TIDMIWG TIDMTTM
RNS Number : 0759I
IWG PLC
10 August 2021
10 August 2021
IWG plc - INTERIM RESULTS ANNOUNCEMENT - SIX MONTHSED 30 JUNE
2021
IWG plc, the global operator of leading workspace brands, today
announces its interim results for the six months ended 30 June
2021
Strong occupancy recovery in Q2 in major markets and future
top-line recovery supported by the growth of hybrid working and new
customer wins. Pace of recovery dependent on continued easing of
pandemic restrictions.
Key Highlights (1)
Performance improvement evident in Q2
-- Open centre revenue increased from Q1 to Q2 by 3.4%(2) ; HY
down 10.4%(2) year-on-year
-- Pre-2020(3) revenue increased from Q1 to Q2 by 1.5%(2) ; HY
down 15.0%(2) year-on-year to GBP992.0m (H1 2020: GBP1,224.7m)
-- Pre-2020(3) occupancy increased from Q1 to Q2 by 120 bps to
69.0%; HY occupancy was 68.4% (H1 2020: 75.3%)
-- Encouraging Group pricing trends at the end of the period,
with average new sales price exceeding embedded price in June
-- Enquiries and customer retention are back to pre-COVID-19
levels in Q2
-- Very strong recovery in meeting room and day office usage in
Q2 with revenue up 39.9%(2) on Q1 2021
-- Month-on-month improvement in EBITDA during Q2
-- US showing the strongest recovery; June was a record month
for space sold
Structural tailwinds strengthening
-- Unprecedented demand for hybrid working; record new client
wins with over 900 new enterprise customers gained in H1
-- Pre-existing demand strongly supplemented by more enterprises
now looking at greater distributed working
Strong focus on cost control
-- On track to achieve a run-rate reduction in underlying
pre-growth costs of c.GBP320m(1) . Approximately GBP190m delivered
in H1 versus prior year
-- GBP39.2m COVID-19 related charges(1)(4)
Quality network growth
-- 84 new locations opened including the acquisition of four
competitor locations with nine more already signed for opening in
H2
-- Less capital-intensive growth - net growth investment of
GBP46.9m(1) (H1 2020: GBP116.2m / 88 locations)
Increased momentum in franchising strategy
-- Added 17 new franchise agreements across 10 countries with an
additional 64 committed locations
-- First franchise agreements signed in the US
-- We have just entered into a JV with Hysan to operate across
Hong Kong and the Greater Bay Area
-- Franchising remains a key focus area for growth; Master
franchise discussions ongoing
Q2 sales and operational performance underpins H2 momentum
-- H2 performance expected to be underpinned by continuing
occupancy and revenue improvement and cost savings
-- Uniquely positioned to help companies adapt to the new world
of hybrid working post COVID-19
Interim results
-------------------------------------- --------------- --------------- ---------- ---------- --------- ---------
H1 2021 H1 2020 H1 2021 H1 2020
% change % change
(Pre-IFRS (Pre-IFRS constant actual
GBPm (As reported) (As reported) 16) 16) currency currency
-------------------------------------- --------------- --------------- ---------- ---------- --------- ---------
Revenue 1,066.6 1,321.3 1,066.6 1,321.3 (15.3)% (19.3)%
Open centre revenue 1,055.2 1,236.2 1,055.2 1,236.2 (10.4)% (14.6)%
Operating (loss) - continuing
operations (79.8) (92.8) (186.6) (169.5)
Adjusted operating profit/(loss) -
continuing operations (30.2) 43.3 (147.4) (13.7)
(L oss) before tax - continuing
operations (162.7) (237.3) (183.4) (176.2)
(Loss) after tax - continuing
operations (172.6) (238.4) (192.0) (202.2)
Earnings per share - attributable
to ordinary shareholders (p) (16.9) (26.5) (18.8) (22.7)
Adjusted earnings per share - from
continuing operations (p) (12.0) (11.0) (15.0) (5.2)
Adjusted EBITDA 528.6 694.5 5.4 137.4
Net debt 6,785.8(5) 7,067.9(5) 414.6 (15.9)
-------------------------------------- --------------- --------------- ---------- ---------- --------- ---------
(1) Presented in accordance with pre-IFRS 16 accounting
standards (as defined in Alternative performance measures
section)
(2) At constant currency
(3) Pre-2020 refers to the performance for all operations opened
on or before 31 December 2019 and which were open throughout the
period
(4) COVID-19 related charges are separately disclosed as
adjusting items as they are considered to be significant in nature
and/or size
(5) Net debt in accordance with IFRS 16 includes lease liabilities of GBP6,371.2m
Mark Dixon, Chief Executive of IWG plc, said:
"The month-on-month improvements in our key operating metrics as
we came into the summer months are encouraging and we anticipate
this momentum continuing into the second half of 2021. The
significant move to hybrid working has created unprecedented demand
for our flexible work products. This fundamental shift in the way
people work is clearly a positive tailwind for IWG over the medium
to longer term and we are seeing increasing levels of interest from
enterprises wishing to transform their working practices.
We continue to make progress with our franchising and partnering
agreements which are central to our capital-light expansion
strategy. We have also seen significant progress in the acquisition
of competitor centres with minimal required investment.
Whilst the pace of recovery remains dependent on the continuing
easing of pandemic restrictions across our markets, we look forward
to the second half with cautious optimism having implemented the
necessary changes to our network and cost base. Looking further
ahead, with the improvements we are observing in our operating
environment, we remain confident of a stronger recovery in
2022."
Details of results presentation
Mark Dixon, Chief Executive Officer, and Glyn Hughes, Chief
Financial Officer, are hosting a conference call today for analysts
and investors at 9.00am BST. Please contact Emily Pollard to obtain
details for the webcast or conference call:
epollard@brunswickgroup.com.
For further information, please contact:
IWG plc Tel: +41 (0) 41 723 2353 Brunswick Tel: +44(0) 20 7404
Mark Dixon, Chief Executive Officer 5959
Glyn Hughes, Chief Financial Officer Nick Cosgrove
Wayne Gerry, Group Investor Relations Oliver Sherwood
Director
For more information, please visit
www.iwgplc.com
Chief Executive Officer's review
The end of the first quarter heralded a clear inflection point
and the nadir of the Group's performance during the coronavirus
crisis. The second quarter witnessed positive occupancy and revenue
momentum in most of our key markets, especially the US, which is
showing the strongest recovery. With enquiries returning to
pre-COVID-19 levels, and occupancy moving in the right direction,
we have been able to improve pricing on new business from March
2021 through granting fewer concessions to customers by tightening
discounts and removing COVID-19 promotions. As these new sales
replace those made during the worst period of the crisis, the
embedded price in the forward order book will improve over time,
reflecting the normal lag effect. With occupancy on an improving
trend, we are also now seeing encouraging signs of service revenue
recovery.
Demand from enterprise clients for both fixed office and
membership subscription deals continue at unprecedented levels. We
won over 900 new enterprise customers in the period and expanded
our business with a significant number of existing customers.
Whilst it is good to highlight these positive trends, as we
reported on 7 June 2021, the speed of recovery in occupancy across
the whole Group has been lower than originally anticipated which,
given the operational gearing of the business, will have a
significant impact on the Group's performance for 2021. Extended
lockdowns in many markets, the emergence of new variants and
companies delaying office return until after the summer combined to
put a check on the rate of occupancy improvement. What the future
recovery looks like will strongly depend on Government policies.
Although future lockdowns and the emergence of further new variants
cannot be discounted, COVID-19 has positively changed the medium
and long-term outlook for the industry and for IWG as the leading
operator.
Although restrictions are easing in most markets, we continue to
prioritise actions to protect the health and safety of our
customers, partners and our colleagues globally, whilst positioning
IWG to emerge strongly as markets recover. We would like to thank
our colleagues for the way they have responded to this
unprecedented challenge.
More companies are now seeking flexible and distributed
workplaces. With the unrivalled coverage and choice our network
offers, IWG is uniquely placed to meet these growing needs.
We retain a strong financial position and are delivering on our
plans to reduce costs, preserve cash and strengthen our liquidity
position to capitalise on attractive organic and inorganic
opportunities to accelerate the growth and development of the
business.
Our strategy is unchanged. We will continue to build on the
scale and resilience of our business and our determination to move
to a franchise model and build an industry-leading services
platform.
Financial performance
Open centre revenue declined 10.4% at constant currency to
GBP1,055.2m compared to GBP1,236.2m in the same period in 2020.
Total Group revenue for the six months to 30 June 2021 reduced by
15.3% at constant currency to GBP1,066.6m (H1 2020:
GBP1,321.3m).
Pre-2020 revenue declined 15.0% at constant currency to
GBP992.0m (H1 2020: GBP1,224.7m).
Pre-2020 occupancy declined from 75.3% for the six months to 30
June 2020 to 68.4% for the same period this year. Our performance
in 2020 benefited from the strongest start to a new financial year
the Group had ever experienced. In contrast, the first half of 2021
incorporates the most challenging first quarter the Group has
experienced with occupancy beginning to improve in March. Pre-2020
occupancy has improved monthly since March and we exited the first
half at 69.5%.
The GBP254.7m reduction in Group revenue resulted in an adjusted
centre contribution of GBP99.6m (H1 2020: GBP193.2m). Under
pre-IFRS 16 reporting, adjusted centre contribution was a negative
contribution of GBP15.1m (H1 2020: GBP143.9m profit).
Good progress has been made in delivering the targeted cost
savings on a pre-IFRS 16 basis, with approximately GBP190m achieved
in H1 versus the prior year. Further savings are anticipated in H2
and we are on track to achieve a run-rate reduction in underlying
pre-growth costs of approximately GBP320m(1).
Adjusted operating loss as reported was GBP30.2m compared to a
profit of GBP43.3m in the same period 2020. Including adjusting
items, the operating loss was GBP79.8m (H1 2020: GBP92.8m loss).
Under pre-IFRS 16 reporting, the operating loss before adjusting
items increased to GBP147.4m from a loss of GBP13.7m in the
corresponding period in 2020.
Our adjusted EBITDA of GBP528.6m compared to GBP694.5m in the
corresponding period in 2020 reflecting the negative impact on the
business of COVID-19, which was felt across all our markets. On a
pre-IFRS 16 reporting basis, the impact was also significant with
an adjusted EBITDA of GBP5.4m compared to GBP137.4m in HY 2020.
Capital investment has been well controlled. Net growth capital
expenditure was GBP61.9m compared to GBP76.8m in H1 2020. Under
pre-IFRS 16 reporting, net growth capital investment was
GBP46.9m, a significant reduction on the H1 2020 expenditure of
GBP116.2m yet delivering 84 new locations and over 90% of the space
added in H1 2020. 76 locations were rationalised in the first
half.
The Group has maintained a strong financial position, with net
debt at 30 June 2021 of GBP6,785.8m (31 December 2020:
GBP6,909.6m). On a pre-IFRS 16 basis, excluding debt relating to
lease liabilities, net debt was at GBP414.6m(1) (31 December 2020:
GBP351.1m).
Open centre revenue performance by region
On a regional basis, open centre revenue performance can be
analysed as follows:
GBPm % Change % Change
-------------- --------
(constant (actual
H1 2021 H1 2020 currency) currency)
-------------- -------- -------- ----------- ------------
Americas 415.7 553.2 (17.8)% (24.9)%
EMEA 334.8 343.5 (0.8)% (2.5)%
Asia Pacific 139.1 147.8 (3.1)% (5.9)%
UK 162.9 188.7 (13.7)% (13.7)%
Other 2.7 3.0 - -
Total 1,055.2 1,236.2 (10.4)% (14.6)%
-------------- -------- -------- ----------- ------------
Americas
The Americas, our largest region, was significantly impacted by
the pandemic, particularly in the first quarter, but is now showing
the strongest signs of recovery. This upturn in performance is
mainly being driven by the US. Our business in Canada continues to
be affected by the continuing COVID-19 restrictions across the
country.
GBPm % Change % Change
----------------------------------- --------
(constant (actual
H1 2021 H1 2020 currency) currency)
----------------------------------- -------- -------- ----------- ------------
Total revenue 419.7 584.1 (21.4)% (28.1)%
Open centre revenue 415.7 553.2 (17.8)% (24.9)%
Pre-2020 revenue 397.0 549.5 (20.9)% (27.7)%
(941)
Pre-2020 occupancy - Workstations 66.0% 75.4% - bps
Pre-2020 occupancy - Square (937)
feet 68.2% 77.5% - bps
Number of centres 1,257 1,271 - -
----------------------------------- -------- -------- ----------- ------------
Major Central Business Districts (CBDs) faced more challenging
conditions than many of the suburban areas. So, although occupancy
is picking up the fastest amongst our four regions, some major
cities in the region are coming from a much lower base level of
occupancy. Despite the removal of promotions and a tightening of
discounts, June was a record month for space sold.
Revenue from open centres declined 17.8% at constant currency to
GBP415.7m. The rate of decline in open centre revenue slowed in the
second quarter to 12.8% from a 22.3% reduction in Q1. Pre-2020
revenue in the region decreased 20.9% at constant currency to
GBP397.0m.
Average occupancy for the region in the pre-2020 business was
68.2% (H1 2020: 77.5%). Although down year on year, we have clearly
seen the inflection point during the first half, with Q2 occupancy
174 bps better than occupancy in Q1.
With the easing of COVID-19 restrictions in the US, occupancy
started to recover in February, with strong momentum continuing in
Q2 2021. Similarly, meeting room and day office usage improved in
Q2. In LATAM the business environment remained tough with COVID-19
restrictions in place in most countries. However, early signs of
recovery have been seen in markets like Brazil, Chile and
Colombia.
There were 14 new locations added in the region in the first
half of 2021 and 28 locations were rationalised. After these
movements, the total number of locations in the region was 1,257 at
30 June 2021.
EMEA
Our EMEA business has seen a clear turnaround in performance
since February, with turnover and occupancy improving. Ancillary
service revenues started to improve towards the end of the first
half. These trends are encouraging but the pace of recovery is
lagging that of the US.
Open centre revenue declined by just 0.9% at constant currency,
with year-on-year growth of 4.4% returning in Q2, reflecting the
turnaround in performance. Pre-2020 revenue reduced by 7.3%, with
occupancy reduced to 69.3% (H1 2020: 73.7%), however occupancy in
Q2 was 135 bps higher than in Q1.
GBPm % Change % Change
----------------------------------- --------
(constant (actual
H1 2021 H1 2020 currency) currency)
----------------------------------- -------- -------- ----------- ------------
Total revenue 336.8 366.7 (6.5)% (8.2)%
Open centre revenue 334.8 343.5 (0.9)% (2.5)%
Pre-2020 revenue 308.3 338.1 (7.3)% (8.8)%
(295)
Pre-2020 occupancy - Workstations 68.5% 71.5% - bps
Pre-2020 occupancy - Square (445)
feet 69.3% 73.7% bps
Number of centres 1,123 1,093 - -
----------------------------------- -------- -------- ----------- ------------
COVID-19 restrictions in EMEA have been diverse across countries
with respective impacts on our business. In the second quarter of
2021 we experienced notable occupancy improvements in major markets
like Germany, Italy and South Africa whereas occupancy remained
broadly flat in other major markets like France, the Netherlands
and Spain, where we have experienced signs of recovery only very
recently.
Growth of our network in EMEA is progressively accelerating with
the benefit of new franchise locations, management agreements and
acquisitions. A total of 51 new locations were added across this
region in the first half of 2021. After these additions and the
rationalisation of 21 locations, the total locations in the region
were 1,123 at 30 June 2021, offering 22.4m sq. ft. of space.
Asia Pacific
Our business in Asia Pacific has delivered a mixed performance
with some markets going back into lockdowns. Revenue from all open
centres declined 3.1% at constant currency to GBP139.1m. After a
decline in Q1 of 12.8% the region returned to growth with a 7.0%
growth in Q2 open centre revenue year-on-year. Pre-2020 revenue was
down 8.2% to GBP131.1m (H1 2020: GBP147.0m) and pre-2020 occupancy
decreased to 67.8% (H1 2020: 72.4%). Q2 occupancy was 150bps higher
than the average occupancy in Q1. Retention improved strongly in
the second quarter.
GBPm % Change % Change
----------------------------------- --------
(constant (actual
H1 2021 H1 2020 currency) currency)
----------------------------------- -------- -------- ----------- ------------
Total revenue 140.7 162.9 (11.1)% (13.6)%
Open centre revenue 139.1 147.8 (3.1)% (5.9)%
Pre-2020 revenue 131.1 147.0 (8.2)% (10.8)%
(374)
Pre-2020 occupancy - Workstations 67.7% 71.4% - bps
Pre-2020 occupancy - Square (455)
feet 67.8% 72.4% bps
Number of centres 647 645 - -
----------------------------------- -------- -------- ----------- ------------
Like EMEA, restrictions in Asia Pacific were also very diverse
and impacted our business accordingly. With easing restrictions, we
experienced occupancy improvements in major countries like
Australia, China, Hong Kong, Indonesia, New Zealand, Malaysia,
Singapore, South Korea and Vietnam. In other markets the business
environment remained challenging.
