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IWG Iwg Plc

193.80
-1.70 (-0.87%)
Last Updated: 14:20:59
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Iwg Plc LSE:IWG London Ordinary Share JE00BYVQYS01 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -1.70 -0.87% 193.80 193.80 194.00 196.30 193.30 194.80 186,715 14:20:59
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Business Services, Nec 2.96B -215M -0.2136 -9.10 1.96B

IWG PLC Full Year Results (5619R)

09/03/2021 7:00am

UK Regulatory


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TIDMIWG TIDMTTM

RNS Number : 5619R

IWG PLC

09 March 2021

9 March 2021

IWG plc - ANNUAL FINANCIAL REPORT ANNOUNCEMENT - YEARED 31 DECEMBER 2020

IWG plc, the global operator of leading workspace brands, today announces its annual results for the year ended 31 December 2020

Whilst 2020 was a challenging year, our decisive action has reset the Group to take advantage of accelerating demand for hybrid working

Key Highlights(1)

COVID-19 created the most challenging year in our history but provides our greatest opportunity in 31-years

- Open centre revenue up 0.5%(2) to GBP2,393.4m, up 10.2% in H1 and down 8.8% in H2

- Pre-2019(3) revenue down 7.4%(2) to GBP2,129.8m, up 0.2% in H1 and down 15.8% in H2

- Pre-2019(3) occupancy at 72.9% (2019: 73.9%), occupancy reduction moderating over the year

- Strong demand for products supporting hybrid working: Virtual Office and VO customer services revenue growth 6.4%

- Adjusted operating loss from continuing operations of GBP173.8m (2019: profit of GBP136.8m), in line with management expectations

Swift, comprehensive actions taken to reduce costs

- Specific COVID-19 related adjusting items of GBP379.5m

- Annualised cost savings anticipated to be in the range GBP325m to GBP375m; estimated cumulative benefit of c. GBP2.4bn

- Cash flow before net growth capex, investments, share repurchase, dividends & adjusting items of GBP140.7m (2019: GBP224.6m)

Maintained strong financial position

- Strengthened financial position following GBP320m equity placing and GBP350m convertible bond offering

- Net debt at 31 December 2020 of GBP351.1m; net debt reduced in Q1 2021 with return of GBP283.7m of investment

- GBP802.3m of available liquidity as at 31 December 2020

Strategic transformation to capital light model continues apace

- Franchising remains a key focus area for growth

- Added 15 new franchise partners and an additional 67 committed locations in 2020

- Signed first franchise in the US since year-end in Metro Detroit

- Strong growth in management agreements and other partnering deals; Master franchise discussions ongoing

Well positioned to capture increased opportunities post COVID-19 recovery

- 2020: a year of unprecedented challenge, likely to persist well into 2021

- Stronger H2 2021 financial performance underpinned by cost savings and expected improved revenue growth

- Existing positive trends accelerated by the pandemic: increased demand for hybrid working solutions and suburban locations

- Uniquely positioned to help enterprises adapt to the new world of hybrid working; many new deals signed

- Strong pipeline of compelling M&A opportunities but we maintain a prudent approach

Hybrid working driving surge in membership deals

- Unprecedented demand for enterprise membership agreements

- More than 1m future members in the pipeline

- Significant new enterprise membership clients include NTT, Standard Chartered, Cisco, Salesforce, Talentsoft, Nestle and Staples

Annual results

 
                                                                                                  % change    % change 
                                                                                                  constant      actual 
                                               2020         2020         2019             2019    currency    currency 
                                                       (Pre-IFRS    (Pre-IFRS                    (Pre-IFRS   (Pre-IFRS 
GBPm                                  (As reported)          16)          16)    (As reported)         16)         16) 
----------------------------------  ---------------  -----------  -----------  ---------------  ----------  ---------- 
Revenue                                     2,480.2      2,480.2      2,648.9          2,648.9      (5.3)%      (6.4)% 
Open centre revenue                         2,393.4      2,393.4      2,408.1          2,408.1        0.5%      (0.6)% 
Pre-2019 revenue                            2,129.8      2,129.8      2,328.7          2,328.7      (7.4)%      (8.5)% 
Operating profit/(loss) - 
 continuing 
 operations                                 (352.0)      (553.3)        136.8            286.8 
Adjusted operating profit/(loss) 
 - continuing operations                       37.8      (173.8)        136.8            286.8 
Profit/(loss) before tax - 
 continuing 
 operations                                 (620.1)      (564.2)        118.5             55.0 
Adjusted profit/(loss) before 
 tax - continuing operations                (230.3)      (184.7)        118.5             55.0 
Profit/(loss) after tax - 
 continuing 
 operations                                 (650.2)      (607.5)        134.0             77.3 
Earnings per share - attributable 
 to ordinary shareholders (p)                (67.9)       (63.5)         56.4             50.5 
Adjusted EBITDA                             1,233.9        133.8        428.3          1,482.8 
Adjusted cash flow before net 
 growth capex, investments, 
 repurchases, 
 dividends & adjusting items                   74.4        140.7        224.6          (876.2) 
Net debt                                 6,909.6(4)        351.1        294.1          6,840.1 
Net debt: EBITDA (x)                                         2.7          0.7 
----------------------------------  ---------------  -----------  -----------  ---------------  ----------  ---------- 
 

1. Results presented in accordance with pre-IFRS 16 accounting standards (as defined in Alternative performance measures section)

2. At constant currency

3. Pre-2019 refers to the performance for all operations opened on or before 31 December 2018 and which were open throughout the period

4. Net debt in accordance with IFRS 16 includes lease liabilities of GBP6,558.5m

5. The comparative information has been restated to reflect the impact of discontinued operations

Mark Dixon, Chief Executive of IWG plc, said:

"This was a period of exceptional change for IWG, for our employees, our clients and for the overall business environment worldwide. Certainly, 2020 was very difficult, and I anticipate these challenging market conditions to prevail for a few months to come. Indeed, we made additional provisions for further network rationalisation as the recovery from the pandemic continues to take longer than we anticipated last summer. I believe this was a prudent decision that emphasises our commitment to doing what needs to be done for the greatest long-term benefit of the Group.

But 2020 was also a year when our market underwent a decade of evolution in just 12 months. It was a year when companies across the world discovered first-hand that their workforces could be highly engaged and productive while utilising the hybrid way of working: at home, in a local office, and occasionally at corporate HQ. This trend is not new, but one that has been accelerated by the emergence of the COVID-19 pandemic. Today, we anticipate a massive surge in growth when we eventually emerge from the unprecedented downturn that the COVID-19 pandemic has created. The sheer scale of our global network positions us uniquely well to benefit from this surging demand. At the same time, our franchising and management agreement strategies are performing to plan as the spearhead of our capital-light expansion strategy. In summary, we are progressing well on our plans to strengthen our position as the leading service provider to the global flexible workspace industry and I firmly believe that the years ahead will be tremendously exciting for our business."

Details of results presentation

Mark Dixon, Chief Executive Officer, and Eric Hageman, Chief Financial Officer, are hosting a webcast today for analysts and investors at 9.00am GMT. Those wishing to watch the webcast will need to register in advance by clicking on the following link:

https://streams.merchantcantos.com/IWG2021

There will also be a replay facility available for 14 days after the call:

 
Dial in number:   +44 (0) 20 8196 1480 
Access Pin:       2171389# 
 

For further information, please contact:

 
IWG plc Tel: +41 (0) 41 723 2353 
 Mark Dixon, Chief Executive Officer 
 Eric Hageman, Chief Financial Officer 
 Wayne Gerry, Group Investor Relations   Brunswick Tel: +44(0) 20 7404 
 Director                                 5959 
 For more information, please visit       Nick Cosgrove 
 www.iwgplc.com                           Oliver Sherwood 
 

Chairman's statement

 
A year of challenge, 
 action and opportunity 
 

For everybody at IWG, our employees, clients, partners and other stakeholders, 2020 will always be remembered as the year when the way we all work changed rapidly and forever.

THE YEAR EVERYTHING CHANGED

The year began with enormous promise, as our business made its strongest-ever start with every sign that 2020 would be a year of significant achievements, especially as the shift towards the hybrid flexible working model gradually continued to gain traction among businesses everywhere. But then things changed, quickly and dramatically, as awareness grew in markets across the world of the very real challenges coming from a growing global pandemic and associated national and regional lockdowns. The speed of change was immense, as 2020 metamorphosed into the most challenging year in memory, not only for IWG but also for most nations, businesses, communities, families and individuals around the world.

FACING THE CHALLENGES

As the intimidating new challenges faced by our clients, employees, franchise and landlord partners, and other stakeholders became apparent, we quickly took comprehensive proportional actions to help protect the future of our business. For our customers and employees, we rapidly implemented new health and safety protocols as well as provided financial support for customers. To preserve cash, we focused on reducing costs across the organisation, including renegotiating leases resulting in many more variable lease terms and management agreements and, where necessary, rationalisation of our network. We also withdrew our final dividend to shareholders for 2019 and suspended our share repurchase scheme and further dividends.

The Board is especially grateful for the personal contributions made by our employees and Senior Leadership Team in meeting the challenges, including swiftly implementing the new health and safety measures to protect the work environments for our employees and clients. I am personally very appreciative for the Board engagement throughout the year via more frequent meetings and increased activity between meetings to deal with pandemic related matters. As the pandemic developed, our Executive and Non-Executive Directors alike took a 50% reduction in their salaries or fees for the remainder of the year and the Executive Directors will not receive any bonuses for 2020, although they have worked harder than ever before.

The impact of the pandemic and resulting actions taken had personal and financial ramifications (as evidenced in our own 2020 results reported herein) on our clients, employees, franchise and landlord partners, and investors. The Board offers its sincere appreciation to everyone working constructively with us as we navigate through the challenges created by the pandemic.

EMBRACING THE OPPORTUNITIES

As the year progressed it became increasingly clear that the crisis was driving fundamental long-term changes for companies, workers, communities and the environment. As more and more organisations adopted the hybrid working model, the desire for many diverse groups to achieve the sustained benefits from this way of working became clear. Companies are able to reduce their operating costs and mitigate financial risk. With the right support, there are mental health and productivity benefits to employees from working locally and commuting less. By helping millions of individuals to work efficiently closer to where they live, we can be a powerful catalyst for our customers to reduce their carbon footprint. In addition, numerous communities can retain talent and attract employment as never before.

As part of our ongoing efforts to continuously improve our approach to environmental, social and governance matters, we have the objective to become carbon neutral within five years. We will also add a Black, Asian or Minority Ethnic Director to the Board by May 2022. Reinforcing IWG's commitment to diversity, equity and inclusion will help us retain and attract talented people who will support our clients and our own enterprise vitality and growth going forward.

PREPARING FOR RAPID GROWTH

Today IWG has by far the world's largest and most widely distributed flexible workspace footprint, which allows us to enable more people than anybody else to work from home, close to home and at other convenient meeting places. The accelerated shift to hybrid working habits is creating an opportunity for unprecedented growth. We plan to rapidly expand our already extensive network by continuing to pursue our capital-light model focusing on franchising, management contracts and other forms of partnership. During 2020 we raised equity capital and issued convertible bonds collectively worth GBP670m. These funds and the measures previously described will support IWG's future development as we broaden our network and service offerings through organic growth and M&A opportunities.

IWG is well positioned to meet the rapidly growing demands of the hybrid working model as the world emerges from the economic and social impacts of the pandemic. Our clients, new franchise and landlord partners across the world are attracted by our brand portfolio, advanced technical platform, global footprint and above all the expertise and commitment of our people. We remain confident in the long-term structural growth drivers of the global flexible work market and our strategy to strengthen our leading position within it while unlocking shareholder value.

douglas sutherland

Chairman

9 March 2021

Chief executive officer's review

 
Our most challenging 
 year demonstrates our 
 business resilience 
 

2020 was simultaneously the toughest time in IWG's 31-year history and the moment of our single greatest developmental leap. It was when our market underwent a decade of evolution in just 12 months.

2020 was the most extraordinary year of my career. On the one hand, it was extremely challenging, not only for our trading performance but also for our customers, their employees, their families and communities across the 120 countries where we have a presence. The disruption caused by the COVID-19 pandemic to people's businesses and lives is immense, outweighing the combined impact of all the 50+ national, regional and global recessions I have personally experienced over the last three decades. It will clearly continue to have a major impact for some time to come.

On the other hand, this was also a year in which IWG's global market took a massive leap forward as companies across the world discovered first-hand that their workforces could be highly engaged and productive while utilising the hybrid way of working: at home, in a local office, and occasionally at corporate HQ.

As a result, at year end, the medium- to long-term future for IWG and the industry we pioneered is looking more positive than ever before.

A new way of working

It would be wrong to assume that the shift we have been witnessing in how organisations work has been driven entirely by the COVID-19 pandemic. This has merely accelerated a trend that's been underway since the dawning of the digital era, which started in the 1970s with the arrival of the first personal computers.

Some five decades on, the only 'analogue residue' still holding companies back from going fully digital was the physical space they worked in. Now, the pandemic has finally and permanently blown this away - and IWG, as the global leader in flexible workspace, is at the forefront of both driving and enabling the office to be wherever workers have the digital tools and access to data they need to do their jobs.

This begs a question: why should companies go to all the expense of providing city centre-based office accommodation when recent months have shown that people can be at least as effective, engaged and productive elsewhere?

In 2020, IWG did more than anybody else to answer this question once and for all. Quite simply, companies no longer need to do so. They can and do use our digital business and communications tools to support and engage their employees at home. They can use our growing portfolio of suburban and rural centres across the world to give people the chance to meet, brainstorm, innovate and create close to home, without the need for a long, tedious, expensive and environmentally damaging commute.

And, when required for the purposes of company identity and cohesion, they can still bring people together to congregate at a city-based corporate HQ, provided and managed by IWG or one of our growing global network of franchise partners.

Group income statement

 
                                                                                                 % Change     % Change 
                                       IFRS                             IFRS                    (constant      (actual 
                              2020       16        2020        2019       16            2019    currency)    currency) 
                                              (Pre-IFRS   (Pre-IFRS                             (Pre-IFRS    (Pre-IFRS 
GBPm                 (As reported)   Impact         16)         16)   Impact   (As reported)          16)          16) 
------------------  --------------  -------  ----------  ----------  -------  --------------  -----------  ----------- 
Revenue                    2,480.2        -     2,480.2     2,648.9        -         2,648.9       (5.3)%       (6.4)% 
Gross 
 profit/(loss) 
 (centre 
 contribution)                19.9    189.8     (169.9)       414.1    151.0           565.1       (143)%       (141)% 
Overheads                  (369.3)     11.5     (380.8)     (280.0)    (1.0)         (281.0)          38%          36% 
------------------  --------------  -------  ----------  ----------  -------  --------------  -----------  ----------- 
Operating 
 (loss)/profit(6)          (352.0)    201.3     (553.3)       136.8    150.0           286.8       (524)%       (504)% 
------------------  --------------  -------  ----------  ----------  -------  --------------  -----------  ----------- 
Operating 
 profit/(loss) 
 before adjusting 
 items(6)                     37.8    211.6     (173.8)       136.8    150.0           286.8       (235)%       (227)% 
------------------  --------------  -------  ----------  ----------  -------  --------------  -----------  ----------- 
(Loss)/profit 
 before tax 
 from continuing 
 operations                (620.1)   (55.9)     (564.2)       118.5   (63.5)            55.0                    (576)% 
Taxation                    (30.1)     13.2      (43.3)        15.5      6.8            22.3 
Effective tax rate          (4.9)%               (7.7)%     (13.1)%                  (40.5)% 
------------------  --------------  -------  ----------  ----------  -------  --------------  -----------  ----------- 
(Loss)/profit 
 after tax 
 from continuing 
 operations                (650.2)   (42.7)     (607.5)       134.0   (56.7)            77.3                    (553)% 
Adjusted EBITDA            1,233.9                133.8       428.3                  1,482.8        (69)%        (69)% 
------------------  --------------  -------  ----------  ----------  -------  --------------  -----------  ----------- 
 

6. Including joint ventures

Revenue and gross margin

 
                               Revenue                     Gross margin % (Pre-IFRS 
                                 GBPm                                 16) 
                      -------  -------  ----------  --------------------------------------- 
                                          % change 
                                         (constant 
Continuing               2020     2019   currency)  2020 Reported  2020 Underlying     2019 
--------------------  -------  -------  ----------  -------------  ---------------  ------- 
2017 Aggregation      1,883.7  2,093.2      (8.9)%          12.2%            16.0%    22.7% 
New 18                  246.1    235.5        5.8%        (25.0)%          (11.7)%   (9.3)% 
--------------------  -------  -------  ----------  -------------  ---------------  ------- 
Pre-2019              2,129.8  2,328.7      (7.4)%           7.9%            12.8%    19.5% 
New 2019                215.4     79.4      171.5%        (76.5)%          (30.6)%  (27.7)% 
New 2020                 48.2        -           -              -                -        - 
--------------------  -------  -------  ----------  -------------  ---------------  ------- 
Open centre revenue   2,393.4  2,408.1        0.5%         (3.7)%             6.7%    17.9% 
--------------------  -------  -------  ----------  -------------  ---------------  ------- 
Closures                 86.8    240.8     (63.5)%       (103.4)%          (12.6)%   (7.5)% 
--------------------  -------  -------  ----------  -------------  ---------------  ------- 
Group                 2,480.2  2,648.9      (5.3)%         (7.2)%             6.1%    15.6% 
--------------------  -------  -------  ----------  -------------  ---------------  ------- 
 

We can see the effects on our business of this trend in action by studying the location of the deals we completed during 2020. While there was lower demand for city-centre properties, we saw a very strong escalation of interest in suburban locations. For example, while deals for locations in New York City fell by around 30% during the year, they rose by more than 40% in Southern Connecticut and in many other primarily suburban and rural locations. We also saw a significant rise in demand for small offices, accommodating one or two people.

The sheer scale of our global network positions us uniquely well to meet this surging demand. During the year, the appeal of

the hybrid model persuaded organisations of all sizes to become IWG clients, from global giants like Standard Chartered, Nestle, Cisco and Staples to many thousands of large and medium-sized organisations right down to small, single-office and even freelance businesses. In fact, we have just signed our biggest enterprise deal in our 31-year history with NTT providing global access to our centres to their 300,000 employees worldwide.

A rapid, decisive response

So 2020 has been both enormously difficult and hugely important for IWG. Following a very encouraging beginning to the year, our strongest ever in terms of financial performance, the situation rapidly changed as the scale of the crisis facing our customers across the world quickly became clear. We had to respond with speed and determination, taking some difficult decisions to cut costs, acting fast to help many clients overcome potentially existential challenges and working hard to support our own team members through this exceptionally testing time. For example, while the pandemic caused us to rationalise some 6% of the network during the year, it was our constant priority to work with landlords on creating solutions that make centres impacted by COVID-19 sustainable for both parties. We made good progress in this area during the year, with many successful outcomes, but much work remains to be done.

We've also innovated as never before, fast-tracking new products and services to market, and refining and strengthening others. And we've worked hard to ensure we have the capital at our disposal to help us grasp the important opportunities for growth that are certain to follow recovery.

Overall, our results for 2020 proved the resilience of our unique business model. In any other year, these results might have been cause for some concern. But given the challenges we faced and overcame in 2020, I am extremely proud of them and of the global team of amazing IWG people whose hard work, courage and passion have made them possible.

This extends beyond our financial results alone, and I have been delighted that IWG is a company that is committed to look after the health and safety of its people and customers.

Clear, compelling advantages

The appeal of the hybrid working model was underlined by the particularly strong sales activity we experienced during the second half of the year, although given the exceptional circumstances this was offset by increased customer churn. During the year, we also supported customers with a range of measures worth approximately GBP100m including payment deferrals.

Nonetheless, the fast-growing appeal and universal advantages of the hybrid working model are clear and compelling. At their simplest, they are:

- Companies gain better financial flexibility to invest in their people and in growing the business instead of the buildings from where they operate, reducing financial risk and generating shareholder value. They also enable them to attract high-quality employees with the offer of flexible working.

- Individual workers gain better mental health and reduced costs through not having to commute many miles into city centres, gaining more time with family and friends.

- Communities gain from the ability to provide more high-quality employment opportunities, encouraging people to stay and spend locally.

- The environment benefits from the long-term carbon-reduction benefits of reduced commuting allied with more efficient modern and upgraded workspaces with fewer damaging emissions.

Indeed, we are so confident in the environmental benefits of hybrid working that we are now targeting carbon-neutral status as an organisation within five years, brought about by a combination of reduced commuting, improved building efficiency, better use of resources such as water and energy, and increased recycling and carbon-offsetting activities. We will provide regular updates as we progress towards this target.

Partnering for capital-light expansion

These are not the only benefits of hybrid working. Its appeal extends beyond potential customers and their employees to include a range of business types that are keen to become involved in such a fast-growing sector of the global real-estate industry.

Property companies, building owners and new investors are all targeting it in significant numbers, and they recognise the value of the scale, experience, visibility and skills we have to offer in a partnership approach.

We also recognise that the wider opportunity is far too big for IWG to realise on our own, and that we need, more than ever, to work with franchise partners and property owners across the world in the years ahead. We have always worked closely with building owners, bringing them the brands, expertise and access to our platform they need to maximise the value of their investments.

Since 2019 and throughout 2020, our emphasis has been on driving growth through franchising, management agreements and other forms of joint venture, as the key enablers of our capital-light growth strategy. This enables us to open more centres, faster and with less capital investment to meet the growing demand for hybrid working opportunities.

Our globally recognised brands, industry-leading platform, decades of experience and commitment to innovation make our offer very attractive to potential franchise partners. This and the growing interest in hybrid and remote working continue to drive more opportunities with potential franchise partners. During the year, we successfully completed 15 new franchise agreements in regions including EMEA, Asia Pacific and the UK, which between them included commitments to open 67 new centres. Since the year end, we have signed our first franchise agreement with a US partner, to develop seven centres over seven years in Metro Detroit. Several other agreements are in the pipeline as I write.

We also continue to pursue management agreements, in which building owners pay us a fee for creating and operating centres in their properties. In the second half of the year we entered numerous agreements of this type and have an attractive pipeline of further opportunities which I believe will come to fruition in 2021.

Clearly, we continue to have centres of our own on our balance sheet, which we bought in the past as part of our historical development programme. We also continue from time to time to buy assets, which ultimately could be used to create property funds. Such properties are a means to an end for IWG, and our focus will increasingly be on the capital-light route to expansion throughout 2021 and beyond.

Creating services for a global industry

For some years, our business has revolved less around the provision of workspace and more about providing the platform, the services and the support that people and businesses need to work efficiently and cost-effectively.

During that time, more than anybody else, we have come to understand the complete end-to-end requirements of organisations everywhere, enabling us to focus our development efforts on innovative, and often digital, new products and bespoke service offerings. For example, in our 2019 Annual Report we covered the launch of Rovva, our unique business support platform that puts in one place everything businesses need, from practical advice on finding a place to work, HR, funding and finance, to virtual office plans, workspace membership and business services on a global scale. On page 35 of our 2020 Annual Report, we describe our breakthrough, end-to-end work with EY that shows how we can innovate through partnerships to help some of the world's biggest organisations meet their evolving needs.

And elsewhere in the 2020 Annual Report, we talk about the 2020 launch of HomeToWork, our new business that delivers everything workers need to stay connected, productive and to enjoy working from home.

These are both game-changing innovations that are facilitating the shift to new ways of working for businesses of every type and size. And they are only two of several other uniquely powerful new solutions that we've either launched or are set to bring to market in the near future.

Our prudent approach to M&A

We know that the period immediately ahead of us is packed with opportunity for IWG, and we are determined to maximise the potential that this limited time window presents. During 2020, therefore, we raised significant quantities of capital to enable us to grow inorganically through M&A activities in parallel with our capital-light expansion strategy. At year end, we were in the final stages of due diligence with a number of acquisitions, on which we will report in due course. Post year end we have acquired a majority investment in The Wing, the leading community and co-working space company designed for women, paving the way for the business to pursue substantial growth plans both in the US and internationally.

