across three continents and its main currency exposure in the year to December 31, 2019, from the euro functional currency, was in relation to the U.S. dollar, British pound, Swedish krona,

Ardagh Group S.A.

F-45

Polish zloty, Danish krone and Brazilian real. Currency exchange risk arises from future commercial transactions, recognized assets and liabilities, and net investments in foreign operations.

As a result of the consolidated financial statements being presented in U.S dollar, the Group's results are also impacted by fluctuations in the U.S. dollar exchange rate versus the euro.

The Group has a limited level of transactional currency exposure arising from sales or purchases by operating units in currencies other than their functional currencies.

The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Group's foreign operations is managed primarily through borrowings and swaps denominated in the Group's principal foreign currencies.

Fluctuations in the value of these currencies with respect to the euro functional currency may have a significant impact on the Group's financial condition and results of operations. The Group believes that a strengthening of the euro exchange rate (the functional currency) by 1% against all other foreign currencies from the December 31, 2019 rate would decrease shareholders' equity by approximately $4 million (2018: $2 million decrease).

Commodity price risk

The Group is exposed to changes in prices of our main raw materials, primarily energy, aluminum and steel. Production costs in our Metal Beverage Packaging division are exposed to changes in prices of our main raw materials, primarily aluminum and steel. Aluminum ingot is traded daily as a commodity on the London Metal Exchange, which has historically been subject to significant price volatility. Because aluminum is priced in U.S. dollars, fluctuations in the U.S. dollar/ euro rate also affect the euro cost of aluminum ingot. The price and foreign currency risk on the aluminum purchases in Metal Beverage Packaging Europe and Metal Beverage Packaging Americas are hedged by entering into swaps under which we pay fixed euro and U.S. dollar prices, respectively. Steel price has a variable cost associated with its raw material components, coking coal and iron ore. Similarly to aluminum ingots, coking coal and iron ore are priced in U.S. dollars. The price and foreign currency risk on the steel purchases in Metal Beverage Packaging Europe are hedged by entering into swaps under which we pay fixed euro. The hedging market for coking coal is a relatively new market which does not have the depth of the aluminum market and as a consequence, there might be limitations to placing hedges in the market. Furthermore, the relative price of oil and its by products may materially impact our business, affecting our transport, lacquer and ink costs.

Where we do not have pass through contracts in relation to the underlying metal raw material cost the Group uses derivative agreements to manage this risk. The Group depends on an active liquid market and available credit lines with counterparty banks to cover this risk. The use of derivative contracts to manage our risk is dependent on robust hedging procedures. Increasing raw material costs over time has the potential, if we are unable to pass on price increases, to reduce sales volume and could therefore have a significant impact on our financial condition. The Group is also exposed to possible interruptions of supply of aluminum and steel or other raw materials and any inability to purchase raw materials could negatively impact our operations.

Production costs in our Glass Packaging division are sensitive to the price of energy. Our main energy exposure is to the cost of gas and electricity. These energy costs have experienced significant volatility in recent years with a corresponding effect on our production costs. In terms of gas, which represents 50% of our energy costs, there is a continuous de-coupling between the cost of gas and oil, whereby now only significant changes in the price of oil have an impact on the price of gas. The volatility in gas pricing is driven by shale gas development (United States only), the availability of liquefied natural gas in Europe, as both Europe and Asia compete for shipments, and storage levels. Volatility in the price of electricity is caused by the German Renewable Energy policy, the phasing out of nuclear generating capacity, fluctuations in the price of gas and coal and the influence of carbon dioxide costs on electricity prices.

Ardagh Group S.A.

F-46

As a result of the volatility of gas and electricity prices, the Group has either included energy pass-through clauses in our sales contracts or developed an active hedging strategy to fix a significant proportion of our energy costs through contractual arrangements directly with our suppliers, where there is no energy clause in the sales contract.

Where pass through contracts do not exist, the Group policy is to purchase gas and electricity by entering into forward price fixing arrangements with suppliers for the bulk of our anticipated requirements for the year ahead. Such contracts are used exclusively to obtain delivery of our anticipated energy supplies. The Group does not net settle, nor do we sell within a short period of time after taking delivery. The Group avails of the own use exemption and, therefore, these contracts are treated as executory contracts.

The Group typically builds up these contractual positions in tranches of approximately 10% of the anticipated volumes. Any gas and electricity which is not purchased under forward price-fixing arrangements is purchased under index tracking contracts or at spot prices. As at December 31, 2019, we have 92% and 59% of our energy risk covered for 2020 and 2021, respectively.

Credit risk

Credit risk arises from derivative contracts, cash and deposits held with banks and financial institutions, as well as credit exposures to the Group's customers, including outstanding receivables. Group policy is to place excess liquidity on deposit, only with recognized and reputable financial institutions. For banks and financial institutions, only independently rated parties with a minimum rating of "BBB+" from at least two credit rating agencies are accepted, where possible. The credit ratings of banks and financial institutions are monitored to ensure compliance with Group policy. Risk of default is controlled within a policy framework of dealing with high quality institutions and by limiting the amount of credit exposure to any one bank or institution.

Group policy is to extend credit to customers of good credit standing. Credit risk is managed on an on-going basis, by experienced people within the Group. The Group's policy for the management of credit risk in relation to trade receivables involves periodically assessing the financial reliability of customers, taking into account their financial position, past experience and other factors. Provisions are made, where deemed necessary, and the utilization of credit limits is regularly monitored. Management does not expect any significant counterparty to fail to meet its obligations. The maximum exposure to credit risk is represented by the carrying amount of each asset. For the year ended December 31, 2019, the Group's ten largest customers accounted for approximately 47% of total revenues from continuing operations (2018: 48%; 2017: 42%). There is no recent history of default with these customers.

Surplus cash held by the operating entities over and above the balance required for working capital management is transferred to Group Treasury. Group Treasury invests surplus cash in interest-bearing current accounts and time deposits with appropriate maturities to provide sufficient headroom as determined by the below-mentioned forecasts.

Liquidity risk

The Group is exposed to liquidity risk which arises primarily from the maturing of short term and long term debt obligations and from the normal liquidity cycle of the business throughout the course of a year. The Group's policy is to ensure that sufficient resources are available either from cash balances, cash flows or undrawn committed bank facilities, to ensure all obligations can be met as they fall due.

To effectively manage liquidity risk, the Group:

  • has committed borrowing facilities that it can access to meet liquidity needs;
  • maintains cash balances and liquid investments with highly-rated counterparties;

Ardagh Group S.A.

F-47

  • limits the maturity of cash balances;
  • borrows the bulk of its debt needs under long term fixed rate debt securities; and
  • has internal control processes to manage liquidity risk.

Cash flow forecasting is performed in the operating entities of the Group and is aggregated by Group Treasury. Group Treasury monitors rolling forecasts of the Group's liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Group's debt financing plans.

Ardagh Group S.A.