A total of 17 new locations were added in the region in the
first half of 2021. We are seeing a clear acceleration in variable
rent and management agreement deals in the region. At 30 June 2021
we had a total of 647 centres in the region.
Good progress is being made on franchising in the region. We
have just entered into a 50:50 Joint Venture with Hysan Development
Company Limited to operate a flexible workspace business across
Hong Kong, Macau and Guangdong ("the Greater Bay Area"
("GBA")).
UK
Lockdown restrictions had a significant impact on the UK
business, with lower demand throughout the CBD of London. Outside
of London our business has been more robust. Since the announcement
of easing restrictions in March, demand for more distributed
working has increased sales in many of the satellite towns and
cities outside of London, and more recently also in CBD London.
Occupancy plateaued in March and has improved since to exit the
half year at 68.2%. Pre-2020 occupancy for the six months to 30
June 2021 averaged 67.7% (H1 2020: 74.6%).
Enquiries are good and sales conversion is improving. Lower
discounting and the removal of COVID-19 promotions is helping
pricing on new sales. Retention is improving and is now at its
highest level since the start of the pandemic. Renewal pricing is
also strengthening. Meeting room demand came back strongly in June
and revenue from other services is recovering with footfall
improvement.
GBPm % Change
----------------------------------- --------
(actual
H1 2021 H1 2020 currency)
----------------------------------- -------- -------- ------------
Total revenue 166.7 204.6 (18.5)%
Open centre revenue 162.9 188.7 (13.7)%
Pre-2020 revenue 152.9 187.1 (18.3)%
(710)
Pre-2020 occupancy - Workstations 65.1% 72.2% bps
Pre-2020 occupancy - Square (683)
feet 67.7% 74.6% bps
Number of centres 294 304 -
----------------------------------- -------- -------- ------------
Revenue from open centres reduced by 13.7% to GBP162.9m, with
the rate of decline slowing to 7.6% in Q2 year-on-year. Pre-2020
revenue declined by 18.3% to GBP152.9m (H1 2020: GBP187.1m), with
the decline similarly reducing in Q2 to 12.3%.
Two new locations were added and 12 rationalised in the UK in
the first half of 2021. The net of these additions and the network
rationalisation led to an overall reduction of locations in the
region to 294 at 30 June 2021.
Growing the network
During the six months to 30 June 2021, 84 locations were opened
and 2.6m sq. ft. of space added to our global network. 43 of these
locations were added in the first quarter. Further progress was
made in the first half in developing capital light and partnering
arrangements. 18 of the added centres were franchises or management
agreements. Of the remaining 66 fully owned locations, 23 involved
various partnering arrangements. There were 76 locations
rationalised in the first half.
We have also been successful in taking over competitor locations
at minimal investment. Four such locations were opened in the first
half, with a further nine openings scheduled for the second half.
In addition, there is a significant pipeline of further potential
centre acquisitions in advanced negotiation.
Our global network now totals 3,321 locations and 64.1m sq. ft.
of space. We added centres in 11 new towns and cities in the first
half and at 30 June 2021 we had coverage across 1,132 towns and
cities.
Franchising momentum picking up
We are experiencing strong momentum in our franchising strategy,
with potential third parties in many different territories
interested in operating under our brands. In the six months to 30
June 2021, we have seen an increase in the number of new agreements
signed. We have signed 17 new franchise partners, two more than we
signed in the whole of 2020. These deals were across ten countries,
including our first deals in the US.
We have just entered into a 50:50 Joint Venture with Hysan
Development Company Limited to operate a flexible workspace
business across Hong Kong, Macau and Guangdong. Hysan is a leading
investment, management and development company based in Hong Kong,
with strong long-term partnership credentials. It has an investment
portfolio of over 4m sq. ft. of space including over 2m sq. ft. in
prime office space in Hong Kong. The JV will acquire and operate
IWG's 32 existing locations in the GBA, with exclusive rights to
use IWG brands. The JV has committed to a development plan that
will add significantly to the network to meet the growing demand
for hybrid working in the region.
Franchising remains core to our growth strategy and indications
of interest from third parties suggest a swift resumption of
activity once there is greater clarity on the post pandemic
environment. As we anticipate further significant franchising
deals, we continue to invest in resources to ensure that we have
the right capabilities. We are focussed on choosing the right
partners, who can drive the business forward and enable the network
to reach its full potential.
Continuing to see unprecedented growth in enterprise
accounts
More companies and public sector bodies are introducing hybrid
working into their way of working and this has led to unprecedented
growth in our enterprise business. We have gained over 900 new
enterprise customers in the half and seen our business expand
strongly with a large proportion of our existing customers. This
reflects both the increasing demand from enterprises to embrace a
more flexible and now an increasingly distributed approach to
corporate real estate.
The unrivalled network coverage we can offer has uniquely
positioned IWG to support this growing part of the market.
Enterprise customers utilise our network in a variety of ways
ranging from drop-in flexible space to local head offices and a
wide combination of the services we can offer.
Outlook
The month-on-month improvements in our key operating metrics as
we came into the summer months are encouraging and we anticipate
this momentum continuing into the second half of 2021. The
significant move to hybrid working has created unprecedented demand
for our flexible work products. This fundamental shift in the way
people work is clearly a positive tailwind for IWG over the medium
to longer term and we are seeing increasing levels of interest from
enterprises wishing to transform their working practices.
We continue to make progress with our franchising and partnering
agreements which are central to our capital-light expansion
strategy. We have also seen significant progress in the acquisition
of competitor centres with minimal required investment.
Whilst the pace of recovery remains dependent on the continuing
easing of pandemic restrictions across our markets, we look forward
to the second half with cautious optimism having implemented the
necessary changes to our network and cost base. Looking further
ahead, with the improvements we are observing in our operating
environment, we remain confident of a stronger recovery in
2022.
Mark Dixon
Chief Executive Officer
10 August 2021
Chief Financial Officer's review
Financial performance
The review below highlights the reported results in accordance
with IFRS 16. Under IFRS 16, while total lease related charges over
the life of a lease remain unchanged, the lease charges are
characterised as depreciation and financing expenses with higher
total expense in the early periods of a lease and lower total
expense in the later periods of the lease.
The Group also presents the results in accordance with pre-IFRS
16 accounting standards as it provides useful information to
shareholders on how the Group is managed, operating performance
targets are measured, and reporting for bank covenants and certain
lease agreements are prepared.
Group income statement
H1 2021 IFRS H1 2021 H1 2020 IFRS H1 2020
16 Impact 16 Impact
(As reported) (Pre-IFRS (Pre-IFRS (As reported)
GBPm 16) 16)
-------------------------------- --------------- ----------- ----------- ----------- ----------- ---------------
Revenue 1,066.6 - 1,066.6 1,321.3 - 1,321.3
Gross (loss)/profit (centre
contribution) 67.8 104.3 (36.5) 3.7 69.0 72.7
-------------------------------- --------------- ----------- ----------- ----------- ----------- ---------------
Gross (loss)/profit before
adjusting
items(1) 99.6 114.7 (15.1) 143.9 49.3 193.2
-------------------------------- --------------- ----------- ----------- ----------- ----------- ---------------
Overheads(2) (147.0) 2.5 (149.5) (172.3) 7.7 (164.6)
Joint ventures (0.6) - (0.6) (0.9) - (0.9)
-------------------------------- --------------- ----------- ----------- ----------- ----------- ---------------
Operating (loss) (79.8) 106.8 (186.6) (169.5) 76.7 (92.8)
-------------------------------- --------------- ----------- ----------- ----------- ----------- ---------------
Operating (loss)/profit before
adjusting items(1) (30.2) 117.2 (147.4) (13.7) 57.0 43.3
-------------------------------- --------------- ----------- ----------- ----------- ----------- ---------------
Net finance (82.9) (86.1) 3.2 (6.7) (137.8) (144.5)
-------------------------------- --------------- ----------- ----------- ----------- ----------- ---------------
(Loss) before tax from
continuing
operations (162.7) 20.7 (183.4) (176.2) (61.1) (237.3)
Taxation (9.9) (1.3) (8.6) (26.0) 24.9 (1.1)
Effective tax rate (6.1)% - (4.7)% (14.8)% (0.5)%
-------------------------------- --------------- ----------- ----------- ----------- ----------- ---------------
(Loss) after tax from
continuing
operations (172.6) 19.4 (192.0) (202.2) (36.2) (238.4)
(Loss)/profit after tax from
discontinuing operations 0.2 0.1 0.1 (1.1) 1.7 0.6
-------------------------------- --------------- ----------- ----------- ----------- ----------- ---------------
(Loss) for the period (172.4) 19.5 (191.9) (203.3) (34.5) (237.8)
-------------------------------- --------------- ----------- ----------- ----------- ----------- ---------------
Basic EPS (p)
- From continuing operations
before adjusting items (12.0) (15.0) (5.2) (11.0)
- Attributable to shareholders (16.9) (18.8) (22.7) (26.5)
-------------------------------- --------------- ----------- ----------- ----------- ----------- ---------------
Depreciation & amortisation 558.6 152.8 150.8 649.2
Adjusted EBITDA(1) 528.6 5.4 137.4 694.5
-------------------------------- --------------- ----------- ----------- ----------- ----------- ---------------
1. Adjusting items relate to income and costs arising
specifically from the impact of COVID-19
2. Overheads for H1 2021 include COVID-19 and other
non-recurring items of GBP17.8m (H1 2020: GBP15.6m)
Adjusting items
With the pace of recovery from COVID-19 coming through slower
than originally anticipated, the Group continued to take measures
to build greater resilience into the business and future proof it
for the long-term structural growth opportunity. These actions,
together with the impact of the prolonged uncertainty caused
directly by COVID-19, have resulted in further charges in the first
half. These adjusting items totalled GBP49.6m (H1 2020: GBP136.1m),
GBP32.4m of which are non-cash items. On a pre-IFRS 16 basis, these
adjusting items totalled GBP39.2m (H1 2020: GBP155.8m), GBP22.0m of
which are non-cash items. These adjusting items primarily reflect
network rationalisation, Group restructuring costs and provision
for expected credit losses.
Network rationalisation
The increased COVID-19 related rationalisation of the network is
nearing the final stages. During the first half, further marginal
centres were eliminated from the network. This led to a charge of
GBP66.3m (H1 2020: GBP7.8m) which was partially offset by a
GBP34.0m reversal of impairment of property, plant and equipment
(H1 2020: impairment of GBP107.0m). Under pre-IFRS 16 reporting,
COVID-19 related rationalisation of the network led to a charge of
GBP30.0m, which was mitigated by utilising GBP20.6m out of the
previously established provision, resulted in a net charge of
GBP9.4m (H1 2020: GBP134.5m).
Restructuring costs
A charge of GBP17.4m (H1 2020: GBP4.9m) is included within
adjusting items to cover legal and other professional costs,
including costs associated with the significant number of
individual centre renegotiations.
Provision for expected credit losses
The prolonged impact of COVID-19, including continuing lockdown
restrictions and concerns over new variants of the virus in some
markets has continued to present an unprecedented challenge to many
of our customers who may struggle to navigate through these
challenges. In light of this, the Group reviewed the recoverability
of its debtor profile and booked an increase of GBP12.6m (H1 2020:
GBP9.4m) in the expected credit loss provision. This increase
reflects the greater likelihood of credit default by the Group's
debtors directly attributable to the impact of COVID-19.
The increase is relatively low compared to the overall debtor
profile as the Group has not historically incurred significant
credit losses and continues to maintain customer deposits as
additional security in the event of non-performance of customer
contracts.
Other one-off items
During the period, the Group incurred GBP0.4m of transaction
costs in respect of master franchise agreements that did not
complete due to COVID-19 (H1 2020: GBP5.8m). In addition, during
the period, the Group received a total of GBP0.6m (H1 2020:
GBP3.7m) in respect of worldwide financial support schemes to fund
employee costs and released excess closure related provisions of
GBP12.5m (H1 2020: GBPnil).
Revenue
Total Group revenue decreased 15.3% at constant currency from
GBP1,321.3m to GBP1,066.6m. Reflecting the global nature of the
pandemic, revenues came under pressure across all four regions.
More encouraging is the 2.5% constant currency improvement in Q2
revenue compared to Q1 revenue for the Group. Revenue increased
sequentially in Q2 in all regions apart from the Americas where Q2
revenue was just 1.1% lower than Q1.
Open centre revenue declined 10.4% to GBP1,055.2m (H1 2020:
GBP1,236.2m). Again, the performance in Q2 was much stronger with a
year-on-year constant currency decline of 4.0%, with positive
improvements in Asia Pacific and EMEA of 7.0% and 4.4% respectively
at constant currency. Revenue in Q2 was 3.4% higher at constant
currency than the revenue in Q1, with EMEA, Asia Pacific and the UK
all contributing. This is an encouraging indicator for future
revenue performance as it is not impacted by the network
rationalisation programme.
The inflection in our performance during the first half is clear
in the pre-2020 revenue performance, a true like-for-like barometer
of our business. Revenue for the six months to 30 June 2021 was
down 15.0% at constant currency to GBP992.0m (H1 2020: GBP1,224.7m)
but the Q2 year-on-year decline was 9.2%. Second quarter revenues
were 1.5% higher than those in the first quarter. Overall, pre-2020
occupancy was 68.4% (H1 2020: 75.3%). Second quarter occupancy
improved 120bps over the first quarter, with all four regions
recording improved occupancy. The June 2021 occupancy exit rate was
69.5%.
Gross (loss)/profit (before adjusting items)
The adjusted gross profit reported for the period was GBP99.6m,
which compares to GBP193.2m in the first half of 2020.
Under pre-IFRS 16 reporting, the adjusted gross loss for the
period was GBP15.1m compared to a profit of GBP143.9m in the
corresponding period in 2020. This loss reflects the reduction in
the contribution from the pre-2020 centres and a greater drag from
the new centres.
GBPm Pre-2020 New Closed Total
centres Centres Centres Centres
H1 2021 H1 2021 H1 2021 H1 2021
----------------------------- ---------- --------- --------- ----------
Revenue 992.0 63.2 11.4 1,066.6
Cost of sales (885.2) (70.3) (11.4) (967.0)
Gross profit/(loss) (centre
contribution) 106.8 (7.1) (0.0) 99.6
Gross margin 10.8% 6.4%
----------------------------- ---------- --------- --------- ----------
Cost of sales(7) (925.4) (120.1) (36.2) (1,081.7)
Gross profit/(loss) (centre
contribution)(7) 66.6 (56.9) (24.8) (15.1)
Gross margin(7) 6.7% (1.4)%
----------------------------- ---------- --------- --------- ----------
GBPm Pre-2020 New Closed Total
centres Centres Centres Centres
H1 2020 H1 2020 H1 2020 H1 2020
----------------------------- ---------- --------- --------- ----------
Revenue 1,224.7 11.5 85.1 1,321.3
Cost of sales (998.0) (23.5) (106.6) (1,128.1)
Gross profit/(loss) (centre
contribution) 226.7 (12.0) (21.5) 193.2
Gross margin 18.5% 14.6%
----------------------------- ---------- --------- --------- ----------
Cost of sales(7) (1,043.3) (21.8) (112.3) (1,177.4)
Gross profit/(loss) (centre
contribution) (7) 181.4 (10.3) (27.2) 143.9
Gross margin 14.8% 10.9%
----------------------------- ---------- --------- --------- ----------
(7) Results presented in accordance with pre-IFRS 16 accounting
standards and before adjusting items
EBITDA
Adjusted EBITDA, before COVID-19 related charges, declined from
a profit of GBP694.5m to a profit of GBP528.6m for the six months
to 30 June 2021 as rental costs under pre-IFRS 16 reporting are
replaced by a depreciation charge on the right of use assets and
finance costs arising on the lease liabilities, both of which are
excluded from EBITDA. EBITDA including the adjusting items was
GBP478.9m (H1 2020: GBP558.4m).
Although under pre-IFRS 16 reporting adjusted EBITDA declined to
GBP5.4m (H1 2020: GBP137.4m), this represented a positive Q2 result
reflecting the monthly improvement in occupancy and revenue.
Adjusted EBITDA still reflects the significant drag from investment
in growth of GBP25.5m (H1 2020: profit of GBP18.7m), and a further
drag of GBP33.0m (H1 2020: GBP27.3m) from centres closed in the
period.
Pre-2020 adjusted EBITDA, which eliminates both these negative
factors and therefore provides a better indication of underlying
performance, was GBP63.8m (H1 2020: GBP145.6m).
Pre-IFRS 16 EBITDA including adjusting items was a loss of
GBP33.8m (H1 2020: loss of GBP18.4m).