Naturally, we continue to take a prudent approach to inorganic growth and will only take action when we believe a deal is overwhelmingly in the best interests of our shareholders and other key stakeholders.

Outlook

This was a period of exceptional change for IWG, for our employees, our clients and for the overall business environment worldwide. While it was undeniably an extremely difficult time for everybody and these conditions are likely to persist well into 2021, I am in no doubt that the uptake of new working practices it has accelerated for so many organisations and enforced on others is now here for good.

I am also in no doubt that these will ultimately be for the good of everybody - businesses, individual workers and their families, communities and the environment.

As for IWG, this fundamental shift in the way people work is clearly an enormously positive step over the medium and longer terms. Certainly, 2020 was very difficult, and I anticipate these challenging market conditions to prevail for a few months to come. Indeed, we have made additional provisions for further network rationalisation as the recovery from the pandemic continues to take longer than we anticipated last summer. I believe this was a prudent decision that emphasises our commitment to doing what needs to be done for the greatest long-term benefit of the Group.

Overall, I am very confident that the events of 2020 have done far more than merely confirm the resilience of our organisation and our business model. They have also delivered the changes in attitudes and working practices that will set us up for sustained success over the next 10 or 20 years and far beyond.

Today, we anticipate a massive surge in growth when we eventually emerge from the unprecedented downturn that the COVID-19 pandemic has created. Our franchising and management agreement strategies are performing to plan as the spearhead of our capital-light expansion strategy. And we are progressing well on our plans to strengthen our position as the leading service provider to the global flexible workspace industry.

In short, in a single year we have made a developmental leap equivalent to the progress we had anticipated for the next decade. The year gone is one we will never forget - and the years ahead are tremendously exciting.

Mark Dixon

Chief Executive Officer

9 March 2021

Chief financial officer's review

 
Despite COVID-19, cash performance has been resilient 
 

Financial performance

The review below highlights the reported results in accordance with IFRS. 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(1) as it provides useful information to key stakeholders on how the Group is managed, operating performance targets are measured, and reporting for bank covenants and certain lease agreements are prepared.

COVID-19

The declaration by the World Health Organization of the COVID-19 pandemic and subsequent global government restrictions impacted the Group's ability to operate at full capacity in 2020. The continuation of COVID-19, including new and extended preventative measures in most of the Group's markets, is expected to prolong the impact on our business in 2021. Following early signs of recovery during the fourth quarter of 2020, we expect our anticipated recovery in 2021 to be delayed but aided by global vaccination programmes.

As a result, in order to improve the transparency and usefulness of the financial information presented and improve year-on-year comparability, the Group has identified net charges of GBP389.8m (pre-IFRS 16: GBP379.5m(1)) relating to directly attributable expenses and gains resulting from COVID-19. These charges are adjusting items as they meet the Group's definition applied in previous years, being significant both in nature and value to the results of the Group for the year ended 31 December 2020.

The adjusting items relate to several separately identifiable items which involve accounting judgement and estimates as follows:

- Network rationalisation

- Provision for expected credit losses

- Transaction costs on deferred franchising deals

- Goodwill impairment

- Other one-off items

Should the actual costs relating to the amounts provided prove to be different to the costs incurred and provided for, the excess or surplus will be disclosed in future years, as adjusting items.

Network rationalisation

As previously announced, in direct response to the pandemic, decisions were taken to accelerate the rationalisation of underperforming centres to ensure we emerge a stronger business post COVID-19. The estimated net impact of network rationalisation is GBP322.3m (pre-IFRS 16: GBP312.0m(1)). This charge includes the impairment of right of use and non-moveable assets and exit costs incurred in the year, which are over and above the normal run rate for the Group.

Group income statement

 
                                                                       2020                 2020     2019(5)                  2019(5) 
                                                                             IFRS 16   (Pre-IFRS   (Pre-IFRS  IFRS 16 
GBPm                                                          (As reported)   impact         16)         16)   impact   (As reported) 
-----------------------------------------------------------  --------------  -------  ----------  ----------  -------  -------------- 
Revenue                                                             2,480.2        -     2,480.2     2,648.9        -         2,648.9 
Gross profit/(loss) 
 (centre contribution)                                                 19.9    189.8     (169.9)       414.1    151.0           565.1 
-----------------------------------------------------------  --------------  -------  ----------  ----------  -------  -------------- 
Gross profit before 
 adjusting items(7)                                                   353.3    200.1       153.2       414.1    151.0           565.1 
-----------------------------------------------------------  --------------  -------  ----------  ----------  -------  -------------- 
Overheads(8)                                                        (369.3)     11.5     (380.8)     (280.0)    (1.0)         (281.0) 
Joint ventures                                                        (2.6)        -       (2.6)         2.7        -             2.7 
-----------------------------------------------------------  --------------  -------  ----------  ----------  -------  -------------- 
Operating (loss)/profit                                             (352.0)    201.3     (553.3)       136.8    150.0           286.8 
-----------------------------------------------------------  --------------  -------  ----------  ----------  -------  -------------- 
Operating (loss)/profit 
 before adjusting items(7)                                             37.8    211.6     (173.8)       136.8    150.0           286.8 
-----------------------------------------------------------  --------------  -------  ----------  ----------  -------  -------------- 
Net finance costs                                                   (268.1)  (257.2)      (10.9)      (18.3)  (213.5)         (231.8) 
-----------------------------------------------------------  --------------  -------  ----------  ----------  -------  -------------- 
(Loss)/profit before 
 tax from continuing 
 operations                                                         (620.1)   (55.9)     (564.2)       118.5   (63.5)            55.0 
Taxation                                                             (30.1)     13.2      (43.3)        15.5      6.8            22.3 
Effective tax rate                                                   (4.9)%               (7.7)%     (13.1)%                  (40.5)% 
-----------------------------------------------------------  --------------  -------  ----------  ----------  -------  -------------- 
(Loss)/profit after 
 tax from continuing 
 operations                                                         (650.2)   (42.7)     (607.5)       134.0   (56.7)            77.3 
Profit after tax from 
 discontinued operations                                                3.4      0.3         3.1       369.1      4.2           373.3 
-----------------------------------------------------------  --------------  -------  ----------  ----------  -------  -------------- 
(Loss)/profit for 
 the period                                                         (646.8)   (42.4)     (604.4)       503.1   (52.5)           450.6 
Basic EPS (p) 
 
  *    From continuing operations before adjusting items(7)          (26.9)               (24.0)        15.0                      8.7 
 
  *    Attributable to shareholders                                  (67.9)               (63.5)        56.4                     50.5 
-----------------------------------------------------------  --------------  -------  ----------  ----------  -------  -------------- 
Depreciation & amortisation                                         1,195.0                307.3       267.8                  1,169.2 
Adjusted(7) EBITDA                                                  1,233.9                133.8       428.3                  1,482.8 
-----------------------------------------------------------  --------------  -------  ----------  ----------  -------  -------------- 
 

7. Adjusting items relate to income and costs arising specifically from the impact of COVID-19.

8. Overheads for 2020 include COVID-19 and other non-recurring items of GBP85.0m.

Goodwill impairment

Despite the continued uncertainty created by COVID-19, there are no long-term indicators of impairment identified for the US and UK and these businesses are expected to recover post COVID-19. However, as previously reported with the interim results, the COVID-19 crisis and linked restrictions have impacted our ability to trade our way to sustainable profitable growth in certain markets. As a result, the projected cash flows for the operations in certain insignificant markets no longer supported the carrying value of goodwill, and an impairment of GBP4.9m was taken as at 30 June 2020. No further impairment was taken in the second half.

Provision for expected credit losses

The COVID-19 pandemic unfortunately presents an unprecedented crisis to many of our customers who may struggle to navigate through these challenges without external support. We have therefore endeavoured to provide support wherever possible to our customers to sustain our long--term relationships.

Considering the disruption of centres globally, the Group reviewed the recoverability of its debtor profile and recorded an increase in the expected credit-loss provision of GBP17.5m for 2020. This increase reflects the greater likelihood of credit default by the Group's debtors directly attributable to the impact of COVID-19 and the likelihood of recoverability of such outstanding balances payable to the Group.

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 rare event of non-performance of customer contracts.

Other one-off items including restructuring

During 2020, the Group incurred GBP8.2m of transaction costs in respect of master franchise agreements that have not completed as at 31 December 2020 because of COVID-19. The Group continues its pivot towards a franchising model and discussions on master franchise agreements have since resumed. Other net charges of GBP36.9m were also incurred in relation to restructuring the Group in respect of the COVID-19 crisis.

Estimated resulting cost benefit

The anticipated annualised cost benefit arising from these actions taken to respond to COVID-19, if fully implemented,

is expected to be in the range of GBP325m to GBP375m. The estimated cumulative benefit of these actions accruing to the Group in future years will be significant and is estimated to be approximately GBP2.4bn as previously announced.

Revenue

Total Group revenue(5) decreased from GBP2,648.9m to GBP2,480.2m, a 5.3% decline when compared at constant currency. This is a commendable outcome given the increasing quarterly year-on-year weakness experienced from the second quarter onwards, including double-digit revenue declines in the third and fourth quarters. The improvement achieved in sales activity has been offset by customer churn and the significant impact the pandemic has had on service revenue. Only EMEA recorded annual revenue growth, aided by the annualised benefit of acquisitions in late 2019, but even here revenue declined in the second half. Although the year-on-year trends for the Group after the first quarter were sequentially increasingly more negative, the absolute level of monthly revenues stabilised in the second half and showed some improvement in December.

As anticipated and previously highlighted, the performance of the business outside of central business districts was more resilient. The demand for more distributed working has increased sales in many of the satellite towns and cities outside of major cities, as more customers adopt hybrid working. The conditions experienced in 2020 have made it our most challenging year ever experienced. Despite seeing early signs of recovery during the fourth quarter of 2020, the continuation of the pandemic, including new or extended preventative measures in most of the Group's markets, is likely to persist well into 2021 before we see the environment improving.

Overall, open centre revenue(5) of GBP2,393.4m (2019: GBP2,408.1m) was broadly stable for the year, a 0.5% increase when compared at constant currency. Again, this performance is reflective of conditions becoming more challenging as we moved through the year. Open centre revenue in the first half increased 10.2% at constant currency, an outcome that was very much first quarter driven. The second quarter reduced to a small positive revenue increase and thereafter moved increasingly into negative territory as the impact of the pandemic continued to be felt on the business.

The continued maturation of the locations opened in 2018 and 2019 and the initial revenue contribution from the 2020 openings combined to deliver the broadly flat revenue position for the year. Regionally, as can be seen in the table below, the increase in revenue from our second largest region, EMEA, was essentially offset by the decline in our largest market, the Americas. Open centre revenue is not impacted by the pro-active network rationalisation programme.

Pre-2019 revenue(5) for the year declined 7.4% at constant currency to GBP2,129.8m (2019: GBP2,328.7m), with all regions experiencing year-on-year revenue declines. A similar pattern emerged through the year. After a very strong first quarter, weakness was experienced in the second quarter resulting in a relatively flat first half performance with revenue up 0.2% at constant currency. This weakness continued into the second half with each quarter showing increasingly weaker year-on-year performance. As a result, pre-2019 revenue declined 15.8% at constant currency in the second half.

Overall, occupancy for the pre-2019 business decreased marginally year-on-year to 72.9% (2019: 73.9%).

Open centre revenue performance by region

On a regional basis, open centre revenue(5) performance can be analysed as follows:

 
                                   % Change    % Change 
                                  (constant     (actual 
GBPm              2020     2019   currency)   currency) 
-------------  -------  -------  ----------  ---------- 
Americas       1,034.2  1,120.5      (5.9)%      (7.7)% 
EMEA             688.9    611.9       12.6%       12.6% 
Asia Pacific     285.0    285.3        1.9%      (0.1)% 
UK               379.7    381.4      (0.4)%      (0.4)% 
Other              5.6      9.0           -           - 
Total          2,393.4  2,408.1        0.5%      (0.6)% 
-------------  -------  -------  ----------  ---------- 
 

Americas

After a strong first quarter in 2020 our largest region, the Americas, faced a very challenging environment as the pandemic spread across the region.

 
                                             % Change    % Change 
                                            (constant     (actual 
GBPm                        2020     2019   currency)   currency) 
-----------------------  -------  -------  ----------  ---------- 
Total revenue(5)         1,066.5  1,187.9      (8.4)%     (10.2)% 
Open centre revenue(5)   1,034.2  1,120.5      (5.9)%      (7.7)% 
Pre-2019 revenue(5)        969.8  1,099.8     (10.1)%     (11.8)% 
Pre-2019 occupancy         74.1%    77.2%           -   (308) bps 
Number of centres          1,271    1,298           -           - 
-----------------------  -------  -------  ----------  ---------- 
 

Revenue from open centres(5) declined 5.9% at constant currency to GBP1,034.2m as conditions increasingly deteriorated from the second quarter onwards due to COVID-19. Total revenue(5) declined 8.4% at constant currency to GBP1,066.5m after a reduction of 1.1% in the first half. Without the benefit of the maturation of the centres opened in 2019 and 2020, pre-2019 revenue(5) for the region decreased 10.1% at constant currency to GBP969.8m, with double-digit declines in almost all the major countries in the region. A notable exception among the top countries remained Mexico, where a strong first half resulted in mid-single digit growth for the year despite negative growth in the second half.

Average occupancy for the region in the pre-2019 business decreased to 74.1% (2019: 77.2%).

During 2020, 32 new locations were opened in the region and 59 locations were rationalised. Following these actions there were 1,271 locations in total in the Americas at 31 December 2020.

EMEA

The stronger performance in EMEA relative to the other regions reflects the previously reported strong start to 2020 in most of the major countries in the region and the annualised benefit of acquisitions completed in the second half of 2019. Otherwise the performance through the year was similar to the other regions, with much weaker performance in Q3 and Q4. Open centre revenue(5) has increased 12.6% to GBP688.9m at constant currency. Open centre revenue growth(5) was heavily weighted to the first half with growth of 22.3% followed by a 3.8% increase in the second half. Total revenue(5) increased 4.7%, at constant currency, to GBP715.1m. Pre-2019 revenue declined 1.6% at constant currency to GBP564.0m. The pre-2019 occupancy increased to 73.9% (2019: 72.5%).

 
                                         % Change    % Change 
                                        (constant     (actual 
GBPm                      2020   2019   currency)   currency) 
-----------------------  -----  -----  ----------  ---------- 
Total revenue(5)         715.1  683.0        4.7%        4.7% 
Open centre revenue(5)   688.9  611.9       12.6%       12.6% 
Pre-2019 revenue(5)      564.0  575.1      (1.6)%      (1.9)% 
Pre-2019 occupancy       73.9%  72.5%           -     138 bps 
Number of centres        1,093  1,096           -           - 
-----------------------  -----  -----  ----------  ---------- 
 

A total of 72 new locations were added and 76 locations were rationalised across this region during 2020. This net reduction of three locations took the total in the region to 1,093 at 31 December 2020.

Asia Pacific

Our business in Asia Pacific endured a challenging second half as the effect of the pandemic impacted revenue after delivering a good performance in the first half. Revenue from all open centres(5) increased 1.9% at constant currency to GBP285.0m. First half growth of 16.2% was followed by a decrease of 11.0% in the second half. Total revenue(5) from the region declined by 9.5% at constant currency to GBP304.2m. Pre-2019 revenue was down 6.4% to GBP252.2m (2019: GBP274.7m) and pre-2019 occupancy decreased to 70.4% (2019: 71.3%).

 
                                         % Change    % Change 
                                        (constant     (actual 
GBPm                      2020   2019   currency)   currency) 
-----------------------  -----  -----  ----------  ---------- 
Total revenue(5)         304.2  342.7      (9.5)%     (11.2)% 
Open centre revenue(5)   285.0  285.3        1.9%      (0.1)% 
Pre-2019 revenue(5)      252.2  274.7      (6.4)%      (8.2)% 
Pre-2019 occupancy       70.4%  71.3%           -     (84)bps 
Number of centres          645    682           -           - 
-----------------------  -----  -----  ----------  ---------- 
 

A total of 24 new locations were added in the region and 61 locations were rationalised during 2020. At 31 December 2020 we had a total of 645 centres in the region.

UK

Like our other markets, the UK had a strong first quarter, but was then increasingly impacted by the COVID-19 pandemic from the second quarter onwards. As anticipated and previously highlighted, the performance of the UK business outside of central London was more resilient. The demand for more distributed working has increased sales in many of the satellite towns and cities outside of London, as more customers adopt hybrid working.

 
                                         % Change    % Change 
                                        (constant     (actual 
GBPm                      2020   2019   currency)   currency) 
-----------------------  -----  -----  ----------  ---------- 
Total revenue(5)         388.8  426.3      (8.8)%      (8.8)% 
Open centre revenue(5)   379.7  381.4      (0.4)%      (0.4)% 
Pre-2019 revenue(5)      338.2  370.1      (8.6)%      (8.6)% 
Pre-2019 occupancy       71.0%  71.4%           -     (39)bps 
Number of centres          304    312           -           - 
-----------------------  -----  -----  ----------  ---------- 
 

Revenue from open centres(5) decreased 0.4% to GBP379.7m. Pre-2019 revenue(5) declined by 8.6% to GBP338.2m (2019: GBP370.1m) and total revenue(5) in the UK declined 8.8% to GBP388.8m, reflecting the continued network rationalisation in the UK. Pre-2019 occupancy decreased to 71.0% (2019: 71.4%).

A total of 13 new locations were added and 21 locations rationalised in the UK during 2020. The net of these additions and the network rationalisation programme led to an overall reduction of eight locations in the region to 304 at 31 December 2020.

EBITDA

Adjusted EBITDA as reported reduced to GBP1,233.9m (2019: GBP1,482.8m), due to the impact of COVID-19 on our business performance.

Under pre-IFRS 16 reporting, adjusted EBITDA(1) declined from GBP428.3m to GBP133.8m. Adjusted EBITDA still reflects the significant drag from the investment in growth, which in 2020 was GBP112.5m (2019: GBP27.6m), and a further GBP9.9m in respect of closed centres (2019: GBP10.3m). The pre-2019 EBITDA(1), which eliminates the drag from the investment in growth and therefore offers a more representative indication of the underlying earnings performance of the business, was GBP255.9m (2019: GBP435.3m).

Underlying performance has also been directly impacted as more of our markets went into lockdown, resulting in reduced profitability from the second quarter of 2020, that is expected to improve as global vaccination rollout programmes advance

and restrictions are lifted. The impact that COVID-19 has had on underlying trading performance is not recognised within adjusting items.

Overhead investment

Whilst reported Group overheads, excluding adjusting items(1) of GBP56.4m related to COVID-19, increased 12.3% at constant currency to GBP312.9m (2019: GBP281.0m), these included GBP30.6m of additional non-recurring costs related to corporate restructuring. This was also true under pre-IFRS 16 reporting, with Group overheads excluding adjusting items of GBP324.4m (2019: GBP280.0m). Excluding these non-recurring costs, overheads(1) increased by 4.9% to GBP293.8m, representing 11.8% of the Group's lower revenue reported for 2020 (2019: 10.6%). The increased investment in overheads, particularly in the second half, reflects the Group's continued development of enterprise accounts and pivot to a capital-light franchise growth model and a scaled platform of services.

Operating loss - continuing operations

Adjusted operating profit(5) as reported was GBP37.8m (2019: GBP286.8m). Including the adjusting items, the operating loss(5) was GBP352.0m compared to the profit of GBP286.8m in 2019 due to COVID-19.

Under pre-IFRS 16 reporting, adjusted operating loss(1)(5) for the year ended 31 December 2020 was GBP173.8m (2019: profit of GBP136.8m). In addition to the planned investment in overheads to develop the business platform, the operating profit(1)(5) continues to reflect the drag from growth investment of GBP175.3m (2019: GBP42.5m) as well as GBP23.8m (2019: GBP37.8m) from centres closed during 2020. Including the adjusting items of GBP379.5m, the operating loss(1)(5) was GBP553.3m compared to a profit(1)(5) of GBP136.8m in 2019.

Net finance costs

The Group reported net finance costs for the year to 31 December 2020 of GBP268.1m (2019: GBP231.8m), including GBP257.2m (2019: GBP213.5m) related to interest on the Group's lease liabilities.

Net finance costs in respect of bank lending decreased to GBP10.9m (2019: GBP18.3m) as there was less need for debt usage during the year. This primarily reflects the Group's laser focus on cash generation, the benefit for the entire year of the proceeds from the master franchise agreements completed last year, over seven months' benefit from the GBP320m share placing in May 2020 and the lower interest rate benefit from the GBP350m convertible bond issue at the start of December 2020.

Taxation

The reported effective tax rate for 2020 is (4.9)% (2019: (40.5)%). The effective tax rate(1)(5) on continuing operations under pre-IFRS 16 reporting was (7.7)% (2019: (13.1)%). Despite reporting a significant loss for the year resulting from challenging trading conditions due to COVID-19, the Group has incurred a tax charge due to several factors. These include the continuing profitability of certain countries and entities within the overall Group and following some internal restructuring during 2020, we have reduced the deferred tax asset of GBP89.8m recognised in 2019 by GBP20.1m, resulting in a 2020 deferred tax charge. The tax charge benefited in 2020 from no US BEAT (base erosion and anti-abuse tax) liabilities in contrast to the negative GBP17.5m impact in 2019. The 2020 tax charge also benefitted from the positive tax impact of the 2020 US CARES Act, resulting in a prior year current tax credit of GBP10.6m in the US.

Dependent upon the Group's continuing ownership of specific countries or regions which may change due to future potential master franchise agreements, the impact of COVID-19 on future results and how long it takes to utilise available tax losses, we currently anticipate an effective tax rate in future years to move back to a similar rate to that seen in the years prior to 2019 of approximately 20%.

Earnings per share

Basic earnings per share were a loss of 67.9p (2019: profit of 50.5p). The loss per share from continuing operations before adjusting items was 26.9p (2019: profit of 8.7p).

Under pre-IFRS 16 reporting, earnings per share(1) decreased in the year ended 31 December 2020 from 56.4p, including the gain in 2019 on the strategic partnerships and deferred tax benefit, to a loss per share of 63.5p. Earnings per share(1)(5) from continuing operations reduced from 15.0p to a loss of 63.8p. Excluding the adjusting items, the loss per share reduces to 24.0p.

Diluted earnings per(1) share for the year to 31 December 2020 were a loss of 63.5p (2019: 55.4p). Diluted earnings per share(1)(5) on a continuing basis before adjusting items for the year were a loss of 63.8p (2019: 14.7p).

The weighted average number of shares in issue for the year was 951,890,712 (2019: 892,737,688). The weighted average number of shares for diluted earnings per share was 969,363,683 (2019: 908,939,911). The Group acquired 13,590,080 shares in the first half of 2020, before the share repurchase programme was suspended, to be held in treasury to satisfy future exercises under various Group long-term incentive schemes. The Group reissued 1,968,169 shares from treasury to satisfy such exercises during 2020.

Cash flow and funding

Cash generation continues to be an attractive feature of our business model and the Group generated cash monthly at the centre level up until December when there was a modest operating cash outflow resulting from the completion of deals with landlords that have secured the significant long-term positive benefits noted earlier. As more deals with landlords complete, further modest outflows are expected in the first quarter of 2021.

Despite the negative impact the COVID-19 pandemic has had on business activity and customer growth, and the reported financial performance, the Group's cash performance has been very resilient with a cash inflow(1) of GBP140.7m before net investment in growth capital expenditure, investments, dividends, share repurchases and adjusting items (2019: GBP224.6m).

As previously reported, the Group deployed capital in the fourth quarter which included GBP276.2m on a potential investment which, post the year end, did not proceed, and has resulted in a return of that cash outflow in the first quarter of 2021.

IFRS 16 has no impact on the Group's cash flows other than presentation of where items are classified on the cash flow statement.