F-48

20. Financial assets and liabilities

The Group's net external debt was as follows:

At December 31,

2019

2018

$'m

$'m

Loan notes

5,529

7,737

Other borrowings

381

142

Total borrowings

5,910

7,879

Cash and cash equivalents

(614)

(530)

Derivative financial instruments used to hedge foreign currency and interest rate risk

32

113

Net debt

5,328

7,462

The Group's net borrowings of $5,910 million (2018: $7,879 million) are classified as non-current liabilities of $5,815 million (2018: $7,761 million) and current liabilities of $95 million (2018: $118 million) in the consolidated statement of financial position at December 31, 2019.

At December 31, 2019, the Group's net debt and available liquidity was as follows:

Maximum

Final

amount

maturity

Facility

Undrawn

Facility

Currency

drawable

date

type

Amount drawn

amount

Local

Local

currency

currency

$'m

$'m

m

m

2.750%

Senior Secured Notes

EUR

741

15-Mar-24

Bullet

741

832

-

4.250%

Senior Secured Notes

USD

695

15-Sep-22

Bullet

695

695

-

2.125%

Senior Secured Notes

EUR

439

15-Aug-26

Bullet

439

493

-

4.125%

Senior Secured Notes

USD

500

15-Aug-26

Bullet

500

500

-

4.750%

Senior Notes

GBP

400

15-Jul-27

Bullet

400

528

-

6.000%

Senior Notes

USD

1,700

15-Feb-25

Bullet

1,700

1,708

-

5.250%

Senior Notes

USD

800

15-Aug-27

Bullet

800

800

-

Global Asset Based Loan Facility

USD

663

07-Dec-22 Revolving

-

-

663

Lease obligations

Various

-

Amortizing

-

364

-

Other borrowings/credit lines

EUR/USD

-

Rolling

Amortizing

-

22

1

Total borrowings / undrawn facilities

5,942

664

Deferred debt issue costs and bond premium

(32)

-

Net borrowings / undrawn facilities

5,910

664

Cash and cash equivalents

(614)

614

Derivative financial instruments used to hedge

foreign currency and interest rate risk

32

-

Net debt / available liquidity

5,328

1,278

Net debt includes the fair value of associated derivative financial instruments that are used to hedge foreign exchange and interest rate risks relating to finance debt.

Certain of the Group's borrowing agreements contain certain covenants that restrict the Group's flexibility in certain areas such as incurrence of additional indebtedness (primarily maximum borrowings to Adjusted EBITDA and a minimum Adjusted EBITDA to interest expense), payment of dividends and incurrence of liens. The Global Asset Based Loan Facility is subject to a number of financial covenants including a fixed charge coverage ratio. The facility also

Ardagh Group S.A.

F-49

includes cash dominion, representations, warranties, events of default and other covenants that are generally of a nature customary for such facilities.

At December 31, 2018, the Group's net debt and available liquidity was as follows:

Maximum

Final

amount

maturity

Facility

Undrawn

Facility

Currency

drawable

date

type

Amount drawn

amount

Local

Local

$'m

$'m

currency

currency

m

m

2.750%

Senior Secured Notes

EUR

750

15-Mar-24

Bullet

750

859

-

4.625%

Senior Secured Notes

USD

1,000

15-May-23

Bullet

1,000

1,000

-

4.125%

Senior Secured Notes

EUR

440

15-May-23

Bullet

440

504

-

4.250%

Senior Secured Notes

USD

715

15-Sep-22

Bullet

715

715

-

4.750%

Senior Notes

GBP

400

15-Jul-27

Bullet

400

512

-

6.000%

Senior Notes

USD

1,700

15-Feb-25

Bullet

1,700

1,685

-

7.250%

Senior Notes

USD

1,650

15-May-24

Bullet

1,650

1,650

-

6.750%

Senior Notes

EUR

750

15-May-24

Bullet

750

859

-

Global Asset Based Loan Facility

USD

739

07-Dec-22

Revolving

-

100

639

Finance lease obligations

Various

-

Amortizing

-

36

-

Other borrowings/credit lines

EUR/USD

-

Rolling

Amortizing

-

15

1

Total borrowings / undrawn facilities

7,935

640

Deferred debt issue costs and bond premium

(56)

-

Net borrowings / undrawn facilities

7,879

640

Cash and cash equivalents

(530)

530

Derivative financial instruments used to hedge

foreign currency and interest rate risk

113

-

Net debt / available liquidity

7,462

1,170

The following table summarizes movement in the Group's net debt:

Net (increase)/decrease in cash and cash equivalents per consolidated statement of cash flows Decrease in net borrowings and derivative financial instruments

Decrease in net debt

Net debt at January 1,

Net debt at December 31,

2019

2018

$'m

$'m

(84)

254

(2,050)

(617)

(2,134)

(363)

7,462

7,825

5,328

7,462

The decrease in net borrowings and derivative financial instruments primarily includes repayments of borrowings of $4.1 billion (2018: $0.4 billion), proceeds from borrowings of $1.8 billion (2018: $0.1 billion), an increase in lease obligations of $0.3 billion (2018: $nil), a fair value gain on derivative financial instruments used to hedge foreign currency and interest rate risk of $0.1 billion (2018: gain of $0.2 billion) which partially offsets a corresponding foreign exchange loss on borrowings of $0.1 billion (2018: loss of $0.2 billion), and an increase to cash and cash equivalents of $0.1 billion (2018: decrease of $0.3 billion).

Ardagh Group S.A.

F-50

The maturity profile of the Group's borrowings is as follows:

Within one year or on demand Between one and three years Between three and five years Greater than five years

At December 31,

2019

2018

$'m

$'m

95

118

796

4

897

2,213

4,122

5,544

5,910

7,879

The maturity profile of the contractual undiscounted cash flows related to the Group's lease liabilities as of December 31, 2019, is as follows:

$'m

Not later than one year

88

Later than one year and not later than five years

219

Later than five years

159

466

The table below analyzes the Group's financial liabilities (including interest payable) into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contracted undiscounted cash flows.

Derivative

Trade and

financial

other

Borrowings

instruments

payables

At December 31, 2019

$'m

$'m

$'m

Within one year or on demand

363

17

1,519

Between one and three years

1,328

9

-

Between three and five years

1,345

35

-

Greater than five years

4,426

-

-

Derivative

Trade and

financial

other

Borrowings

instruments

payables

$'m

$'m

$'m

At December 31, 2018

Re-presented

Within one year or on demand

541

38

1,872

Between one and three years

859

2

-

Between three and five years

3,000

105

-

Greater than five years

5,845

-

-

Ardagh Group S.A.