Overhead investment
Reported Group overheads, excluding adjusting items of GBP17.8m
related to COVID-19, decreased 10.3% at constant currency to
GBP129.2m (H1 2020: GBP149.0m). Under pre-IFRS 16 reporting,
overheads before the GBP17.8m of adjusting items, reduced by 12.7%
at constant currency to GBP131.7m (H1 2020: GBP156.7m). Personnel
cost savings have been a significant contributor to this overhead
improvement. As a percentage of revenue, overheads are 12.3%, which
is just 40bps higher than in the corresponding period for 2020
despite the lower revenue level and continued investment in the
business platform, the development of enterprise accounts and our
pivot to a franchise and capital-light business model.
Operating loss - continuing operations
The adjusted operating loss reported was GBP30.2m (H1 2020:
profit of GBP43.3m). Including the adjusting items, the operating
loss was GBP79.8m compared to a loss of GBP92.8m in the first half
of 2020.
Under pre-IFRS-16 reporting, the adjusted operating loss for the
six months to 30 June 2021 was GBP147.4m (H1 2020: GBP13.7m loss).
In addition to the impact of COVID-19 on the operating performance
of the business, the interim operating loss continues to reflect
the drag from new centres of GBP86.2m (H1 2020: GBP14.8m) as well
as losses of GBP26.4m (H1 2020: GBP37.0m) from centres closed in
the six months to 30 June 2021. Including the adjusting items of
GBP39.2m, the operating loss was GBP186.6m (H1 2020: GBP169.5m
loss).
Net finance
The Group has reported a net finance costs under IFRS 16 for the
six months to 30 June 2021 of GBP82.9m (H1 2020: GBP144.5m). Under
IFRS 16 the lease liability is measured as the present value of the
lease payments to be paid during the lease term, discounted using
an incremental borrowing rate. The lease liability is subsequently
increased by the interest cost on the lease liability arising from
the unwind of the discounting. This interest cost is recognised
within finance costs in the income statement as it unwinds.
Under pre-IFRS 16 reporting, the Group has reported a net
finance income for the six months to 30 June 2021 of GBP3.2m,
compared to a net finance cost of GBP6.7m for the corresponding
period in 2020. Two factors have contributed to this positive net
interest position. The most significant is the mark-to-market of
the option element of the convertible bond. Primarily due to the
lower share price during the period this has resulted in a gain of
GBP14.3m. The second benefit was GBP3.2m of interest received on
the unwinding of an unsuccessful investment transaction.
Excluding the mark-to-market of the convertible bond and the
exceptional interest receipt on the unwinding of the aborted
investment, the total net financial expense was GBP11.1m, on a
pre-IFRS 16 basis.
Taxation
The reported effective interim tax rate for the six months to 30
June 2021 is (6.1)% (H1 2020: (0.5)% on continuing operations). The
effective tax rate on continuing operations under pre-IFRS 16
reporting is (4.7)% (H1 2020: (14.8)%). Despite reporting a loss
for the year, the Group has incurred a tax charge due to the
continuing profitability of certain countries and entities within
the overall Group.
Looking forward at factors that potentially influence the
effective tax rate, we expect the full year current tax charge to
be lower than in 2020, because of continuing challenging trading
conditions arising from COVID-19 and the availability of tax losses
arising in 2020.
Earnings per share
Reported basic earnings per share for the first half was a loss
of 16.9p (H1 2020: (26.5)p). The loss per share from continuing
operations before adjusting items was 12.0p (H1 2020: (11.0)p).
Under pre-IFRS 16 reporting, the loss per share improved to
18.8p (H1 2020: (22.7)p). The loss per share from continuing
operations before adjusting items increased to 15.0p (H1 2020:
5.2p).
Diluted earnings per share under pre-IFRS 16 reporting for the
first half was a loss of 16.9p (H1 2020: (26.5)p). Diluted earnings
per share on a continuing basis before adjusting items for H1 2021
was a loss of 12.0p (H1 2020: (11.0)p).
The weighted average number of shares in issue for the first six
months of the year was 1,007,043,055 (H1 2020: 897,228,291). The
weighted average number of shares for diluted earnings per share
was 1,104,176,078 (H1 2020: 914,334,296). No shares were acquired
in the period to be held in treasury to satisfy future exercises
under various Group long-term incentive schemes. The Group reissued
796,947 shares from treasury to satisfy such exercises during the
first half. At 30 June 2021 49,880,333 shares were held as treasury
shares.
Cash flow and funding
Reported cash flow in the first six months to 30 June 2021, the
Group experienced a cash outflow of GBP230.0m before net investment
in growth capital expenditure compared to a cash outflow of
GBP89.4m for the same period in 2020. The primary reason for these
outflows is the success the Group has had in completing more deals
with landlords which triggered the release of rent payments in the
first quarter, which had been accrued for at 31 December 2020. This
negatively impacted working capital for the period.
Overall, the Group cash inflow for the period was GBP123.8m as
the net growth capital expenditure was GBP61.9m (H1 2020: GBP76.8m)
and the return from an aborted potential acquisition was GBP283.7m.
Net debt at 30 June 2021 reduced to GBP6,785.8m from GBP6,909.6m at
31 December 2020.
On a pre-IFRS reporting basis, in the six months to 30 June 2021
the Group experienced a significant cash outflow of GBP303.0m
before net investment in growth capital expenditure compared to a
cash inflow of GBP125.4m for the corresponding period in 2020 for
the reasons noted earlier.
On a pre-IFRS reporting basis, the overall Group cash outflow
for the period was limited to GBP63.5m through the planned
reduction in net growth capital expenditure to GBP46.9m (H1 2020:
GBP116.2m) and the GBP283.7m return of cash from an unsuccessful
potential acquisition. Net debt at 30 June 2021 on a pre-IFRS 16
basis therefore increased to GBP414.6m from GBP351.1m at 31
December 2020.
Cash flow
The table below reflects the Group's cash flow:
GBPm H1 2021 IFRS 16 H1 2021 H1 2020 IFRS H1 2020
Impact 16 Impact
(As reported) (Pre-IFRS (Pre-IFRS (As reported)
16) 16)
(Restated(8)
)
-------------------------------- --------------- ---------- ------------ ----------- ----------- ---------------
Adjusted EBITDA 528.6 523.2 5.4 137.4 557.1 694.5
Working capital (224.0) 13.9 (237.9) 177.3 (151.8) 25.5
Growth-related partner
contributions - 29.3 (29.3) (73.7) 73.7 -
Maintenance capital expenditure (45.8) 6.3 (52.1) (91.5) 10.8 (80.7)
Taxation (9.2) - (9.2) (8.7) - (8.7)
Finance costs (92.8) (87.9) (4.9) (7.6) (133.2) (140.8)
Finance lease liability
arising on new leases (391.6) (391.6) - - (639.0) (639.0)
Proceeds from partner
contributions (lease
incentives) 7.1 7.1 - - 67.1 67.1
Other items (2.3) (27.3) 25.0 (7.8) 0.5 (7.3)
-------------------------------- --------------- ---------- ------------ ----------- ----------- ---------------
Cash flow before growth
capital expenditure, share
repurchases and dividends (230.0) (73.0) (303.0) 125.4 (214.8) (89.4)
Gross growth capital
expenditure (91.2) (15.0) (76.2) (189.9) 39.4 (150.5)
Growth-related partner
contributions 29.3 - 29.3 73.7 - 73.7
-------------------------------- --------------- ---------- ------------ ----------- ----------- ---------------
Net growth capital expenditure
(8) (61.9) (15.0) (46.9) (116.2) 39.4 (76.8)
Total net cash flow from
operations (291.9) 58.0 (349.9) 9.2 (175.4) (166.2)
Purchase of shares - - - (43.7) - (43.7)
Dividend paid - - - - - -
Corporate financing activities 0.1 (0.7) 0.8 1.0 - 1.0
Investment related loan
receivable acquired 283.7 - 283.7 - - -
Net proceeds from the
issue of shares - - - 313.9 - 313.9
Opening net debt (6,909.6) (6,558.5) (351.1) (294.1) (6,546.0) (6,840.1)
Exchange movement 131.9 130.0 1.9 (2.2) (330.6) (332.8)
Closing net debt (6,785.8) (6,371.3) (414.6) (15.9) (7,052.0) (7,067.9)
-------------------------------- --------------- ---------- ------------ ----------- ----------- ---------------
(8) The comparative reported information has been restated to
reflect the impact of interest charges on lease liabilities and
partner contributions.
Capital investment in the network
Consistent with our strategy of delivering more capital-light
growth we have added over 90% of the space we did in H1 2020 but at
approximately 40% of the net investment made in the same period on
a pre-IFRS 16 basis. During the period, we added 84 new locations
and 2.6m sq. ft. of additional gross space to our global network.
This represents an approximate 4% increase in gross space compared
to the Group's footprint at 31 December 2020. The net growth
capital expenditure in the six months to 30 June 2021 was GBP46.9m,
net of partner contributions (H1 2020: GBP116.2m).
In the six months to 30 June 2021, we rationalised 76 centres
and approximately 1.4m sq. ft. of gross space.
At 30 June 2021, the group's physical network comprised 3,321
locations and 64.1m sq. ft. of gross space.
As with growth capital expenditure, reducing maintenance capital
expenditure was a decisive action taken to mitigate the impact of
COVID-19. Gross maintenance capital expenditure reported in the
first half reduced to GBP45.8m (H1 2020: GBP80.7m). Under pre-IFRS
16 basis it reduced to GBP52.1m (H1 2020: GBP91.5m). After partner
contributions received, net maintenance capital expenditure was
GBP45.8m (H1 2020: GBP80.7m) on a pre-IFRS 16 basis.
Strong financial position
Reported net debt has decreased to GBP6,785.8m (H1 2020:
GBP7,067.9m) due to the lease liabilities being recognised under
IFRS 16.
On a pre-IFRS basis, the Group has maintained a strong financial
position with net debt at 30 June 2021 of GBP414.6m (31 December
2020: GBP351.1m). The 30 June 2021 net debt position reflects the
previously highlighted return of the GBP283.7m investment on an
unsuccessful potential acquisition and the higher-than-normal cash
outflows resulting from the completion of more deals with
landlords, which triggered the release of previously deferred rent
payments.
During the first half the Group proactively engaged with the
lending banks in its GBP950m Revolving Credit Facility to structure
the facility to provide maximum flexibility in the current
environment. All twelve banks universally agreed new short-term
covenant tests which are more aligned with the present market
environment and which will allow the business to consider an
increased number of attractive organic and inorganic opportunities
to accelerate growth and development.
Cash plus the unused portion of the revolving credit facility at
30 June 2021 totalled GBP635.3m (H1 2020: GBP830.3m).
Foreign exchange
The Group's results are exposed to translation risk from the
movement in currencies. During the first half of 2021 key
individual exchange rates have moved, as shown in the table below.
Overall, this provided a headwind, particularly in respect of the
US dollar.
On pre-IFRS 16 reporting the overall impact of these exchange
rate movements over the course of the first six months of the year
decreased revenue and operating profit by GBP58.3m and GBP0.9m
respectively. Gross profit increased by GBP1.1m due to regional
mix.
Foreign exchange rates
At 30 June Half year average
================= ============= ===== ======================= =====
Per GBP sterling 2021 2020 % 2021 2020 %
================= ================= ============= ===== ========= ============ =====
US dollar 1.38 1.23 12.2% 1.39 1.26 10.3%
Euro 1.17 1.10 6.4% 1.15 1.14 0.9%
================= ================= ============= ===== ========= ============ =====
Risk management
Effective management of risk is an everyday activity for the
Group and, crucially, integral to our growth planning. A detailed
assessment of the principal risks and uncertainties which could
impact the Group's long-term performance and the risk management
structure in place to identify, manage and mitigate such risks can
be found on pages 48 to 55 of the 2020 Annual Report and Accounts.
The principal risks and uncertainties for the remaining six months
of the year are unchanged from those noted in the Annual
Report.
Related parties
There have been no changes to the type of related party
transactions entered into by the Group that had a material effect
on the financial statements for the six months ended 30 June 2021.
Details of related party transactions that have taken place in the
period can be found in note 15.
Dividends
For the purposes of liquidity, we are ensuring that the company
maintains sufficient funding especially in any period of
significant centre rationalisation. Our capital allocation policy
remains in place, prioritising investment in the long-term growth
of our business and dividend distribution to shareholders. However,
given the uncertainty caused by COVID-19, we believe it is prudent
to protect our liquidity and as a result, future dividend payments
remain on hold with the intention of the earliest possible return
to our progressive dividend policy.
Going Concern COVID-19 Update
The ongoing impact of COVID-19 on the global economy and the
operating activities of many businesses continues to create a
climate of considerable uncertainty. The ultimate impact of the
pandemic on the Group remains uncertain at the date of signing
these financial statements.
The Directors have assessed the potential cash generation of the
Group against a range of projected scenarios, the liquidity of the
Group, existing funding available to the Group and mitigating
actions to reduce discretionary and other operating cash outflows.
The Group continues to have options to further reduce operating
costs and overheads to optimise cash flows and liquidity during the
current environment.
Based on the strength of the Group's balance sheet and its
available liquidity, the Group will continue to consider taking
advantage of growth opportunities and strengthening the Group's
global leadership position where and when appropriate. These
include:
-- Enhanced organic expansion possibilities arising from
increased future demand from enterprise customers;
-- Rescue situations, adding attractive centres and brands to
our existing portfolio and realising efficiencies when integrating
onto the Group's operating platform; and
-- M&A opportunities.
On the basis of these actions and assessments, the Directors
consider it appropriate to continue to adopt the going concern
basis in preparing the financial statements for the six months
ended 30 June 2021.
Glyn Hughes
Chief Financial Officer
10 August 2021
Condensed Consolidated Financial Information
Interim consolidated income statement (unaudited)
Six months ended Six months
ended
30 June 2021 30 June
2020
(Restated)
(1)
Notes Total Total
GBPm
--------------------------------------------------- --------------- ---------------------- ------------
Revenue 1,066.6 1,321.3
Total costs of sales (979.6) (1,239.2)
---------------------------------------------------- --------------- ---------------------- ------------
Cost of sales (960.4) (1,128.1)
Adjusting items to cost of sales 5 (53.2) (4.1)
Reversal/(loss) on impairment of property,
plant and equipment 5 34.0 (107.0)
---------------------------------------------------- --------------- ---------------------- ------------
Expected credit losses on trade receivables (19.2) (9.4)
---------------------------------------------------- --------------- ---------------------- ------------
Gross profit (centre contribution) 67.8 72.7
Total selling, general and administration
expenses (147.0) (164.6)
---------------------------------------------------- --------------- ---------------------- ------------
Selling, general and administration expenses (129.2) (149.0)
Adjusting items to selling, general and
administration expenses 5 (17.8) (15.6)
---------------------------------------------------- --------------- ---------------------- ------------
Share of loss of equity-accounted investees,
net of tax (0.6) (0.9)
---------------------------------------------------- --------------- ---------------------- ------------
Operating loss (79.8) (92.8)
Finance expense 3 (100.5) (144.8)
Finance income 3 17.6 0.3
---------------------------------------------------- --------------- ---------------------- ------------
Net finance expense (82.9) (144.5)
---------------------------------------------------- --------------- ---------------------- ------------
Loss before tax for the period from continuing
operations (162.7) (237.3)
Income tax charge (9.9) (1.1)
---------------------------------------------------- --------------- ---------------------- ------------
Loss for the period from continuing operations (172.6) (238.4)
Profit after tax for the period from discontinued
operations 4 0.2 0.6
---------------------------------------------------- --------------- ---------------------- ------------
Loss for the period (172.4) (237.8)
---------------------------------------------------- --------------- ---------------------- ------------
Attributable to equity shareholders of the
Group (170.3) (237.8)
---------------------------------------------------- --------------- ---------------------- ------------
Attributable to non-controlling interests (2.1) -
---------------------------------------------------- --------------- ---------------------- ------------
(1) The comparative information has been restated to reflect the
impact of discontinued operations (note 4).
Loss per ordinary share (EPS) Six months Six months
: ended ended
30 June 30 June
2021 2020 (Restated)
(1)
--------------------------------------- ----------- -----------------
Attributable to ordinary shareholders
Basic (p) (16.9) (26.5)
Diluted (p) (16.9) (26.5)
From continuing operations
Basic (p) (16.9) (26.6)
Diluted (p) (16.9) (26.6)
----------------------------------------- ----------- -----------------
(1) The comparative information has been restated to reflect the
impact of discontinued operations (note 4).
The above interim consolidated income statement should be read
in conjunction with the accompanying notes.