Cash flow

The table below reflects the Group's cash flow:

 
                                         2020                   2020        2019                        2019 
                                                 IFRS 16   (Pre-IFRS   (Pre-IFRS    IFRS 16 
GBPm                            (As reported)     impact         16)         16)     impact    (As reported) 
----------------------------  ---------------  ---------  ----------  ----------  ---------  --------------- 
Adjusted EBITDA                       1,233.9    1,100.1       133.8       428.3    1,054.5          1,482.8 
Working capital                          24.3    (218.0)       242.3       267.2      579.3            312.1 
Growth-related partner 
 contributions                              -      106.6     (106.6)     (263.0)      263.0                - 
Maintenance capital 
 expenditure                           (81.9)       15.0      (96.9)     (147.8)       39.1          (108.7) 
Taxation                               (21.9)          -      (21.9)      (48.8)          -           (48.8) 
Finance costs                         (266.4)    (249.4)      (17.0)      (20.7)    (213.2)          (233.9) 
Finance lease liability 
 arising on new leases                (917.8)    (917.8)           -           -  (1,872.8)        (1,872.8) 
Proceeds from partner 
 contributions (lease 
 incentives)                            111.0      111.0           -           -      204.1            204.1 
Other items                             (6.8)       13.8         7.0         9.4        3.8             13.2 
----------------------------  ---------------  ---------  ----------  ----------  ---------  --------------- 
Cash flow before growth 
 capital expenditure, 
 investments, share 
 repurchases and dividends               74.4     (66.3)       140.7       224.6  (1,100.8)          (876.2) 
Gross growth capital 
 expenditure                          (310.4)       47.1     (357.5)     (652.0)      104.4          (547.6) 
Growth-related partner 
 contributions                          106.6          -       106.6       263.0          -            263.0 
----------------------------  ---------------  ---------  ----------  ----------  ---------  --------------- 
Net growth capital 
 expenditure(9)                       (203.8)       47.1     (250.9)     (389.0)      104.4          (284.6) 
Total net cash flow 
 from operations                      (129.4)     (19.2)     (110.2)     (164.4)    (996.4)        (1,160.8) 
Purchase of shares                     (43.7)          -      (43.7)      (49.5)          -           (49.5) 
Dividend                                    -          -           -      (58.2)          -           (58.2) 
Corporate financing 
 activities                               1.8          -         1.8         5.4          -              5.4 
Investment related 
 loan receivable                      (276.2)          -     (276.2)           -          -                - 
Net proceeds from 
 the issue of shares                    313.9          -       313.9           -          -                - 
Proceeds on convertible 
 bond                                   343.2          -       343.2           -          -                - 
Debt element of convertible 
 bond                                 (291.4)          -     (291.4)           -          -                - 
Proceeds from master 
 franchise                                3.3          -         3.3       424.6          -            424.6 
Opening net debt                    (6,840.1)  (6,546.0)     (294.1)     (460.8)  (5,643.4)        (6,104.2) 
Exchange movement                         9.0        6.7         2.3         8.8       93.8            102.6 
Closing net debt                    (6,909.6)  (6,558.5)     (351.1)     (294.1)  (6,546.0)        (6,840.1) 
----------------------------  ---------------  ---------  ----------  ----------  ---------  --------------- 
 

9. Net growth capital expenditure of GBP250.9m relates to the cash outflow in the year to 31 December 2020. Accordingly, it includes net capital expenditure related to locations added in 2019 and to be added in 2021, as well as those added in 2020. The total net investment in the period for 2019 and 2021 additions amounted to GBP93.4m.

Capital investment in the network

In line with the Group's expectations, net growth capital expenditure in 2020 reduced by GBP80.8m to GBP203.8m (2019: GBP284.6m). This reflects the dialling down of our growth programme as part of the mitigating actions taken to offset the impact of COVID-19 and the continued focus on pivoting to capital-light growth, which is expected to result in further reductions in capital expenditure in future years. Under pre-IFRS 16 reporting, net growth capital expenditure(1) reduced by GBP138.1m to GBP250.9m (2019: GBP389.0m).

During 2020 we added 141 new locations and rationalised 217 locations, mostly directly COVID-19 related. At 31 December 2020, the Group's physical network comprised 3,313 locations globally, providing the largest global and most widely distributed network. The new locations added 4.0m sq. ft. of space. This, together with the impact of the rationalisation programme, resulted in the Group having 62.9m sq. ft. of flexible workspace at 31 December 2020 (2019: 62.4m sq. ft.).

Maintenance capital expenditure(1) also reduced year on year. After the completion of the planned stepped up refurbishment programme, notably in the first quarter, which increased investment in the first half of the year to GBP80.7m (pre-IFRS 16: GBP91.5m), investment slowed from the second quarter. Consequently, maintenance capital expenditure(1) for 2020 reduced from GBP108.7m in 2019 to GBP81.9m (pre-IFRS 16: from GBP147.8m in 2019 to GBP96.9m). A further slowdown is anticipated for 2021.

Strong financial position

The Group has maintained a strong financial position throughout 2020. At 31 December 2020, the Group had significant liquidity headroom of GBP802.3m.

Net debt at 31 December 2020 has increased to GBP6,909.6m from GBP6,840.1m at 31 December 2019. Excluding debt related to lease liabilities, the Group had net borrowings(1) of GBP351.1m (2019: GBP294.1m). The year-end position is below the interim position at 30 June 2020 of GBP7,067.9m reflecting the network rationalisation programme and related actions taken by the Group in response to COVID-19.

The year-end net debt position includes GBP320m of gross proceeds raised through the equity placing on 28 May 2020, GBP350m from the convertible bond offering on 2 December 2020 less the debt element of the convertible bonds, and GBP527.1m deployment of cash for organic and inorganic growth and investments. The Group, as previously announced, also increased the net debt to EBITDA covenant on its GBP950m revolving credit facility. The new capital raised and increased covenant flexibility will enable the Group to further execute its stated strategy.

The lease liabilities recognised by the Group do not impact on the Group's covenants which are based on pre-IFRS 16 accounting standards.

Foreign exchange

The Group's results are exposed to translation risk from the movement in currencies. During 2020 key individual exchange rates have moved, as shown in the table below. Overall, these exchange rate movements had a mixed but modest impact on the Group's results. Revenue was reduced by GBP27.3m but gross profit and operating profit increased by GBP9.5m and GBP27.1m respectively, reflecting the relative contribution to Group profit from our US business.

Risk management

Effective management of risk is an everyday activity for the Group and, crucially, integral to our strategic 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.

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 period ended 31 December 2020. Details of related party transactions that have taken place in the period can be found in note 30.

Foreign exchange rates

 
                     At 31 December      Annual year average 
-----------------  ------------------  ----------------------- 
Per GBP sterling   2020  2019       %    2020   2019         % 
-----------------  ----  ----  ------  ------  -----  -------- 
US dollar          1.37  1.32    3.8%    1.29   1.28      0.8% 
Euro               1.11  1.18  (5.9)%    1.13   1.14    (0.9)% 
-----------------  ----  ----  ------  ------  -----  -------- 
 

Dividends and share repurchase programme

For the purposes of liquidity, we are ensuring that the Group maintains sufficient funding especially in a period of significant centre rationalisation. Our capital allocation policy remains in place, prioritising investment in the long-term development of our business and dividend distribution to shareholders. However, given the prolonged uncertainty caused by COVID-19, we believe it is prudent to protect our liquidity and as a result, future dividend payments and a restart of our share repurchase programme are placed on hold for the moment with a clear intention of the earliest possible return to our stated shareholder return policy.

Going concern

The impact of COVID-19 on the global economy and the operating activities of many businesses has resulted in a climate of considerable uncertainty. The ultimate impact of the pandemic on the Group is uncertain at the date of signing these financial statements.

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), the liquidity of the Group, funding available under the Group's bank facility and mitigating actions to reduce operating costs and optimise cash flows during the current environment.

In addition, the Group successfully raised GBP320m of equity in May 2020 and issued GBP350m of unsubordinated unsecured Guaranteed Convertible Bonds in December 2020 to take advantage of growth opportunities and strengthen the Group's global leadership position.

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 of the Group.

OUTLOOK

After an excellent start to the year, 2020 brought enormous challenges for the Group which we have navigated in a robust manner whilst maintaining a strong financial position. We have successfully augmented our capital resources and are consequently well poised to capitalise on the new world of hybrid working as global vaccination programmes are rolled out, restrictions are removed, and we emerge from this crisis.

We are already witnessing an unprecedented surge in new enterprise deals. We are signing membership deals that are multiple times larger than any previous deals in the Group's history and there is a rich pipeline that represents over one million future members. The quality and scale of these deals is demonstrably generating greater momentum in the evident shift to hybrid working solutions, which we are uniquely positioned to support.

Our business has shown great resilience through this period and, with the actions we have taken to reset the Group, we are confident this will bring us through the challenges and into the new world of working as a stronger, more profitable business capable of delivering increased cashflow and returns.

Eric Hageman

Chief Financial Officer

9 March 2021

Consolidated income statement

 
                                                                              Year ended 
                                                                Year ended        31 Dec 
                                                                    31 Dec          2019 
GBPm                                                     Notes        2020   Restated(1) 
-------------------------------------------------------  -----  ----------  ------------ 
Revenue                                                      3     2,480.2       2,648.9 
Total costs of sales                                             (2,425.5)     (2,081.8) 
-------------------------------------------------------  -----  ----------  ------------ 
Cost of sales                                                    (2,108.4)     (2,083.9) 
Adjusting items to cost of sales                            10      (71.1)             - 
(Loss)/profit on impairment of property, plant, 
 equipment and right-of-use assets                           5     (246.0)           2.1 
-------------------------------------------------------  -----  ----------  ------------ 
Expected credit losses on trade receivables                  5      (34.8)         (2.0) 
-------------------------------------------------------  -----  ----------  ------------ 
Gross profit (centre contribution)                                    19.9         565.1 
Total selling, general and administration expenses                 (371.9)       (278.3) 
-------------------------------------------------------  -----  ----------  ------------ 
Selling, general and administration expenses                       (312.9)       (281.0) 
Adjusting items to selling, general and administration 
 expenses                                                   10      (56.4)             - 
Share of (loss)/profit of equity-accounted investees, 
 net of tax                                                 21       (2.6)           2.7 
-------------------------------------------------------  -----  ----------  ------------ 
Operating (loss)/profit                                      5     (352.0)         286.8 
Finance expense                                              7     (271.1)       (232.3) 
Finance income                                               7         3.0           0.5 
-------------------------------------------------------  -----  ----------  ------------ 
Net finance expense                                                (268.1)       (231.8) 
-------------------------------------------------------  -----  ----------  ------------ 
(Loss)/profit before tax for the year from continuing 
 operations                                                        (620.1)          55.0 
Income tax (expense)/credit                                  8      (30.1)          22.3 
(Loss)/profit after tax for the year from continuing 
 operations                                                        (650.2)          77.3 
-------------------------------------------------------  -----  ----------  ------------ 
Profit after tax for the period from discontinued 
 operations                                                  9         3.4         373.3 
(Loss)/profit for the period attributable to 
 equity shareholders of the parent                                 (646.8)         450.6 
-------------------------------------------------------  -----  ----------  ------------ 
 
(Loss)/earnings per ordinary share (EPS): 
 
Attributable to ordinary shareholders 
Basic (p)                                                   11      (67.9)          50.5 
Diluted (p)                                                 11      (67.9)          49.6 
 
From continuing operations 
Basic (p)                                                   11      (68.3)           8.7 
Diluted (p)                                                 11      (68.3)           8.5 
-------------------------------------------------------  -----  ----------  ------------ 
 

1. The comparative information has been restated to reflect the impact of discontinued operations (note 9).

Consolidated statement of comprehensive income

 
                                                                       Year ended  Year ended 
                                                                           31 Dec      31 Dec 
GBPm                                                            Notes        2020        2019 
--------------------------------------------------------------  -----  ----------  ---------- 
(Loss)/profit for the year                                                (646.8)       450.6 
 
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 
 fair value                                                                     -       (0.5) 
Foreign exchange recycled to profit or loss from discontinued 
 operations                                                         9           -       (8.8) 
Foreign currency translation differences for foreign 
 operations                                                                   1.3      (24.5) 
--------------------------------------------------------------  -----  ----------  ---------- 
Items that are or may be reclassified to profit or 
 loss in subsequent periods                                                   1.3      (33.8) 
--------------------------------------------------------------  -----  ----------  ---------- 
 
Other comprehensive income/(loss) that will never 
 be reclassified to profit or loss in 
 subsequent periods: 
Re-measurement of defined benefit liability, net of 
 income tax                                                        26           -           - 
--------------------------------------------------------------  -----  ----------  ---------- 
Items that will never be reclassified to profit or 
 loss in subsequent periods                                                     -           - 
--------------------------------------------------------------  -----  ----------  ---------- 
 
Other comprehensive income/(loss) for the period, 
 net of tax                                                                   1.3      (33.8) 
--------------------------------------------------------------  -----  ----------  ---------- 
 
Total comprehensive (loss)/income for the year                            (645.5)       416.8 
--------------------------------------------------------------  -----  ----------  ---------- 
 

Consolidated statement of changes in equity

 
                                                                      Foreign 
                                     Issued                          currency 
                                      share     Share  Treasury   translation   Hedging      Other   Retained    Total 
GBPm                        Notes   capital   premium    shares       reserve   reserve   reserves   earnings   equity 
--------------------------  -----  --------  --------  --------  ------------  --------  ---------  ---------  ------- 
Balance at 1 January 2019               9.2         -    (74.1)          68.2       0.3       25.8      538.4    567.8 
--------------------------  -----  --------  --------  --------  ------------  --------  ---------  ---------  ------- 
Total comprehensive income 
 for the year: 
Profit for the year                       -         -         -             -         -          -      450.6    450.6 
Other comprehensive 
income: 
Cash flow hedges - 
 effective 
 portion of changes in 
 fair 
 value                                    -         -         -             -     (0.5)          -          -    (0.5) 
Foreign exchange recycled 
 to profit or loss from 
 discontinued 
 operations                               -         -         -         (8.8)         -          -          -    (8.8) 
Foreign currency 
 translation 
 differences for foreign 
 operations                               -         -         -        (24.5)         -          -          -   (24.5) 
--------------------------  -----  --------  --------  --------  ------------  --------  ---------  ---------  ------- 
Other comprehensive 
 income, 
 net of tax                               -         -         -        (33.3)     (0.5)          -          -   (33.8) 
--------------------------  -----  --------  --------  --------  ------------  --------  ---------  ---------  ------- 
Total comprehensive income 
 for the year                             -         -         -        (33.3)     (0.5)          -      450.6    416.8 
Transactions with owners 
 of the Company 
Share-based payments                      -         -         -             -         -          -        0.7      0.7 
Ordinary dividend paid         12         -         -         -             -         -          -     (58.2)   (58.2) 
Purchase of shares             22         -         -    (49.5)             -         -          -          -   (49.5) 
Proceeds from exercise of 
 share awards                  22         -         -       6.7             -         -          -      (3.8)      2.9 
--------------------------  -----  --------  --------  --------  ------------  --------  ---------  ---------  ------- 
Balance at 31 December 
 2019                                   9.2         -   (116.9)          34.9     (0.2)       25.8      927.7    880.5 
--------------------------  -----  --------  --------  --------  ------------  --------  ---------  ---------  ------- 
Total comprehensive 
income/(loss) 
for the year: 
Loss for the year                         -         -         -             -         -          -    (646.8)  (646.8) 
Other comprehensive 
income: 
Foreign currency 
 translation 
 differences for 
 foreign operations                       -         -         -           1.3         -          -          -      1.3 
--------------------------  -----  --------  --------  --------  ------------  --------  ---------  ---------  ------- 
Other comprehensive 
 income, 
 net of tax                               -         -         -           1.3         -          -          -      1.3 
--------------------------  -----  --------  --------  --------  ------------  --------  ---------  ---------  ------- 
Total comprehensive 
 income/(loss) 
 for the year                             -         -         -           1.3         -          -    (646.8)  (645.5) 
Transactions with owners 
 of the Company 
Share-based payments                      -         -         -             -         -          -        6.4      6.4 
Ordinary dividend paid         12         -         -         -             -         -          -          -        - 
Proceeds from issue of 
 ordinary 
 shares, net of costs          22       1.3     312.6         -             -         -          -          -    313.9 
Purchase of shares             22         -         -    (43.7)             -         -          -          -   (43.7) 
Proceeds from exercise of 
 share awards                  22         -         -       6.5             -         -          -      (4.3)      2.2 
--------------------------  -----  --------  --------  --------  ------------  --------  ---------  ---------  ------- 
Balance at 31 December 
 2020                                  10.5     312.6   (154.1)          36.2     (0.2)       25.8      283.0    513.8 
--------------------------  -----  --------  --------  --------  ------------  --------  ---------  ---------  ------- 
 

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.

Consolidated balance sheet

 
                                                     As at    As at 
                                                    31 Dec   31 Dec 
GBPm                                        Notes     2020     2019 
-----------------------------------------   -----  -------  ------- 
Non-current assets 
Goodwill                                       13    695.5    674.6 
Other intangible assets                        14     53.3     45.0 
Property, plant and equipment                  15  6,855.9  7,190.7 
------------------------------------------  -----  -------  ------- 
Right-of-use assets                            15  5,646.9  5,917.4 
Other property, plant and equipment            15  1,209.0  1,273.3 
------------------------------------------  -----  -------  ------- 
Deferred tax assets                             8    188.2    195.0 
Other long-term receivables                    16     55.0     61.0 
Investments in joint ventures                  21     11.3     13.8 
------------------------------------------  -----  -------  ------- 
Total non-current assets                           7,859.2  8,180.1 
------------------------------------------  -----  -------  ------- 
 
Current assets 
Inventory                                              1.3      1.3 
Trade and other receivables                    17  1,003.7    681.3 
Corporation tax receivable                      8     29.1     24.0 
Cash and cash equivalents                      23     71.0     66.6 
------------------------------------------  -----  -------  ------- 
Total current assets                               1,105.1    773.2 
Total assets                                       8,964.3  8,953.3 
 
Current liabilities 
Trade and other payables (incl. customer 
 deposits)                                     18  1,007.6    788.8 
Deferred income                                      328.9    322.6 
Corporation tax payable                         8     40.0     32.3 
Bank and other loans                           19     21.9      9.7 
Lease liabilities                              23  1,019.6    977.4 
Provisions                                     20     17.5      8.9 
------------------------------------------  -----  -------  ------- 
Total current liabilities                          2,435.5  2,139.7 
------------------------------------------  -----  -------  ------- 
 
Non-current liabilities 
Other long-term payables                               5.9      2.0 
Deferred tax liability                          8      0.2        - 
Bank and other loans                           19    400.2    351.0 
Lease liabilities                              23  5,538.9  5,568.6 
Derivative financial liabilities               24     49.6      0.2 
Provisions                                     20     13.5      6.9 
Provision for deficit on joint ventures        21      4.6      2.9 
Retirement benefit obligations                 26      2.1      1.5 
------------------------------------------  -----  -------  ------- 
Total non-current liabilities                      6,015.0  5,933.1 
Total liabilities                                  8,450.5  8,072.8 
 
Total equity 
Issued share capital                           22     10.5      9.2 
Issued share premium                           22    312.6        - 
Treasury shares                                22  (154.1)  (116.9) 
Foreign currency translation reserve                  36.2     34.9 
Hedging reserve                                      (0.2)    (0.2) 
Other reserves                                        25.8     25.8 
Retained earnings                                    283.0    927.7 
------------------------------------------  -----  -------  ------- 
Total equity                                         513.8    880.5 
------------------------------------------  -----  -------  ------- 
Total equity and liabilities                       8,964.3  8,953.3 
------------------------------------------  -----  -------  ------- 
 

Approved by the Board on 9 March 2021

 
Mark Dixon               ERIC HAGEMAN 
                         Chief Financial 
Chief Executive Officer   Officer 
 

CoNSOLIDATED STATEMENT OF CASH FLOWS

 
                                                                Year ended    Year ended 
                                                                    31 Dec   31 Dec 2019 
GBPm                                                     Notes        2020   Restated(1) 
-------------------------------------------------------  -----  ----------  ------------ 
Operating activities 
(Loss)/profit for the year from continuing operations              (650.2)          77.3 
Adjustments for: 
Profit from discontinued operations                          9         0.6          21.9 
Net finance expense                                          7       268.1         231.8 
Share of loss/(profit) on equity-accounted investees, 
 net of income tax                                          21         2.6         (2.7) 
Depreciation charge                                         15     1,186.3       1,159.7 
-------------------------------------------------------  -----  ----------  ------------ 
Right-of-use assets                                         15       946.0       1,010.0 
Other property, plant and equipment                         15       240.3         149.7 
-------------------------------------------------------  -----  ----------  ------------ 
Loss on impairment of goodwill                              13         4.9           0.8 
Loss on disposal of property, plant and equipment            5        93.1          24.4 
(Profit)/loss on disposal of right-of-use assets            5, 
 and related lease liabilities                              23      (25.7)           1.7 
Loss/(profit) on disposal of intangible assets               5         0.1         (0.3) 
Impairment/(reversal of impairment) of property,            5, 
 plant and equipment                                        15        82.1         (2.1) 
                                                            5, 
Loss on impairment of right-of-use assets                   15       163.9             - 
                                                            5, 
Amortisation of intangible assets                           14         8.7           9.7 
Loss on disposal of other investments                       21         1.6             - 
                                                            8, 
Tax expense/(credit)                                         9        30.4        (22.3) 
Expected credit losses on trade receivables                  5        34.8           2.0 
Increase/(decrease) in provisions                           20        15.2         (1.3) 
Share-based payments                                                   6.4           0.7 
Other non-cash movements                                             (4.4)         (1.6) 
-------------------------------------------------------  -----  ----------  ------------ 
Operating cash flows before movements in working 
 capital                                                           1,218.5       1,499.7 
-------------------------------------------------------  -----  ----------  ------------ 
Proceeds from partner contributions (reimbursement 
 of costs)                                                  15        38.4          98.0 
Increase in trade and other receivables                             (76.4)       (108.7) 
Increase in trade and other payables                                  77.3       (301.4) 
-------------------------------------------------------  -----  ----------  ------------ 
Cash generated from operations                                     1,257.8       1,187.6 
-------------------------------------------------------  -----  ----------  ------------ 
Interest paid and similar charges on bank loans 
 and corporate borrowings                                           (17.6)        (21.2) 
Interest paid on lease liabilities                          23     (249.4)       (213.2) 
Tax paid                                                            (21.9)        (48.8) 
Net cash inflows from operating activities                           968.9         904.4 
-------------------------------------------------------  -----  ----------  ------------ 
 
Investing activities 
Purchase of property, plant and equipment                   15     (257.4)       (356.4) 
Purchase of subsidiary undertakings, net of cash 
 acquired                                                   27      (26.8)        (24.2) 
Purchase of intangible assets                               14      (16.5)        (12.8) 
Purchase of joint ventures                                  21           -         (1.8) 
Purchase of current other current receivables               17     (276.2)             - 
Proceeds on the sale of discontinued operations, 
 net of cash disposed of                                     9         3.3         424.6 
Proceeds on sale of property, plant and equipment                      8.2           0.6 
Interest received                                            7         0.6           0.5 
Net cash (outflows)/inflows from investing activities              (564.8)          30.5 
-------------------------------------------------------  -----  ----------  ------------ 
 
Financing activities 
Proceeds from issue of loans                                         876.5         850.5 
Repayment of loans                                               (1,109.8)     (1,013.0) 
Proceeds from issue of convertible bonds (net 
 of transaction costs)                                      19       343.2             - 
Payment of lease liabilities                                23     (898.1)       (878.3) 
Proceeds from partner contributions (lease incentives)      15       111.0         204.1 
Proceeds from issue of ordinary shares, net of 
 costs                                                      22       313.9             - 
Purchase of treasury shares                                 22      (43.7)        (49.5) 
Proceeds from exercise of share awards                                 2.2           2.9 
Payment of ordinary dividend                                12           -        (58.2) 
Net 
 cash outflows from financing activities                           (404.8)       (941.5) 
-------------------------------------------------------  -----  ----------  ------------ 
 
Net decrease in cash and cash equivalents                            (0.7)         (6.6) 
Cash and cash equivalents at beginning of the 
 year                                                                 66.6          69.0 
Effect of exchange rate fluctuations on cash 
 held                                                                  5.1           4.2 
Cash and cash equivalents at end of the year                23        71.0          66.6 
-------------------------------------------------------  -----  ----------  ------------ 
 

1. The comparative information has been restated to reflect the impact of discontinued operations (note 9), interest charges on lease liabilities and

partner contributions (note 2).