F-51

The carrying amount and fair value of the Group's borrowings excluding lease obligations are as follows:

At December 31, 2019

Loan notes

Global Asset Based Loan Facility and other borrowings

At December 31, 2018

Loan notes

Global Asset Based Loan Facility and other borrowings

Financing activity

2019

Carrying value

Deferred debt

Amount

issue costs and

drawn

premium

Total

Fair value

$'m

$'m

$'m

$'m

5,556

(27)

5,529

5,752

22

(5)

17

22

5,578

(32)

5,546

5,774

Carrying value

Deferred debt

Amount

issue costs and

drawn

premium

Total

Fair value

$'m

$'m

$'m

$'m

7,784

(46)

7,738

7,563

115

(10)

105

115

7,899

(56)

7,843

7,678

Lease obligations of $364 million primarily reflect increases related to $349 million lease liabilities due to initial adoption of IFRS 16 as of January 1, 2019, as well as $169 million of new lease liabilities, partly offset by $84 million of lease liabilities divested at October 31, 2019, $78 million of principal repayments in continuing operations and $14 million of principal repayments in discontinued operation in the year ended December 31, 2019.

On August 12, 2019, the Group issued €440 million 2.125% Senior Secured Notes due 2026, $500 million 4.125% Senior Secured Notes due 2026, and $800 million 5.250% Senior Notes due 2027. The net proceeds from the issuance of these notes were used to redeem on August 13, 2019 the $1,650 million 7.250% Senior Notes due 2024 and to pay applicable redemption premiums and accrued interest in accordance with their terms.

Following the completion of the combination of its Food & Specialty business with the business of Exal, on October 31, 2019, the Group issued tender offers, at par, in respect of its $715 million 4.250% Senior Secured Notes due 2022, €750 million 2.750% Senior Secured Notes due 2024, €440 million 2.125% Senior Secured Notes due 2026 and $500 million 4.125% Senior Secured Notes due 2026. Following the expiration of the offer on November 28, 2019 notice was given to repurchase the following amounts, $20 million of the $715 million 4.250% Senior Secured Notes due 2022, €9 million of the €750 million 2.750% Senior Secured Notes due 2024, and €1 million of the €440 million 2.125% Senior Secured Notes due 2026. On December 2, 2019, in accordance with the terms of the offer, the redemptions were completed.

On November 14, 2019, the Group redeemed $1,000 million 4.625% Senior Secured Notes due 2023 and €440 million 4.125% Senior Secured Notes due 2023, and paid the applicable redemption premiums and accrued interest in accordance with their terms.

On November 29, 2019, the Group redeemed €750 million 6.750% Senior Notes due 2024 and paid the applicable redemption premium and accrued interest in accordance with their terms.

As at December 31, 2019, the Group had $663 million available under the Global Asset Based Loan Facility. During 2019, the Group reduced the facility size from $850 million to $700 million as a result of the disposal of the Food & Specialty Metal Packaging business.

Ardagh Group S.A.

F-52

2018

On July 31, 2018, the Group redeemed in full its $440 million 6.000% Senior Notes due 2021 and paid applicable redemption premium and accrued interest in accordance with their terms. The redemption was funded by a combination of cash-on-hand and available liquidity, drawing from the Group's Global Asset Based Loan Facility.

As at December 31, 2018, the Group had $639 million available under the Global Asset Based Loan Facility.

Effective interest rates

The effective interest rates of borrowings at the reporting date are as follows:

2019

2018

USD

EUR

GBP

USD

EUR

GBP

2.750% Senior Secured Notes due 2024

-

2.92

%

-

-

2.92

%

-

4.250% Senior Secured Notes due 2022

4.52 %

-

-

4.51 %

-

-

2.125% Senior Secured Notes due 2026

-

2.33

%

-

-

-

-

4.125% Senior Secured Notes due 2026

4.37 %

-

-

-

-

-

4.750% Senior Notes due 2027

-

-

4.99

%

-

4.99

%

6.000% Senior Notes due 2025

6.14 %

-

-

6.14 %

-

-

5.250% Senior Notes due 2027

5.50

%

-

-

-

-

-

4.625% Senior Secured Notes due 2023

-

-

-

5.16 %

-

-

4.125% Senior Secured Notes due 2023

-

-

-

4.63

%

-

7.250% Senior Notes due 2024

-

-

-

7.72 %

-

-

6.750% Senior Notes due 2024

-

-

-

-

7.00

%

-

Various Currencies

Lease obligations

4.77

%

6.45

%

-

-

The carrying amounts of the Group's net borrowings are denominated in the following currencies:

At December 31,

2019

2018

$'m

$'m

Euro

1,411

2,221

U.S. dollar

3,909

5,149

British pound

559

509

Other

31

-

5,910

7,879

The Group has the following undrawn borrowing facilities:

At December 31,

2019

2018

$'m

$'m

Expiring within one year

1

1

Expiring beyond one year

663

639

664

640

Ardagh Group S.A.

F-53

Fair value methodology

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments:

Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

Fair values are calculated as follows:

  1. Senior secured and senior notes - The fair value of debt securities in issue is based on valuation techniques in which all significant inputs are based on observable market data. In the year ended December 31, 2019 the classification for all senior secured and senior notes was changed from Level 1 to Level 2 based on management's assessment that quoted prices in the market for such debt securities are not regularly available.
  2. Global Asset Based Loan facility and other borrowings - The estimated value of fixed interest bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debts with similar credit risk and remaining maturity and represents Level 2 inputs.
  3. Cross currency interest rate swaps ("CCIRS") - The fair values of the CCIRS are based on quoted market prices and represent Level 2 inputs.
  4. Commodity and foreign exchange derivatives - The fair value of these derivatives are based on quoted market prices and represent Level 2 inputs.

Derivative financial instruments

Assets

Liabilities

Contractual

Contractual

or notional

or notional

Fair values

amounts

Fair values

amounts

$'m

$'m

$'m

$'m

Fair value derivatives

Metal forward contracts

4

100

10

252

Cross currency interest rate swaps

3

600

35

913

Forward foreign exchange contracts

-

31

13

351

NYMEX gas swaps

-

3

3

24

At December 31, 2019

7

734

61

1,540

Assets

Liabilities

Contractual

Contractual

or notional

or notional

Fair values

amounts

Fair values

amounts

$'m

$'m

$'m

$'m

Fair value derivatives

Metal forward contracts

9

79

22

262

Cross currency interest rate swap

9

282

122

2,219

Forward foreign exchange contracts

2

354

1

98

NYMEX gas swaps

-

7

-

8

At December 31, 2018

20

722

145

2,587

For metal forward contracts with a notional amount of $22 million and a fair value of $1 million, offsetting derivatives with identical terms are in place with Trivium.

Derivative instruments with a fair value of $4 million (2018: $11 million) are classified as non-current assets and $3 million (2018: $9 million) as current assets in the consolidated statement of financial position at December 31, 2019. Derivative instruments with a fair value of $44 million (2018: $107 million) are classified as non-current liabilities and

Ardagh Group S.A.

F-54

$17 million (2018: $38 million) as current liabilities in the consolidated statement of financial position at December 31, 2019.

The majority of derivative assets and liabilities are non-current, including certain of the Group's CCIRS which mature at dates between August 2021 and November 2025 and certain metal forward contracts which mature at dates between January 2021 and December 2022.

With the exception of interest on the CCIRS, all cash payments in relation to derivative instruments are paid or received when they mature. Bi-annual and quarterly interest cash payments and receipts are made and received in relation to the CCIRS.