Interim consolidated statement of comprehensive income
(unaudited)
Six months Six months
ended ended
GBPm 30 June 30 June
2021 2020
--------------------------------------------------------------- ----------- -----------
Loss for the period (172.4) (237.8)
Other comprehensive income/(loss) that is or may be
reclassified to profit or loss in subsequent periods:
Cash flow hedges - effective portion of changes in 0.2 -
fair value
Foreign exchange recycled to profit or loss from discontinued - -
operations
Foreign currency translation differences for foreign
operations (21.7) 35.3
--------------------------------------------------------------- ----------- -----------
Items that are or may be reclassified to profit or
loss in subsequent periods (21.5) 35.3
--------------------------------------------------------------- ----------- -----------
Other comprehensive income that will never be reclassified - -
to profit or loss in subsequent periods:
Re-measurement of defined benefit liability, net of - -
income tax
--------------------------------------------------------------- ----------- -----------
Items that will never be reclassified to profit or - -
loss in subsequent periods
--------------------------------------------------------------- ----------- -----------
Other comprehensive (loss)/income for the period, net
of tax (21.5) 35.3
Total comprehensive loss for the period, net of tax (193.9) (202.5)
--------------------------------------------------------------- ----------- -----------
Attributable to shareholders of the Group (191.8) (202.5)
--------------------------------------------------------------- ----------- -----------
Attributable to non-controlling interests (2.1) -
--------------------------------------------------------------- ----------- -----------
The above interim consolidated statement of comprehensive income
should be read in conjunction with the accompanying notes.
Interim consolidated statement of changes in equity
(unaudited)
Issued Share Treasury Foreign Hedging Other Retained Total Equity Non-controlling Total
share premium shares currency reserve reserves earnings attributable interests Equity
capital translation (1) to equity
GBPm reserve shareholders
----------------- -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
Balance at 1
January 2020 9.2 - (116.9) 34.9 (0.2) 25.8 927.7 880.5 - 880.5
Loss for the
period - - - - - - (237.8) (237.8) - (237.8)
Other
comprehensive
income:
Cash flow hedges - - - - - - - - - -
- effective
portion
of changes in
fair value
Foreign exchange - - - - - - - - - -
recycled to
profit or
loss from
discontinued
operations
Foreign currency
translation
differences
for foreign
operations - - - 35.3 - - - 35.3 - 35.3
------------------ -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
Other
comprehensive
income, net of
tax - - - 35.3 - - - 35.3 - 35.3
------------------ -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
Total
comprehensive
income/(loss)
for
the period - - - 35.3 - - (237.8) (202.5) - (202.5)
------------------ -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
Transaction with
owners of the
Company
Share-based
payments - - - - - - 1.0 1.0 - 1.0
Ordinary - - - - - - - - - -
dividend paid
Proceeds from
exercise of
share awards,
net of costs 1.3 312.6 - - - - - 313.9 - 313.9
Purchase of
shares - - (43.7) - - - - (43.7) - (43.7)
Proceeds from
exercise of
share awards - - 3.5 - - - (2.6) 0.9 - 0.9
------------------ -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
Total
transactions
with owners of
the
Company 1.3 312.6 (40.2) - - - (1.6) 272.1 - 272.1
------------------ -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
Balance at 30
June 2020 10.5 312.6 (157.1) 70.2 (0.2) 25.8 688.3 950.1 - 950.1
------------------ -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
Balance at 1
January 2021 10.5 312.6 (154.1) 36.2 (0.2) 25.8 283.0 513.8 - 513.8
Loss for the
period - - - - - - (170.3) (170.3) (2.1) (172.4)
Other
comprehensive
income:
Cash flow hedges
- effective
portion
of changes in
fair value - - - - 0.2 - - 0.2 - 0.2
Foreign exchange - - - - - - - - - -
recycled to
profit or
loss from
discontinued
operations
Foreign currency
translation
differences
for foreign
operations - - - (21.7) - - - (21.7) - (21.7)
------------------ -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
Other
comprehensive
(loss)/income,
net
of tax - - - (21.7) 0.2 - - (21.5) - (21.5)
------------------ -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
Total
comprehensive
(loss)/income
for
the period - - - (21.7) 0.2 - (170.3) (191.8) (2.1) (193.9)
------------------ -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
Transaction with
owners of the
Company
Share-based
payments - - - - - - 2.1 2.1 - 2.1
Ordinary - - - - - - - - - -
dividend paid
Purchase of - - - - - - - - - -
shares
Proceeds from
exercise of
share awards - - 2.6 - - - (1.8) 0.8 - 0.8
------------------ -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
Total
contributions
and
distributions - - 2.6 - - - 0.3 2.9 - 2.9
------------------ -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
Acquisition of
subsidiary with
Non-controlling
interest - - - - - - - - 13.5 13.5
------------------ -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
Total
transactions
with owners of
the
Company - - 2.6 - - - 0.3 2.9 13.5 16.4
------------------ -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
Balance at 30
June 2021 10.5 312.6 (151.5) 14.5 - 25.8 113.0 324.9 11.4 336.3
------------------ -------- -------- --------- ------------ -------- --------- --------- ------------- ---------------- --------
(1) (Other reserves include GBP10.5m for the restatement of the
assets and liabilities of the UK associate, from historic to fair
value at the time of the acquisition of the outstanding 58%
interest on 19 April 2006, GBP37.9m arising from the Scheme of
Arrangement undertaken on 14 October 2008, GBP6.5m relating to
merger reserves and GBP0.1m to the redemption of preference shares
partly offset by GBP29.2m arising from the Scheme of Arrangement
undertaken in 2003.)
The above interim consolidated statement of changes in equity
should be read in conjunction with the accompanying notes.
Interim consolidated balance sheet
As at 30 As at 31
June 2021 December
2020 (1)
GBPm Notes (unaudited)
-------------------------------------- ---- ------- ------------- ----------
Non-current assets
Goodwill 7 691.7 695.5
Other intangible assets 7 65.9 53.3
Property, plant and equipment 8 6,617.8 6,855.9
-------------------------------------------- ------- ------------- ----------
Right-of-use asset 8 5,480.6 5,646.9
Other property, plant and equipment 8 1,137.2 1,209.0
-------------------------------------------- ------- ------------- ----------
Deferred tax assets 9 188.6 188.2
Other long-term receivables 52.4 55.0
Investments in joint ventures 10.8 11.3
Other investments 0.4 -
-------------------------------------- ---- ------- ------------- ----------
Total non-current assets 7,627.6 7,859.2
-------------------------------------------- ------- ------------- ----------
Current assets
Inventory 1.2 1.3
Trade and other receivables (2) 687.8 1,003.7
Corporation tax receivable 31.0 29.1
Cash and cash equivalents 10 90.9 71.0
-------------------------------------------- ------- ------------- ----------
Total current assets 810.9 1,105.1
Total assets 8,438.5 8,964.3
-------------------------------------------- ------- ------------- ----------
Current liabilities
Trade and other payables 426.9 584.0
Customer deposits 386.7 423.6
Deferred income 307.3 328.9
Corporation tax payable 43.3 40.0
Bank and other loans 10 20.5 21.9
Lease liabilities 10 926.3 1,019.6
Provisions 5.6 17.5
Total current liabilities 2,116.6 2,435.5
Non-current liabilities
Other long-term payables 5.2 5.9
Deferred tax liability 0.2 0.2
Bank and other loans 10 485.0 400.2
Lease liabilities 10 5,444.9 5,538.9
Derivative financial liabilities 11 35.1 49.6
Provisions 8.4 13.5
Provision for deficit on joint
ventures 4.7 4.6
Retirement benefit obligations 2.1 2.1
-------------------------------------------- ------- ------------- ----------
Total non-current liabilities 5,985.6 6,015.0
Total liabilities 8,102.2 8,450.5
-------------------------------------------- ------- ------------- ----------
Total equity
Issued share capital 12 10.5 10.5
Issued share premium 312.6 312.6
Treasury shares (151.5) (154.1)
Foreign currency translation reserve 14.5 36.2
Hedging reserve - (0.2)
Other reserves 25.8 25.8
Retained earnings 113.0 283.0
-------------------------------------------- ------- ------------- ----------
Total shareholder's equity 324.9 513.8
-------------------------------------------- ------- ------------- ----------
Non-controlling interests 11.4 -
-------------------------------------- ---- ------- ------------- ----------
Total equity 336.3 513.8
-------------------------------------------- ------- ------------- ----------
Total equity and liabilities 8,438.5 8,964.3
-------------------------------------------- ------- ------------- ----------
(1) Based on the audited financial statements for the year ended
31 December 2020.
(2) Included in other receivables at 31 December 2020 was a
mezzanine and senior debt recognised at amortised cost of
GBP276.2m. This receivable balance was fully repaid to the Group in
February 2021.
The above interim consolidated balance sheet should be read in
conjunction with the accompanying notes.
Interim consolidated statement of cash flows (unaudited)
Six months Six months
ended ended
GBPm 30 June 2021 30 June 2020
(Restated)
Notes (1)
---------------------------------------------------- ------ -------------- --------------
Operating activities
Loss for the period from continuing operations (172.6) (238.4)
Adjustments for:
Profit from discontinued operations 4 0.2 0.6
Net finance expense 3 82.9 144.5
Share of loss on equity-accounted investees,
net of income tax 0.6 0.9
Depreciation charge - Other property,
plant and equipment 8 101.4 118.7
Depreciation charge - Right-of-use assets 8 451.2 525.7
Impairment of goodwill 7 - 4.9
Loss on disposal of property, plant and
equipment 8 55.2 19.5
Profit on disposal of right-of-use assets
and related leases liabilities (26.5) (2.3)
Profit on sale of other current assets (1.4) -
(2)
Loss on impairment of property, plant
and equipment 8 6.8 27.8
Loss on impairment of right-of-use assets 8 3.5 79.2
Amortisation of intangible assets 6.0 4.1
Tax expenses 9.9 1.1
Expected credit losses on trade receivables 19.2 9.4
(Decrease)/increase in provisions (18.4) 2.1
Unrealised loss on fair value financial - -
derivative instruments
Share-based payments 2.1 1.0
Other non-cash movements 6.5 (11.8)
---------------------------------------------------- ------ -------------- --------------
Operating cash flows before movements
in working capital 526.6 687.0
---------------------------------------------------- ------ -------------- --------------
Proceeds from partner contributions (reimbursement
of costs) 8 4.1 30.0
Decrease/(increase)in trade and other
receivables 15.6 (50.3)
(Decrease)/increase in trade and other
payables (237.4) 37.3
---------------------------------------------------- ------ -------------- --------------
Cash generated from operations 308.9 704.0
---------------------------------------------------- ------ -------------- --------------
Interest paid and similar charges on
bank loans and corporate borrowings (8.2) (7.8)
Interest paid on lease liabilities (87.9) (133.2)
Tax paid (9.2) (8.6)
---------------------------------------------------- ------ -------------- --------------
Net cash inflows from operating activities 203.6 554.4
---------------------------------------------------- ------ -------------- --------------
Investing activities
Purchase of property, plant and equipment 8 (107.6) (151.3)
Purchase of subsidiary undertakings (net
of cash acquired) 16 6.5 (0.6)
Purchase of intangible assets (12.9) (5.6)
Purchase of joint ventures (0.3) -
Proceeds on the sale of discontinued
operations, net of cash disposed of 4 - (0.5)
Proceeds on sale of property, plant and
equipment 8 0.1 8.2
Proceeds on sale of other current assets 283.7 -
(2)
Interest received 3 3.3 0.3
---------------------------------------------------- ------ -------------- --------------
Net cash inflows/(outflows) from investing
activities 172.8 (149.5)
---------------------------------------------------- ------ -------------- --------------
Financing activities
Proceeds from issue of loans 10 561.0 420.1
Repayment of loans 10 (484.0) (406.9)
Payment of lease liabilities 10 (441.4) (463.2)
Proceeds from partners contributions
(lease incentives) 7.1 67.1
Proceeds from issue of ordinary shares,
net of costs 12 - 313.9
Purchase of treasury shares - (43.7)
Proceeds from exercise of share awards 0.8 0.9
Net cash outflows from financing activities (356.5) (111.8)
---------------------------------------------------- ------ -------------- --------------
Net increase in cash and cash equivalents 10 19.9 293.1
Cash and cash equivalents at beginning
of the period 10 71.0 66.6
Effect of exchange rate fluctuations
on cash held 10 - 3.0
---------------------------------------------------- ------ -------------- --------------
Cash and cash equivalents at end of the
period 10 90.9 362.7
---------------------------------------------------- ------ -------------- --------------
(1) The comparative information has been restated to reflect the
impact of discontinued operations (note 4), interest charges on
lease liabilities and partner contributions (note 1).
(2) Included in other receivables at 31 December 2020 was
mezzanine and senior debt recognised at amortised cost of
GBP276.2m. This receivable balance was fully repaid to the Group in
February 2021, in addition to associated costs reimbursements,
resulting in an additional GBP1.4m gain on settlement.
The above interim consolidated statement of cash flows should be
read in conjunction with the accompanying notes.
Notes to the Condensed Interim Consolidated Financial
Information (unaudited)
Note 1: Basis of preparation and accounting policies
IWG plc is a public limited company incorporated in Jersey and
registered and domiciled in Switzerland. The Company's ordinary
shares are traded on the London Stock Exchange. IWG plc owns a
network of business centres which are utilised by a variety of
business customers.
The unaudited condensed interim consolidated financial
information as at and for the six months ended 30 June 2021
included within the half yearly report:
-- was prepared in accordance with International Accounting
Standard 34 "Interim Financial Reporting" ("IAS 34") as adopted by
the European Union ("adopted IFRS"), and therefore does not include
all disclosures that would otherwise be required in a complete set
of financial statements. Selected explanatory notes are included to
understand events and transactions that are significant to
understand the changes in the Group's financial position and
performance since the last IWG plc Annual Report and Accounts for
the year ended 31 December 2020;
-- was prepared in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority;
-- comprises the Company and its subsidiaries (the "Group") and
the Group's interests in jointly controlled entities;
-- does not constitute statutory accounts as defined in
Companies (Jersey) Law 1991. A copy of the statutory accounts for
the year ended 31 December 2020 has been filed with the Jersey
Companies Registry. Those accounts have been reported on by the
Company's auditors and the report of the auditors was (i)
unqualified, and (ii) did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying their report. These accounts are available from the
Company's website - www.iwgplc.com ; and
-- was approved by the Board of Directors on 10 August 2021 .
The accounting policies set out below have been applied
consistently to all periods presented in these Group financial
statements. The Consolidated Statement of Cash Flows as of 30 June
2020 has been restated, whereby the Group previously disclosed:
-- Interest charges on lease liabilities of GBP133.2m within the
'payment of lease liabilities' balance (GBP597.0m) within financing
activities.
-- Partner contributions of GBP97.1m offset within 'Increase in trade and other payables' for reimbursements for landlord assets (GBP30.0m) and 'Payment for lease liabilities' for lease incentives (GBP67.1m).
Having considered feedback from the Financial Reporting Council,
as disclosed in the 2020 Annual Report and Accounts, the Group
revisited these classifications and determined that:
-- Cash flows related to lease interest payments (GBP133.2m for
the period ended 30 June 2020) are material and should be disclosed
separately as operating cashflows, consistent with the treatment of
other interest payments. The 'payment of lease liabilities' balance
at 30 June 2020 has been adjusted accordingly.
-- Cash flows related to partner contributions (both
reimbursements and lease incentives) are material and should be
disclosed separately with contributions received for reimbursements
(GBP30.0m for the period ended 30 June 2020) as operating cashflows
and contributions received as for lease incentives (GBP67.1m for
the period ended 30 June 2020) as financing cash flows, with
'movement in trade and other payables' and 'payment of lease
liabilities' restated for these changes respectively.
The basis of preparation and accounting policies set out in the
Report and Accounts for the year ended 31 December 2020 have been
applied in the preparation of this half yearly report, except for
the adoption of new accounting policies and new standards and
interpretations effective as of 1 January 2021, which did not have
a material effect on the Group's financial statements, unless
otherwise indicated.
New standards and interpretations
The following standards, interpretations and amendments to
standards were applicable to the Group for periods commencing on or
after 1 January 2021:
Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
------------------------------------------------------------
The above has not had a significant impact on the Group.
The following new or amended standards and interpretations that
are mandatory for 2022 annual periods (and future years) are not
expected to have a material impact on the Company:
Onerous contracts - Cost of Fulfilling a Contract (Amendments 1 January 2022
to IAS 37)
Annual Improvements to IFRS Standards 2018-2020 1 January 2022
Property, Plant and Equipment: Proceeds before Intended 1 January 2022
Use (Amendments to IAS 16)
Reference to the Conceptual Framework - Amendments 1 January 2022
to IFRS 3
IFRS 17 Insurance Contracts and amendments to IFRS 1 January 2023
17 Insurance Contracts
Amendments to IAS 8 Accounting policies, Changes in 1 January 2023
Accounting Estimates and Errors: Definition
of Accounting Estimates
Disclosure of Accounting Policies (Amendments to IAS 1 January 2023
1 and IFRS Practice Statement 2)
Classification of Liabilities as Current or Non-current 1 January 2023
(Amendments to IAS 1)
------------------------------------------------------------- --------------
There are no other IFRS standards or interpretations that are
not yet effective that would be expected to have a material impact
on the Group. The Group has not early adopted any standard,
interpretation or amendment that has been issued but is not yet
effective.