Notes to the accounts

1. Authorisation of financial statements

IWG plc is a public limited company incorporated in Jersey and registered and domiciled in Switzerland. The Group and Company financial statements for the year ended 31 December 2020 were authorised for issue by the Board of Directors on 9 March 2021 and the balance sheets were signed on the Board's behalf by Mark Dixon and Eric Hageman. The Company's ordinary shares are traded on the London Stock Exchange. The audited Group accounts are included from pages 105 to 152.

IWG plc owns, and is a franchise operator of, a network of business centres which are utilised by a variety of business customers. Information on the Group's structure is provided in note 31, and information on other related party relationships of the Group is provided in note 30.

The Group financial statements have been prepared and approved by the Directors in accordance with Companies (Jersey) Law 1991 and International Financial Reporting Standards as adopted by the European Union ('Adopted IFRSs').

The Company prepares its parent company annual accounts in accordance with accounting policies based on the Swiss Code of Obligations; extracts from these unaudited accounts are presented on page 153.

2. Accounting policies

Basis of preparation

The Group financial statements consolidate those of the parent company and its subsidiaries (together referred to as the 'Group') and equity account the Group's interest in joint ventures. The extract from the parent company annual accounts presents information about the Company as a separate entity and not about its Group.

The accounting policies set out below have been applied consistently to all periods presented in these Group financial statements. Amendments to adopted IFRSs issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) with an effective date from 1 January 2020 did not have a material effect on the Group financial statements, unless otherwise indicated.

The 2019 Consolidated Statement of Cash Flows has been restated, whereby the Group previously disclosed:

- Interest charges on lease liabilities of GBP213.2m within the 'payment of lease liabilities' balance (GBP1,091.5m) within financing activities.

- Partner contributions of GBP302.1m offset within 'Increase in trade and other payables' for reimbursements for landlord assets (GBP98.0m) and 'Proceeds for lease incentives' for lease incentives (GBP204.1m).

Having considered feedback from the Financial Reporting Council, the Group revisited these classifications and determined that:

- Cash flows related to lease interest payments (GBP213.2m in 2019) are material and should be disclosed separately as operating cash flows, consistent with the treatment of other interest payments. The 'payment of lease liabilities' balance in 2019 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 (GBP98.0m in 2019) as operating cash flows and contributions received for lease incentives (GBP204.1m in 2019) as financing cash flows, with 'movement in trade and other payables' restated for these changes respectively.

The following standards, interpretations and amendments to standards were adopted by the Group for periods commencing on or after 1 January 2020:

 
Amendments to References to Conceptual Framework in IFRS Standards 
Definition of a Business (Amendments to IFRS 3) 
Definition of Material (Amendments to IAS 1 and IAS 8) 
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform 
COVID-19 Related Rent Concessions (Amendments to IFRS 16)(1) 
----------------------------------------------------------------------- 
 

1. This standard was not applied by the Group as adoption is optional.

Judgements made by the Directors in the application of these accounting policies that have significant effect on the consolidated financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 32.

The consolidated financial statements are prepared on a historical cost basis, with the exception of certain financial assets and liabilities that are measured at fair value or amortised cost.

GOING CONCERN

The Group reported a loss after tax of GBP650.2m from continuing operations for the year. This result includes a significant amount of non-cash related charges. Net cash of GBP968.9m was generated from operations during the year. Although the Group's balance sheet at 31 December 2020 reports a net current liability position of GBP1,330.4m 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 assets of GBP18.1m at 31 December 2020.

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. GBP731.3m was available and undrawn at 31 December 2020. This facility is committed until March 2025 with an option to extend until 2026 (note 24).

The Directors consider that the Group is well placed to successfully manage the actual and potential risks faced by the organisation including risks related to COVID-19. (For more detail, see 'Understanding and managing risk' in this report.)

On the basis of their assessment, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of at least 12 months from the date of approval of these consolidated financial statements and consider it appropriate to continue to adopt the going concern basis in preparing the financial statements of the Group.

These Group consolidated financial statements are presented in pounds sterling (GBP), which is IWG plc's functional currency, and all values are in million pounds, rounded to one decimal place, except where indicated otherwise.

The attributable results of those companies acquired or disposed of during the year are included for the periods of ownership.

IFRs not yet effective

The following new or amended standards and interpretations that are mandatory for 2021 annual periods (and future years) are not expected to have a material impact on the Group financial statements, unless otherwise stated:

 
Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS         1 January 
 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)                               2021 
Amendments to IFRS 4 Insurance Contracts - deferral of IFRS          1 January 
 9                                                                    2021 
Onerous contracts - Cost of Fulfilling a Contract (Amendments        1 January 
 to IAS 37)                                                           2022 
                                                                     1 January 
Annual Improvements to IFRS Standards 2018-2020                       2022 
Property, Plant and Equipment: Proceeds before Intended Use          1 January 
 (Amendments to IAS 16)                                               2022 
IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance      1 January 
 Contracts                                                            2023 
Amendments to IAS 8 Accounting policies, Changes in Accounting 
 Estimates and Errors: Definition                                    1 January 
 of Accounting Estimates                                              2023 
Classification of Liabilities as Current or Non-current (Amendments  1 January 
 to IAS 1)                                                            2023 
-------------------------------------------------------------------  --------- 
 

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.

Basis of consolidation

Subsidiaries are entities controlled by the Group. Control exists when the Group controls an entity, when it is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences. The results are consolidated until the date control ceases or the subsidiary qualifies as a disposal group, at which point the assets and liabilities are carried at the lower of fair value less costs to sell and carrying value.

Joint ventures are those entities over whose activities the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. The consolidated financial statements include the Group's share of the total recognised gains and losses of joint ventures on an equity-accounted basis, from the date that joint control commences until the date that joint control ceases or the joint venture qualifies as a disposal group, at which point the investment is carried at the lower of fair value less costs to sell and carrying value. When the Group's share of losses exceeds its interest in a joint venture, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of a joint venture.

Leases

The nature of the Group's leases relates to the rental of commercial office real estate premises globally.

1. Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised and initial direct costs incurred. The recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.

Right-of-use assets are subject to impairment review on an annual basis.

2. Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments and variable lease payments that depend on an index or a rate. The variable lease payments that do not depend on an index or a rate are recognised as a rent expense in the period in which they are incurred.

In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date as the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term or a change in the in-substance fixed lease payments.

3. Lease modifications

The carrying amount of lease liabilities is remeasured where there is a modification, a change in the lease term, a change in the lease payments (e.g. changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. The impact of the modification is recognised against the carrying amount of the right-of-use assets or is recorded in profit or loss if the carrying amount of the right-of-use assets has been reduced to zero.

4. Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to short-term leases (i.e. those leases that have a lease term of 12 months or less from commencement). It also applies the lease of low-value assets recognition exemption under IFRS 16 to leases that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as a rent expense on a straight-line basis over the lease term.

5. Lessor accounting

There are no lessor arrangements in the Group as a result of the contractual arrangements in place with customers which convey the right to use an identified asset.

6. Partner contributions

Partner contributions are contributions from our business partners (property owners and landlords) towards the initial costs of opening a business centre, including the fit-out of the property. Partner contributions representing a reimbursement to the lessee (IWG) are accounted for as agency arrangements, and form part of the lessor's (landlord's) assets.

Partner contributions where the Group retains ownership of the fit-out assets are accounted for as a lease incentive. If received at or before the lease commencement date, are accounted for by reducing the right-of-use asset; and if received after the commencement date, are accounted for as a reduction of the lease liability and the right-of-use asset.

7. Lease term

The lease term represents the period from lease inception up to either:

a. The earliest point at which the lease could be broken, where break clauses exist;

b. The point at which the lease could be extended, but no further, where extension options exist; or

c. To the end of the contractual lease term in all other cases.

8. Lease break penalties

Lease break penalties where the lease term has been determined as the period from inception up to a break clause and when there are break payments or penalties, have been appropriately included in the measurement of the lease liability.

DILAPIDATIONS

A provision is recognised for those potential dilapidation payments when it is probable that an outflow will occur and can be reliably estimated.

Impairment of non-financial assets

For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount was estimated in two tranches, at 30 September 2020 and 31 December 2020 respectively. At each reporting date, the Group reviews the carrying amount of these assets to determine whether there is an indicator of impairment. If any indicator is identified, then the assets' recoverable amount is re-evaluated.

The carrying amount of the Group's other non-financial assets (other than deferred tax assets and inventory), including right-of-use assets, is reviewed at the reporting date to determine whether there is an indicator of impairment. If any such indication exists, the assets' recoverable amount is estimated.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit (CGU) exceeds its recoverable amount. Impairment losses are recognised in the income statement.

A cash-generating unit (CGU) is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The Group has identified individual business centres as the CGU.

The potential impairment of immovable property, plant and equipment and right-of-use assets at the centre (CGU) level are evaluated where there are indicators of impairment.

Centres (CGUs) are grouped by country of operation for the purposes of carrying out impairment reviews of goodwill as this is the lowest level at which it can be assessed.

Individual fittings and equipment in centres or elsewhere in the business that become obsolete or are damaged are assessed and impaired where appropriate.

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

Goodwill

All business combinations are accounted for using the purchase method. Goodwill is initially measured at fair value, being the excess of the aggregate of the fair value of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group reassesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred (negative goodwill), then the gain is recognised in profit or loss.

Positive goodwill is stated at cost less any provision for impairment in value. An impairment test is carried out annually and, in addition, whenever indicators exist that the carrying amount may not be recoverable. Negative goodwill is recognised directly in profit or loss.

Intangible assets

Intangible assets acquired separately from the business are capitalised at cost. Intangible assets acquired as part of an acquisition of a business are capitalised separately from goodwill if their fair value can be identified and measured reliably on initial recognition.

Intangible assets are amortised on a straight-line basis over the estimated useful life of the assets as follows:

 
Brand - Regus brand            Indefinite life 
Brand - Other acquired brands  20 years 
Computer software              Up to 5 years 
Customer lists                 2 years 
-----------------------------  --------------- 
 

Amortisation of intangible assets is expensed through administration expenses in the income statement.

Acquisitions of non-controlling interests

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary.

Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Asset lives and recoverable amounts are reviewed on annual basis. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows:

 
Right-of-use assets (1)          Over the lease term 
Buildings                        50 years 
Leasehold improvements (1)       10 years 
Furniture                        10 years 
Office equipment and telephones  5 - 10 years 
Computer hardware                3 - 5 years 
-------------------------------  ------------------- 
 

1. 10 years represents the average useful economic life across the lease portfolio. Actual economic useful lives determined for leases in scope of IFRS 16 range from approximately 3 to in excess of 10 years.

Revenue

The Group's primary activity and only business segment is the provision of global workspace solutions.

The Group recognises revenue when it transfers services to a customer. It is measured based on the consideration specified in a contract with a customer. Services transfer to the customer equally over the contract period based on the time elapsed. Where discounted periods are granted to customers, service income is spread on a straight-line basis over the duration of the customer contract.

1. Workstations

Workstation revenue is recognised over time as the services are provided. Amounts invoiced in advance are accounted for as deferred income (contract liability) and recognised as revenue upon provision of the service.

2. Customer service income

Service income (including the provision of meeting rooms) is recognised over time as the services are delivered or at a point in time depending on contractual obligations. In circumstances where the Group acts as an agent for the sale and purchase of goods to customers, only the commission fee earned is recognised as revenue.

3. Management and franchise fees

Fees received for the provision of initial and subsequent services are recognised over time as the services are rendered. Fees charged for the use of continuing rights granted by the agreement, or for other services provided during the period of the agreement, are recognised as revenue as the services are provided or the rights used.

4. Membership card income

Revenue from the sale of membership cards is deferred and recognised over time within the period that the benefits of the membership card are expected to be provided. Deferred revenue is included in contract liabilities.

The Group has generally concluded that it is the principal in its revenue arrangements, except where noted above.

ADJUSTING ITEMS

Significant infrequent transactions not indicative of the underlying performance of the consolidated Group are reported separately as non-recurring/adjusting items.

Adjusting items are separately disclosed by the Group to provide readers with helpful, additional information on the performance of the business across periods. In 2020, items arising specifically from the impact of the COVID-19 pandemic have been deemed to meet the definition of adjusting items. Each of these items are considered to be significant in nature and/or size and are also consistent with items treated as adjusting in prior periods in which significant non-recurring transactions occurred. The exclusion of these items is consistent with how the business performance is planned by, and reported to, the Board. The profit before tax and adjusting items measure is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies. The classification of adjusting items requires significant management judgement after considering the nature and intentions of a transaction.

Employee benefits

The majority of the Group's pension plans are of the defined contribution type. For these plans the Group's contribution and other paid and unpaid benefits earned by the employees are charged to the income statement as incurred.

The cost of providing benefits under the defined benefit plans is determined using the projected unit credit method.

Re-measurements, comprising actuarial gains and losses, the effect of the asset ceiling and the return on plan assets, excluding net interest, are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.

Service costs are recognised in profit or loss, and include current and past service costs as well as gains and losses on curtailments.

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognises the following changes in the net defined benefit obligation under 'cost of sales' and 'selling, general and administration expenses' in the consolidated income statement: service costs comprising current service costs; past service costs; and gains and losses on curtailments and non-routine settlements.

Settlements of defined benefit schemes are recognised in the period in which the settlement occurs.

Grants that compensate the Group for expenses incurred are recognised in profit or loss on a systematic basis in the periods in which the expenses are recognised.

Share-based payments

The share awards programme entitles certain Directors and employees to acquire shares of the ultimate parent company (IWG plc); these awards are granted by the ultimate parent company (IWG plc) and are equity-settled.

The fair value of options and awards granted under the Group's share-based payment plans outlined in note 25 is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using the Black-Scholes valuation model or the Monte Carlo method, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest in respect of non-market conditions except where forfeiture is due to the expiry of the option.

Taxation

Tax on the profit for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

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

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are not subject to discounting. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets and liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.

A deferred tax asset is recognised for unused tax losses only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

The carrying amount of a deferred tax asset or liability may change for reasons other than a change in the temporary difference itself. Such changes might arise as a result of a change in tax rates or laws, a reassessment of the recoverability of a deferred tax asset or a change in the expected manner of recovery of an asset or the expected manner of a settlement of a liability. The impact of these changes is recognised in the income statement or in other comprehensive income depending on where the original deferred tax balance was recognised.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Upon adoption of IFRIC Interpretation 23, in 2019, the Group considered whether it has any uncertain tax positions, particularly those relating to transfer pricing. The Company's and the subsidiaries' tax filings in different jurisdictions include deductions related to transfer pricing and the taxation authorities may challenge those tax treatments. The Group determined, based on its tax compliance and transfer pricing studies, that in most jurisdictions it is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities. The Group has, where considered appropriate, provided for the potential impact of uncertain tax positions where the likelihood of tax authority adjustment is considered to be more likely than not. The adoption of the interpretation did not have an impact on the consolidated financial statements of the Group.

Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

Restructuring provisions are made for direct expenditures of a business reorganisation where the plans are sufficiently detailed and well-advanced and where the appropriate communication to those affected has been undertaken at the reporting date.

Provision is made for closure costs to the extent that the unavoidable costs of meeting the obligations exceed the economic benefits expected to be delivered.

Equity

Equity instruments issued by the Group are recorded at the value of proceeds received, net of direct issue costs.

When shares recognised as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the treasury share reserve. When treasury shares are sold or re-issued subsequently, the amount received is recognised as an increase in equity and the resulting surplus or deficit on the transaction is presented within retained earnings.

Inventory

Inventories relate to consumable items which are measured at the lower of cost or net realisable value. The cost of inventories is based on the first-in, first-out principle.

Net finance expense

Interest charges and income are accounted for in the income statement on an accrual basis. Financing transaction costs that relate to financial liabilities are charged to interest expense using the effective interest rate method and are recognised within the carrying value of the related financial liability on the balance sheet. Fees paid for the arrangement of credit facilities are recognised as an asset and recognised through the finance expense over the term of the facility.

Where assets or liabilities on the Group balance sheet are carried at net present value, the increase in the amount due to unwinding the discount is recognised as a finance expense or finance income as appropriate.

Costs arising on bank guarantees and letters of credit and foreign exchange gains or losses are included in other finance costs (note 7).

Interest-bearing borrowings and other financial liabilities

Financial liabilities, including interest-bearing borrowings, are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, financial liabilities are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest rate method.

The Group derecognises financial liabilities when the Group's obligations are discharged, cancelled or expired.

Financial liabilities are classified as financial liabilities at fair value through profit or loss where the liability is either held for trading or is designated as held at fair value through profit or loss on initial recognition. Financial liabilities at fair value through profit or loss are stated at fair value with any resultant gain or loss recognised in the income statement.

Compound financial instruments issued by the Group comprise convertible bonds denominated in pounds sterling that can be converted to ordinary shares at the option of the holder.

The debt component of compound financial instruments is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The conversion option represents a derivative financial liability and is initially recognised as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the debt host.

Subsequent to initial recognition, the debt component of a compound financial instrument is measured at amortised cost using the effective interest method. The derivative component of a compound financial instrument is remeasured at fair value through profit or loss. Interest related to the debt is recognised as a finance expense in profit or loss.

Derivative financial instruments

The Group's policy on the use of derivative financial instruments can be found in note 24. Derivative financial instruments are measured initially at fair value and changes in the fair value are recognised through profit or loss unless the derivative financial instrument has been designated as a cash flow hedge whereby the effective portion of changes in the fair value are deferred in equity.

Financial assets

Financial assets are classified and subsequently measured at amortised cost, fair value through the profit or loss, or fair value through other comprehensive income (OCI). The classification depends on the nature and purpose of the financial assets and is determined on initial recognition.

Financial assets (including trade and other receivables) are measured at amortised cost if both of the following conditions are met:

- The financial asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and

- Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at fair value through profit or loss are measured at fair value and changes therein, including any interest or dividend income, are recognised in profit or loss.

Financial assets (including trade and other receivables) are measured at fair value through OCI if both of the following conditions are met:

- The financial asset is held within a business model whose objective is achieved by both collecting cash flows and selling financial assets; and

- Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

IFRS 9 requires the Group to record expected credit losses on all of its financial assets held at amortised cost, either on a 12-month or lifetime basis. The Group applies the simplified approach to trade receivables and recognises expected credit losses based on the lifetime expected losses. Provisions for receivables are established based on both expected credit losses and information available that the Group will not be able to collect all amounts due according to the original terms of the receivables.

Customer deposits

Deposits received from customers against non-performance of the contract are held on the balance sheet as a current liability until they are either returned to the customer at the end of their relationship with the Group, or released to the income statement.

Foreign currency transactions and foreign operations

Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the closing rate of exchange at the balance sheet date and the gains or losses on translation are taken to the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. The results and cash flows of foreign operations are translated using the average rate for the period. Assets and liabilities, including goodwill and fair value adjustments, of foreign operations are translated using the closing rate, with all exchange differences arising on consolidation being recognised in other comprehensive income, and presented in the foreign currency translation reserve in equity. Exchange differences are reclassified to the income statement on disposal.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and are subject to an insignificant risk of change in value.

Discontinued operations

A discontinued operation is a component of the Group's business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:

- represents a separate major line of business or geographic area of operations;

- is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or

- is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale. When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI is re-presented as if the operation had been discontinued from the start of the comparative year.

Foreign currency translation rates

 
             At 31 December    Annual average 
            ----------------  ---------------- 
               2020     2019     2020     2019 
----------  -------  -------  -------  ------- 
US dollar      1.37     1.32     1.29     1.28 
Euro           1.11     1.18     1.13     1.14 
----------  -------  -------  -------  ------- 
 

3. 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 segmental information is presented on the same basis on which the chief operating decision-maker received reporting during the year. The presentation of reported segment profit or loss has changed in 2020 to a pre-IFRS 16 basis (2019: in accordance with IFRS) and comparatives have been restated on this basis. Segmental assets and liabilities continue to be presented in accordance with IFRS.

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.

 
                              Americas                 EMEA               Asia Pacific         United Kingdom          Other                Total 
                        --------------------  ----------------------  --------------------  --------------------  ----------------  ---------------------- 
                             2020       2019       2020         2019     2020         2019       2020       2019     2020     2019       2020         2019 
Continuing                                               Restated(5)           Restated(5)                                                     Restated(5) 
 operations                  GBPm       GBPm       GBPm         GBPm     GBPm         GBPm       GBPm       GBPm     GBPm     GBPm       GBPm         GBPm 
----------------------  ---------  ---------  ---------  -----------  -------  -----------  ---------  ---------  -------  -------  ---------  ----------- 
Revenue from 
 external customers(1)    1,066.5    1,187.9      715.1        683.0    304.2        342.7      388.8      426.3      5.6      9.0    2,480.2      2,648.9 
----------------------  ---------  ---------  ---------  -----------  -------  -----------  ---------  ---------  -------  -------  ---------  ----------- 
Mature (2)                  969.8    1,099.8      564.0        575.1    252.2        274.7      338.2      370.1      5.6      9.0    2,129.8      2,328.7 
2019 Expansions 
 (2)                         53.4       20.7      103.4         36.8     27.1         10.6       31.5       11.3        -        -      215.4         79.4 
2020 Expansions 
 (2)                         11.0          -       21.5            -      5.7            -       10.0          -        -        -       48.2            - 
Closures (2)                 32.3       67.4       26.2         71.1     19.2         57.4        9.1       44.9        -        -       86.8        240.8 
----------------------  ---------  ---------  ---------  -----------  -------  -----------  ---------  ---------  -------  -------  ---------  ----------- 
Gross profit 
 (centre contribution)    (101.7)      220.5       23.0        123.4   (13.9)         28.4     (80.0)       28.9      2.7     12.9    (169.9)        414.1 
Share of (loss)/profit 
 of equity-accounted 
 investees                      -          -      (0.1)          2.6    (0.2)        (0.1)      (2.3)        0.2        -        -      (2.6)          2.7 
Operating 
 (loss)/profit            (184.6)      155.6     (60.4)         60.2   (44.8)          1.8    (116.7)        0.4  (146.8)   (81.2)    (553.3)        136.8 
Finance expense                                                                                                                        (13.9)       (18.7) 
Finance income                                                                                                                            3.0          0.5 
----------------------  ---------  ---------  ---------  -----------  -------  -----------  ---------  ---------  -------  -------  ---------  ----------- 
Profit before 
 tax for the 
 year                                                                                                                                 (564.2)        118.6 
 
Depreciation 
 and amortisation           161.4      133.0       60.9         45.8     33.1         29.3       41.2       43.7     10.6      8.8      307.2        260.6 
Impairment 
 of assets                      -      (0.7)          -          0.2        -        (1.2)          -      (0.4)        -        -          -        (2.1) 
 
Assets(3)                 3,460.0    3,797.4    2,542.0      2,294.4    676.5        730.1    1,925.4    1,699.6    360.4    431.8    8,964.3      8,953.3 
Liabilities(3)          (3,334.6)  (3,443.7)  (2,398.3)    (2,058.9)  (685.3)      (639.6)  (1,562.3)  (1,426.5)  (470.0)  (504.1)  (8,450.5)    (8,072.8) 
----------------------  ---------  ---------  ---------  -----------  -------  -----------  ---------  ---------  -------  -------  ---------  ----------- 
Net 
 assets/(liabilities)       125.4      353.7      143.7        235.5    (8.8)         90.5      363.1      273.1  (109.6)   (72.3)      513.8        880.5 
 
Non-current 
 asset additions(4)         886.2    1,139.1      867.6        779.4    321.5        224.2      320.0      455.5     36.7    172.6    2,432.0      2,770.8 
----------------------  ---------  ---------  ---------  -----------  -------  -----------  ---------  ---------  -------  -------  ---------  ----------- 
 

1. Excludes revenue from discontinued operations (note 9).

2. Revenue has been disaggregated to reflect the basis on which it is reported to the chief operating decision-maker. Further information can be found in the unaudited "Segmental analysis -- Based on estimates" on pages 158 and 159.