The Group mitigates the counterparty risk for derivatives by contracting with major financial institutions which have high credit ratings.

Cross currency interest rate swaps

2019

The Group hedges certain of its external borrowings and interest payable thereon using cross-currency interest rate swaps ("CCIRS"), with a net asset at December 31, 2019 of $32 million (December 31, 2018: $113 million net liability).

On February 15, 2019 the Group's $200 million U.S dollar to euro CCIRS matured. The fair value of these swaps at maturity was $14 million and the cash settlement of these swaps was $14 million. The Group entered into new $200 million U.S dollar to euro CCIRS on March 1, 2019.

On August 12, 2019, the Group terminated a number of CCIRS. The total fair value of these swaps at termination was $17 million and the cash receipt on these swaps was $23 million. The Group entered into a new $500 million U.S dollar to euro CCIRS on August 12, 2019.

2018

The Group hedges certain portions of its external borrowings and interest payable thereon using CCIRS, with a net liability at December 31, 2018 of $113 million (December 31, 2017: $301 million).

On July 11, 2018, the Group terminated its $440 million U.S. dollar to euro CCIRS, due for maturity in 2019. The Group paid net consideration of $44 million on termination and recognized a related exceptional loss of $6 million (Note 4).

Net investment hedge in foreign operations

The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Group's foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies.

Hedges of net investments in foreign operations are accounted for whereby any gain or loss on the hedging instruments relating to the effective portion of the hedge is recognized in other comprehensive income. The gain or loss relating to an ineffective portion is recognized immediately in the consolidated income statement within finance income or expense respectively. Gains and losses accumulated in other comprehensive income are recycled to the consolidated income statement when the foreign operation is disposed of. The amount that has been recognized in the consolidated income statement due to ineffectiveness is $1 million (2018: $nil; 2017: $nil).

Ardagh Group S.A.

F-55

Metal forward contracts

The Group hedges a substantial portion of its anticipated metal purchases. Excluding conversion and freight costs, the physical metal deliveries are priced based on the applicable indices agreed with the suppliers for the relevant month.

Fair values have been based on quoted market prices and are valued using Level 2 valuation inputs. The fair value of these contracts when initiated is $nil; no premium is paid or received.

Forward foreign exchange contracts

The Group operates in a number of currencies and, accordingly, hedges a portion of its currency transaction risk. The fair values are based on Level 2 valuation techniques and observable inputs including the contract prices. The fair value of these contracts when initiated is $nil; no premium is paid or received.

NYMEX gas swaps

The Group hedges a portion of its Glass Packaging North America anticipated energy purchases on the New York Mercantile Exchange ("NYMEX").

Fair values have been based on NYMEX-quoted market prices and Level 2 valuation inputs have been applied. The fair value of these contracts when initiated is $nil; no premium is paid or received.

21. Employee benefit obligations

The Group operates defined benefit or defined contribution pension schemes in most of its countries of operation and the assets are held in separately administered funds. The principal funded defined benefit schemes, which are funded by contributions to separately administered funds, are in the United States and the United Kingdom.

Other defined benefit schemes are unfunded and the provision is recognized in the consolidated statement of financial position. The principal unfunded schemes are in Germany.

The contribution rates to the funded plans are agreed with the Trustee boards, plan actuaries and the local pension regulators periodically. The contributions paid in 2019 were those recommended by the actuaries.

In addition, the Group has other employee benefit obligations in certain territories.

Total employee obligations recognized in the consolidated statement of financial position of $716 million (2018: $957 million) includes other employee benefit obligations of $101 million (2018: $127 million).

The employee obligations and assets of the defined benefit schemes included in the consolidated statement of financial position are analyzed below:

U.S.

Germany

UK

Other

Total

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

$'m

$'m

$'m

$'m

$'m

$'m

$'m

$'m

$'m

$'m

Obligations

(1,318)

(1,217)

(176)

(386)

(830)

(862)

(25)

(38)

(2,349)

(2,503)

Assets

1,139

1,040

-

-

585

624

10

9

1,734

1,673

Net obligations

(179)

(177)

(176)

(386)

(245)

(238)

(15)

(29)

(615)

(830)

Ardagh Group S.A.

F-56

Defined benefit pension schemes

The amounts recognized in the consolidated income statement are:

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

Current service cost and administration costs:

Cost of sales - current service cost (Note 8)

(28)

(38)

(33)

Cost of sales - past service credit/(charge) (Note 8)

54

(6)

-

SGA - current service cost (Note 8)

(3)

(4)

(3)

23

(48)

(36)

Finance expense (Note 5)

(18)

(16)

(18)

5

(64)

(54)

Discontinued operation

1

-

(6)

6

(64)

(60)

The amounts recognized in the consolidated statement of comprehensive income are:

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

Re-measurement of defined benefit obligation:

Actuarial (loss)/gain arising from changes in demographic assumptions

(4)

18

(3)

Actuarial (loss)/gain arising from changes in financial assumptions

(272)

116

(85)

Actuarial (loss)/gain arising from changes in experience

(23)

19

(1)

(299)

153

(89)

Re-measurement of plan assets:

Actual return/(loss) less expected return on plan assets

203

(144)

129

Actuarial (loss)/gain for the year on defined benefit pension schemes

(96)

9

40

Actuarial (loss)/gain on other long term and end of service employee benefits

(6)

6

(2)

(102)

15

38

Discontinued operation

(38)

(4)

11

(140)

11

49

The actual return on plan assets was a gain of $271 million in 2019 (2018: $96 million loss; 2017: $228 million

gain).

Ardagh Group S.A.

F-57

Movement in the defined benefit obligations and assets:

At December 31,

Obligations

Assets

2019

2018

2019

2018

$'m

$'m

$'m

$'m

At January 1,

(2,503)

(2,762)

1,673

1,897

Interest income

-

-

54

55

Current service cost

(28)

(40)

-

-

Past service credit

62

3

-

-

Interest cost

(72)

(72)

-

-

Administration expenses paid from plan assets

-

-

(1)

(1)

Re-measurements

(351)

157

217

(151)

Employer contributions

-

-

47

52

Benefits paid

151

140

(151)

(140)

Disposal of Food & Specialty

408

-

(123)

-

Exchange

(16)

71

18

(39)

At December 31,

(2,349)

(2,503)

1,734

1,673

The defined benefit obligations above include $182 million (2018: $403 million) of unfunded obligations. Employer contributions above include no contributions under schemes extinguished during the year (2018: $nil). The defined benefit obligations above also include a movement of $17 million relating to the disposed Food & Specialty Metal Packaging business which had a defined obligation of $285 million at October 31, 2019. The above movements include $3 million current service costs (2018: $4 million), $8 million of a past service credit (2018: $9 million), $4 million net interest expense (2018: $5 million), $38 million of remeasurement losses (2018: $3 million of remeasurement gains) and $14 million of benefits paid (2018: $20 million) relating to the Food & Specialty Metal Packaging business.