Seasonality
The majority of the Group's revenue is contracted and is
therefore not subject to significant seasonal fluctuations. Demand
based revenue (from products such as Meeting Rooms and Customer
Services) is impacted by seasonal factors within the period,
particularly around summer and winter vacation periods. This
fluctuation leads to a small seasonal profit bias to the second
half year compared to the first half. However, this seasonal bias
is often hidden by other factors, which drive changes in the
pattern of profit delivery such as the addition of new centres or
changes in demand or prices.
Judgements and estimates
In preparing this condensed consolidated interim financial
information, the significant judgments made by management and the
key sources of estimation of uncertainty were the same as those
that applied to the Report and Accounts for the year ended 31
December 2020.
Principal risks
As part of the half year risk assessment, the Board has
considered the impact of the COVID-19 pandemic on the principal
risks of the Group. Following this risk assessment, the Board are
satisfied that the principal risks impacting the group over the
next 6 months are unchanged from those noted on pages 48 to 55 of
the 2020 Annual Report.
Going concern
The ongoing impact of COVID-19 on the global economy and the
operating activities of many businesses continues to facilitate a
climate of considerable uncertainty. The ultimate impact of the
pandemic on the Group remains uncertain at the date of signing
these financial statements.
The Group reported a loss after tax of GBP172.6m from continuing
operations for the period. This result includes a significant
amount of non-cash related charges. Net cash of GBP203.6m was
generated from operations during the year. Although the Group's
balance sheet at 30 June 2021 reports a net current liability
position of GBP1,305.7m the Directors do not consider that this
gives rise to a liquidity risk. A large portion of the net current
liabilities comprise non-cash liabilities such as deferred income
which will be recognised through future periods in the income
statement. The Group also holds customer deposits which are spread
across a large number of customers with no deposit for any
individual customer being material. Excluding deferred income and
short-term lease liabilities, the Group had net current liabilities
of GBP72.1m at 30 June 2021.
The Group maintains a 12-month rolling forecast and a three-year
strategic outlook. It also monitors the covenants in its facilities
to manage the risk of breach. The Group expects to remain within
covenants throughout the forecast period. The Directors have
assessed the potential cash generation of the Group against a range
of illustrative COVID-19 scenarios (including a severe but
plausible outcome), mitigating actions to reduce operating costs
and optimise cash flows during the ongoing global restrictions, the
liquidity of the Group and funding available under the Group's
GBP950.0m Revolving Credit Facility. GBP544.4m was available and
undrawn at 30 June 2021.
The Directors have assessed the potential cash generation of the
Group against a range of projected scenarios, the liquidity of the
Group, existing funding available to the Group and mitigating
actions to reduce discretionary and other operating cash outflows.
These mitigating actions included the suspension of future dividend
payments and the share repurchase programme, reducing growth and
maintenance capital expenditure, deferring or cancelling new centre
openings and a strengthened focus on the network rationalisation
programme.
Further, the impact of various illustrative COVID-19 scenarios
(including a severe but plausible outcome) on the business have
been modelled and tested against the Group's existing funding
arrangements.
The Group has also undertaken extensive mitigating actions to
reduce operating costs and overheads and optimise cash flows and
liquidity during the current environment.
On the basis of these actions and assessments, the Directors
consider it appropriate to continue to adopt the going concern
basis in preparing the financial statements for the six months
ended 30 June 2021.
Contractual obligations
During 2021 the Group conducted a review of its customer
deposits for inactive customer accounts. Based on this review, the
Group has released the financial liabilities in respect of such
deposits where the obligation qualifies for derecognition. The
effect of these changes was an increase in operating profit of
GBP21.9m in 2021.
The group conducted a review of the expected credit risk
associated with accounts receivable balances during 2021. This
review was performed in response to changing commercial
circumstances, with the Group recognising an increase in the
expected credit losses of GBP6.1m.
Note 2: Segmental analysis
An operating segment is a component of the Group that engages in
business activities from which it may earn revenue and incur
expenses. An operating segment's results are reviewed regularly by
the chief operating decision-maker (the Board of Directors of the
Group) on a pre-IFRS 16 basis to make decisions about resources to
be allocated to the segment and assess its performance, and for
which discrete financial information is available.
The business is run on a worldwide basis but managed through
four principal geographical segments (the Group's operating
segments): the Americas; EMEA (Europe, Middle East and Africa);
Asia Pacific; and the United Kingdom. These geographical segments
exclude the Group's non-trading, holding and corporate management
companies, which are included in the "Other" segment. The results
of business centres in each of these regions form the basis for
reporting geographical results to the chief operating
decision-maker. All reportable segments are involved in the
provision of global workplace solutions.
The Group's reportable segments operate in different markets and
are managed separately because of the different economic
characteristics that exist in each of those markets. Each
reportable segment has its own discrete senior management team
responsible for the performance of the segment.
The accounting policies of the operating segments are the same
as those described in the Annual Report and Accounts for the Group
for the year ended 31 December 2020.
Six months ended 30 Americas EMEA Asia Pacific United Kingdom Other Total
June
GBPm
-----------------------
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Restated(5) Restated(5) Restated(5) Restated(5) Restated(5) Restated(5)
----------------------- ---------- ------------ ---------- ------------ -------- ------------ ---------- ------------ -------- ------------ ---------- ------------
Revenues from external
customers (1) 419.7 584.1 336.8 366.7 140.7 162.9 166.7 204.6 2.7 3.0 1,066.6 1,321.3
----------------------- ---------- ------------ ---------- ------------ -------- ------------ ---------- ------------ -------- ------------ ---------- ------------
Mature (2) 397.0 549.5 308.3 338.1 131.1 147.0 152.9 187.1 2.7 3.0 992.0 1,224.7
2020 Expansions (2) 9.0 3.7 20.8 5.4 7.3 0.8 9.7 1.6 - - 46.8 11.5
2021 Expansions (2) 9.7 - 5.7 - 0.7 - 0.3 - - - 16.4 -
Closures (2) 4.0 30.9 2.0 23.2 1.6 15.1 3.8 15.9 - - 11.4 85.1
----------------------- ---------- ------------ ---------- ------------ -------- ------------ ---------- ------------ -------- ------------ ---------- ------------
Gross (loss)/profit
(centre contribution) (23.6) (30.8) 0.3 34.1 8.4 7.5 (24.2) (12.8) 2.6 5.7 (36.5) 3.7
Share of loss of
equity-accounted
investees - - - (0.1) - (0.1) (0.6) (0.7) - - (0.6) (0.9)
Operating loss (69.3) (70.2) (31.4) (7.6) (3.4) (9.3) (34.4) (30.6) (48.1) (51.8) (186.6) (169.5)
Finance expense - - - - - (14.4) (7.0)
Finance income - - - - - 17.6 0.3
----------------------- ---------- ------------ ---------- ------------ -------- ------------ ---------- ------------ -------- ------------ ---------- ------------
Loss before tax for
the period from
continuing operations (183.4) (176.2)
Depreciation and
amortisation 72.4 79.6 33.5 29.5 15.9 16.6 22.7 19.9 8.3 5.1 152.8 150.7
Impairment of assets - - - - - - - - - - - -
Assets(3) 3,326.5 4,029.4 2,535.3 2,621.2 632.7 775.7 1,518.4 1,765.6 425.6 549.4 8,438.5 9,741.3
Liabilities(3) (3,203.0) (3,697.0) (2,379.8) (2,427.4) (640.0) (731.1) (1,346.7) (1,536.7) (532.7) (399.0) (8,102.2) (8,791.2)
----------------------- ---------- ------------ ---------- ------------ -------- ------------ ---------- ------------ -------- ------------ ---------- ------------
Net assets /
(liabilities) 123.5 332.4 155.5 193.8 (7.3) 44.6 171.7 228.9 (107.1) 150.4 336.3 950.1
Non-current asset
additions (3)(4) 23.0 128.1 106.6 301.0 28.3 52.9 11.3 94.5 24.6 62.9 193.8 639.4
----------------------- ---------- ------------ ---------- ------------ -------- ------------ ---------- ------------ -------- ------------ ---------- ------------
(1) Excludes revenue from discontinued operations.
(2) Revenue has been disaggregated to reflect the basis on which
it is reported to the chief operating decision-maker.
(3) Presents on a basis consistent with IFRS 16.
(4) Excluding deferred taxation.
(5) The comparative information has been restated to reflect the
impact of discontinued operations and presentation of the reported
segment profit or loss on a pre-IFRS 16 basis, as adopted in
2020.
Operating profit in the "Other" category is generated from
services related to the provision of workspace solutions, including
fees from franchise agreements, offset by corporate overheads.
The operating segment's results presented on a pre-IFRS 16 basis
reconcile to the financial statements as follows:
Americas EMEA Asia Pacific United Kingdom Other Total
-------------------- -------------------- ------------------- ------------------- ------------------ --------------------
Continuing 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
operations Restated(1) Restated(1) Restated(1) Restated(1) Restated(1) Restated(1)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ------- ----------- ------- ----------- ------ ----------- ------ ----------- ----- ----------- ------- -----------
Gross (loss)/profit
(centre contribution) (23.6) (30.8) 0.3 34.1 8.4 7.5 (24.2) (12.8) 2.6 5.7 (36.5) 3.7
Rent 212.6 236.8 157.5 149.1 67.8 76.1 77.0 72.7 1.6 0.5 516.5 535.2
Depreciation
of right-of-use
assets/property,
plant and equipment (153.4) (220.3) (138.6) (129.7) (54.6) (78.0) (56.7) (67.7) (1.7) (0.2) (405.0) (495.9)
Other (7.4) 24.5 2.5 10.2 (1.2) 2.5 (1.1) (0.9) - (6.6) (7.2) 29.7
---------------------- ------- ----------- ------- ----------- ------ ----------- ------ ----------- ----- ----------- ------- -----------
Gross profit/(loss)
(centre contribution)
- Reported 28.2 10.2 21.7 63.7 20.4 8.1 (5.0) (8.7) 2.5 (0.6) 67.8 72.7
---------------------- ------- ----------- ------- ----------- ------ ----------- ------ ----------- ----- ----------- ------- -----------
(1) The comparative information has been restated to reflect the
impact of discontinued operations and presentation of the reported
segment profit or loss on a pre-IFRS 16 basis, as adopted in
2020.
Americas EMEA Asia Pacific United Kingdom Other Total
-------------------- -------------------- ------------------- ------------------- ------------------- --------------------
Continuing 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
operations Restated(1) Restated(1) Restated(1) Restated(1) Restated(1) Restated(1)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------- ----------- ------- ----------- ------ ----------- ------ ----------- ------ ----------- ------- -----------
Operating
(loss)/profit (69.3) (70.2) (31.4) (7.6) (3.4) (9.3) (34.4) (30.6) (48.1) (51.8) (186.6) (169.5)
Rent 212.7 236.8 157.5 149.1 67.8 76.1 79.8 82.9 2.0 1.3 519.8 546.2
Depreciation
of right-of-use
assets/property,
plant and
equipment (153.4) (220.3) (138.6) (129.7) (54.6) (78.0) (57.0) (68.2) (2.2) (1.5) (405.8) (497.7)
Other (7.5) 24.5 2.3 10.0 (1.3) 2.3 (0.9) (0.8) 0.2 (7.8) (7.2) 28.2
----------------- ------- ----------- ------- ----------- ------ ----------- ------ ----------- ------ ----------- ------- -----------
Operating
(loss)/profit
- Reported (17.5) (29.2) (10.2) 21.8 8.5 (8.9) (12.5) (16.7) (48.1) (59.8) (79.8) (92.8)
----------------- ------- ----------- ------- ----------- ------ ----------- ------ ----------- ------ ----------- ------- -----------
(1) The comparative information has been restated to reflect the
impact of discontinued operations and presentation of the reported
segment profit or loss on a pre-IFRS 16 basis, as adopted in
2020.
Americas EMEA Asia Pacific United Kingdom Other Total
------------------ ------------------ ----------------- ----------------- ----- ------------------ -----------
Continuing 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
operations Restated(1) Restated(1) Restated(1) Restated(1) Restated(1) Restated(1)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ----- ----------- ----- ----------- ---- ----------- ---- ----------- ----- ----------- ----- -----------
Depreciation
and amortisation 72.4 79.6 33.5 29.5 15.9 16.6 22.7 19.9 8.3 5.1 152.8 150.7
Depreciation
of right-of-use
assets/property,
plant and
equipment 153.4 220.3 138.6 129.7 54.6 78.0 57.0 68.2 2.2 1.5 405.8 497.7
----------------- ----- ----------- ----- ----------- ---- ----------- ---- ----------- ----- ----------- ----- -----------
Depreciation
and amortisation
- Reported 225.8 299.9 172.1 159.2 70.5 94.6 79.7 88.1 10.5 6.6 558.6 648.4
----------------- ----- ----------- ----- ----------- ---- ----------- ---- ----------- ----- ----------- ----- -----------
(1) The comparative information has been restated to reflect the
impact of discontinued operations and presentation of the reported
segment profit or loss on a pre-IFRS 16 basis, as adopted in
2020.
Americas EMEA Asia Pacific United Kingdom Other Total
------------------- ----------------- ----------------- ----------------- ----------------- -----------------
Continuing 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
operations Restated(1) Restated(1) Restated(1) Restated(1) Restated(1) Restated(1)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------ ----------- ---- ----------- ---- ----------- ---- ----------- ---- ----------- ---- -----------
Impairment - - - - - - - - - - - - -
of assets
Impairment
of right-of-use
assets/property,
plant and
equipment (12.9) 83.9 10.6 8.2 0.3 2.9 12.3 12.0 - - 10.3 107.0
----------------- ------ ----------- ---- ----------- ---- ----------- ---- ----------- ---- ----------- ---- -----------
Impairment
of assets -
Reported (12.9) 83.9 10.6 8.2 0.3 2.9 12.3 12.0 - - 10.3 107.0
----------------- ------ ----------- ---- ----------- ---- ----------- ---- ----------- ---- ----------- ---- -----------
(1) The comparative information has been restated to reflect the
impact of discontinued operations and presentation of the reported
segment profit or loss on a pre-IFRS 16 basis, as adopted in
2020.
Note 3: Net finance expense
Six months Six months
ended ended
30 June 2021 30 June 2020
(Restated)
GBPm (1)
--------------------------------------------------- ------------- -------------
Interest payable and similar charges on bank loans
and corporate borrowings (9.1) (6.7)
Interest payable on finance lease liabilities (87.9) (133.2)
--------------------------------------------------- ------------- -------------
Total interest expense (97.0) (139.9)
Other finance income/(costs) (including foreign
exchange) (3.5) (4.8)
Unwinding of discount rates - (0.1)
--------------------------------------------------- ------------- -------------
Total finance expense (100.5) (144.8)
--------------------------------------------------- ------------- -------------
Total interest income 3.3 0.3
Unwinding of discount rates - -
Financial liabilities measured at FVTPL 14.3 -
--------------------------------------------------- ------------- -------------
Total finance income 17.6 0.3
--------------------------------------------------- ------------- -------------
Net finance expense (82.9) (144.5)
--------------------------------------------------- ------------- -------------
(1) The comparative information has been restated to reflect the
impact of discontinued operations.
Note 4: Discontinued operations
During the period, the Group completed the sale of the business
and assets of Davao Felcris Centre, Inc. in Philippines, which
resulted in a gain of GBP 0.2m.
Six months Six months
ended ended
GBPm 30 June 2021 30 June 2020
------------------------------------- -------------- --------------
Revenue - 2.0
Expenses (1) - (0.9)
-------------------------------------- -------------- --------------
Profit before tax for the period - 1.1
Income tax expense / (credit) - -
------------------------------------- -------------- --------------
Profit after tax for the period - 1.1
Gain/(loss) on sale of discontinued
operations 0.2 (0.5)
-------------------------------------- -------------- --------------
Profit for the period, net of tax 0.2 0.6
-------------------------------------- -------------- --------------
The assets and liabilities of these operations at their
respective dates of disposal were as follows:
GBPm 30 June 2021 30 June 2020
------------------------------------------------ ------------- -------------
Total assets 1.3 -
Total liabilities (0.8) -
------------- -------------
Net assets 0.5 -
------------------------------------------------ ------------- -------------
Costs directly associated with the disposal - -
Foreign exchange recycled to profit and loss - -
-------------------------------------------------- ------------- -------------
0.5 -
Consideration on disposal (net of cash
and debt) (2) 0.7 (0.5)
-------------------------------------------------- ------------- -------------
Gain/(loss) on sale of discontinued operations 0.2 (0.5)
-------------------------------------------------- ------------- -------------
(1) Includes GBP0.7m of depreciation and amortisation
(2) The consideration on disposal in 2021 is deferred in
nature.