3. Presented 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.

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 
                        ----------------  --------------------  --------------------  ----------------  ------------  -------------------- 
                           2020     2019     2020         2019     2020         2019     2020     2019   2020   2019     2020         2019 
Continuing                                         Restated(5)           Restated(5)                                           Restated(5) 
 operations                GBPm     GBPm     GBPm         GBPm     GBPm         GBPm     GBPm     GBPm   GBPm   GBPm     GBPm         GBPm 
----------------------  -------  -------  -------  -----------  -------  -----------  -------  -------  -----  -----  -------  ----------- 
Gross profit 
 (centre contribution)  (101.7)    220.5     23.0        123.4   (13.9)         28.4   (80.0)     28.9    2.7   12.9  (169.9)        414.1 
Rent                      445.4    454.1    308.4        249.7    148.3        158.1    147.9    149.8    1.2  (0.1)  1,051.2      1,011.6 
Depreciation 
 of right-of-use 
 assets/property, 
 plant and equipment    (339.5)  (376.8)  (275.7)      (235.0)  (137.4)      (128.6)  (130.9)  (140.2)  (1.0)    6.2  (884.5)      (874.4) 
Other                     (9.0)      5.2     17.5         11.8      7.8          2.7      7.1      0.2  (0.3)  (6.1)     23.1         13.8 
----------------------  -------  -------  -------  -----------  -------  -----------  -------  -------  -----  -----  -------  ----------- 
Gross profit 
 (centre contribution) 
 - Reported               (4.8)    303.0     73.2        149.9      4.8         60.6   (55.9)     38.7    2.6   12.9     19.9        565.1 
----------------------  -------  -------  -------  -----------  -------  -----------  -------  -------  -----  -----  -------  ----------- 
 
 
                       Americas              EMEA              Asia Pacific       United Kingdom        Other              Total 
                   ----------------  --------------------  --------------------  ----------------  ---------------  -------------------- 
                      2020     2019     2020         2019     2020         2019     2020     2019     2020    2019     2020         2019 
Continuing                                    Restated(5)           Restated(5)                                              Restated(5) 
 operations           GBPm     GBPm     GBPm         GBPm     GBPm         GBPm     GBPm     GBPm     GBPm    GBPm     GBPm         GBPm 
-----------------  -------  -------  -------  -----------  -------  -----------  -------  -------  -------  ------  -------  ----------- 
Operating 
 (loss)/profit     (184.6)    155.6   (60.4)         60.2   (44.8)          1.8  (116.7)      0.4  (146.8)  (81.2)  (553.3)        136.8 
Rent                 445.5    454.1    308.4        249.7    148.3        158.1    160.8    149.8      2.2       -  1,065.2      1,011.7 
Depreciation 
 of right-of-use 
 assets/property, 
 plant and 
 equipment         (339.5)  (376.8)  (275.7)      (235.0)  (137.4)      (128.6)  (131.5)  (140.5)    (2.9)     5.4  (887.0)      (875.5) 
Other                (9.1)      5.0     17.1         11.4      7.4          2.7      7.0      0.1      0.7   (5.4)     23.1         13.8 
-----------------  -------  -------  -------  -----------  -------  -----------  -------  -------  -------  ------  -------  ----------- 
Operating 
 (loss)/profit 
 - Reported         (87.7)    237.9   (10.6)         86.3   (26.5)         34.0   (80.4)      9.8  (146.8)  (81.2)  (352.0)        286.8 
-----------------  -------  -------  -------  -----------  -------  -----------  -------  -------  -------  ------  -------  ----------- 
 
 
                     Americas           EMEA            Asia Pacific     United Kingdom     Other            Total 
                   ------------  ------------------  ------------------  --------------  -----------  -------------------- 
                    2020   2019   2020         2019   2020         2019   2020     2019  2020   2019     2020         2019 
Continuing                              Restated(5)         Restated(5)                                        Restated(5) 
 operations         GBPm   GBPm   GBPm         GBPm   GBPm         GBPm   GBPm     GBPm  GBPm   GBPm     GBPm         GBPm 
-----------------  -----  -----  -----  -----------  -----  -----------  -----  -------  ----  -----  -------  ----------- 
Depreciation 
 and amortisation  161.4  133.0   60.9         45.8   33.1         29.3   41.2     43.7  10.6    8.8    307.2        260.6 
Depreciation 
 of right-of-use 
 assets/property, 
 plant and 
 equipment         339.5  376.8  275.7        236.7  137.4        127.0  131.5    140.5   2.9  (6.9)    887.0        874.1 
-----------------  -----  -----  -----  -----------  -----  -----------  -----  -------  ----  -----  -------  ----------- 
Depreciation 
 and amortisation 
 - Reported        500.9  509.8  336.6        282.5  170.5        156.3  172.7    184.2  13.5    1.9  1,194.2      1,134.7 
-----------------  -----  -----  -----  -----------  -----  -----------  -----  -------  ----  -----  -------  ----------- 
 
 
                                                                          United 
                     Americas          EMEA           Asia Pacific        Kingdom        Other            Total 
                   ------------  -----------------  -----------------  -------------  ------------  ------------------ 
                    2020   2019  2020         2019  2020         2019  2020     2019   2020   2019   2020         2019 
Continuing                             Restated(5)        Restated(5)                                      Restated(5) 
 operations         GBPm   GBPm  GBPm         GBPm  GBPm         GBPm  GBPm     GBPm   GBPm   GBPm   GBPm         GBPm 
-----------------  -----  -----  ----  -----------  ----  -----------  ----  -------  -----  -----  -----  ----------- 
Impairment 
 of assets             -  (0.7)     -          0.2     -        (1.2)     -    (0.4)      -      -      -        (2.1) 
Impairment 
 of right-of-use 
 assets/property, 
 plant and 
 equipment         161.3      -  25.2            -  14.1            -  45.4        -      -      -  246.0            - 
-----------------  -----  -----  ----  -----------  ----  -----------  ----  -------  -----  -----  -----  ----------- 
Impairment 
 of assets - 
 Reported          161.3  (0.7)  25.2          0.2  14.1        (1.2)  45.4    (0.4)      -      -  246.0        (2.1) 
-----------------  -----  -----  ----  -----------  ----  -----------  ----  -------  -----  -----  -----  ----------- 
 

4. Segmental analysis - entity-wide disclosures

The Group's primary activity and only business segment is the provision of global workplace solutions, therefore all revenue is attributed to a single group of similar products and services. It is not meaningful to separate this group into further categories of products. Revenue is recognised where the service is provided.

The Group has a diversified customer base and no single customer contributes a material percentage of the Group's revenue.

The Group's revenue from external customers and non-current assets analysed by foreign country are as follows:

 
                                                   2020                   2019 
                                           ---------------------  --------------------- 
                                           External  Non-current  External  Non-current 
GBPm                                        revenue    assets(2)   revenue    assets(2) 
-----------------------------------------  --------  -----------  --------  ----------- 
Country of tax domicile - Switzerland(1)          -            -         -            - 
United States of America                      899.7      3,140.2     999.3      3,500.1 
United Kingdom                                388.8      1,613.5     426.3      1,653.5 
All other countries                         1,191.7      2,917.3   1,223.3      2,831.5 
-----------------------------------------  --------  -----------  --------  ----------- 
                                            2,480.2      7,671.0   2,648.9      7,985.1 
-----------------------------------------  --------  -----------  --------  ----------- 
 

1. Revenue of GBPnil (2019: GBP39.1m) is included in discontinued operations, following sale of master franchise agreement.

2. Excluding deferred tax assets.

5. Operating (LOSS)/profit - continuing operations

Operating (loss)/profit has been arrived at after charging/(crediting):

 
                                                                  2020      2019 
                                                        Notes     GBPm   GBPm(4) 
------------------------------------------------------  -----  -------  -------- 
Revenue                                                        2,480.2   2,648.9 
 
Depreciation on property, plant and equipment(1)           15  1,185.5   1,125.0 
------------------------------------------------------  -----  -------  -------- 
 Right-of-use assets                                       15    945.4     982.0 
 Other property, plant and equipment                       15    240.1     143.0 
------------------------------------------------------  -----  -------  -------- 
Amortisation of intangible assets                          14      8.7       9.7 
Variable property rents payable in respect of 
 leases                                                           64.9      43.7 
Lease expense on low-value assets                                  3.4       0.9 
Lease expense on short-term leases                                   -       2.3 
Staff costs                                                 6    346.5     372.7 
Facility and other property costs                                431.9     419.0 
Expected credit losses on trade receivables(2)             24     34.8       2.0 
Loss on disposal of property, plant and equipment                 93.1      31.0 
(Profit)/loss on disposal of right-of-use assets 
 and related lease liabilities                                  (25.7)       1.7 
Impairment of goodwill                                     13      4.9       0.8 
Loss/(profit) on disposal of intangible assets             14      0.1     (0.3) 
Impairment/(reversal of impairment) of property, 
 plant and equipment(3)                                    15    246.0     (2.1) 
------------------------------------------------------  -----  -------  -------- 
Impairment/(reversal of impairment) of other 
 property, plant and equipment                                    82.1     (2.1) 
Impairment of right-of-use assets                                163.9         - 
------------------------------------------------------  -----  -------  -------- 
Other costs                                                      435.5     358.4 
------------------------------------------------------  -----  -------  -------- 
Operating (loss)/profit before equity-accounted 
 investees                                                     (349.4)     284.1 
Share of (loss)/profit of equity-accounted investees, 
 net of tax                                                21    (2.6)       2.7 
------------------------------------------------------  -----  -------  -------- 
Operating (loss)/profit                                        (352.0)     286.8 
------------------------------------------------------  -----  -------  -------- 
 

1. Excludes depreciation expenses related to discontinued operations for right-of-use assets of GBP0.6m (2019: GBP27.7m) and other property, plant and equipment of GBP0.2m (2019: GBP6.7m).

2. Of the GBP34.8m expected credit loss, GBP17.5m relates to COVID-19 adjusting items (note 10).

3. Of the GBP246.0m impairment charge, GBP244.8m relates to COVID-19 adjusting items (note 10).

4. The comparative information has been restated to reflect the impact of discontinued operations.

 
                                                          2020   2019 
                                                          GBPm   GBPm 
-------------------------------------------------------  -----  ----- 
Fees payable to the Group's auditor and its associates 
 for the audit of the Group accounts                       1.2    1.2 
Fees payable to the Group's auditor and its associates 
 for other services: 
  The audit of the Company's subsidiaries pursuant to 
   legislation                                             3.1    2.8 
Other services pursuant to legislation: 
  Tax services                                               -      - 
  Other services                                           0.2    0.2 
  Other non-audit services                                 1.0      - 
-------------------------------------------------------  -----  ----- 
 

6. Staff costs

 
                                                   2020      2019 
                                                GBPm(1)   GBPm(1) 
---------------------------------------------  --------  -------- 
The aggregate payroll costs were as follows: 
Wages and salaries(2)                             284.6     314.6 
Social security                                    49.9      51.7 
Pension costs                                       5.6       5.7 
Share-based payments                                6.4       0.7 
---------------------------------------------  --------  -------- 
                                                  346.5     372.7 
---------------------------------------------  --------  -------- 
 

1. Excludes staff costs related to discontinued operations of GBP0.1m (2019: GBP11.0m).

2. Includes worldwide financial support schemes disclosed in Note 10.

 
                                                                  2020             2019 
                                                               Average          Average 
                                                                  full             full 
                                                                  time             time 
                                                        equivalents(2)   equivalents(3) 
-----------------------------------------------------  ---------------  --------------- 
The average number of persons employed by the Group 
 (including Executive Directors), 
 analysed by category and geography, was as follows: 
Centre staff                                                     6,467            7,599 
Sales and marketing staff                                          425              462 
Finance staff                                                      775              749 
Other staff                                                        887              904 
-----------------------------------------------------  ---------------  --------------- 
                                                                 8,554            9,714 
-----------------------------------------------------  ---------------  --------------- 
 
Americas                                                         2,431            3,195 
EMEA                                                             2,592            2,744 
Asia Pacific                                                     1,248            1,268 
United Kingdom                                                     683              913 
Corporate functions                                              1,600            1,594 
-----------------------------------------------------  ---------------  --------------- 
                                                                 8,554            9,714 
-----------------------------------------------------  ---------------  --------------- 
 

3. The average full-time equivalents excludes employees for countries sold during 2020 of 6 (2019: 227).

Details of Directors' emoluments and interests are given on pages 84 to 96 in the Directors' Remuneration report, with audited schedules identified where relevant.

7. Net finance expense

 
                                                            2020      2019 
                                                            GBPm   GBPm(2) 
-------------------------------------------------------  -------  -------- 
Interest payable and similar charges on bank loans and 
 corporate borrowings                                     (12.8)    (13.7) 
Interest payable on finance lease liabilities(1)         (249.4)   (213.3) 
-------------------------------------------------------  -------  -------- 
Total interest expense                                   (262.2)   (227.0) 
Other finance costs (including foreign exchange)           (8.8)     (5.1) 
Unwinding of discount rates                                (0.1)     (0.2) 
-------------------------------------------------------  -------  -------- 
Total finance expense                                    (271.1)   (232.3) 
-------------------------------------------------------  -------  -------- 
 
Financial liabilities measured at FVTPL (note 19)            2.4         - 
Total interest income                                        0.6       0.5 
-------------------------------------------------------  -------  -------- 
Total finance income                                         3.0       0.5 
-------------------------------------------------------  -------  -------- 
 
Net finance expense                                      (268.1)   (231.8) 
-------------------------------------------------------  -------  -------- 
 

1. Excludes lease liability finance expense related to discontinued operations of GBP0.1m (2019: GBP2.9m).

2. The comparative information has been restated to reflect the impact of discontinued operations.

8. Taxation

(a) Analysis of charge in the year

 
                                                             2020    2019 
                                                             GBPm    GBPm 
---------------------------------------------------------  ------  ------ 
Current taxation 
Corporate income tax                                       (42.8)  (60.9) 
Previously unrecognised tax losses and other differences      8.5     4.2 
Over/(under) provision in respect of prior years             11.1   (0.6) 
---------------------------------------------------------  ------  ------ 
Total current taxation                                     (23.2)  (57.3) 
---------------------------------------------------------  ------  ------ 
Deferred taxation 
Origination and reversal of temporary differences           (6.9)    79.0 
Previously unrecognised tax losses and other differences        -     0.9 
Under provision in respect of prior years                       -   (0.3) 
---------------------------------------------------------  ------  ------ 
Total deferred taxation                                     (6.9)    79.6 
---------------------------------------------------------  ------  ------ 
Tax (charge)/credit on continuing operations               (30.1)    22.3 
---------------------------------------------------------  ------  ------ 
 

(b) Reconciliation of taxation charge

 
                                                     2020             2019 
                                                ---------------  -------------- 
                                                   GBPm       %    GBPm       % 
----------------------------------------------  -------  ------  ------  ------ 
(Loss)/profit before tax from continuing 
 operations                                     (620.1)            55.0 
----------------------------------------------  -------  ------  ------  ------ 
Tax on profit at 11.9% (2019: 14.6%)               73.8  (11.9)   (8.0)  (14.6) 
Tax effects of: 
Expenses not deductible for tax purposes         (44.9)     7.2  (38.5)  (70.0) 
Items not chargeable for tax purposes             155.0  (25.0)    31.9    58.0 
Recognition of previously unrecognised 
 deferred tax assets                                8.5   (1.4)     5.0     9.1 
Movements in temporary differences in 
 the year not recognised in deferred tax        (451.2)    72.8  (49.0)  (89.1) 
Adjustment to tax charge in respect of 
 previous years                                    11.1   (1.8)   (0.9)   (1.6) 
Differences in tax rates on overseas earnings     217.6  (35.1)    81.8   148.7 
----------------------------------------------  -------  ------  ------  ------ 
                                                 (30.1)     4.8    22.3    40.5 
----------------------------------------------  -------  ------  ------  ------ 
 

The applicable tax rate is determined based on the tax rate in the canton of Zug in Switzerland which is the country of domicile of the parent company of the Group for the financial year.

(c) Factors that may affect the future tax charge

Unrecognised tax losses to carry forward against certain future overseas corporation tax liabilities have the following expiration dates.

 
                                                            2020     2019 
                                                            GBPm     GBPm 
-------------------------------------------------------  -------  ------- 
2020                                                           -     13.9 
2021                                                        24.9     31.7 
2022                                                        43.1     37.7 
2023                                                        45.9     50.2 
2024                                                        49.3     64.0 
2025                                                        53.8     44.9 
2026                                                        38.8     47.1 
2027                                                        18.5     17.3 
2028 and later                                           1,106.9    472.9 
-------------------------------------------------------  -------  ------- 
                                                         1,381.2    779.7 
Available indefinitely                                     919.3    640.9 
-------------------------------------------------------  -------  ------- 
Tax losses available to carry forward                    2,300.5  1,420.6 
-------------------------------------------------------  -------  ------- 
Amount of tax losses recognised in deferred tax assets   1,029.0    488.5 
-------------------------------------------------------  -------  ------- 
Total tax losses available to carry forward              3,329.5  1,909.1 
-------------------------------------------------------  -------  ------- 
 

The following deferred tax assets have not been recognised due to uncertainties over recoverability.

 
                                      2020   2019 
                                      GBPm   GBPm 
---------------------------------  -------  ----- 
Intangibles                          420.0  410.8 
Accelerated capital allowances        26.4   17.7 
Tax losses                           564.5  347.3 
Rent                                  48.6   11.2 
Leases                                22.7   23.1 
Short-term temporary differences       3.7    5.6 
---------------------------------  -------  ----- 
                                   1,085.9  815.7 
---------------------------------  -------  ----- 
 

Estimates relating to deferred tax assets, including assumptions about future profitability, are re-evaluated at the end of each reporting period.

(d) Corporation tax

 
                               2020    2019 
                               GBPm    GBPm 
---------------------------  ------  ------ 
Corporation tax payable      (40.0)  (32.3) 
Corporation tax receivable     29.1    24.0 
---------------------------  ------  ------ 
 

(e) Deferred taxation

The movement in deferred tax is analysed below:

 
                                            Property,                               Short-term 
                                                plant                                temporary 
                          Intangibles   and equipment  Tax losses   Rent  Leases   differences  Total 
                                 GBPm            GBPm        GBPm   GBPm    GBPm          GBPm   GBPm 
------------------------  -----------  --------------  ----------  -----  ------  ------------  ----- 
Deferred tax asset 
At 1 January 2019              (33.5)          (24.8)        45.8   52.4    86.7         (9.3)  117.3 
Current year movement            71.5           (5.9)        71.2    3.3     6.9        (66.1)   80.9 
Prior year movement                 -           (2.0)         1.1    0.2       -           0.4  (0.3) 
Disposals                           -             0.6       (1.3)  (0.1)       -         (1.4)  (2.2) 
Transfers                           -             0.1           -  (0.1)       -             -      - 
Exchange rate movements           1.4             0.5       (1.3)  (1.6)       -           0.3  (0.7) 
------------------------  -----------  --------------  ----------  -----  ------  ------------  ----- 
At 31 December 2019              39.4          (31.5)       115.5   54.1    93.6        (76.1)  195.0 
------------------------  -----------  --------------  ----------  -----  ------  ------------  ----- 
Current year movement          (19.0)          (42.7)       137.6    9.6    13.4       (105.6)  (6.7) 
Prior year movement                 -               -           -      -       -             -      - 
Disposals                           -               -           -      -       -             -      - 
Transfers                       (0.2)           (4.6)         4.2    0.6       -             -      - 
Exchange rate movements           1.8             0.8       (0.3)  (1.7)   (0.1)         (0.6)  (0.1) 
------------------------  -----------  --------------  ----------  -----  ------  ------------  ----- 
At 31 December 2020              22.0          (78.0)       257.0   62.6   106.9       (182.3)  188.2 
------------------------  -----------  --------------  ----------  -----  ------  ------------  ----- 
 
Deferred tax liability 
At 1 January 2019               (0.2)           (4.7)         4.6    0.5       -         (0.2)      - 
Current year movement               -               -       (0.2)      -       -           0.2      - 
Prior year movement                 -               -           -      -       -             -      - 
Disposals                           -               -           -      -       -             -      - 
Transfers                           -           (0.1)           -    0.1       -             -      - 
Exchange rate movements             -             0.2       (0.2)      -       -             -      - 
------------------------  -----------  --------------  ----------  -----  ------  ------------  ----- 
At 31 December 2019             (0.2)           (4.6)         4.2    0.6       -             -      - 
------------------------  -----------  --------------  ----------  -----  ------  ------------  ----- 
Current year movement               -               -           -      -   (0.2)             -  (0.2) 
Prior year movement                 -               -           -      -       -             -      - 
Disposals                           -               -           -      -       -             -      - 
Transfers                         0.2             4.6       (4.2)  (0.6)       -             -      - 
Exchange rate movements             -               -           -      -       -             -      - 
------------------------  -----------  --------------  ----------  -----  ------  ------------  ----- 
At 31 December 2020                 -               -           -      -   (0.2)             -  (0.2) 
------------------------  -----------  --------------  ----------  -----  ------  ------------  ----- 
 

The movements in deferred taxes included above are after the offset of deferred tax assets and deferred tax liabilities where there is a legally enforceable right to set off and they relate to income taxes levied by the same taxation authority.

At the balance sheet date, the temporary difference arising from unremitted earnings of overseas subsidiaries was GBP11.9m (2019: GBP12.1m). The only tax that would arise on these reserves would be non-recoverable withholding tax.

As part of the Group's pivot towards franchising in 2019, the Group recognised a deferred tax asset of GBP89.8m and a corresponding deferred tax credit. This arose in connection with a restructure during 2019 involving the move of the Group's intellectual property (IP) and franchising arrangements from Luxembourg to Switzerland, and was based on the expected future value of annual amortisation on the fair market value of the IP at the date of the restructuring, which is deductible for Swiss corporate income tax purposes.

Further restructuring of Group cost allocations in 2020 has resulted in a reduction in the recognition of the deferred tax asset to GBP69.7m, resulting in a deferred tax charge of GBP20.1m, based on the updated future value of annual amortisation on the fair market value of the IP.

Tax losses have increased in 2020 as a result of both trading conditions and a further simplification of the Luxembourg and Switzerland head office structure.

The Directors have exercised judgement in determining the appropriate timescale (which is aligned with the Group's business planning processes) over which it is more likely than not that the Group will earn sufficient future taxable profits to utilise the available amortisation deductions.

9. Discontinued operations

During 2020, the Group completed the sale of various country operations through the signing of master franchise agreements. The financial impact of these transactions is treated as discontinued operations in accordance with IFRS 5, however these operations under franchise will continue to be an important strategic component of the overall Group network. These transactions form part of the larger change in strategy of the Group towards adopting a franchising model. Fees from

franchising activities subsequent to sale are reflected as franchise revenues in continuing operations.