Interest income and interest cost above does not include interest cost of $3 million (2018: $4 million; 2017: $3 million) relating to other employee benefit obligations. Current service costs above does not include current service costs of $7 million (2018: $6 million) relating to other employee benefit obligations.

During the year ended December 31, 2019, the Group elected to re-design the pension plans in Metal Beverage Packaging Germany, moving from a current defined benefit scheme into a contribution orientated scheme. This resulted in the recognition of a past service credit of $17 million in the year within the income statement. During the year ended December 31, 2019, as part of the 2019 Collective Bargaining Agreement, Glass Packaging North America successfully concluded a process involving the hourly defined benefit pension plan, moving to a future service only plan. This resulted in the recognition of an exceptional gain of $37 million within the income statement for the year ended December 31, 2019. There was also an $8 million past service credit recognized in October 2019 in respect of the second step in the redesign of the pension scheme in Germany which is noted below.

During the year ended December 31, 2018, the Group elected to re-design one of its pension schemes in Germany, moving from a defined benefit pension scheme to a contribution orientated system. This amendment resulted in the recognition of a past service credit of $12 million (2017: $nil) in the year within cost of sales. The past service credit was partly offset by a past service cost of $8 million (2017: $nil) following a high court judgment in the U.K. in October 2018 guaranteeing gender equality in U.K. pension schemes for accrued benefits ("GMP Equalization") and a further $1 million past service cost arising from amendments to the defined benefit pension scheme in Metal Beverage U.K. during the year. The GMP equalization past service cost has been recognized as exceptional within the income statement for the year ended December 31, 2018.

Ardagh Group S.A.

F-58

Plan assets comprise:

At December 31,

2019

2019

2018

2018

$'m

%

$'m

%

Equities / multi strategy

1,107

65

1,039

62

Target return funds

267

15

267

16

Bonds

178

10

184

11

Cash/other

182

10

183

11

1,734

100

1,673

100

The pension assets do not include any of the Company's ordinary shares, securities or other Group assets.

Investment strategy

The choice of investments takes account of the expected maturity of the future benefit payments. The plans invest in diversified portfolios consisting of an array of asset classes that attempt to maximize returns while minimizing volatility. The asset classes include national and international equities, fixed income government and non-government securities and real estate, as well as cash.

Characteristics and associated risks

Glass Packaging North America and Metal Beverage Packaging Americas each sponsor a defined benefit pension plan which is subject to Federal law ("ERISA"), reflecting regulations issued by the Internal Revenue Service ("IRS") and the U.S. Department of Labor.

The Glass Packaging North America plan covers both hourly and salaried employees. The plan benefits are determined using a formula which reflects an employee's years of service and either their final average salary or a dollar per month benefit level. The plan is governed by a Fiduciary Benefits Committee ("the Committee") which is appointed by the Company and contains only employees of Ardagh Group. The Committee is responsible for the investment of the plan's assets, which are held in a trust for the benefit of employees, retirees and their beneficiaries, and which can only be used to pay plan benefits and expenses.

The defined benefit pension plan is subject to IRS funding requirements with actuaries calculating the minimum and maximum allowable contributions each year. The defined benefit pension plan currently has no cash contribution requirement due to the existence of a credit balance following a contribution of approximately $200 million made in 2014 in connection with the acquisition of Verallia North America. The Pension Benefit Guaranty Corporation ("PBGC") protects the pension benefits of employees and retirees when a plan sponsor becomes insolvent and can no longer meet its obligation. All plan sponsors pay annual PBGC premiums that have two components: a fixed rate based on participant count and a variable rate which is determined based on the amount by which the plan is underfunded.

The Metal Beverage Packaging Americas plan covers hourly employees only. Plan benefits are determined using a formula which reflects the employees' years of service and is based on a final average pay formula.

The Group operates a number of defined benefit pension schemes in Germany. The pension plans in Germany operate under the framework of German Company Pension Law (BetrAVG) and general regulations based on German labor law. The entitlements of the plan members depend on years of service and final salary. Furthermore, the plans provide lifelong pensions. No separate assets are held in trust, i.e. the plans are unfunded defined benefit plans. During the years ended December 31, 2019 and 2018, the Group elected to re-design two of its pension schemes in Germany, moving to contribution orientated schemes.

Ardagh Group S.A.

F-59

The U.K. pension plans are trust-based U.K. funded final salary defined benefit schemes providing pensions and lump sum benefits to members and dependents. There is one pension plan in place relating to Metal Beverage Packaging Europe. It is closed to new entrants and was closed to future accrual effective December 31, 2018. For this plan, pensions are calculated based on service to retirement, with members' benefits based on final career earnings. The U.K. pension plans are each governed by a board of trustees, which includes members who are independent of the Company. The trustees are responsible for managing the operation, funding and investment strategy. The U.K. pension plans are subject to the U.K. regulatory framework, the requirements of the Pensions Regulator and are subject to a statutory funding objective.

There are two pension plans in place in Glass Packaging Europe. The pension plans relating to Glass Packaging Europe have been closed to future accrual from March 31, 2013 and September 30, 2015 respectively.

Assumptions and sensitivities

The principal pension assumptions used in the preparation of the financial statements take account of the different economic circumstances in the countries of operations and the different characteristics of the respective plans, including the duration of the obligations. The ranges of the principal assumptions applied in estimating defined benefit obligations were:

U.S.

Germany

UK

2019

2018

2019

2018

2019

2018

%

%

%

%

%

%

Rates of inflation

2.50

2.50

1.50

1.50

2.90

3.15

Rates of increase in salaries

3.00

1.50 - 3.00

2.50

2.50

2.00

2.15

Discount rates

3.40

4.50

1.20 - 1.48

1.88 - 2.25

2.10 - 2.15

2.90 - 2.95

Assumptions regarding future mortality experience are based on actuarial advice in accordance with published statistics and experience.

These assumptions translate into the following average life expectancy in years for a pensioner retiring at age 65. The mortality assumptions for the countries with the most significant defined benefit plans are set out below:

U.S.

Germany

UK

2019

2018

2019

2018

2019

2018

Years

Years

Years

Years

Years

Years

Life expectancy, current pensioners

21

22

22

22

21

20

Life expectancy, future pensioners

23

23

24

24

22

21

If the discount rate were to decrease by 50 basis points from management estimates, the carrying amount of the pension obligations would increase by an estimated $186 million (2018: $193 million). If the discount rate were to increase by 50 basis points, the carrying amount of the pension obligations would decrease by an estimated $166 million (2018: $173 million).

If the inflation rate were to decrease by 50 basis points from management estimates, the carrying amount of the pension obligations would decrease by an estimated $56 million (2018: $85 million). If the inflation rate were to increase by 50 basis points, the carrying amount of the pension obligations would increase by an estimated $63 million (2018: $94 million).

If the salary increase rate were to decrease by 50 basis points from management estimates, the carrying amount of the pension obligations would decrease by an estimated $61 million (2018: $90 million). If the salary increase rate were to increase by 50 basis points, the carrying amount of the pension obligations would increase by an estimated $69 million (2018: $99 million).