The net cash flows incurred by these operations are as
follows:
Six months Six months
GBPm ended ended
30 June 2021 30 June 2020
----------------- --------------- --------------
Operating - 1.9
Investing - -
Financing - (1.7)
------------------- ------------- --------------
Net cash inflow - 0.2
------------------- ------------- --------------
Note 5: COVID-19 related adjusting items
Following the declaration by the World Health Organisation of
the COVID-19 pandemic (COVID-19) and subsequent global government
restrictions in March 2020, the Group has been unable to operate at
full capacity. Given the ongoing political and economic uncertainty
resulting from COVID-19, the Group continues to expect to see
significant volatility and business disruption, impacting expected
performance in 2021 and potentially 2022.
In order to improve the transparency and usefulness of the
financial information presented and improve year-on-year
comparability, the Group has identified charges of GBP49.6m (2020:
GBP136.1m) relating to directly attributable gains and expenses
resulting from COVID-19. These charges are considered to be
adjusting items as they meet the Group's established definition,
being both significant in nature and value to the results of the
Group in the current period. For more details on the Group's
accounting policies for adjusting items, refer to page 114 of the
Annual Report and Accounts 2020.
The charges relate to several separately identifiable areas of
accounting judgement and estimates as follows:
GBPm Six months Six months
ended ended
30 June 2021 30 June 2020
-------------- --------------
Reversal of impairment)/Impairments
of property, plant and equipment
(including right-of-use assets)
(1) (34.0) 107.0
Impairments of goodwill (2) - 4.9
Provision for expected credit losses
(4) 12.6 9.4
Network rationalisation (1) 66.3 7.8
Other one-off items (3) 4.7 7.0
-------------- --------------
Total adjusting items 49.6 136.1
--------------------------------------- --- -------------- --------------
(1) Included as an adjusting item in cost of sales.
(2) Included as an adjusting item in selling, general and
administration.
(3) Included as adjusting items in selling, general and
administration except for GBP13.1m (2020: GBP3.7m) in respect of
worldwide financial support schemes which is included in costs of
sales.
(4) Included within the GBP19.2m of expected credit losses in
cost of sales (2020: GBP9.4m).
-- Impairment of property, plant and equipment (including right-of-use assets)
The continuation of COVID-19, including new and extended
preventative measures in most of the Group's markets, continues to
prolong the impact on our business in 2021. As a result of these
measures, management continues to carry out a comprehensive review
exercise for potential impairments across the whole portfolio at a
cash-generating units (CGUs) level.
The impairment review forms part of the Group's rationalisation
process undertaken throughout the period due to the impact of
COVID-19. This review compared the recoverable amounts of CGUs,
based on management's assumptions regarding likely future trading
performance, to the carrying values at 30 June 2021. Following this
review, an additional charge of GBP67.7m (2020: charge of
GBP107.0m) recognised, offset by a reversal of GBP101.7m due to
renegotiation and/or improvement in performance. Of this release,
GBP12.4m (2020: charge of GBP27.8m) was recorded against property,
plant and equipment and a release of GBP21.6m (2020: charge of
GBP79.2m) was recorded against right-of-use assets.
-- Impairment of goodwill
COVID-19 and associated restrictions continue to impact our
ability to trade our way to sustainable, profitable growth in
certain markets. As a result, the projected cash flows for these
markets continue to be evaluated to determine the carrying value of
the CGUs, with no additional impairment taken as at 30 June 2021
(2020: impairment of GBP4.9m). Further detail on the Group's
impairment analysis carried out as a result of COVID-19 is provided
in note 7.
-- Provision for expected credit losses
The Group continues to review the recoverability of its trade
and other receivables portfolio and booked an additional expected
credit loss of GBP12.6m (2020: GBP9.4m). This increase reflects the
greater likelihood of credit default by the Group's debtors
directly attributable to the impact of COVID-19.
-- Network rationalisation
GBP66.3m (2020: GBP7.8m) of charges were incurred relating to
the rationalisation of 63 centres (2020: 32 centres) which arose
directly as a result of COVID-19. A separate rationalisation charge
for a further 13 centres (2020: 53 centres) has also been recorded
which is not included as adjusting items.
-- Other one-off items
During the period, the Group incurred GBP0.4m of transaction
costs in respect of master franchise agreements that did not
complete due to the outbreak of COVID-19 (2020: GBP5.8m). The Group
fully expects to resume its pivot towards a franchising model in
due course.
Other charges of GBP17.4m (2020: GBP4.9m) were also incurred,
arising from mitigating actions taken by the Group in respect of
the COVID-19 crisis, offset by the release of excess closure
related provisions of GBP12.5m (2020: GBPnil). In addition, during
the period, the Group received a total of GBP0.6m (2020: GBP3.7m)
in respect of worldwide financial support schemes to fund staff
costs.
Should the estimated charges prove to be less than the amounts
required, the release of any amounts previously provided for would
be treated as adjusting items. The impact that COVID-19 has had on
underlying trading performance is not recognised within adjusting
items.
Note 6: Dividends
Equity dividends on ordinary shares paid during the period:
Six months Six months
GBPm ended ended
30 June 2021 30 June 2020
---------------------------------------------------- -------------- --------------
Final dividend for the year ended 31 December 2020: - -
Nil pence per share (2019: Nil pence per share)
---------------------------------------------------- -------------- --------------
Due to the prolonged uncertainty caused by COVID-19, we believe
it is prudent to protect our liquidity and as a result, no final
dividend was declared in 2020, payable in 2021 (2020: GBPnil).
Our capital allocation policy remains unchanged, prioritising
investment in the long-term growth of our business and dividend
distribution to shareholders. However, given the uncertainty caused
by COVID-19, we believe it is prudent to protect our liquidity in
the short-term and as a result, future dividend payments are to be
placed on hold with the intention of the earliest possible return
to our progressive dividend policy.
Note 7: Goodwill and indefinite life intangible assets
As at 30 June 2021, the carrying value of the Group's goodwill
and indefinite life intangible assets was GBP691.7m and GBP11.2m
respectively
(31 December 2020: GBP695.5m and GBP11.2m respectively).
In accordance with IAS 36, given the potential impact of the
COVID-19 pandemic as a triggering event due to the impact on
performance during the first half of the year, the Group reviewed
goodwill recognised for potential indicators of impairment.
Detailed impairment indicator reviews were performed on both the US
and UK businesses, with consideration given to key drivers of
performance and actions taken by management in response to
COVID-19. These key drivers included pre-COVID-19 business
performance, cost mitigation actions taken since the outbreak of
COVID-19, review of sales key performance indicators and market
specific economic trends. There were no long-term indicators of
impairment identified for the US and UK. There was no impairment
recognised in the current period in respect of individually
immaterial countries (2020: GBP4.9m) (refer to note 5).
Note 8: Property, plant and equipment
Right-of-use
assets Land and Leasehold Furniture Computer
(1) buildings improvements and equipment hardware Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------ ---------- ------------- -------------- --------- --------
Cost
At 1 January 2021 9,529 .9 149.9 1,521.0 775.0 129.0 12,104.8
Additions 77.5 10.7 61.1 28.2 3.5 181.0
Modifications (2) 278.7 - - - - 278.7
Acquisition of subsidiaries
(Note 16) 68.3 - 12.3 7.1 0.5 88.2
( 304.9
Disposals (4) (5) ) - (78.7) (13.7) (1.3) (398.6)
( 183.9
Exchange rate movements ) - (33.9) (12.9) (2.5) (233.2)
---------------------------- ------------ ---------- ------------- -------------- --------- --------
At 30 June 2021 9,465.6 160.6 1, 481.8 783.7 129.2 12,020.9
---------------------------- ------------ ---------- ------------- -------------- --------- --------
Accumulated depreciation
At 1 January 2021 3,883.0 8.7 835.5 420.8 100.9 5,248.9
Charge for the period
(3) (6) 451.2 1.3 66.9 28.7 4.5 552.6
Disposals (4) (5) (270.6) - (29.4) (8.7) (0.9) (309.6)
Impairment/ Reversal of
impairment (7) 3.5 - 6.8 - - 10.3
Exchange rate movements (82.1) (0.3) (9.0) (5.8) (1.9) (99.1)
---------------------------- ------------ ---------- ------------- -------------- --------- --------
At 30 June 2021 3,985.0 9.7 870.8 435.0 102.6 5,403.1
---------------------------- ------------ ---------- ------------- -------------- --------- --------
Net book value
At 1 January 2021 5,646.9 141.2 685.5 354.2 28.1 6,855.9
At 30 June 2021 5,480.6 150.9 611.0 348.7 26.6 6,617.8
---------------------------- ------------ ---------- ------------- -------------- --------- --------
(1) Right-of-use assets consist of property related leases.
(2) Modifications includes lease modifications and
extensions.
(3) Includes depreciation expenses related to discontinued
operations for right-of-use assets of GBPnil and other property,
plant and equipment of GBPnil.
(4) Included disposals related to discontinued operations for
right-of-use assets of GBP0.1m and other property, plant and
equipment of GBP0.6m.
(5) Disposals is net of GBP18.2m (2020: GBPnil) in respect of
COVID related adjusting items previously provided for (Note 5).
(6) Depreciation is net of GBP25.3m (2020: GBPnil) in respect of
COVID related adjusting items previously provided for (Note 5).
(7) The impairment of GBP10.3m includes an additional COVID
related impairment of GBP67.7m (2020: GBP107.0m), offset by the
reversal of GBP58.2m (2020: GBPnil) previously provided for (Note
5).
The key assumptions and methodology in calculating right-of-use
assets and the corresponding lease liability remain consistent with
those noted in note 32 of the Group's 2020 Annual Report and
Accounts.
Capital expenditure authorised and contracted for but not
provided for in the accounts amounted to GBP80.3m (30 June 2020:
GBP94.1m).
Impairment tests for property, plant and equipment (including
right-of-use assets) are performed on a cash-generating unit basis
when impairment triggers arise. Cash-generating units (CGUs) are
defined as individual business centres, being the smallest
identifiable group of assets that generate cash flows that are
largely independent of other groups of assets. The Group assesses
whether there is an indication that a CGU may be impaired,
including persistent operating losses, net cash outflows and poor
performance against forecasts. During the period, and as a direct
result of the challenging economic circumstances arising from
COVID-19, this gave rise to impairment tests in relation to various
centres where impairment indicators were identified.
The recoverable amounts of property, plant & equipment are
based on the higher of fair value less costs to sell and value
in
use. The Group considered both fair value less costs to dispose
and value in use in the impairment testing on a centre by centre
level. Impairment charges are recognised within cost of sales in
the consolidated income statement. In 2021, the Group recorded
impairment charges of GBP3.5m
(2020: GBP79.2m) in respect of right-of-use assets and GBP6.8m
(2020: GBP27.8m) in respect of leasehold improvements.
Note 9: Deferred tax assets
The Group's deferred tax assets arising on IFRS 16 have
increased to GBP188.6m (31 December 2021: GBP188.2m).
The Directors have assessed the recoverability of all deferred
tax balances in response to the impact of the COVID-19 pandemic on
the Group's performance and concluded that it is more likely than
not that the Group will earn sufficient taxable profits in order to
recover these balances. The period over which these balances are
expected to be recovered is not significantly different at 30 June
2021 than it was at the 31 December 2020.
Note 10: Analysis of financial assets/(liabilities)
Cash and Debt due Debt due Lease due Lease due Net financial
cash within after one within after one assets/
equivalents Gross cash one year year (1) one year year Gross Debt (liabilities)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------------- ---------- --------- ---------- --------- ---------- ---------- --------------
At 1 January
2020 66.6 66.6 (9.7) (351.0) (977.4) (5,568.6) (6,906.7) (6,840.1)
Cash flow (2) 293.1 293.1 (3.7) (9.2) 98.9 498.1 584.1 877.2
Non-cash
movements - - - - (155.4) (616.8) (772.2) (772.2)
Exchange rate
movements 3.0 3.0 - (5.0) (50.2) (280.6) (335.8) (332.8)
--------------- --------------- ---------- --------- ---------- --------- ---------- ---------- --------------
At 30 June 2020 362.7 362.7 (13.4) (365.2) (1,084.1) (5,967.9) (7,430.6) (7,067.9)
--------------- --------------- ---------- --------- ---------- --------- ---------- ---------- --------------
At 1 January 2021 71.0 71.0 (21.9) (400.2) (1,019.6) (5,538.9) (6,980.6) (6,909.6)
Cash flow 19.9 19.9 1.9 (78.9) 85.5 443.8 452.3 472.2
Non-cash movements - - (0.8) (7.5) (13.2) (458.8) (480.3) (480.3)
Exchange rate
movements - - 0.3 1.6 21.0 109.0 131.9 131.9
------------------- ---- ---- ------ ------- --------- --------- --------- ---------
At 30 June 2021 90.9 90.9 (20.5) (485.0) (926.3) (5,444.9) (6,876.7) (6,785.8)
------------------- ---- ---- ------ ------- --------- --------- --------- ---------
(1) Includes GBP303.5 (2020: GBPNil) convertible bond
liability.
(2) Includes restated lease and debt cash flows of GBP0.6m and
GBP0.3m relating to discontinued operations
Cash, cash equivalents and liquid investment balances held by
the Group that are not available for use ("Blocked Cash") amounted
to GBP5.8m at
30 June 2021 (31 December 2020: GBP4.1m).
Of this balance, GBP2.5m (31 December 2020: GBP1.6m) is pledged
as security against outstanding bank guarantees and a further
GBP3.3m (31 December 2020: GBP2.5m) is pledged against various
other commitments of the Group.
Cash flows on lease liabilities consist of principal payments of
GBP441.4m (2020: GBP463.8m) and interest payments of GBP87.9m
(2020: GBP133.2m). Total cash outflows of GBP563.0m (2020:
GBP618.4m) for leases, including variable payments of GBP33.7m
(2020: GBP21.4m), were incurred in the period.
Non-cash movements of GBP472.0m (2020: GBP772.2m) represent the
movements on lease liabilities in relation to new lease interest
expense, leases, lease modifications/remeasurements and lease
cessations.
Cash flows on debt due within, and after, one year relate to
movements in the revolving credit facility and other borrowings.
These net movements align with the activities reported in the cash
flow statement after taking into consideration the GBP35.1m
derivative liability recognised separately.
The following amounts are included in the Group's consolidated
financial statements in respect of its leases:
30 June 30 June
2021 2020
------------------------------------------------------------ ------- -------
Depreciation charge for right-of-use assets 451.2 525.7
Principal lease liability repayments 441.4 463.8
Interest expense on lease liabilities 87.9 133.2
Expense relating to short-term leases - -
Expense relating to leases of low-value assets that - -
are not shown above as short-term leases
Expenses relating to variable lease payments not included
in lease liabilities 33.7 21.4
Total cash outflow for leases comprising interest and
capital payments (529.3) (597.0)
Additions to right-of-use assets 77.5 401.2
Gains/(losses) arising from sale and leaseback transactions - -
Income from sub-leasing right-of-use assets - -
------------------------------------------------------------ ------- -------
Note 11: Financial instruments
The fair values of financial assets and financial liabilities,
together with the carrying amounts included in the consolidated
statement of financial position, are as follows:
At 30 June 2021 At 31 December 2020
------------------------------------ --- -------------------- ---------------------
Carrying Carrying
amount Fair value amount Fair value
------------------------------------ -------- ---------- --------- ----------
Cash and cash equivalents 90.9 - 71.0 -
Trade and other receivables 545.7 - 875.3 276.2
Other long-term receivables 52.4 - 55.0 -
Derivative financial liabilities (35.1) (35.1) (49.6) (49.6)
Convertible bond (303.5) (303.5) (298.8) (298.8)
Bank loans and corporate borrowings (171.5) - (91.7) -
Other loans (30.5) - (31.6) -
Trade and other payables (797.1) - (1,007.6) -
Other long-term payables (5.2) - (4.1) -
(653.9) (338.6) (482.1) (72.2)
--------------------------------------- -------- ---------- --------- ----------
The undiscounted cash flow and fair values of these instruments
is not materially different from the carrying value.
The fair value of the derivative element of the convertible bond
has been calculated with reference to unobservable credit spreads
and is considered to be a level 3 instrument. To calculate the fair
value of the derivative element of the convertible bond, a
convertible bond model has been applied. The convertible bond model
provides a price for the option as well as a price for the bond
component. An external valuation is obtained, where judgement is
applied in determining the fair credit spread and volatility
assumptions to use in the valuation. The model then provides a fair
value output for the embedded option which accurately reflects the
trading dynamics of the convertible in which it is embedded.