Disposal of operations

During 2020, the Group completed the sale of individually immaterial operations for a consideration of GBP3.3m (2019: GBP104.3m). The results of these operations up to the date of disposal were as follows:

 
                                               2020    2019 
                                               GBPm    GBPm 
--------------------------------------------  -----  ------ 
Revenue                                         1.8    50.3 
Expenses                                      (0.9)  (43.4) 
--------------------------------------------  -----  ------ 
Profit before tax for the year                  0.9     6.9 
Income tax (expense)/credit                   (0.3)     2.8 
--------------------------------------------  -----  ------ 
Profit after tax for the year                   0.6     9.7 
Gain on the sale of discontinued operations     2.8    84.5 
--------------------------------------------  -----  ------ 
Profit for the year, net of tax                 3.4    94.2 
--------------------------------------------  -----  ------ 
 

The assets and liabilities of these operations at their respective dates of disposal were as follows:

 
                                                    2020     2019 
                                                    GBPm     GBPm 
-------------------------------------------------  -----  ------- 
Total assets                                         2.9    141.2 
Total liabilities                                  (2.2)  (124.2) 
-------------------------------------------------  -----  ------- 
Net assets                                           0.7     17.0 
Costs directly associated with the disposal(1)     (0.2)      5.0 
Foreign exchange recycled to profit and loss           -    (2.2) 
-------------------------------------------------  -----  ------- 
                                                     0.5     19.8 
Consideration on disposal (net of cash and debt)     3.3    104.3 
-------------------------------------------------  -----  ------- 
Gain on sale of discontinued operations              2.8     84.5 
-------------------------------------------------  -----  ------- 
 

1. Includes net payments received as final settlement to the original agreements completed in 2019.

The net cash flows incurred by these operations are as follows:

 
                             2020    2019 
                             GBPm    GBPm 
--------------------------  -----  ------ 
Operating                     1.3    15.2 
Investing                     0.3  (17.9) 
Financing                   (1.0)   (1.9) 
--------------------------  -----  ------ 
Net cash inflow/(outflow)     0.6   (4.6) 
--------------------------  -----  ------ 
 

Disposal of the Japanese operations (2019)

On 31 May 2019, the Group completed the sale of its Japanese operations to TKP Corporation for a consideration of GBP320.3m, with final adjustments recognised during the second half of 2019.

 
                                               2020    2019 
                                               GBPm    GBPm 
--------------------------------------------  -----  ------ 
Revenue                                           -    46.9 
Expenses                                          -  (31.9) 
--------------------------------------------  -----  ------ 
Profit before tax for the year                    -    15.0 
Income tax expense                                -   (2.8) 
--------------------------------------------  -----  ------ 
Profit after tax for the year                     -    12.2 
Gain on the sale of discontinued operations       -   266.9 
--------------------------------------------  -----  ------ 
Profit for the year, net of tax                   -   279.1 
--------------------------------------------  -----  ------ 
 

The assets and liabilities of the Japanese operations as at 31 May 2019 were as follows:

 
                                                    2020     2019 
                                                    GBPm     GBPm 
-------------------------------------------------  -----  ------- 
Total assets                                           -    281.4 
Total liabilities                                      -  (245.5) 
-------------------------------------------------  -----  ------- 
Net assets                                             -     35.9 
Costs directly associated with the disposal            -     24.1 
Foreign exchange recycled to profit and loss           -    (6.6) 
-------------------------------------------------  -----  ------- 
                                                       -     53.4 
Consideration on disposal (net of cash and debt)       -    320.3 
-------------------------------------------------  -----  ------- 
Gain on sale of discontinued operations                -    266.9 
-------------------------------------------------  -----  ------- 
 

The net cash flows incurred by the Japanese operations were as follows:

 
                   2020   2019 
                   GBPm   GBPm 
----------------  -----  ----- 
Operating             -    6.6 
Investing             -  (5.2) 
Financing             -      - 
----------------  -----  ----- 
Net cash inflow       -    1.4 
----------------  -----  ----- 
 

10. Covid-19 related adjusting items

In March 2020, following the declaration by the World Health Organization of the COVID-19 pandemic (COVID-19) and subsequent global government restrictions, the Group has been unable to operate at full capacity. Given the political and economic uncertainty resulting from COVID-19, the Group continues to see significant volatility and business disruption, reducing expected performance in 2021.

The impact that COVID-19 has had on underlying trading performance is not recognised within adjusting items.

In order to improve the transparency and usefulness of the financial information presented and improve year-on-year comparability, the Group has identified net charges of GBP389.8m relating to directly attributable charges resulting from COVID-19. These charges are considered to be adjusting items as they meet the Group's definition, as disclosed in previous annual reports, being both significant in nature and value to the results of the Group in the current period. GBP333.4m of these charges have been recognised as adjusting items to cost of sales and GBP56.4m of these charges have been recognised as adjusting items to selling, general and administration expenses in the Group's income statement.

The charges relate to several separately identifiable areas of accounting judgement and estimates as follows:

 
                                                    Year ended 
                                                        31 Dec 
                                                          2020 
                                                    ---------- 
Impairments of property, plant and equipment 
 (including right-of-use assets)(1)                      244.8 
Impairments of goodwill(2)                                 4.9 
Provision for expected credit losses(1)                   17.5 
Network rationalisation(1)                                77.5 
Other one-off items including restructuring(3)            45.1 
--------------------------------------------------  ---------- 
Total adjusting items                                    389.8 
--------------------------------------------------  ---------- 
 

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 GBP6.4m in respect of worldwide financial support schemes which is included

in costs of sales.

- Impairments 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, is expected to prolong the impact on our business in 2021. As a result of these measures, management carried out a comprehensive review exercise for potential impairments across the whole portfolio at a cash-generating units (CGUs) level.

The impairment review formed part of the Group's rationalisation process undertaken throughout the year due to the impact

of COVID-19. This review compared the value-in-use of CGUs, based on management's assumptions regarding likely future trading performance, to the carrying values at 31 December 2020. Following this review, a charge of GBP244.8m was recorded within net operating expenses. Of this charge, GBP80.9m was recorded against property, plant and equipment and a charge of GBP163.9m was recorded against right-of-use assets.

- Impairments of goodwill

COVID-19 and linked restrictions has impacted our ability to trade our way to sustainable profitable growth in certain markets. As a result, the projected cash flows for the operations in certain countries no longer supported the carrying value of the CGUs and an impairment of GBP4.9m was recognised during 2020.

- Provision for expected credit losses

In light of the temporary closure of centres globally, the Group reviewed the recoverability of its trade receivables profile and booked an increase of the expected credit loss provision of GBP17.5m. This increase reflects the greater likelihood of credit default by the Group's debtors directly attributable to the impact of COVID-19 and the significant change in the ageing profile of trade receivables as a direct consequence 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.

- Network rationalisation

GBP77.5m of charges were incurred relating to network rationalisations that occurred in the year, which includes the write off of the book value of assets and direct closure costs related to these centres. A separate rationalisation charge of GBP15.3m has also been recorded which is not included as adjusting items.

- Other one-off items including restructuring

During the year, the Group incurred GBP8.2m of transaction costs in respect of master franchise agreements that did not complete due to the outbreak of COVID-19. The Group fully expects to resume its pivot towards a franchising model in due course.

Other charges of GBP43.3m were also incurred, including severance costs and restructurings arising from mitigating actions taken by the Group in respect of COVID-19, completed by 31 December 2020 as well as claims in respect of centre closures. In addition, during the year, the Group received a total of GBP6.4m in respect of worldwide financial support schemes to fund staff costs.

Should the estimated charges not prove to be in excess of the amounts required, the release of any amounts provided for at year-end would be treated as adjusting items.

11. Earnings per ordinary share (basic and diluted)

 
                                                                        2020          2019 
-------------------------------------------------------------  -------------  ------------ 
Basic and diluted (loss)/profit for the year attributable 
 to shareholders (GBPm)                                              (646.8)         450.6 
Basic (loss)/earnings per share (p)                                   (67.9)          50.5 
Diluted (loss)/earnings per share (p)                                 (67.9)          49.6 
-------------------------------------------------------------  -------------  ------------ 
Basic and diluted (loss)/profit for the year from continuing 
 operations (GBPm)                                                   (650.2)          77.3 
Basic (loss)/earnings per share (p)                                   (68.3)           8.7 
Diluted (loss)/earnings per share (p)                                 (68.3)           8.5 
-------------------------------------------------------------  -------------  ------------ 
Basic and diluted profit for the year from discontinued 
 operations (GBPm)                                                       3.4         373.3 
Basic earnings per share (p)                                             0.4          41.8 
Diluted earnings per share (p)                                           0.4          41.1 
                                                               ------------- 
Weighted average number of shares for basic EPS                  951,890,712   892,737,688 
Weighted average number of shares under option                    41,016,473    34,671,862 
Weighted average number of shares that would have been 
 issued at average market price                                 (25,287,994)  (19,932,772) 
Weighted average number of share awards under the CIP, 
 PSP, DSBP and One-off Award                                       1,744,492     1,463,133 
Weighted average number of shares on convertible bonds            76,408,203             - 
-------------------------------------------------------------  -------------  ------------ 
Weighted average number of shares for diluted EPS              1,045,771,886   908,939,911 
-------------------------------------------------------------  -------------  ------------ 
 

Options are considered dilutive when they would result in the issue of ordinary shares for less than the market price of ordinary shares in the period. The amount of the dilution is taken to be the average market price of shares during the period minus the exercise price. There were no material awards considered anti-dilutive at the reporting date.

The Group issued GBP350.0m of convertible bonds in December 2020. The bond issue creates a potential 76,408,203 shares for bondholders. This represents a potential 7.1% dilutive impact at time of issue.

The average market price of one share during the year was 296.88p (2019: 338.28p), with a high of 469.00p on 17 January 2020 and a low of 114.00p on 18 March 2020.

12. Dividends

 
                                                         2020   2019 
-------------------------------------------------------  ----  ----- 
Dividends per ordinary share proposed                       -  4.80p 
Interim dividends per ordinary share declared and paid 
 during the year                                            -  2.15p 
-------------------------------------------------------  ----  ----- 
 

The Group initially declared a final dividend of 4.80 pence, equating to GBP42.4m, on 3 March 2020, for the year ended 31 December 2019. However, in response to COVID-19, the Group announced on 23 March 2020 the prudent and precautionary decision to not pay this final dividend. Consequently, the resolution in respect of the 2019 final dividend was not proposed at the AGM held on 12 May 2020 and no dividends were paid during the year (2019: GBP58.2m). The Company has proposed to shareholders that no final dividend will be paid for the year ended 31 December 2020 (2019: Nil).

Our capital allocation policy remains unchanged, prioritising investment in the long-term growth of our business and dividend distribution to shareholders. Given the uncertainty caused by COVID-19 and in order to protect our liquidity in the short-term, future dividend payments have been placed on hold with the intention to review the return to our progressive dividend policy when appropriate.

13. Goodwill

 
                                                 GBPm 
---------------------------------------------  ------ 
Cost 
At 1 January 2019                               679.2 
Recognised on acquisition of subsidiaries(1)     22.6 
Disposal of goodwill                           (10.9) 
Goodwill impairment                             (0.8) 
Exchange rate movements                        (15.5) 
---------------------------------------------  ------ 
At 31 December 2019                             674.6 
---------------------------------------------  ------ 
Recognised on acquisition of subsidiaries(1)     28.7 
Disposal of goodwill                                - 
Goodwill impairment                             (4.9) 
Exchange rate movements                         (2.9) 
---------------------------------------------  ------ 
At 31 December 2020                             695.5 
---------------------------------------------  ------ 
 
Net book value 
At 31 December 2019                             674.6 
---------------------------------------------  ------ 
At 31 December 2020                             695.5 
---------------------------------------------  ------ 
 

1. Net of GBPNil (2019: GBP8.5m) derecognised on the finalisation of the accounting for prior year acquisitions previously reported on a provisional basis.

Cash-generating units (CGUs), defined as individual business centres, are grouped by country of operation for the purposes of carrying out impairment reviews of goodwill as this is the lowest level at which it can be assessed. Goodwill acquired through business combinations is held at a country level and is subject to impairment reviews based on the cash flows of the CGUs within that country.

The goodwill attributable to the reportable business segments is as follows:

 
                                                2020   2019 
Carrying amount of goodwill included within:    GBPm   GBPm 
---------------------------------------------  -----  ----- 
Americas                                       307.0  290.9 
EMEA                                           142.5  138.6 
Asia Pacific                                    26.6   26.2 
United Kingdom                                 219.4  218.9 
---------------------------------------------  -----  ----- 
                                               695.5  674.6 
---------------------------------------------  -----  ----- 
 

The carrying value of goodwill and indefinite life intangibles allocated to two countries, the USA and the UK, is material relative to the total carrying value, comprising 73% of the total. The remaining 27% of the carrying value is allocated to a further 39 countries. The goodwill and indefinite life intangibles allocated to the USA and the UK are set out below:

 
                            Intangible 
                  Goodwill      assets   2020   2019 
               `      GBPm        GBPm   GBPm   GBPm 
----------------  --------  ----------  -----  ----- 
USA                  286.1           -  286.1  268.7 
United Kingdom       219.4        11.2  230.6  230.1 
Other countries      190.0           -  190.0  187.0 
----------------  --------  ----------  -----  ----- 
                     695.5        11.2  706.7  685.8 
----------------  --------  ----------  -----  ----- 
 

The indefinite life intangible asset relates to the Regus brand.

The value in use for each country has been determined using a model which derives the individual value in use for each country from the value in use of the Group as a whole. Although the model includes budgets and forecasts prepared by management it also reflects external factors, such as capital market risk pricing as reflected in the market capitalisation of the Group and prevailing tax rates, which have been used to determine the risk-adjusted discount rate for the Group. Management believes that the projected cash flows are a reasonable reflection of the likely outcomes over the medium to long term. In the event that trading conditions deteriorate beyond the assumptions used in the projected cash flows, it is also possible that impairment charges could arise in future periods.

The following key assumptions have been used in calculating the value in use for each country:

- Future cash flows are based on forecasts prepared by management. The model excludes cost savings and restructurings that are anticipated but had not been committed to at the date of the determination of the value in use. Thereafter, forecasts have been prepared by management for 2021, and for a further four years, that follow a budgeting process approved by the Board;

- These forecasts exclude the impact of acquisitive growth expected to take place in future periods;

- Management considers these projections to be a reasonable projection of margins expected at the mid-cycle position. A terminal value is included in the assessment, reflecting the Group's expectation that it will continue to operate in these markets and the long-term nature of the business. The terminal value includes a three-year average inflation growth rate which management believes is a reasonable long-term growth rate for the countries in which the Group operates; and

- The Group applies a country-specific pre-tax discount rate to the pre-tax cash flows for each country. The country-specific discount rate is based on the underlying weighted average cost of capital (WACC) for the Group. The Group WACC is then adjusted for each country to reflect the assessed market risk specific to that country. The Group pre-tax WACC decreased from 12.4% in 2019 to 8.2% in 2020 (post-tax WACC: 6.6%), reflecting an update/refinement of the methodology and key assumptions used by the Group in determining the WACC and changes in external information used to determine the cost of equity. The country-specific pre-tax WACC reflecting the respective market risk adjustment has been set between 7.9% and 10.6% (2019: 9.9% to 15.7%).

The amounts by which the values in use exceed the carrying amounts of goodwill are sufficiently large to enable the Directors to conclude that a reasonably possible change in the key assumptions would not result in an impairment charge in any of the countries. Foreseeable events are unlikely to result in a change in the projections of such a significant nature as to result in the goodwill carrying amount exceeding their recoverable amount. The forecast models used in assessing the impairment of goodwill are based on the related business centre structure at the end of the year.

The US model assumes an average centre contribution of 11.0% over the next five years. A terminal value centre gross margin of 16.0% is adopted from 2025, with a 2.1% long-term growth rate assumed on revenue and costs into perpetuity. The cash flows have been discounted using a pre-tax discount rate of 10.0% (2019: 14.0%). As disclosed in the sensitivities below, using the 2019 discount rate (before the update to the methodology and key assumptions in 2020) would not have resulted in a value in use of the CGU amounting to less than its carrying value.

The UK model assumes an average centre contribution of 14.0% over the next five years. A terminal value centre gross margin of 21.0% is adopted from 2025, with a 2.2% long-term growth rate assumed on revenue and costs into perpetuity. The cash flows have been discounted using a pre-tax discount rate of 8.3% (2019: 12.0%). As disclosed in the sensitivities below, using the 2019 discount rate (before the update to the methodology and key assumptions in 2020) would not have resulted in a value in use of the CGU amounting to less than its carrying value.

Management has considered the following sensitivities:

- Market growth and WIPOS - Management has considered the impact of a variance in market growth and WIPOS. The value in use calculation shows that if the long-term growth rate was reduced to nil, the recoverable amount of the US and UK would still be greater than their carrying value.

- Discount rate - Management has considered the impact of an increase in the discount rate applied to the calculation. The value in use calculation shows that for the recoverable amount to be less than its carrying value, the pre-tax discount rate would have to be increased to 31% (2019: 59%) for the US and 18% (2019: 15%) for the UK.

- Occupancy - Management has considered the impact of a variance in occupancy. The value in use calculation shows that for the recoverable amount to be less than its carrying value, occupancy in all future years would have to decrease by 13% (2019: 17%) for the US and 8% (2019: 2%) for the UK.

14. Other intangible assets

 
                                                       Customer 
                                                Brand     lists  Software   Total 
                                                 GBPm      GBPm      GBPm    GBPm 
----------------------------------------------  -----  --------  --------  ------ 
Cost 
At 1 January 2019                                63.6      32.5      66.1   162.2 
Additions at cost                                 0.2         -      12.6    12.8 
Acquisition of subsidiaries                         -         -         -       - 
Disposals (including discontinued operations)       -         -     (0.5)   (0.5) 
Exchange rate movements                         (1.6)     (0.7)     (0.9)   (3.2) 
----------------------------------------------  -----  --------  --------  ------ 
At 31 December 2019                              62.2      31.8      77.3   171.3 
----------------------------------------------  -----  --------  --------  ------ 
Additions at cost                                   -         -      16.5    16.5 
Acquisition of subsidiaries                         -       0.1       0.2     0.3 
Disposals (including discontinued operations)       -     (0.6)    (11.2)  (11.8) 
Exchange rate movements                           2.9     (0.6)       0.2     2.5 
----------------------------------------------  -----  --------  --------  ------ 
At 31 December 2020                              65.1      30.7      83.0   178.8 
----------------------------------------------  -----  --------  --------  ------ 
 
Amortisation 
At 1 January 2019                                37.4      32.3      50.0   119.7 
Charge for year                                   2.6       0.3       6.8     9.7 
Disposals (including discontinued operations)       -     (0.3)     (0.5)   (0.8) 
Exchange rate movements                         (1.2)     (0.7)     (0.4)   (2.3) 
----------------------------------------------  -----  --------  --------  ------ 
At 31 December 2019                              38.8      31.6      55.9   126.3 
----------------------------------------------  -----  --------  --------  ------ 
Charge for year                                   1.1         -       7.6     8.7 
Disposals (including discontinued operations)       -     (0.6)    (11.1)  (11.7) 
Exchange rate movements                           2.3     (0.4)       0.3     2.2 
----------------------------------------------  -----  --------  --------  ------ 
At 31 December 2020                              42.2      30.6      52.7   125.5 
----------------------------------------------  -----  --------  --------  ------ 
 
Net book value 
At 1 January 2019                                26.2       0.2      16.1    42.5 
----------------------------------------------  -----  --------  --------  ------ 
At 31 December 2019                              23.4       0.2      21.4    45.0 
----------------------------------------------  -----  --------  --------  ------ 
At 31 December 2020                              22.9       0.1      30.3    53.3 
----------------------------------------------  -----  --------  --------  ------ 
 

Included within the brand value is GBP11.2m relating to the acquisition of the remaining 58% of the UK business in the year ended 31 December 2006. The Regus brand acquired in this transaction is assumed to have an indefinite useful life due to the fact that the value of the brand is intrinsically linked to the continuing operation of the Group.

As a result of the Regus brand acquired with the UK business having an indefinite useful life no amortisation is charged but the carrying value is assessed for impairment on an annual basis. The brand was tested at the balance sheet date against the recoverable amount of the UK business segment at the same time as the goodwill arising on the acquisition of the UK business (see note 13).

15. Property, plant and equipment

 
                              Right-of-use    Land and      Leasehold       Furniture   Computer 
                                 assets(1)   buildings   improvements   and equipment   hardware      Total 
                                      GBPm        GBPm           GBPm            GBPm       GBPm       GBPm 
----------------------------  ------------  ----------  -------------  --------------  ---------  --------- 
Cost 
At 1 January 2019                  8,304.9       146.3        1,455.0           709.1      136.9   10,752.2 
Additions                          2,157.7        10.6          230.6           101.8       13.4    2,514.1 
Acquisition of subsidiaries           63.0           -            1.1             0.5          -       64.6 
Disposals                        (1,046.2)       (0.5)        (174.7)          (36.9)     (13.4)  (1,271.7) 
Exchange rate movements             (40.0)           -         (42.5)          (24.8)      (4.4)    (111.7) 
----------------------------  ------------  ----------  -------------  --------------  ---------  --------- 
At 31 December 2019                9,439.4       156.4        1,469.5           749.7      132.5   11,947.5 
----------------------------  ------------  ----------  -------------  --------------  ---------  --------- 
Additions                            501.4         2.2          267.3            89.5        9.4      869.8 
Modifications(2)                     664.1           -              -               -          -      664.1 
Acquisition of subsidiaries            3.0           -            4.1             0.9        0.1        8.1 
Disposals(4)                     (1,073.5)       (8.7)        (193.7)          (54.6)     (10.9)  (1,341.4) 
Exchange rate movements              (4.5)           -         (26.2)          (10.5)      (2.1)     (43.3) 
----------------------------  ------------  ----------  -------------  --------------  ---------  --------- 
At 31 December 2020                9,529.9       149.9        1,521.0           775.0      129.0   12,104.8 
----------------------------  ------------  ----------  -------------  --------------  ---------  --------- 
 
Accumulated depreciation 
 At 1 January 2019                 3,172.5         5.3          758.5           413.2      105.5    4,455.0 
Charge for the year(3)             1,009.7         1.7           89.6            48.8        9.6    1,159.4 
Disposals                          (706.9)       (0.1)        (115.0)          (26.4)     (10.1)    (858.5) 
Reversal of impairment                   -           -          (2.1)               -          -      (2.1) 
Exchange rate movements               46.7       (0.1)         (27.3)          (13.2)      (3.1)        3.0 
----------------------------  ------------  ----------  -------------  --------------  ---------  --------- 
At 31 December 2019                3,522.0         6.8          703.7           422.4      101.9    4,756.8 
Charge for the year(3)               946.0         2.5          173.8            54.1        9.9    1,186.3 
Disposals(4)                       (736.5)       (0.7)        (108.1)          (46.4)     (10.2)    (901.9) 
Impairment                           163.9           -           82.1               -          -      246.0 
Exchange rate movements             (12.4)         0.1         (16.0)           (9.3)      (0.7)     (38.3) 
----------------------------  ------------  ----------  -------------  --------------  ---------  --------- 
At 31 December 2020                3,883.0         8.7          835.5           420.8      100.9    5,248.9 
----------------------------  ------------  ----------  -------------  --------------  ---------  --------- 
 
Net book value 
At 1 January 2019                  5,132.4       141.0          696.5           295.9       31.4    6,297.2 
----------------------------  ------------  ----------  -------------  --------------  ---------  --------- 
At 31 December 2019                5,917.4       149.6          765.8           327.3       30.6    7,190.7 
----------------------------  ------------  ----------  -------------  --------------  ---------  --------- 
At 31 December 2020                5,646.9       141.2          685.5           354.2       28.1    6,855.9 
----------------------------  ------------  ----------  -------------  --------------  ---------  --------- 
 

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 GBP0.6m (2019: GBP27.7m) and other property, plant and equipment of GBP0.2m (2019: GBP6.7m).

4. Included disposals related to discontinued operations for right-of-use assets of GBP0.7m (2019: GBP274.6m) and other property, plant and equipment of GBP1.2m (2019: GBP42.3m).

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 year, 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. Value in use calculations are based on cash flow projections and discount rates for items of property, plant and equipment, on the same basis as described in note 13. Impairment charges are recognised within cost of sales in the consolidated income statement. In 2020, the Group recorded impairment charges of GBP163.9m in respect of right-of-use assets and GBP82.1m in respect of leasehold improvements.