Ardagh Group S.A.

F-60

The impact of increasing the life expectancy by one year would result in an increase in the Group's liability of $68 million at December 31, 2019 (2018: $66 million), holding all other assumptions constant.

The Group's best estimate of contributions expected to be paid to defined benefit plans in 2020 is $30 million (2019: $21 million).

The principal defined benefit schemes are described briefly below:

Metal Beverage Packaging

Glass Packaging

Europe

Europe

North

Europe

Europe

North

UK

Germany

America

UK

Germany

America

Nature of the schemes

Funded

Unfunded

Funded

Funded

Unfunded

Funded

2019

Active members

-

893

822

-

977

3,827

Deferred members

808

198

44

1,240

689

2,638

Pensioners including dependents

475

117

41

815

783

6,571

Weighted average duration (years)

19

21

20

21

17

12

2018

Active members

467

939

825

-

1,027

4,193

Deferred members

478

161

23

1,240

747

2,589

Pensioners including dependents

385

70

19

815

775

6,455

Weighted average duration (years)

19

22

19

20

18

12

The expected total benefit payments over the next five years are:

Subsequent

2020

2021

2022

2023

2024

five years

$'m

$'m

$'m

$'m

$'m

$'m

Benefits

101

100

102

104

106

550

The Group also has defined contribution plans; the contribution expense associated with these plans for 2019 was $40 million (2018: $32 million; 2017: $30 million). The Group's best estimate of the contributions expected to be paid to these plans in 2020 is $44 million (2019: $31 million).

Other employee benefits

At December 31,

2019

2018

$'m

$'m

End of service employee benefits

2

25

Long term employee benefits

99

102

101

127

End of service employee benefits principally comprise amounts due to be paid to employees leaving the Group's service in Poland and Italy.

Long term employee benefit obligations comprise amounts due to be paid under post-retirement medical schemes in Glass Packaging North America and Metal Beverage Packaging Americas, partial retirement contracts in Germany and other obligations to pay benefits primarily related to long service awards.

Ardagh Group S.A.

F-61

22. Provisions

At December 31,

2019

2018

$'m

$'m

Current

48

83

Non-current

29

38

77

121

Other

Total

Restructuring

provisions

provisions

$'m

$'m

$'m

At January 1, 2018

25

89

114

Provided

39

103

142

Released

(17)

(24)

(41)

Paid

(26)

(67)

(93)

Exchange

(1)

-

(1)

At December 31, 2018

20

101

121

Provided

16

90

106

Released

(1)

(18)

(19)

Paid

(21)

(89)

(110)

Disposal of Food & Specialty

(9)

(11)

(20)

Exchange

-

(1)

(1)

At December 31, 2019

5

72

77

The restructuring provision relates to redundancy and other restructuring costs. Other provisions relate to probable environmental claims, customer quality claims, onerous leases and specifically in Glass Packaging North America, workers' compensation provisions.

The provisions classified as current are expected to be paid in the next twelve months. The majority of the restructuring provision is expected to be paid in 2020. The remaining balance represents longer term provisions for which the timing of the related payments is subject to uncertainty.

23. Trade and other payables

At December 31,

2019

2018

$'m

$'m

Trade payables

1,166

1,517

Other payables and accruals

279

339

Other tax and social security payable

109

111

Payables and accruals for exceptional items

65

16

Related party payables

9

-

1,628

1,983

The fair values of trade and other payables approximate the amounts shown above.

Other payables and accruals mainly comprise accruals for operating expenses, deferred income and value added tax payable.

Ardagh Group S.A.

F-62

24. Cash generated from operating activities

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

Loss from continuing operations

(284)

(292)

(126)

Income tax charge/(credit) (Note 6)

44

18

(77)

Net finance expense (Note 5)

659

479

638

Depreciation and amortization (Notes 9, 10)

652

599

583

Exceptional operating items (Note 4)

53

311

123

Share of post-tax loss in equity accounted joint venture (Note 12)

49

-

-

Movement in working capital

105

(9)

116

Transaction-related,start-up and other exceptional costs paid

(87)

(92)

(70)

Exceptional restructuring paid

(12)

(23)

(2)

Cash generated from continuing operations

1,179

991

1,185

25. Business combinations and disposals

On October 31, 2019, the Group completed the combination of Food & Specialty with the business of Exal to form Trivium. Consequently, Food & Specialty has been accounted for as a discontinued operation in the year ended December 31, 2019 and previous years have been represented accordingly below.

Results of discontinued operation

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

Revenue

2,003

2,421

2,206

Expenses

(1,769)

(2,197)

(1,980)

Profit before tax

234

224

226

Income tax charge

(19)

(26)

(37)

Profit from discontinued operation after tax

215

198

189

Gain on disposal of discontinued operation, net of costs of disposal and tax

1,527

-

-

Profit from discontinued operation

1,742

198

189

Total comprehensive income from discontinued operation

1,741

163

303

Basic and diluted earnings per share from discontinued operation

$

7.37

$

0.84

$

0.82

Ardagh Group S.A.

F-63

The Group has recognized a significant gain on the transaction on closing, which is detailed below.

The cash consideration, which is subject to customary completion adjustments, and the net assets disposed in the transaction were as follows:

Cash consideration

42% equity investment in Trivium

Non-current assets

Current assets

Total assets

Non-current liabilities

Current liabilities

Total liabilities

Net assets disposed

Cumulative foreign currency translation adjustments

Gain on disposal of discontinued operation

The net cash flow relating to the disposal is summarized below:

Year ended December 31,

2019 $'m

2,573

412

2,985

1,717

805

2,522

542

555

1,097

(1,425)

(27)

1,533

$'m

Cash consideration

2,573

Cash and cash equivalents disposed

(18)

Net proceeds from disposal *

2,555

  • Please refer to the proceeds from disposal of discontinued operation, net of cash disposed of, as presented on the consolidated statement of cashflows.

Ardagh Group S.A.

F-64

26. Dividends

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

Cash dividends on common shares declared and paid:

Interim dividend: $0.14 per share (Prior year: $0.14 per share)

(33)

(33)

(67)

Interim dividend: $0.14 per share (Prior year: $0.14 per share)

(33)

(33)

(33)

Interim dividend: $0.14 per share (Prior year: $0.14 per share)

(33)

(33)

(32)

Interim dividend: $0.14 per share (Prior year: $0.14 per share)

(33)

(33)

(33)

(132)

(132)

(165)

  • On February 8, 2019, the Company declared a cash dividend of $0.14 per common share. The dividend of $33 million was paid on March 13, 2019 to shareholders of record on February 27, 2019.
  • On April 25, 2019, the Company declared a cash dividend of $0.14 per common share. The dividend of $33 million was paid on May 31, 2019 to shareholders of record on May 17, 2019.
  • On July 24, 2019 the Company declared a cash dividend of $0.14 per common share. The dividend of $33 million was paid on August 30, 2019 to shareholders of record on August 16, 2019.
  • On October 31, 2019 the Company declared a cash dividend of $0.14 per common share. The dividend of $33 million was paid on November 29, 2019 to shareholders of record on November 15, 2019.