There has been no change in the classification of financial
assets and liabilities, the methods and assumptions used in
determining fair value and the categorisation of financial assets
and liabilities within the fair value hierarchy from those
disclosed in the annual report for the year ended 31 December
2020.
While the Group continues to monitor liquidity risk on a basis
consistent to the approach set out on page 135 of the 2020 Annual
Report and Accounts, the Group has considered the liquidity impact
of COVID-19 with mitigating actions to reduce discretionary and
other operating cash outflows. These actions included withdrawing
our final dividend for 2020 and suspending the share repurchase
program . The Group also assessed the recoverability of trade
receivables, with an increase in expected credit losses of GBP19.2
million recorded during the period (as at 30 June 2020: GBP9.4
million). See note 5 for further detail.
Although the Group has net current liabilities of GBP1,305.7m
(31 December 2020: GBP1,330.4m), the Group does not consider that
this gives rise to
a liquidity risk. A large proportion of the net current
liabilities comprise non-cash liabilities such as deferred income
which will be recognised in future periods through the income
statement. The Group holds customer deposits of GBP386.7m (December
2020: GBP423.6m) which are spread across a large number of
customers and no deposit held for an individual customer is
material. Therefore, the Group does not believe the balance
represents a liquidity risk. Excluding short-term lease liabilities
and deferred income, the Group has net current liabilities of
GBP72.1m at 30 June 2021 which will be managed through the Group's
available resources (31 December 2020: net current assets of
GBP18.1m).
The Group maintains a revolving credit facility provided by a
group of international banks. The amount of the facility is
GBP950.0 million with a final maturity of March 2025 and an option
to extend until 2026. As at 30 June, GBP544.4m was available and
undrawn under this facility (as at 30 June 2020: GBP467.6m).
The GBP950.0m revolving credit facility is subject to financial
covenants. In April 2021 the Group agreed revised covenants for the
period to June 2022 relating to EBITDA and liquidity headroom. The
Group was in compliance with its covenants up to the date of the
amendment of the covenants and is in compliance with the amended
covenant requirements.
In December 2020 the Group issued a GBP350.0m convertible bond,
which is due for repayment in 2027 if not previously converted into
shares. If the conversion option is exercised by the holder of the
option, the issuer has the choice to settle by cash or equity
shares in the Group. The holders of the bond have the right to put
the bonds back to the Group in 2025 at par. The bond carries a
fixed coupon of 0.5% per annum. In accordance with IFRS, the bond
liability is split between corporate borrowings (debt) and a
derivative financial liability. At the date of issue, the GBP350.0m
was bifurcated at GBP298.2m and GBP51.8m between corporate
borrowings (debt) and a derivative financial liability
respectively. At 30 June 2021, the debt was valued at its amortised
cost, GBP303.5m (31 December 2020: GBP298.8m) and the derivative
liability at its fair value, GBP35.1m (31 December 2020: GBP49.4m).
A mark-to-market gain of GBP14.3m (2020: GBPnil), on the derivative
liability, was recognised through finance income.
Note 12: Share Capital
On 28 May 2020 the Group announced the placement of 133,891,213
new ordinary shares, with a par value of 1 pence each. The price of
239.0 pence represented a discount of 8.1% to the middle market
closing price of 260.2 pence on 27 May 2020, with the Group
recognising net proceeds of GBP313.9m.
Note 13: Share-based payment
During the period, the Group awarded 734,820 options (30 June
2020: 19,725,000) under the Share Option Plan, 959,015 share awards
(30 June 2020: 915,739) under the Performance Share Plan and no
share awards (30 June 2020: 264,277) under the Deferred Share Bonus
Plan. During the period, a charge of GBP2.1m was recognized (2020:
GBP1.0m).
Note 14: Bank guarantees and contingent liabilities
The Group has bank guarantees and letters of credit held with
certain banks, predominantly in support of leasehold contracts with
a variety of landlords, amounting to GBP263.0m (31 December 2020:
GBP143.9m). There are no material lawsuits pending against the
Group.
Note 15: Related parties
The nature of related parties as disclosed in the consolidated
financial statements for the Group for the year ended 31 December
2020 has not changed.
31 December
30 June 2021 2020
---------------------------------------------- ------------ -----------
Management fees received from related parties 1.2 2.6
---------------------------------------------- ------------ -----------
31 December
30 June 2021 2020
------------------------------ ------------ -----------
Amounts owed by related party 19.7 17.6
Amounts owed to related party 5.3 4.3
------------------------------ ------------ -----------
As at 30 June 2021, no amounts due to the Group have been
provided for (31 December 2020: GBPNil).
As part of the share placing announced on 28 May 2020, Mark
Dixon, the CEO of the Group, subscribed for 38,205,384 shares at
the placing price of 239.0 pence. This equated to GBP91.3 million
and represented 28.53 percent of the total number of placing shares
offered. Additionally, Toscafund Ltd is a substantial shareholder
of the Group, and a related party of the Group for the purposes of
the Listing Rules, and subscribed for 24,845,223 shares at the same
placing price, representing an aggregate consideration of GBP59.4
million.
During the period the Group acquired goods and services from a
company indirectly controlled by a director of the Group amounting
to GBP4,926 (31 December 2020: GBP5,629).
Compensation paid to the key management personnel of the Group
will be disclosed in the Group's Annual Report and Accounts for the
year ending 31 December 2021.
Note 16: Acquisitions of subsidiaries and non-controlling
interest
Current period acquisitions
During the six months ended 30 June 2021, the Group made three
individually immaterial acquisitions for a total consideration of
GBP27.3m.
Provisional Provisional
fair value fair
GBPm Book value adjustments value
------------------------------------------------------ ---------- ------------ -----------
Net assets acquired
Right-of-use assets 68.3 - 68.3
Other property, plant and equipment 19.9 - 19.9
Cash 27.8 - 27.8
Other current and non-current assets 22.5 - 22.5
Lease liabilities (77.0) - (77.0)
Current liabilities (24.9) - (24.9)
Non-current liabilities (2.3) - (2.3)
------------------------------------------------------ ---------- ------------ -----------
Net assets acquired 34.3 - 34.3
NCI based on their proportionate interest in
the recognised amounts of the assets and liabilities
of 'The Wing' (13.5)
Goodwill arising on acquisition 6.5
------------------------------------------------------ ---------- ------------ -----------
Total consideration 27.3
Less deferred consideration (6.0)
Cash flow on acquisition
Cash paid 21.3
------------------------------------------------------ ---------- ------------ -----------
Net cash inflow 6.5
------------------------------------------------------ ---------- ------------ -----------
The goodwill arising on the 2021 acquisitions reflects the
anticipated future benefits IWG can obtain from operating the
businesses more efficiently, primarily through increasing occupancy
and the addition of value-adding products and services. Of the
above goodwill, GBP6.5m is expected to be deductible for tax
purposes.
If the above acquisitions had occurred on 1 January 2021, the
revenue and net retained loss arising from these acquisitions would
have been GBP6.7m and GBP10.3m respectively. In the period, the
equity acquisitions contributed revenue of GBP3.9m and net retained
loss of GBP7.3m.
There was no contingent consideration arising on the 2021
acquisitions, nor was any contingent consideration paid during the
current period with respect to milestones achieved on previous
acquisitions. There are no contingent considerations held on the
Group's balance sheet as at 30 June 2021.
These acquisitions include a 57% controlling interest acquired
in a subsidiary, 'The Wing'. A non-controlling interest of 43% has
been recognised on acquisition of the Company.
The acquisition costs associated with these transactions were
GBP1.0m, recorded within administration expenses in the
consolidated income statement.
For 2021's acquisitions, the fair value of assets acquired has
only been provisionally assessed, pending completion of a fair
value assessment which has not yet been completed due to the
limited time available between the date of acquisitions and the
year-end date. The main changes in the provisional fair values
expected are primarily for customer relationships and plant,
property and equipment. The final assessment of the fair value of
these assets will be made within 12 months of the acquisition dates
and any adjustments reported in future reports.
Prior period acquisitions
During the six months ended 30 June 2020 the Group made certain
individually immaterial acquisitions for a total consideration of
GBP0.6m, with goodwill of GBP0.5m recognised on the provisional
fair value . Acquisition accounting has been concluded on
acquisitions completed before 30 June 2020 with no fair value
adjustments recognised.
Note 17: Events after the balance sheet date
On 9 August 2021, the Group entered into a joint venture, with
Hysan Development Company Limited, for the sale of 32 locations.
The related strategic master franchise agreement grants the joint
venture the exclusive right to operate all IWG brands in Hong Kong
and the Greater Bay Area.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
For the half year ended 30 June 2021
The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules ("the DTR") of the UK's Financial Conduct
Authority ("the UK FCA").
In preparing the condensed set of financial statements included
within the half-yearly financial report, the Directors are required
to:
-- prepare and present the condensed set of financial statements
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the DTR of the UK FCA;
-- ensure the condensed set of financial statements has adequate disclosures;
-- select and apply appropriate accounting policies; and
-- make accounting estimates that are reasonable in the circumstances.
The Directors are responsible for designing, implementing and
maintaining such internal controls as they determine is necessary
to enable the preparation of the condensed set of financial
statements that is free from material misstatement whether due to
fraud or error.
We confirm that to the best of our knowledge:
1. the condensed set of consolidated financial statements
included within the half-yearly financial report of IWG plc for the
six months ended 30 June 2021 ("the interim financial information")
which comprises which comprises the Condensed Consolidated Income
Statement, the Condensed Consolidated Statement of Comprehensive
Income, the Condensed Consolidated Statement of Financial Position,
the Condensed Consolidated Statement of Changes in Equity, the
Condensed Consolidated Statement of Cash Flows and the related
explanatory notes, have been presented and prepared in accordance
with IAS 34, Interim Financial Reporting, as adopted by the
European Union, and the DTR of the UK FCA.
2. The interim financial information presented, as required by the DTR of the UK FCA, includes:
-- an indication of important events that have occurred during
the first 6 months of the financial year, and their impact on the
condensed set of financial statements;
-- a description of the principal risks and uncertainties for
the remaining 6 months of the financial year;
-- related parties' transactions that have taken place in the
first 6 months of the current financial year and that have
materially affected the financial position or the performance of
the enterprise during that period; and
-- any changes in the related parties' transactions described in
the last annual report that could have a material effect on the
financial position or performance of the enterprise in the first 6
months of the current financial year.
On behalf of the board
Mark Dixon Glyn Hughes
Chief Executive Officer Chief Financial Officer
10 August 2021
This half yearly announcement contains certain forward-looking
statements with respect to the operations of IWG plc. These
statements and forecasts involve risk and uncertainty because they
relate to events and depend upon circumstances that may or may not
occur in the future. There are a number of factors that could cause
actual results or developments to differ materially from those
expressed or implied by these forward-looking statements and
forecasts. Nothing in this announcement should be construed as a
profit forecast.
Independent Review Report to IWG plc
Introduction
We have been engaged by the Entity to review the accompanying
condensed set of consolidated financial statements in the
half-yearly financial report for the six months ended 30 June 2021
which comprises the Condensed Consolidated Income Statement, the
Condensed Consolidated Statement of Comprehensive Income, the
Condensed Consolidated Statement of Financial Position, the
Condensed Consolidated Statement of Changes in Equity, the
Condensed Consolidated Statement of Cash Flows and the related
explanatory notes ('the condensed consolidated interim financial
information'). Our review was conducted in accordance with the
International Standard on Review Engagements 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity'.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the half-yearly financial report for the
six months ended 30 June 2021 is not prepared in accordance with
IAS 34 Interim Financial Reporting as adopted by the EU and the
Disclosure Guidance and Transparency Rules ("the DTR") of the UK's
Financial Conduct Authority ("the UK FCA").
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA. As disclosed in note 1, the annual financial
statements of the Group are prepared in accordance with
International Financial Reporting Standards as adopted by the EU.
The Directors are responsible for ensuring that the condensed set
of consolidated financial statements included in this half-yearly
financial report has been prepared in accordance with IAS 34
Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the Entity a conclusion on
the condensed set of consolidated financial statements in the
half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with the International
Standard on Review Engagements 2410 Review of Interim Financial
Information Performed by the Independent Auditor of the Entity. A
review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We read the other information contained in the half-yearly
financial report to identify material inconsistencies with the
information in the condensed set of consolidated financial
statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the review. If
we become aware of any apparent material misstatements or
inconsistencies, we consider the implications for our report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Entity in accordance with the
terms of our engagement to assist the Entity in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Entity those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Entity for our
review work, for this report, or for the conclusions we have
reached.
Barrie O'Connell 10 August 2021
For and on behalf of KPMG
Chartered Accountants, Statutory Audit firm
1 Stokes Place
St. Stephen's Green
Dublin 2
D02 DE03
Ireland
Alternative performance measures
The Group reports certain alternative performance measures
('APMs') that are not required under International Financial
Reporting Standards ('IFRS') which represents the generally
accepted accounting principles ('GAAP') under which the Group
reports. The Group believes that the presentation of these APMs
provides useful supplemental information, when viewed in
conjunction with our IFRS financial information as follows:
-- to evaluate the historical and planned underlying results of our operations;
-- to set director and management remuneration; and
-- to discuss and explain the Group's performance with the investment analyst community.
None of the APMs should be considered as an alternative to
financial measures derived in accordance with GAAP. The APMs can
have limitations as analytical tools and should not be considered
in isolation or as a substitute for an analysis of our results as
reported under GAAP. These performance measures may not be
calculated uniformly by all companies and therefore may not be
directly comparable with similarly titled measures and disclosures
of other companies.
Please refer to page 163 of the IWG plc 2020 Annual Report and
Accounts for further details.
Additional information has been provided on the following pages
to bridge the statutory information reported within this half-year
announcement with the performance presented as part of the Chief
Executive Officer's and Chief Financial Officers' review.
Adjusted centre contribution
Centre contribution excluding adjusting items
Adjusted EBITDA
EBITDA excluding adjusting items
Adjusted EPS
EPS excluding adjusting items
Adjusted operating profit
Operating profit excluding adjusting items
Adjusting items
Adjusting items reflects the impact of adjustments , both
incomes and costs, which are considered to be significant in nature
and/or size.
Available workstations
The total number of workstations in the Group (also termed
Inventory). During the year, this is expressed as a weighted
average. At period ends the absolute number is used.
EBIT
Earnings before interest and tax.
EBITDA
Earnings before interest, tax, depreciation and amortisation for
the period
EPS
Earnings per share
Expansions
A general term which includes new business centres established
by the Group and acquired centres in the year.
Growth estate
Comprises centres which opened during the current or prior
financial year.
Network rationalisation
Network rationalisation for the current year is defined as a
centre that ceases operation during the period from 1 January to
December of the current year. Network rationalisation for the prior
year comparative is defined as a centre that ceases operation from
1 January of the prior year to December of the current year.
Mature business
Operations owned for a full 12-month period prior to the start
of the current financial year and operated throughout the current
financial year, which therefore have a full-year comparative.
Net debt
Operations cash and cash equivalents, adjusted for both short
and long--term borrowings and lease liabilities.
Occupancy
Occupied square feet divided by available square feet expressed
as a percentage.
Open centres
All centres excluding closures.
Operating profit before growth
Reported operating profit adjusted for the gross profit impact
arising from centres opening in the current year and centres to be
opened in the subsequent year.
Pre-2020 business
Operations owned for a full 12-month period prior to the start
of the financial year and operated throughout the current financial
year, which therefore have a full-year comparative.
Pre-2020 gross margin
Gross margin attributable to the Pre-2020 business.
Pre-IFRS 16 basis
IFRS accounting standards effective as at the relevant reporting
date with the exception of IFRS 16.
Revenue development
Revenue development, on a continuing basis, for the last
four years.
ROI
Return on investment.
TSR
Total shareholder return.
REVPOS
Revenue per occupied square feet.
Workstation occupancy
Occupied workstations divided by available workstations
expressed as a percentage.
Pre-IFRS 16 PRO FORMA Statements
Interim consolidated income statement
The purpose of these unaudited pages is to provide a
reconciliation from the 2021 interim financial results to the pro
forma statements in accordance with the previous pre-IFRS 16
policies adopted by the Group, and thereby, giving the reader
greater insight into the impact of IFRS 16 on the results of the
Group.