16. Other long-term receivables

 
                                                       2020   2019 
                                                       GBPm   GBPm 
----------------------------------------------------  -----  ----- 
Deposits held by landlords against rent obligations    54.5   59.3 
Other receivables                                       0.5    1.3 
Amounts owed by joint ventures                            -    0.4 
----------------------------------------------------  -----  ----- 
Total non-current                                      55.0   61.0 
----------------------------------------------------  -----  ----- 
 

17. Trade and other receivables

 
                                                         2020   2019 
                                                         GBPm   GBPm 
----------------------------------------------------  -------  ----- 
Trade receivables, net                                  285.1  242.1 
Prepayments and accrued income                          128.4  134.3 
Other receivables                                       416.0  226.8 
VAT recoverable                                         171.8   73.0 
Deposits held by landlords against rent obligations       2.4    5.1 
                                                      ------- 
Total current                                         1,003.7  681.3 
----------------------------------------------------  -------  ----- 
 

Included within other receivables is GBP276.2m (2019: GBPNil) of mezzanine and senior debt in an acquisition target that the Group did not control as at 31 December 2020. This classification as a current asset reflects the status of the counterparty in default and that the debt was technically repayable on demand. The balances have been recognised at amortised cost of GBP276.2m at 31 December 2020 and, as the acquisition did not complete, the debts were fully repaid to the Group in February 2021.

18. Trade and other payables (including customer deposits)

 
                                   2020   2019 
                                   GBPm   GBPm 
------------------------------  -------  ----- 
Customer deposits                 423.6  476.8 
Other accruals                    160.0   96.8 
Trade payables                    270.7  116.4 
VAT payable                       125.6   46.2 
Other payables                     12.9   47.0 
Other tax and social security      14.8    5.6 
                                ------- 
Total current                   1,007.6  788.8 
------------------------------  -------  ----- 
 

19. Borrowings

The Group's total loan and borrowing position at 31 December 2020 and at 31 December 2019 had the following maturity profiles:

Bank and other loans

 
                                                          2020   2019 
                                                          GBPm   GBPm 
-------------------------------------------------------  -----  ----- 
Repayments falling due as follows: 
In more than one year but not more than two years          6.6    8.1 
In more than two years but not more than five years(1)   392.8  341.3 
In more than five years                                    0.8    1.6 
-------------------------------------------------------  -----  ----- 
Total non-current                                        400.2  351.0 
Total current                                             21.9    9.7 
-------------------------------------------------------  -----  ----- 
Total bank and other loans                               422.1  360.7 
-------------------------------------------------------  -----  ----- 
 

1. Includes convertible bond debt of GBP298.8m (2019: GBPNil).

The Group issued GBP350.0m convertible bonds in December 2020, raising GBP343.2m, net of transaction fees. At the date of issue the convertible bonds were bifurcated between:

- A financial liability recognised at amortised cost of GBP298.2m, by using the discounted cash flow of interest payments and the bonds' nominal value; and subsequently remeasured at amortised cost of GBP298.8m at 31 December 2020. The financial liability is included in the above, falling due in more than two but not more than five years.

- A derivative financial liability of GBP51.8m, not being closely related to the host financial liability, is recognised separately and measured at fair value through profit or loss (see note 24). A gain has been recognised at 31 December 2020 of GBP2.4m through net finance expenses, resulting in a year-end liability of GBP49.4m.

Further information regarding the committed borrowings and the convertible bonds can be found on page 139 in note 24.

20. Provisions

 
                                   2020                     2019 
                          -----------------------  ----------------------- 
                          Closures  Other   Total  Closures  Other   Total 
                              GBPm   GBPm    GBPm      GBPm   GBPm    GBPm 
------------------------  --------  -----  ------  --------  -----  ------ 
At 1 January                  13.0    2.8    15.8      14.1    3.0    17.1 
------------------------  --------  -----  ------  --------  -----  ------ 
Provided in the period        40.3    4.5    44.8      20.4    2.6    23.0 
Utilised in the period      (29.0)      -  (29.0)    (20.9)  (2.9)  (23.8) 
Exchange rate movements      (0.4)  (0.2)   (0.6)     (0.6)    0.1   (0.5) 
------------------------  --------  -----  ------  --------  -----  ------ 
At 31 December                23.9    7.1    31.0      13.0    2.8    15.8 
------------------------  --------  -----  ------  --------  -----  ------ 
Analysed between: 
Current                       11.5    6.0    17.5       6.9    2.0     8.9 
Non-current                   12.4    1.1    13.5       6.1    0.8     6.9 
------------------------  --------  -----  ------  --------  -----  ------ 
At 31 December                23.9    7.1    31.0      13.0    2.8    15.8 
------------------------  --------  -----  ------  --------  -----  ------ 
 

Closures

Provisions for closures relate to the expected costs of centre closures, including restructuring costs. Impairments of right-of-use assets and property, plant and equipment (note 15), are not included above.

Other

Other provisions include the estimated costs of claims against the Group outstanding at the year-end, of which, due to their nature, the maximum period over which they are expected to be utilised is uncertain.

The Group is involved in various disputes, primarily related to potential lease obligations, some of which are in the course of litigation. Where there is a dispute and where, based on legal counsel advice, the Group estimates that it is probable that the dispute will result in an outflow of economic resources, provision is made based on the Group's best estimate of the likely financial outcome. Where a reliable estimate cannot be made, or where the Group, based on legal counsel advice, considers that it is not probable that there will be an outflow of economic resources, no provision is recognised. There are no disputes which are expected to have a material impact on the Group.

21. Investments in joint ventures

 
                                          Provision 
                                        for deficit 
                          Investments            in 
                             in joint         joint 
                             ventures      ventures  Total 
                                 GBPm          GBPm   GBPm 
------------------------  -----------  ------------  ----- 
At 1 January 2019                12.2         (5.5)    6.7 
Additions                         1.8             -    1.8 
Share of profit                   0.1           2.6    2.7 
Exchange rate movements         (0.3)             -  (0.3) 
------------------------  -----------  ------------  ----- 
At 31 December 2019              13.8         (2.9)   10.9 
------------------------  -----------  ------------  ----- 
Share of loss                   (0.9)         (1.7)  (2.6) 
Disposals                       (1.6)             -  (1.6) 
Exchange rate movements             -             -      - 
------------------------  -----------  ------------  ----- 
At 31 December 2020              11.3         (4.6)    6.7 
------------------------  -----------  ------------  ----- 
 

The Group has 46 joint ventures (2019: 59) at the reporting date, all of which are individually immaterial. The Group has a legal obligation in respect of its share of any deficits recognised by these operations.

The results of the joint ventures below are the full-year results of the joint ventures and do not represent the effective share:

 
                                 2020    2019 
                                 GBPm    GBPm 
-----------------------------  ------  ------ 
Income statement 
Revenue                          28.3    30.2 
Expenses                       (36.9)  (34.3) 
-----------------------------  ------  ------ 
Loss before tax for the year    (8.6)   (4.1) 
Tax charge                      (0.7)   (0.7) 
-----------------------------  ------  ------ 
Loss after tax for the year     (9.3)   (4.8) 
-----------------------------  ------  ------ 
Balance sheet 
Non-current assets               43.1    67.0 
Current assets                   50.8    52.0 
Current liabilities            (68.8)  (74.3) 
Non-current liabilities        (36.4)  (52.8) 
-----------------------------  ------  ------ 
Net liabilities                (11.3)   (8.1) 
-----------------------------  ------  ------ 
 

22. Share capital

Ordinary equity share capital

 
                                            2020                       2019 
                                ----------------------------  ---------------------- 
                                                                             Nominal 
                                               Nominal value                   value 
                                       Number           GBPm         Number     GBPm 
------------------------------  -------------  -------------  -------------  ------- 
Authorised 
Ordinary 1p shares in IWG plc 
 at 1 January                   8,000,000,000           80.0  8,000,000,000     80.0 
Ordinary 1p shares in IWG plc 
 at 31 December                 8,000,000,000           80.0  8,000,000,000     80.0 
------------------------------  -------------  -------------  -------------  ------- 
Issued and fully paid up 
Ordinary 1p shares in IWG plc 
 at 1 January                     923,357,438            9.2    923,357,438      9.2 
Ordinary 1p shares issued for 
 cash in the year                 133,891,213            1.3              -        - 
Ordinary 1p shares in IWG plc 
 at 31 December                 1,057,248,651           10.5    923,357,438      9.2 
------------------------------  -------------  -------------  -------------  ------- 
 

On 28 May 2020 the Group announced the placement of 133,891,213 new ordinary shares, with a par value of 1.0 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, with share premium of GBP312.6m recognised.

Treasury share transactions involving IWG plc shares between 1 January 2020 and 31 December 2020

During the year, 13,590,080 shares were purchased in the open market and 1,968,169 treasury shares held by the Group were utilised to satisfy the exercise of share awards by employees. As at 9 March 2021, 50,380,775 treasury shares were held. The holders of ordinary shares in IWG plc are entitled to receive such dividends as are declared by the Company and are entitled to one vote per share at meetings of the Company. Treasury shares do not carry such rights until reissued.

 
                                             2020                2019 
                                      ------------------  ------------------ 
                                           Number              Number 
                                        of shares   GBPm    of shares   GBPm 
------------------------------------  -----------  -----  -----------  ----- 
1 January                              39,055,369  116.9   28,736,954   74.1 
Purchase of treasury shares in IWG 
 plc                                   13,590,080   43.7   12,379,535   49.5 
Treasury shares in IWG plc utilised   (1,968,169)  (6.5)  (2,061,120)  (6.7) 
31 December                            50,677,280  154.1   39,055,369  116.9 
------------------------------------  -----------  -----  -----------  ----- 
 

23. Analysis of financial assets/(liabilities)

 
                                                              Debt        Lease       Lease 
                                                               due   due within   due after 
                             Cash                Debt        after          one         one              Net financial 
                         and cash  Gross   due within          one         year        year      Gross         assets/ 
                      equivalents   cash     one year   year(2)(3)          (1)         (1)       debt   (liabilities) 
                             GBPm   GBPm         GBPm         GBPm         GBPm        GBPm       GBPm            GBPm 
-------------------  ------------  -----  -----------  -----------  -----------  ----------  ---------  -------------- 
At 1 January 2019            69.0   69.0        (9.9)      (519.9)      (900.0)   (4,743.4)  (6,173.2)       (6,104.2) 
Cash flow                   (6.6)  (6.6)            -        162.5        171.7       919.8    1,254.0         1,247.4 
Non-cash movements              -      -            -          2.0      (262.5)   (1,825.4)  (2,085.9)       (2,085.9) 
Exchange rate 
 movements                    4.2    4.2          0.2          4.4         13.4        80.4       98.4           102.6 
-------------------  ------------  -----  -----------  -----------  -----------  ----------  ---------  -------------- 
At 31 December 2019          66.6   66.6        (9.7)      (351.0)      (977.4)   (5,568.6)  (6,906.7)       (6,840.1) 
-------------------  ------------  -----  -----------  -----------  -----------  ----------  ---------  -------------- 
Cash flow                   (0.7)  (0.7)       (13.1)       (45.0)        151.6       995.9    1,089.4         1,088.7 
Non-cash 
 movements(4)                   -      -            -        (0.5)      (200.5)     (966.2)  (1,167.2)       (1,167.2) 
Exchange rate 
 movements                    5.1    5.1          0.9        (3.7)          6.7           -        3.9             9.0 
-------------------  ------------  -----  -----------  -----------  -----------  ----------  ---------  -------------- 
At 31 December 2020          71.0   71.0       (21.9)      (400.2)    (1,019.6)   (5,538.9)  (6,980.6)       (6,909.6) 
-------------------  ------------  -----  -----------  -----------  -----------  ----------  ---------  -------------- 
 

1. There are no significant lease commitments for leases not commenced at 31 December 2020.

2. Includes GBP298.8m (2019: GBPNil) convertible bond liability.

3. Excludes the convertible bond derivative liability element at the issue date value of GBP51.8m.

4. Includes early termination of lease liabilities of GBP362.8m (2019: GBP344.0m) of which GBP0.8m (2019: GBP281.1m) is related to discontinued operations.

Cash and cash equivalent balances held by the Group that are not available for use amounted to GBP4.1m at 31 December 2020 (2019: GBP8.3m). Of this balance, GBP1.6m (2019: GBP2.9m) is pledged as security against outstanding bank guarantees and a further GBP2.5m (2019: GBP5.4m) is pledged against various other commitments of the Group.

Cash flows on lease liabilities consist of principal payments of GBP898.1m (2019: GBP878.3m) and interest payments of GBP249.4m (2019: GBP213.2m). Total cash outflows of GBP1,212.4m (2019: GBP1,135.2m) for leases, including variable payments of GBP64.9m (2019: GBP43.7m), were incurred in the year.

Non-cash movements of GBP1,166.7m (2019: GBP2,087.9m) represent the movements on lease liabilities in relation to new 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 GBP51.8m derivative liability recognised separately.

The following amounts are included in the Group's consolidated financial statements in respect of its leases:

 
                                                                 2020       2019 
------------------------------------------------------------  -------  --------- 
Depreciation charge for right-of-use assets                   (946.0)  (1,010.0) 
Principal lease liability repayments                          (898.1)    (878.3) 
Interest expense on lease liabilities                         (249.4)    (213.2) 
Expense relating to short-term leases                               -        2.3 
Expense relating to leases of low-value assets that 
 are not shown above as short-term leases                         3.4        0.9 
Expenses relating to variable lease payments not included 
 in lease liabilities                                            64.9       43.7 
Total cash outflow for leases comprising interest and 
 capital payments                                             1,147.5    1,091.5 
Additions to right-of-use assets                                501.4    2,157.7 
Gains/(losses) arising from sale and leaseback transactions         -          - 
Income from sub-leasing right-of-use assets                         -          - 
------------------------------------------------------------  -------  --------- 
 

24. Financial instruments and financial risk management

The objectives, policies and strategies applied by the Group with respect to financial instruments and the management of capital are determined at Group level. The Group's Board maintains responsibility for the risk management strategy of the Group and the Chief Financial Officer is responsible for policy on a day-to-day basis. The Chief Financial Officer and Group Treasurer review the Group's risk management strategy and policies on an ongoing basis. The Board has delegated to the Group Audit Committee the responsibility for applying an effective system of internal control and compliance with the Group's risk management policies.

Exposures to credit, interest rate and currency risks arise in the normal course of business.

Going concern

The Strategic Report on pages 1 to 65 of the Annual Report and Accounts sets out the Group's strategy and the factors that are likely to affect the future performance and position of the business. The financial review on pages 40 to 47 within the Strategic Report reviews the trading performance, financial position and cash flows of the Group. The Group's net debt position increased by GBP69.5m to a net debt position of GBP6,909.6m as at 31 December 2020. Excluding the IFRS 16 lease liabilities, the net debt position increased to GBP351.1m (2019: GBP294.1m). The investment in growth is funded by a combination of cash flow generated from the Group's mature business centres, cash consideration received in franchising the business and debt. The Group has a GBP950.0m revolving credit facility (RCF) provided by a group of relationship banks with a final maturity in 2025 with an option to extend until 2026. As at 31 December 2020, GBP731.3m of the RCF was available and undrawn.

Although the Group has net current liabilities of GBP1,330.4m (2019: GBP1,366.5m), 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 GBP423.6m (2019: GBP476.8m) 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 assets of GBP18.1m at 31 December 2020 (2019: net current liabilities of GBP66.5m).

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and, accordingly, continue to adopt the going concern basis in preparing the Annual Report and Accounts.

Credit risk

Credit risk could occur where a customer or counterparty defaults under the contractual terms of a financial instrument and arises principally in relation to customer contracts and the Group's cash deposits.

A diversified customer base, requirement for customer deposits, and payments in advance on workstation contracts minimise the Group's exposure to customer credit risk. No single customer contributes a material percentage of the Group's revenue. The Group's policy is to provide against trade receivables when specific debts are judged to be irrecoverable or where formal recovery procedures have commenced. A provision taking into account the customer deposit held is created where debts are more than three months overdue, which reflects the Group's experience of the likelihood of recoverability of these trade receivables based on both historical and forward-looking information. These provisions are reviewed on an ongoing basis to assess changes in the likelihood of recoverability.

The Group has assessed the other receivable balances for expected credit losses, with no further provision required due to the nature of these items.

The maximum exposure to credit risk for trade receivables at the reporting date, not taking into account customer deposits held, analysed by geographic region, is summarised below.

 
                  2020   2019 
                  GBPm   GBPm 
---------------  -----  ----- 
Americas         113.6   40.2 
EMEA              82.7   98.3 
Asia Pacific      31.6   39.9 
United Kingdom    57.2   63.7 
---------------  -----  ----- 
                 285.1  242.1 
---------------  -----  ----- 
 

All of the Group's trade receivables relate to customers purchasing workplace solutions and associated services and no individual customer has a material balance owing as a trade receivable.

The ageing of trade receivables at 31 December was:

 
                             Gross  Provision  Gross  Provision 
                              2020       2020   2019       2019 
                              GBPm       GBPm   GBPm       GBPm 
---------------------------  -----  ---------  -----  --------- 
Not overdue                  161.5          -  178.2          - 
Past due 0 - 30 days          27.9          -   32.1          - 
Past due 31 - 60 days         16.9          -   13.1          - 
Past due more than 60 days   104.5     (25.7)   26.4      (7.7) 
---------------------------  -----  ---------  -----  --------- 
                             310.8     (25.7)  249.8      (7.7) 
---------------------------  -----  ---------  -----  --------- 
 

At 31 December 2020, the Group maintained a provision of GBP25.7m for expected credit losses (2019: GBP7.7m) arising from trade receivables. The Group had provided GBP34.8m (2019: GBP2.0m) in the year, utilised GBP16.8m (2019: GBP8.3m) and released GBPNil (2019: GBP8.2m). Customer deposits of GBP423.6m (2019: GBP476.8m) are held by the Group, mitigating the risk of default.

IFRS 9 requires the Group to record expected credit losses on all of its receivables, either on a 12-month or lifetime basis. The Group has applied the simplified approach to all trade receivables, which requires the recognition of the expected credit loss based on the lifetime expected losses. The expected credit loss is mitigated through the invoicing of contracted services in advance and customer deposits.

Cash investments and derivative financial instruments are only transacted with counterparties of sound credit ratings, and management does not expect any of these counterparties to fail to meet their obligations.

Liquidity risk

Liquidity risk represents the risk that the Group will not be able to meet their obligations as they fall due. The Group manages liquidity risk by closely monitoring the global cash position, the available and undrawn credit facilities, and forecast capital expenditure and expects to have sufficient liquidity to meet its financial obligations as they fall due. During 2020, there has been a sharp focus on cash generation by reducing cost, renegotiating rents and rationalising the network. More than 1,500 leases were renegotiated or restructured which resulted in short or long term cash benefits. The Group has free cash and liquid investments (excluding blocked cash) of GBP66.9m (2019: GBP58.3m). In addition to cash and liquid investments, the Group had GBP731.3m available and undrawn under its committed borrowings. The Directors consider the Group has adequate liquidity to meet day-to-day requirements.

The Group maintains a revolving credit facility provided by a group of international banks. At 31 December 2020, the amount of the facility remains GBP950.0m (2019: GBP950.0m) and the final maturity extended in March 2020 to March 2025 with an option to extend until 2026.

The Group actively reviews its exposure to interest rate movements. The issuance of the fixed rate convertible bond significantly reduces the Group's exposure to an increase in interest rates. The final interest rate swap taken to hedge against the floating interest rate obligations of debt drawn under the revolving credit facility matured in February 2021. This has a nominal amount of GBP30.0m and a fixed rate of 1.2%.

Market risk

The Group is exposed to market risk primarily related to foreign currency exchange rates, interest rates and the market value of our investments in financial assets. These exposures are actively managed by the Group Treasurer and Chief Financial Officer in accordance with a written policy approved by the Board of Directors. The Group does not use financial derivatives for trading or speculative reasons.

Interest rate risk

The Group manages its exposure to interest rate risk through the relative proportions of fixed rate debt and floating rate debt. Any surplus cash balances are invested short-term, and at the end of 2020 no cash was invested for a period exceeding three months (2019: GBPNil).

Foreign currency risk

The Group is exposed to foreign currency exchange rate movements. The majority of day-to-day transactions of overseas subsidiaries are carried out in local currency and the underlying foreign exchange exposure is small. Transactional exposures do arise in some countries where it is local market practice for a proportion of the payables or receivables to be in other than the functional currency of the affiliate. Intercompany charging, funding and cash management activity may also lead to foreign exchange exposures. It is the policy of the Group to seek to minimise such transactional exposures through careful management of non-local currency assets and liabilities, thereby minimising the potential volatility in the income statement. Net investments in IWG affiliates with a functional currency other than pounds sterling are of a long-term nature and the Group does not normally hedge such foreign currency translation exposures.

The principal exposures of the Group are to the US dollar and the euro, with approximately 37% of the Group's revenue being attributable to the US dollar and 22% to the euro.

From time to time the Group uses short-term derivative financial instruments to manage its transactional foreign exchange exposures where these exposures cannot be eliminated through balancing the underlying risks. No transactions of a speculative nature are undertaken.

The foreign currency exposure arising from open third-party transactions held in a currency other than the functional currency of the related entity is summarised as follows:

 
                                                       2020 
                                               -------------------- 
GBPm                                              GBP    EUR    USD 
---------------------------------------------   -----  -----  ----- 
Trade and other receivables                       0.1    1.8    1.3 
Trade and other payables                        (0.4)  (4.1)  (1.8) 
----------------------------------------------  -----  -----  ----- 
Net statement of financial position exposure    (0.3)  (2.3)  (0.5) 
----------------------------------------------  -----  -----  ----- 
 
 
                                                       2019 
                                               -------------------- 
GBPm                                              GBP    EUR    USD 
---------------------------------------------   -----  -----  ----- 
Trade and other receivables                         -    1.3    0.5 
Trade and other payables                        (0.2)  (1.4)  (2.4) 
----------------------------------------------  -----  -----  ----- 
Net statement of financial position exposure    (0.2)  (0.1)  (1.9) 
----------------------------------------------  -----  -----  ----- 
 

Other market risks

The Group does not hold any equity securities for fair value measurement under IFRS 9 and is therefore not subject to risks of changes in equity prices in the income statement.

Sensitivity analysis

For the year ended 31 December 2020, it is estimated that a general increase of one percentage point in interest rates would have increased the Group's loss before tax by approximately GBP1.8m (2019: decrease in profit of GBP3.8m) with a corresponding decrease in total equity.

It is estimated that a five-percentage point weakening in the value of the US dollar against pounds sterling would have increased the Group's loss before tax by approximately GBP2.9m for the year ended 31 December 2020 (2019: decrease in profit of GBP12.9m). It is estimated that a five-percentage point weakening in the value of the euro against pounds sterling would have increased the Group's loss before tax by approximately GBP1.0m for the year ended 31 December 2020 (2019: decrease in profit of GBP5.9m).

It is estimated that a five-percentage point weakening in the value of the US dollar against pounds sterling would have decreased the Group's total equity by approximately GBP6.3m for the year ended 31 December 2020 (2019: decrease of GBP11.1m). It is estimated that a five-percentage point weakening in the value of the euro against pounds sterling would have decreased the Group's total equity by approximately GBP5.4m for the year ended 31 December 2020 (2019: decrease of GBP6.1m).

Capital management

The Group's parent company is listed on the UK stock exchange and the Board's policy is to maintain a strong capital base. The Chief Financial Officer monitors the diversity of the Group's major shareholders and further details of the Group's communication with key investors can be found in the Corporate Governance Report on page 73. In 2006, the Board approved the commencement of a progressive dividend policy to enhance the total return to shareholders.

The Group's Chief Executive Officer, Mark Dixon, is a major shareholder of the Company. Details of the Directors' shareholdings can be found in the Directors' Remuneration report on pages 84 to 96. In addition, the Group operates various share option plans for key management and other senior employees.

Treasury share transactions involving IWG plc shares between 1 January 2020 and 31 December 2020

During the year, 13,590,080 shares were purchased in the open market and 1,968,169 treasury shares held by the Group were utilised to satisfy the exercise of share awards by employees. As at 31 December 2020, 50,677,280 treasury shares were held.

The Company declared and paid no interim dividend per share during the year ended 31 December 2020 (2019: 2.15p) and proposed no final dividend per share (2019: 4.80p per share). The dividend initially proposed of 4.80p per share in the 2019 Annual Report and Accounts was not proposed at the AGM held on 12 May 2020 and no dividends were paid during the current year.

The Group's objective when managing capital (equity and borrowings) is to safeguard the Group's ability to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital.

Effective interest rates

In respect of financial assets and financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they mature.