27. Related party information

(i) Interests of Paul Coulson

As of February 19, 2020, the approval date of these financial statements, a company owned by Paul Coulson owns approximately 25% of the issued share capital of ARD Holdings S.A., the ultimate parent company. Through its non-controlling interest in the Yeoman group of companies, this company has an interest in a further approximate 34% of the issued share capital of ARD Holdings S.A..

(ii) Yeoman Capital S.A.

At December 31, 2019, Yeoman Capital S.A. owned approximately 34% of the ordinary shares of ARD Holdings S.A..

(iii) Common directorships

Four of the ARD Holdings S.A. directors (Paul Coulson, Brendan Dowling, Gerald Moloney and Hermanus Troskie) also serve as directors in the Yeoman group of companies. With the exception of Philip Hammond, Damien O'Brien and Edward White, all of the directors of Ardagh Group S.A. are members of the board of directors of ARD Holdings S.A..

(iv) Joint ventures

The Group's interests held in joint ventures are related parties and these are set out in further detail in notes 11 and 12. Balances outstanding with Trivium are set out in notes 15 and 23. Transactions with joint ventures were not material for any of the years presented.

Ardagh Group S.A.

F-65

(v) Key management compensation

Key management are those persons who have the authority and responsibility for planning, directing and controlling the activities of the Group. Key management is comprised of the members who served on the Board and the Group's executive leadership team during the reporting period. The amount outstanding at year end was $5 million (2018: $1 million, 2017: $7 million).

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

Salaries and other short-term employee benefits

14

10

12

Post-employment benefits

-

1

1

14

11

13

Other compensation

6

-

7

20

11

20

(vi) Pension schemes

The Group's pension schemes are related parties. For details of all transactions during the year, please see

Note 21.

(vii) Related party balances

With the exception of the balances outlined in (i) to (vi) above, there are no material balances outstanding with related parties at December 31, 2019.

  1. Toggle / PIK Notes

In November 2019, ARD Finance S.A. issued the Toggle Notes to, among other things, refinance certain toggle notes issued by it in September 2016 (the "September 2016 Toggle Notes") and certain PIK notes issued by ARD Securities Finance SARL in January 2018 ("January 2018 PIK Notes"). Certain directors of the Company that held September 2016 Toggle Notes and January 2018 PIK Notes prior to the refinancing acquired and hold Toggle Notes issued in the refinancing.

Ardagh Group S.A.

F-66

(ix) Subsidiaries

The following table provides information relating to our principal operating subsidiaries, all of which are wholly owned, at December 31, 2019.

Country of

Company

incorporation

Activity

Ardagh Metal Beverage Manufacturing Austria GmbH

Austria

Metal Beverage Packaging

Ardagh Metal Beverage Trading Austria GmbH

Austria

Metal Beverage Packaging

Latas Indústria de Embalagens de Alumínio do Brasil Ltda

Brazil

Metal Beverage Packaging

Ardagh Indústria de Embalagens de Metálicas do Brasil Ltda

Brazil

Metal Beverage Packaging

Ardagh Glass Holmegaard A/S

Denmark

Glass Packaging

Ardagh Metal Beverage Trading France SAS

France

Metal Beverage Packaging

Ardagh Metal Beverage France SAS

France

Metal Beverage Packaging

Ardagh Glass GmbH

Germany

Glass Packaging

Heye International GmbH

Germany

Glass Engineering

Ardagh Metal Beverage Trading Germany GmbH

Germany

Metal Beverage Packaging

Ardagh Metal Beverage Germany GmbH

Germany

Metal Beverage Packaging

Ardagh Glass Sales Limited

Ireland

Glass Packaging

Ardagh Packaging Holdings Limited

Ireland

Glass and Metal Beverage Packaging

Ardagh Glass Italy S.r.l

Italy

Glass Packaging

Ardagh Glass Dongen B.V.

Netherlands

Glass Packaging

Ardagh Glass Moerdijk B.V.

Netherlands

Glass Packaging

Ardagh Metal Beverage Trading Netherlands B.V.

Netherlands

Metal Beverage Packaging

Ardagh Metal Beverage Netherlands B.V.

Netherlands

Metal Beverage Packaging

Ardagh Glass S.A.

Poland

Glass Packaging

Ardagh Metal Beverage Trading Poland Sp. z o.o

Poland

Metal Beverage Packaging

Ardagh Metal Beverage Poland Sp. z o.o

Poland

Metal Beverage Packaging

Ardagh Metal Beverage Trading Spain SL

Spain

Metal Beverage Packaging

Ardagh Metal Beverage Spain SL

Spain

Metal Beverage Packaging

Ardagh Glass Limmared AB

Sweden

Glass Packaging

Ardagh Metal Beverage Europe GmbH

Switzerland

Metal Beverage Packaging

Ardagh Glass Limited

United Kingdom

Glass Packaging

Ardagh Metal Beverage Trading UK Limited

United Kingdom

Metal Beverage Packaging

Ardagh Metal Beverage UK Limited

United Kingdom

Metal Beverage Packaging

Ardagh Glass Inc

United States

Glass Packaging

Ardagh Metal Beverage USA Inc

United States

Metal Beverage Packaging

Ardagh Group S.A.

F-67

28. Contingencies Environmental issues

The Group is regulated under various national and local environmental, occupational health and safety and other governmental laws and regulations relating to:

  • the operation of installations for manufacturing of metal packaging and surface treatment using solvents;
  • the operation of installations for manufacturing of container glass;
  • the generation, storage, handling, use and transportation of hazardous materials;
  • the emission of substances and physical agents into the environment;
  • the discharge of waste water and disposal of waste;
  • the remediation of contamination;
  • the design, characteristics, collection and recycling of its packaging products; and
  • the manufacturing, sale and servicing of machinery and equipment for the container glass and metal packaging industry.

The Group believes, based on current information that it is in substantial compliance with applicable environmental laws and regulations and permit requirements. It does not believe it will be required, under existing or anticipated future environmental laws and regulations, to expend amounts, over and above the amounts accrued, which will have a material effect on its business, financial condition or results of operations or cash flows. In addition, no material proceedings against the Group arising under environmental laws are pending.

Legal matters

In 2015, the German competition authority (the Federal Cartel Office) initiated an investigation of the practices in Germany of metal packaging manufacturers, including Ardagh's Food & Specialty Metal Packaging business which was sold to Trivium. In 2018, the European Commission took over this investigation and the German investigation is, as a result, at an end. Ardagh has agreed to provide an indemnity in respects of certain losses that Trivium might incur in connection with this investigation. The European Commission's investigation is ongoing, and there is, at this stage no certainty as to the extent of any charge which may arise. Accordingly, no provision has been recognized.