Period
Period ended
ended 30 June
30 June Rent & 2021
2021 finance pre-IFRS
As reported costs Depreciation Other adjustments Taxation 16
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Revenue 1,066.6 - - - - 1,066.6
Total cost of sales (979.6) (516.5) 405.0 7.2 - (1,083.9)
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Cost of sales (960.4) (516.5) 405.0 (3.2) - (1,075.1)
Adjusting items to cost of
sales (53.2) - - 44.4 - (8.8)
Loss on impairment of property,
plant , equipment and right-of-use
assets 34.0 - - (34.0) - -
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Expected credit losses on
trade receivables (19.2) - - - - (19.2)
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Gross profit/(loss) (centre
contribution) 67.8 (516.5) 405.0 7.2 - (36.5)
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Total selling, general and
administration expenses (147.0) (3.3) 0.8 - - (149.5)
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Selling, general and administration
expenses (129.2) (3.3) 0.8 - - (131.7)
Adjusting items to selling,
general and administration
expenses (17.8) - - - - (17.8)
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Share of loss of equity-accounted
investees, net of tax (0.6) - - - - (0.6)
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Operating loss (79.8) (519.8) 405.8 7.2 - (186.6)
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Finance expense (100.5) 87.9 - (1.8) - (14.4)
Finance income 17.6 - - - - 17.6
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Net finance expense (82.9) 87.9 - (1.8) - 3.2
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Loss before tax for the period
from continuing operations (162.7) (431.9) 405.8 5.4 - (183.4)
Income tax expense (9.9) - - - 1.3 (8.6)
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Loss for the period from continuing
operations (172.6) (431.9) 405.8 5.4 1.3 (192.0)
Profit after tax for the period
from discontinuing operations 0.2 (0.2) - 0.1 - 0.1
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
(Loss)/profit for the period (172.4) (432.1) 405.8 5.5 1.3 (191.9)
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Attributable to equity shareholders
of the Company (170.3) (432.1) 405.8 5.5 1.3 (189.8)
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Attributable to non-controlling
interests (2.1) - - - - (2.1)
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Earnings per ordinary share
(EPS):
Attributable to ordinary shareholders
Basic (p) (16.9) (18.8)
Diluted (p) (16.9) (18.8)
From continuing operations
Basic (p) (16.9) (18.9)
Diluted (p) (16.9) (18.9)
-------------------------------------- ------------- -------- ------------ ----------------- -------- ----------
Pro forma adjustments recognised
The performance of the Group is impacted by the following
significant adjustments in adopting IFRS 16. The recognition of
these balances will not impact the overall cash flows of the Group
or the cash generation per share.
1. Right-of-use assets and related lease liabilities
These adjustments reflect the right-of-use assets recognised on
transition, together with the related lease liabilities. The
initial lease liabilities are equal to the present value of the
lease payments during the lease term that have not yet been paid.
The cost of the right-of-use asset comprises the amount of the
initial measurement of the lease liability, plus any additional
direct costs associated with setting up the lease.
2. Rent and finance costs
Under IFRS 16 conventional rent charges are not recognised in
the profit or loss. The payments associated with these charges
instead form part of the lease payments used in calculating the
right-of-use assets and related lease liabilities noted above. The
lease liabilities are measured in subsequent periods using the
effective interest rate method, based on the applicable interest
rate determined at the date of transition. The related finance
costs arising on subsequent measurement are recognised directly
through profit or loss.
3. Depreciation and lease payments
Depreciation on the right-of-use assets recognised is
depreciated over the life of the lease on a straight-line basis,
adjusted for any period between the lease commencement date and the
date the related centre opens, reflecting the lease related costs
directly incurred in preparing the business centre for trading.
Lease payments reduce the lease liabilities recognised in the
balance sheet.
4. Taxation
The underlying tax charge is impacted by the change in the
profit before tax and deferred tax assets recognised.
5. Other adjustments
These adjustments primarily reflect the impairment of the
right-of-use assets and other property, plant and equipment as well
as the reversal of the closure cost provision on a pre-IFRS 16
basis. Certain parking, storage and brokerage costs are also
reversed, as they form part of the lease payments.
Interim consolidated balance sheet
Period
Period ended
ended Right-of-use 30 June
30 June asset & Rent & Depreciation 2021
2021 related finance & lease pre-IFRS
As reported lease liability costs payments Other adjustments Taxation 16
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Non-current assets
Goodwill 691.7 - - - - - 691.7
Other intangible
assets 65.9 - - - - - 65.9
Property, plant
and equipment 6,617.8 (5,932.9) 537.7 405.8 12.5 - 1,640.9
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Right-of-use
assets 5,480.6 (5,932.9) - 451.2 1.1 - -
Other property,
plant
and equipment 1,137.2 - 537.7 (45.4) 11.4 - 1,640.9
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Deferred tax
assets 188.6 - - - - (106.2) 82.4
Other long-term
receivables 52.4 - - - 0.5 - 52.9
Investments in
joint ventures 10.8 - - - - - 10.8
Other investments 0.4 - - - - - 0.4
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Total non-current
assets 7,627.6 (5,932.9) 537.7 405.8 13.0 (106.2) 2,545.0
Current assets
Inventory 1.2 - - - - - 1.2
Trade and other
receivables 687.8 - 125.1 - - - 812.9
Corporation tax
receivable 31.0 - - - - - 31.0
Cash and cash
equivalents 90.9 - - - - - 90.9
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Total current
assets 810.9 - 125.1 - - - 936.0
Total assets 8,438.5 (5,932.9) 662.8 405.8 13.0 (106.2) 3,481.0
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Current
liabilities
Trade and other
payables 426.9 - 394.0 - - - 820.9
Customer deposits 386.7 - - - - - 386.7
Deferred income 307.3 - - - - - 307.3
Corporation tax
payable 43.3 - - - - (0.4) 42.9
Bank and other
loans 20.5 - - - - - 20.5
Lease liabilities 926.3 (923.7) (87.5) 84.9 - - -
Provisions 5.6 - - - 239.2 - 244.8
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Total current
liabilities 2,116.6 (923.7) 306.5 84.9 239.2 (0.4) 1,823.1
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Non-current
liabilities
Other long-term
payables 5.2 - 911.3 - 0.4 - 916.9
Deferred tax
liability 0.2 - - - - (0.2) -
Bank and other
loans 485.0 - - - - - 485.0
Lease liabilities 5,444.9 (5,801.0) (0.4) 356.5 - - -
Derivative
financial assets 35.1 - - - - - 35.1
Provisions 8.4 - - - 2.1 - 10.5
Provision for
deficit
in joint ventures 4.7 - - - - - 4.7
Retirement benefit
obligations 2.1 - - - - - 2.1
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Total non-current
liabilities 5,985.6 (5,801.0) 910.9 356.5 2.5 (0.2) 1,454.3
Total liabilities 8,102.2 (6,724.7) 1,217.4 441.4 241.7 (0.6) 3,277.4
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Total equity
Issued share
capital 10.5 - - - - - 10.5
Issued share
premium 312.6 - - - - - 312.6
Treasury shares (151.5) - - - - - (151.5)
Foreign currency
translation
reserve 14.5 (21.3) - - - - (6.8)
Hedging reserve - - - - - - -
Other reserves 25.8 - - - - - 25.8
Retained earnings 113.0 813.1 (554.6) (35.6) (228.7) (105.6) 1.6
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Total
shareholder's
equity 324.9 791.8 (554.6) (35.6) (228.7) (105.6) 192.2
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Non-controlling
interests 11.4 - - - - - 11.4
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Total equity 336.3 791.8 (554.6) (35.6) (228.7) (105.6) 203.6
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Total equity and
liabilities 8,438.5 (5,932.9) 662.8 405.8 13.0 (106.2) 3,481.0
------------------ ------------ ---------------- -------- ------------ ----------------- -------- ----------
Interim consolidated statement of cash flows
Period Period
ended ended
30 June Rent & Depreciation 30 June
2021 finance & lease 2021 pre-IFRS
As reported costs payments Other adjustments 16
GBPm GBPm GBPm GBPm GBPm
--------------------------------------------- ------------ -------- ------------ ----------------- --------------
Operating activities
Loss for the period from continuing
operations (172.6) (431.9) 405.8 6.7 (192.0)
Adjustments for:
Profit from discontinued operations 0.2 (0.2) - 0.1 0.1
Net finance expense 82.9 (87.9) - 1.8 (3.2)
Share of loss on equity-accounted investees,
net of income tax 0.6 - - - 0.6
Depreciation charge - Other property,
plant and equipment 101.4 - 45.4 - 146.8
Depreciation charge - Right-of-use
assets 451.2 - (451.2) - -
Loss on disposal of property, plant
and equipment 55.2 - - 20.6 75.8
Profit on disposal of right-of-use
assets and related leases liabilities (26.5) - - 26.5 -
Profit on sale on current assets (1.4) - - - (1.4)
Loss on impairment of property, plant
and equipment 6.8 - - (6.8) -
Loss on impairment of right-of-use
assets 3.5 - - (3.5) -
Amortisation of intangible assets 6.0 - - - 6.0
Tax expenses 9.9 - - (1.3) 8.6
Expected credit losses on trade receivables 19.2 - - - 19.2
(Decrease)/increase in provisions (18.4) - - (8.6) (27.0)
Share-based payments 2.1 - - - 2.1
Unrealised loss on fair value financial - - - - -
derivative instruments
Other non-cash movements 6.5 - - (3.2) 3.3
--------------------------------------------- ------------ -------- ------------ ----------------- --------------
Operating cash flows before movements
in working capital 526.6 (520.0) - 32.3 38.9
--------------------------------------------- ------------ -------- ------------ ----------------- --------------
Proceeds from partner contributions
(reimbursement of costs) 4.1 - (4.1) - -
Decrease/(increase) in trade and other
receivables 15.6 17.8 - - 33.4
(Decrease)/increase in trade and other
payables (237.4) 428.6 (430.2) (32.3) (271.3)
--------------------------------------------- ------------ -------- ------------ ----------------- --------------
Cash generated from operations 308.9 (73.6) (434.3) - (199.0)
--------------------------------------------- ------------ -------- ------------ ----------------- --------------
Interest paid and similar charges on
bank loans and corporate borrowings (8.2) - - - (8.2)
Interest paid on lease liability (87.9) 87.9 - - -
Tax paid (9.2) - - - (9.2)
--------------------------------------------- ------------ -------- ------------ ----------------- --------------
Net cash inflows from operating activities 203.6 14.3 (434.3) - (216.4)
--------------------------------------------- ------------ -------- ------------ ----------------- --------------
Investing activities
Purchase of property, plant and equipment (107.6) (14.3) (121.9)
Purchase of subsidiary undertakings
(net of cash acquired) 6.5 - - - 6.5
Purchase of intangible assets (12.9) - - - (12.9)
Purchase of joint ventures (0.3) - - - (0.3)
Proceeds on the sale of discontinued - - - - -
operations, net of cash disposed of
Proceeds on sale of property, plant
and equipment 0.1 - - - 0.1
Proceeds on sale of other current assets 283.7 283.7
Interest received 3.3 - - - 3.3
--------------------------------------------- ------------ -------- ------------ ----------------- --------------
Net cash inflows / (outflows) from
investing activities 172.8 (14.3) - - 158.5
--------------------------------------------- ------------ -------- ------------ ----------------- --------------
Financing activities
Proceeds from issue of loans 561.0 - - - 561.0
Repayment of loans (484.0) - - - (484.0)
Payment of lease liabilities (441.4) - 441.4 - -
Proceeds from partners contributions
(lease incentives) 7.1 - (7.1) - -
Proceeds from issue of ordinary shares, - - - - -
net of costs
Purchase of treasury shares - - - - -
Proceeds from exercise of share awards 0.8 - - - 0.8
Net cash outflows from financing activities (356.5) - 434.3 - 77.8
--------------------------------------------- ------------ -------- ------------ ----------------- --------------
Net increase in cash and cash equivalents 19.9 - - - 19.9
Cash and cash equivalents at beginning
of the period 71.0 - - - 71.0
Effect of exchange rate fluctuations - - - - -
on cash held
--------------------------------------------- ------------ -------- ------------ ----------------- --------------
Cash and cash equivalents at end of
the period 90.9 - - - 90.9
--------------------------------------------- ------------ -------- ------------ ----------------- --------------
Segmental analysis - management basis (unaudited)
Six months ended Americas EMEA Asia Pacific UK Other Total
30 June 2021 (pre-IFRS (pre-IFRS (pre-IFRS (pre-IFRS (pre-IFRS (pre-IFRS
16 basis) 16 basis) 16 basis) 16 basis) 16 basis) 16 basis)
------------------------ ----------- ----------- ------------- ----------- ----------- -----------
Pre-2020 (1)
Square Feet (000's)
(4) 11,784 8,569 3,381 4,500 - 28,234
Occupancy % 68.2% 69.3% 67.8% 67.7% - 68.4%
------------------------ ----------- ----------- ------------- ----------- ----------- -----------
Workstations (8) 212,129 183,978 91,276 103,043 - 590,426
Workstations occupancy
(%) 66.0% 68.5% 67.7% 65.1% - 66.9%
------------------------ ----------- ----------- ------------- ----------- ----------- -----------
Revenue (GBPm) 397.0 308.3 131.1 152.9 2.7 992.0
REVPOS (GBP) 49.4 52.0 57.2 50.2 - 51.4
2020 Expansions
(2)
Square Feet (000's)
(4) 434 860 191 301 - 1,786
Occupancy % 43.9% 50.4% 57.2% 48.6% - 49.2%
Revenue (GBPm) 9.0 20.8 7.3 9.7 - 46.8
2021 Expansions
(2)(5)
Square Feet (000's)
(4) 89 403 71 29 - 592
Occupancy (%) 20.0% 23.8% 16.4% 33.3% - 22.8%
Revenue (GBPm) 9.7 5.7 0.7 0.3 - 16.4
Closures(3) (6)
Square Feet (000's)
(4) 113 95 42 123 - 373
Occupancy (%) 50.8% 42.1% 54.7% 49.2% - 48.5%
Revenue (GBPm) 4.0 2.0 1.6 3.8 - 11.4
Total
Square Feet (000's)
(4) 12,420 9,927 3,685 4,953 - 30,985
Occupancy (%) 66.8% 65.5% 66.1% 65.9% - 66.2%
Revenue (GBPm) 419.7 336.8 140.7 166.7 2.7 1,066.6
Period end square
feet (000's) (7)
Pre-2020 11,815 8,608 3,396 4,612 - 28,431
2020 Expansions 436 860 189 303 - 1,788
2021 Expansions 116 701 125 41 - 983
Total 12,367 10,169 3,710 4,956 - 31,202
------------------------ ----------- ----------- ------------- ----------- ----------- -----------
Segmental analysis - management basis (continued)
Six months ended Americas EMEA Asia Pacific UK Other Total
30 June 2020 (pre-IFRS (pre-IFRS (pre-IFRS (pre-IFRS (pre-IFRS (pre-IFRS
16 basis) 16 basis) 16 basis) 16 basis) 16 basis) 16 basis)
------------------------ ----------- ----------- ------------- ----------- ----------- -----------
Pre-2020 (1)
Square Feet (000's)
(4) 11,850 8,632 3,361 4,573 - 28,416
Occupancy % 77.5% 73.7% 72.4% 74.6% - 75.3%
------------------------ ----------- ----------- ------------- ----------- ----------- -----------
Workstations (8) 212,588 174,163 91,191 101,777 - 579,719
Workstations occupancy
(%) 75.4% 71.5% 71.4% 72.2% - 73.0%
------------------------ ----------- ----------- ------------- ----------- ----------- -----------
Revenue (GBPm) 549.5 338.1 147.0 187.1 3.0 1,224.7
REVPOS (GBP) 59.8 53.1 60.4 54.9 - 57.2
2020 Expansions
(1)
Square Feet (000's)
(4) 232 388 61 53 - 734
Occupancy (%) 23.2% 33.5% 22.7% 14.4% - 28.0%
Revenue (GBPm) 3.7 5.4 0.8 1.6 - 11.5
Closures(3) (6)
Square Feet (000's)
(4) 868 610 388 384 - 2,250
Occupancy (%) 60.1% 69.3% 64.0% 68.9% - 64.8%
Revenue (GBPm) 30.9 23.2 15.1 15.9 - 85.1
Total
Square Feet (000's)
(4) 12,950 9,630 3,810 5,010 - 31,400
Occupancy (%) 75.4% 71.8% 70.7% 73.5% - 73.4%
Revenue (GBPm) 584.1 366.7 162.9 204.6 3.0 1,321.3
------------------------ ----------- ----------- ------------- ----------- ----------- -----------
(1) The Pre-2020 business comprises centres opened prior to the
current or previous financial year
(2) Expansions include new centres opened and acquired
businesses
(3) Network rationalisation for the 2021 data is defined as a
centre closed during the period from 1 January 2021 to 30 June
2021
(4) Office square feet are calculated as the weighted average
for the period
(5) 2021 expansions include any costs incurred in 2021 for
centres which will open in 2022
(6) Network rationalisation for the 2020 comparative data is
defined as a centre closed during the period from 1 January 2020 to
30 June 2021
(7) Office square feet available at period end
(8) Workstation numbers are calculated as the weighted average
for the period
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IR FZGGRLLLGMZM
(END) Dow Jones Newswires
August 10, 2021 02:00 ET (06:00 GMT)
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