On April 21, 2017, a jury in the United States awarded $50 million in damages against the Group's U.S. glass packaging business, formerly Verallia North America ("VNA"), in respect of one of two asserted patents alleged to have been infringed by VNA. On March 8, 2018, the trial judge confirmed the jury verdict. On July 12, 2019, the US Court of Appeals for the Federal Circuit affirmed the District Court's decision of March 2018. The case was filed before Ardagh acquired VNA and customary indemnifications are in place between Ardagh and the seller of VNA. Arbitration proceedings are ongoing to enforce the indemnity. On October 8, 2019, Ardagh paid the court award and related interests to the plaintiffs. The results for the year ended December 31, 2019 include the receivable for the tax adjusted indemnity.

With the exception of the above legal matters, the Group is involved in certain other legal proceedings arising in the normal course of its business. The Group believes that none of these proceedings, either individually or in aggregate, are expected to have a material adverse effect on its business, financial condition, results of operations or cash flows.

Ardagh Group S.A.

F-68

29. Events after the reporting period

On February 19, 2020, the Company approved a cash dividend of $0.14 per common share. The dividend of $33 million will be payable on April 1, 2020 to shareholders of record on March 18, 2020.

30. Company financial information

This note has been included in these financial statements in accordance with the requirements of Regulation S-X rule 12.04 Condensed financial information of registrant. The financial information provided below relates to the individual company financial statements for Ardagh Group S.A. as presented in accordance with IFRS as issued by the IASB.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with International Financial Reporting Standards have been condensed or omitted. The footnote disclosures contain supplemental information only and, as such, these statements should be read in conjunction with the notes to the accompanying consolidated financial statements.

The condensed financial information has been prepared using the same accounting policies as set out in the consolidated financial statements, except that investments in subsidiaries are included at cost less any provision for impairment in value.

The functional currency of the Company is euro and accordingly, the company financial information set out below is presented in euro.

i) Statement of financial position

At December 31,

2019

2018

€'m

€'m

Non-current assets

Investments in subsidiary undertakings

2,484

1,809

Investments in joint venture

371

-

2,855

1,809

Current assets

Amounts receivable from subsidiary undertakings

88

1

88

1

Total assets

2,943

1,810

Equity attributable to owners of the parent

Issued capital

22

22

Share premium

1,092

1,092

Legal reserve

2

2

Capital contribution

431

431

Retained earnings

1,394

261

Total equity

2,941

1,808

Current liabilities

Other payables

2

2

2

2

Total liabilities

2

2

Total equity and liabilities

2,943

1,810

Ardagh Group S.A.

F-69

ii) Statement of comprehensive income

Year ended December 31,

2019

2018

2017

`

€'m

€'m

€'m

Dividend income

89

110

150

Other external charges

(3)

(1)

(1)

Finance expense

(1)

(1)

(1)

Profit before tax and gain on disposal of investment

85

108

148

Income tax

-

-

-

Gain on disposal of investment *

1,164

-

-

Profit and total comprehensive income for the year

1,249

108

148

  • The gain recognized in the Company for the year ended December 31, 2019, relates to the divestment of the Food & Specialty Metal Packaging business completed on October 31, 2019 and the recognition of shares issued to the Company by Trivium Packaging B.V. as part consideration for the disposal.

iii) Statement of cash flows

Year ended December 31,

2019

2018

2017

€'m

€'m

€'m

Cash flows from operating activities

Cash generated from operations

(3)

(1)

(1)

Tax paid

-

(1)

-

Increase in receivables

-

-

(10)

Increase/(decrease) in payables

1

(6)

-

Net cash from operating activities

(2)

(8)

(11)

Cash flows from investing activities

Proceeds from disposal of investment

2,307

-

-

(Repayment)/receipt of loans from subsidiary undertakings

(1,601)

9

-

Contribution to subsidiary undertaking (i)

(675)

-

(299)

Dividends received

89

110

150

Net cash received from/(used in) investing activities

120

119

(149)

Cash flows from financing activities

Proceeds from share issuance

-

-

309

Dividends paid

(118)

(112)

(148)

Net cash (outflow)/inflow from financing activities

(118)

(112)

161

Net (decrease)/increase in cash and cash equivalents

-

(1)

1

Cash and cash equivalents at the beginning of the year

-

1

-

Cash and cash equivalents at the end of the year

-

-

1

  1. In November 2019 AGSA made a capital contribution of €675 million into Ardagh Packaging Group Limited a wholly owned subsidiary. Ardagh Packaging Group Limited is an Irish registered company that acts as an intermediate holding company for the Ardagh Group.
    1. Maturity analysis of the Company's borrowings
      At December 31, 2019, the Company had €nil borrowings (2018: €nil).

Ardagh Group S.A.

F-70

v) Distributions paid and received

During the year ended December 31, 2019 the Company received a dividend of €89 million (2018: €110 million,

2017: €150 million) from a subsidiary company. The Company also paid a dividend to its equity holders of €118 million

(2018: €112 million, 2016: €148 million). vi) Commitments and contingencies

The Company has guaranteed certain liabilities of a number of its subsidiaries for the year ended December 31, 2019 including guarantees under Section 357 of the Irish Companies Act, 2014, and Section 264 of the German Commercial Code. Furthermore, the Company has assumed joined and several liability in accordance with Section 403, Book 2 of the Dutch Civil Code for the liabilities of a number of its Dutch subsidiaries.

With exception of the above guarantees the Company had no commitments and contingencies at December 31, 2019 (2018: €nil).

vii) Additional information

The following reconciliations are provided as additional information to satisfy the Schedule I SEC Requirements for parent-only financial information, and are presented in both euro and U.S. dollars.

IFRS profit/(loss) reconciliation:

Parent only-IFRS profit for the year

Additional gain/(loss) if subsidiaries had been accounted for using the equity method of accounting as opposed to cost

Consolidated IFRS profit/(loss) for the year

IFRS equity reconciliation:

Parent only-IFRS equity

Additional loss if subsidiaries had been accounted for using the equity method of accounting as opposed to cost

Consolidated-IFRS equity

IFRS profit/(loss) reconciliation:

Parent only-IFRS profit for the year

Additional gain/(loss) if subsidiaries had been accounted for using the equity method of accounting as opposed to cost

Consolidated IFRS profit/(loss) for the year

IFRS equity reconciliation:

Parent only-IFRS equity

Additional loss if subsidiaries had been accounted for using the equity method of accounting as opposed to cost

Consolidated-IFRS equity

Year ended December 31,

2019

2018

2017

€'m

€'m

€'m

1,249

108

148

78

(191)

(94)

1,327

(83)

54

At December 31,

2019

2018

2017

€'m

€'m

€'m

2,941

1,808

1,812

(3,128)

(3,127)

(2,961)

(187)

(1,319)

(1,149)

Year ended December 31,

2019

2018

2017

$'m

$'m

$'m

1,400

128

166

58

(222)

(103)

1,458

(94)

63

At December 31,

2019

2018

2017

$'m

$'m

$'m

3,304

2,064

2,173

(3,520)

(3,574)

(3,548)

(216)

(1,510)

(1,375)

Ardagh Group S.A.

F-71

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Ardagh Group SA published this content on 20 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 February 2020 15:35:04 UTC