Except for lease liabilities, the undiscounted cash flow and fair values of these instruments is not materially different from the carrying value.

As at 31 December 2020

 
                                 Effective             Contractual 
                                  interest   Carrying         cash  Less than                        More than 
                                      rate      value         flow     1 year  1-2 years  2-5 years    5 years 
                                         %       GBPm         GBPm       GBPm       GBPm       GBPm       GBPm 
-------------------------------  ---------  ---------  -----------  ---------  ---------  ---------  --------- 
Cash and cash equivalents             0.1%       71.0         71.0       71.0          -          -          - 
Trade and other receivables(1)           -      875.3        875.3      875.3          -          -          - 
Other long-term receivables              -       55.0         55.0          -       27.8       27.2          - 
                                 ---------  ---------  -----------  ---------  ---------  ---------  --------- 
Financial assets (2)                          1,001.3      1,001.3      946.3       27.8       27.2          - 
-------------------------------  ---------  ---------  -----------  ---------  ---------  ---------  --------- 
 
Non-derivative financial 
 liabilities(3): 
Bank loans and corporate 
 borrowings                           2.8%     (91.7)       (91.7)          -      (1.0)     (90.7)          - 
Convertible bonds 
 - debt host                          3.8%    (298.8)      (358.8)      (1.8)      (1.8)    (355.2)          - 
Lease liabilities                     3.4%  (6,558.5)    (9,832.4)  (1,186.4)  (1,165.1)  (3,054.4)  (4,426.5) 
Other loans                           1.2%     (31.6)       (31.6)     (21.9)      (5.6)      (3.3)      (0.8) 
Trade and other payables(4)              -  (1,007.6)    (1,007.6)  (1,007.6)          -          -          - 
Other long-term payables(4)              -      (4.1)        (4.1)          -      (4.1)          -          - 
Derivative financial 
 liabilities: 
Convertible bonds 
 - embedded conversion 
 option                                  -     (49.4)       (49.4)          -          -     (49.4)          - 
Interest rate swaps 
 
  *    Outflow                           -      (0.2)        (0.2)      (0.2)          -          -          - 
                                         -          -            -          -          -          -          - 
  *    Inflow 
-------------------------------  ---------  ---------  -----------  ---------  ---------  ---------  --------- 
Financial liabilities                       (8,041.9)   (11,375.8)  (2,217.9)  (1,177.6)  (3,553.0)  (4,427.3) 
-------------------------------  ---------  ---------  -----------  ---------  ---------  ---------  --------- 
 

As at 31 December 2019

 
                                 Effective             Contractual 
                                  interest   Carrying         cash  Less than                        More than 
                                      rate      value         flow     1 year  1-2 years  2-5 years    5 years 
                                         %       GBPm         GBPm       GBPm       GBPm       GBPm       GBPm 
-------------------------------  ---------  ---------  -----------  ---------  ---------  ---------  --------- 
Cash and cash equivalents             0.1%       66.6         66.6       66.6          -          -          - 
Trade and other receivables(1)           -      547.0        554.8      554.8          -          -          - 
Other long-term receivables              -       61.0         61.0          -       31.3       29.7          - 
Financial assets (2)                            674.6        682.4      621.4       31.3       29.7          - 
-------------------------------  ---------  ---------  -----------  ---------  ---------  ---------  --------- 
 
Non-derivative financial 
 liabilities(3): 
Bank loans and corporate 
 borrowings                           3.2%    (340.2)      (340.2)      (0.1)      (2.0)    (338.1)          - 
Lease liabilities                     3.5%  (6,546.0)    (8,965.4)  (1,168.6)  (1,164.7)  (2,942.2)  (3,689.9) 
Other loans                           0.8%     (20.5)       (20.5)      (9.6)      (6.1)      (3.2)      (1.6) 
Trade and other payables(4)              -    (788.8)      (788.8)    (788.8)          -          -          - 
Other long-term payables(4)              -      (2.0)        (2.0)          -      (2.0)          -          - 
Derivative financial 
 liabilities: 
Interest rate swaps 
 
  *    Outflow                           -      (0.2)        (0.2)      (0.2)          -          -          - 
                                         -          -            -          -          -          -          - 
  *    Inflow 
-------------------------------  ---------  ---------  -----------  ---------  ---------  ---------  --------- 
Financial liabilities                       (7,697.7)   (10,117.1)  (1,967.3)  (1,174.8)  (3,283.5)  (3,691.5) 
-------------------------------  ---------  ---------  -----------  ---------  ---------  ---------  --------- 
 

1. Excluding prepayments.

2. Financial assets are all held at amortised cost.

3. All financial instruments are classified as variable rate instruments.

4. Excluding deferred rents.

Fair value disclosures

The fair values together with the carrying amounts shown in the balance sheet are as follows:

 
31 December 2020                                 Carrying amount                                Fair value 
                             -------------------------------------------------------  ------------------------------ 
                                                                Cash flow 
                                        Cash,         Other             - 
                                        loans     financial       hedging             Level  Level    Level 
GBPm                          and receivables   liabilities   instruments      Total      1      2        3    Total 
---------------------------  ----------------  ------------  ------------  ---------  -----  -----  -------  ------- 
Cash and cash equivalents                71.0             -             -       71.0      -      -        -        - 
Trade and other receivables             875.3             -             -      875.3      -  276.2        -    276.2 
Other long-term receivables              55.0             -             -       55.0      -      -        -        - 
Derivative financial 
 liabilities                                -        (49.4)         (0.2)     (49.6)      -  (0.2)   (49.4)   (49.6) 
Convertible bonds                           -       (298.8)             -    (298.8)      -      -  (298.8)  (298.8) 
Bank loans and corporate 
 borrowings                                 -        (91.7)             -     (91.7)      -      -        -        - 
Other loans                                 -        (31.6)             -     (31.6)      -      -        -        - 
Trade and other payables                    -     (1,007.6)             -  (1,007.6)      -      -        -        - 
Other long-term payables                    -         (4.1)             -      (4.1)      -      -        -        - 
---------------------------  ----------------  ------------  ------------  ---------  -----  -----  -------  ------- 
                                      1,001.3     (1,483.2)         (0.2)    (482.1)      -  276.0  (348.2)   (72.2) 
---------------------------  ----------------  ------------  ------------  ---------  -----  -----  -------  ------- 
 

Included within other receivables is GBP276.2m relating to mezzanine and senior debts acquired in December 2020. The balances have been recognised at fair value of GBP276.2m at 31 December 2020. The mezzanine and senior debt receivable balances have been settled in full in February 2021.

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 31 December 2020, the debt was valued at its amortised cost, GBP298.8m and the derivative liability at its fair value, GBP49.4m.

 
31 December 2019                                 Carrying amount                             Fair value 
                              -----------------------------------------------------  -------------------------- 
                                                                      Cash 
                                                                      flow 
                                         Cash,         Other             - 
                                         loans     financial       hedging           Level  Level  Level 
GBPm                           and receivables   liabilities   instruments    Total      1      2      3  Total 
----------------------------  ----------------  ------------  ------------  -------  -----  -----  -----  ----- 
Cash and cash equivalents                 66.6             -             -     66.6      -      -      -      - 
Trade and other receivables              547.0             -             -    547.0      -      -      -      - 
Other long-term receivables               61.0             -             -     61.0      -      -      -      - 
Derivative financial 
 liabilities                                 -             -         (0.2)    (0.2)      -  (0.2)      -  (0.2) 
Bank loans and corporate 
 borrowings                                  -       (340.2)             -  (340.2)      -      -      -      - 
Other loans                                  -        (20.5)             -   (20.5)      -      -      -      - 
Trade and other payables                     -       (788.8)             -  (788.8)      -      -      -      - 
Other long-term payables                     -         (2.0)             -    (2.0)      -      -      -      - 
----------------------------  ----------------  ------------  ------------  -------  -----  -----  -----  ----- 
                                         674.6     (1,151.5)         (0.2)  (477.1)      -  (0.2)      -  (0.2) 
----------------------------  ----------------  ------------  ------------  -------  -----  -----  -----  ----- 
 

During the years ended 31 December 2020 and 31 December 2019, there were no transfers between levels for fair value measured instruments.

Valuation techniques

When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

- Level 1: quoted prices in active markets for identical assets or liabilities;

- Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly; and

- Level 3: inputs for the asset or liability that are not based on observable market data.

The following tables show the valuation techniques used in measuring level 2 and level 3 fair values and methods used for financial assets and liabilities not measured at fair value:

 
Type                                    Valuation technique 
--------------------------------------  --------------------------------------------------- 
Cash and cash equivalents,              For cash and cash equivalents, receivables/payables 
 trade and other receivables/payables,   with a remaining life of less than one year 
 customer deposits and investment        and customer deposits, the book value approximates 
 loan receivables                        the fair value because of their short-term 
                                         nature. 
--------------------------------------  --------------------------------------------------- 
Loans, overdrafts and debt              The fair value of bank loans, overdrafts 
 element of                              and other loans approximates the carrying 
 convertible bonds                       value because interest rates are at floating 
                                         rates where payments are reset to market 
                                         rates at intervals of less than one year. 
--------------------------------------  --------------------------------------------------- 
Foreign exchange contracts,             The fair values are based on a combination 
 interest rate swaps and                 of broker quotes, forward pricing, and swap 
 derivative element of convertible       models. The fair value of the derivative 
 bonds                                   element of convertible bonds has been calculated 
                                         with reference to unobservable credit spreads. 
--------------------------------------  --------------------------------------------------- 
 

Derivative financial instruments

The following table summarises the notional amount of the open contracts as at the reporting date:

 
                                          2020   2019 
                                          GBPm   GBPm 
---------------------------------------  -----  ----- 
Derivatives used for cash flow hedging    30.0   30.0 
---------------------------------------  -----  ----- 
 

Committed borrowings

 
                                 2020        2020       2019        2019 
                             Facility   Available   Facility   Available 
                                 GBPm        GBPm       GBPm        GBPm 
--------------------------  ---------  ----------  ---------  ---------- 
Revolving credit facility       950.0       731.3      950.0       485.9 
--------------------------  ---------  ----------  ---------  ---------- 
 

The Group maintains a revolving credit facility provided by a group of international banks. At 31 December 2020, the amount of the facility remains GBP950.0m (2019: GBP950.0m) and the final maturity extended in March 2020 to March 2025 with an option to extend until 2026. As at 31 December, GBP731.3m was available and undrawn under this facility.

The GBP950.0m revolving credit facility is subject to financial covenants relating to net debt to EBITDA, and EBITDA plus rent to interest plus rent on a pre-IFRS 16 basis. The Group is in compliance with all covenant requirements.

The Group actively reviews its exposure to interest rate movements. The issuance of the fixed rate convertible bond significantly reduces the Group's exposure to an increase in interest rates. The final interest rate swap taken to hedge against the floating interest rate obligations of debt drawn under the revolving credit facility matured in February 2021. This has a nominal amount of GBP30.0m and a fixed rate of 1.2%.

CONVERTIBLE BONDS

In December 2020 the Group issued a GBP350.0m convertible bond, issued by IWG Group Holdings Sarl, a subsidiary of Group

and guaranteed by IWG plc, 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. 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 31 December 2020, the debt was valued at its amortised cost, GBP298.8m and the derivative liability at its fair value, GBP49.4m.

The derivative liability represents a level 3 instrument, which has been valued with reference to the total convertible bond price (a level 1 valuation) minus the level 3 valuation of the debt host. A change of 10 basis points in the credit spread that is indirectly used to value the derivative liability would have increased or decreased profit or loss by GBP1.1m.

25. Share-based payments

There are three share-based payment plans, details of which are outlined below:

Plan 1: IWG Group Share Option Plan

During 2004 the Group established the IWG Group Share Option Plan that entitles Executive Directors and certain employees to purchase shares in IWG plc. In accordance with this programme, holders of vested options are entitled to purchase shares at the market price of the shares at the day before the date of grant.

The IWG Group also operates the IWG Group Share Option Plan (France) which is included within the numbers for the IWG Share Option Plan disclosed above. The terms of the IWG Share Option Plan (France) are materially the same as the IWG Group Share Option Plan with the exception that they are only exercisable from the fourth anniversary of the date of grant, assuming the performance conditions have been met.

Reconciliation of outstanding share options

 
                                       2020                     2019 
                             ------------------------  ----------------------- 
                                             Weighted                 Weighted 
                                   Number     average       Number     average 
                                       of    exercise           of    exercise 
                                    share   price per        share   price per 
                                  options       share      options       share 
---------------------------  ------------  ----------  -----------  ---------- 
At 1 January                   32,511,195      200.34   36,441,222      191.87 
Granted during the year        20,198,148      167.21      918,829      362.69 
Lapsed during the year       (11,124,669)      209.91  (2,787,736)      205.68 
Exercised during the year     (1,535,999)      145.00  (2,061,120)      143.37 
---------------------------  ------------  ----------  -----------  ---------- 
Outstanding at 31 December     40,048,675      183.10   32,511,195      200.34 
---------------------------  ------------  ----------  -----------  ---------- 
Exercisable at 31 December      4,477,253      156.40    4,807,175      142.44 
---------------------------  ------------  ----------  -----------  ---------- 
 
 
                                   Weighted 
                                    average 
                                   exercise 
                        Numbers   price per                               At 31 Dec       Exercisable      Expiry 
Date of grant           granted       share        Lapsed     Exercised        2020              from        date 
------------------  -----------  ----------  ------------  ------------  ----------  ---  -----------  ---------- 
23/03/2010            3,986,000      100.50   (3,499,063)     (486,937)           -        23/03/2013  23/03/2020 
28/06/2010              617,961       75.00     (545,505)      (72,456)           -        28/06/2013  28/06/2020 
01/09/2010              160,646       69.10     (146,728)      (13,918)           -        01/09/2013  01/09/2020 
01/04/2011            2,400,000      114.90     (954,402)   (1,055,598)     390,000  (1)   01/04/2014  01/04/2021 
30/06/2011            9,867,539      109.50   (4,905,047)   (4,768,465)     194,027  (1)   30/06/2014  30/06/2021 
13/06/2012           11,189,000       84.95   (3,805,914)   (6,382,726)   1,000,360  (1)   13/06/2015  13/06/2022 
12/06/2013            7,741,000      155.60   (4,306,000)   (2,752,173)     682,827  (1)   12/06/2016  12/06/2023 
18/11/2013              600,000      191.90     (575,000)             -      25,000  (1)   18/11/2016  17/11/2023 
18/12/2013            1,000,000      195.00     (833,333)     (166,667)           -  (1)   18/12/2016  17/12/2023 
20/05/2014            1,845,500      187.20   (1,658,500)     (160,300)      26,700  (1)   20/05/2017  19/05/2024 
05/11/2014           12,875,796      186.00   (8,675,510)   (1,229,402)   2,970,884  (2)   05/11/2017  04/11/2024 
19/05/2015            1,906,565      250.80   (1,829,565)             -      77,000  (2)   19/05/2018  18/05/2025 
22/12/2015            1,154,646      322.20     (395,186)      (25,000)     734,460  (2)   22/12/2018  22/12/2025 
29/06/2016              444,196      272.50     (367,735)      (11,009)      65,452  (2)   29/06/2019  29/06/2026 
28/09/2016              249,589      258.00     (214,313)       (7,055)      28,221  (2)   28/09/2019  28/09/2026 
01/03/2017            1,200,000      283.70             -             -   1,200,000  (2)   01/03/2020  01/03/2027 
14/12/2017            1,000,507      197.00   (1,000,507)             -           -        14/12/2020  14/12/2027 
10/10/2018              685,127      223.20     (685,127)             -           -        10/10/2021  10/10/2028 
21/12/2018 (Grant 
 1)                     300,000      203.10             -             -     300,000  (3)   21/12/2021  21/12/2028 
28/12/2018 (Grant 
 2)                  20,900,000      199.80   (8,674,996)             -  12,225,004  (2)   28/12/2021  28/12/2028 
15/05/2019              613,872      341.90     (613,872)             -           -  (3)   15/05/2022  15/05/2029 
13/09/2019              196,608      402.30     (130,508)             -      66,100  (3)   13/09/2022  13/09/2029 
19/12/2019              108,349      408.60     (81,357))             -      26,992  (3)   19/12/2022  19/12/2029 
02/04/2020           19,575,000      165.00     (162,500)             -  19,412,500  (3)   02/04/2023  02/04/2030 
15/05/2020              150,000      202.00             -             -     150,000  (3)   15/05/2023  15/05/2030 
05/08/2020              300,000      222.60             -             -     300,000  (3)   05/08/2023  05/08/2030 
09/09/2020              173,148      291.00             -             -     173,148  (3)   09/09/2023  09/09/2030 
------------------  -----------  ----------  ------------  ------------  ----------  ---  -----------  ---------- 
Total               101,241,049              (44,060,668)  (17,131,706)  40,048,675 
------------------  -----------  ----------  ------------  ------------  ----------  ---  -----------  ---------- 
 

1. These options have fully vested as of 31 December 2020.

2. The performance targets for these options have been met and they are subject to vesting schedules as described below.

3. These options are subject to performance targets and vesting schedules as described below.

The vesting of share options is subject to an ongoing employment condition. As at 31 December 2020 there were 4,477,253 (2019: 4,807,175) outstanding share options which had fully vested with no further performance or holding period requirements and which had a weighted average exercise price of GBP156.40 (2019: GBP142.44).

Performance conditions for share options

November 2014 share options

The share options outstanding under this grant at 31 December 2020 reflect the options that have been awarded based on achievement against the relevant performance targets and are now vesting ratably over a five-year period, which began in November 2017 and will end in November 2021.

May 2015 share options

The share options outstanding under this grant at 31 December 2020 reflect the options that have been awarded based on achievement against the relevant performance targets and are now vesting ratably over a five-year period beginning May 2020 and ending May 2024.

December 2015 share options

The share options outstanding under this grant at 31 December 2020 reflect the options that have been awarded based on achievement against the relevant performance targets and are now vesting ratably over a five-year period beginning December 2018 and ending December 2022.

June 2016 share options

The share options outstanding under this grant at 31 December 2020 reflect the options that have been awarded based on achievement against the relevant performance targets and are now vesting ratably over a five-year period beginning June 2019 and ending June 2023.

September 2016 share options

The share options outstanding under this grant at 31 December 2020 reflect the options that have been awarded based on achievement against the relevant performance targets and are now vesting ratably over a five-year period beginning September 2019 and ending September 2023.

March 2017 share options

The share options outstanding under this grant at 31 December 2020 reflect the options that have been awarded based on achievement against the relevant performance targets and are now vesting ratably over a three-year period beginning March 2020 and ending March 2022.

December 2018 (Grant 1) share options

The share options outstanding under this grant at 31 December 2020 are subject to the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. Any shares awarded based on achievement of these performance targets will be subject to vesting ratably over a three-year period beginning December 2021 and ending December 2023.

December 2018 (Grant 2) share options

The share options outstanding under this grant at 31 December 2020 reflect the options that have been awarded based on achievement against performance targets and are now subject to vesting ratably over a three-year period beginning December 2021 and ending December 2023.

May 2019 share options

The share options outstanding under this grant at 31 December 2020 are subject to Group performance targets based on Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years. Any shares awarded based on achievement of these performance targets will be subject to vesting ratably over a three-year period beginning May 2022 and ending May 2024.

September 2019 share options

The share options outstanding under this grant at 31 December 2020 are subject to Group performance targets based on Group operating profit and the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. Any shares awarded based on achievement of these performance targets will be subject to vesting ratably over a five-year period beginning September 2022 and ending September 2026.

December 2019 share options

The share options outstanding under this grant at 31 December 2020 are subject to Group performance targets based on Group operating profit and the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. Any shares awarded based on achievement of these performance targets will be subject to vesting ratably over a five-year period beginning December 2022 and ending December 2026.

April 2020 share options

The share options outstanding under this grant at 31 December 2020 are subject to performance targets with 50% of the options subject to the achievement of a performance target based on the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. The remaining 50% of outstanding options are subject to individual and Group franchising targets for a three-year period with a minimum performance threshold based on achieving a minimum level of franchises and the maximum award based on achieving a stretch target for franchises. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning April 2023 and ending April 2025.

May 2020 share options

The share options outstanding under this grant at 31 December 2020 are subject to performance targets with 50% of the options subject to the achievement of a performance target based on the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. The remaining 50% of outstanding options are subject to individual and Group franchising targets for a three-year period with a minimum performance threshold based on achieving a minimum level of franchises and the maximum award based on achieving a stretch target for franchises. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning May 2023 and ending May 2025.

August 2020 share options

The share options outstanding under this grant at 31 December 2020 are subject to performance targets with 50% of the options subject to the achievement of a performance target based on the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. The remaining 50% of outstanding options are subject to individual and Group franchising targets for a three-year period with a minimum performance threshold based on achieving a minimum level of franchises and the maximum award based on achieving a stretch target for franchises. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning August 2023 and ending August 2025.

September 2020 share options

The share options outstanding under this grant at 31 December 2020 are subject to performance targets with 50% of the options subject to the achievement of a performance target based on the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. The remaining 50% of outstanding options are subject to individual and Group franchising targets for a three-year period with a minimum performance threshold based on achieving a minimum level of franchises and the maximum award based on achieving a stretch target for franchises. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning September 2023 and ending September 2025.

Measurement of fair values

The fair value of the rights granted through the employee share purchase plan was measured based on the Monte Carlo simulation or the Black-Scholes formula. The expected volatility is based on the historic volatility adjusted for any abnormal movement in share prices.

The inputs to the model are as follows:

 
                                                                                                        December 
                        September      August        May      April    December  September        May       2018 
                                                                                                          (Grant 
                             2020        2020       2020       2020        2019       2019       2019         2) 
---------------------  ----------  ----------  ---------  ---------  ----------  ---------  ---------  --------- 
Share price on grant 
 date                     291.00p     222.60p    202.00p    165.00p     408.60p    402.30p    341.90p    199.80p 
Exercise price            291.00p     222.60p    202.00p    165.00p     408.60p    402.30p    341.90p    199.80p 
Expected volatility        51.81%      51.88%     50.15%     49.02%      36.24%     36.33%     38.84%     37.66% 
                         - 62.96%    - 63.17%   - 61.06%   - 59.29%    - 44.72%          -          -          - 
                                                                                    44.83%     45.75%     44.35% 
Option life             3-7 years   3-7 years  3-7 years  3-7 years   3-7 years  3-7 years  3-5 years  3-5 years 
Expected dividend           2.39%       3.12%      3.44%      4.21%       1.59%      1.62%      1.85%      2.95% 
Fair value of option      122.93p      84.95p     71.39p     50.79p     141.77p    137.79p    120.77p     58.77p 
 at time of grant       - 146.68p   - 102.54p   - 86.80p   - 62.29p   - 172.84p          -          -          - 
                                                                                   169.19p    141.08p     69.33p 
Risk-free interest        (0.08%)     (0.08%)      0.00%      0.00%       0.57%      0.48%      0.52%      0.87% 
 rate                   - (0.04%)   - (0.04%)    - 0.06%    - 0.06%     - 0.65%          -          -    - 1.01% 
                                                                                     0.50%      0.60% 
---------------------  ----------  ----------  ---------  ---------  ----------  ---------  ---------  --------- 
 
 
                        December 
                            2018    October   December      March  September       June   December 
                          (Grant 
                              1)       2018       2017       2017       2017       2016       2015 
---------------------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
Share price on grant 
 date                    203.10p    223.20p    197.00p    283.70p    258.00p    272.50p    322.20p 
Exercise price           203.10p    223.20p    197.00p    283.70p    258.00p    272.50p    322.20p 
Expected volatility       37.63%     37.15%     33.31%     27.42%     27.45%     27.71%     24.80% 
                               -          -          -          -          -          -          - 
                          44.25%     43.32%     35.93%     29.87%     32.35%     34.81%     37.08% 
Option life            3-5 years  3-5 years  3-5 years  3-5 years  3-7 years  3-7 years  3-7 years 
Expected dividend          2.90%      2.64%      2.69%      1.80%      1.80%      1.71%      1.40% 
Fair value of option      39.36p     67.69p     40.06p     44.51p     40.96p     44.28p     29.76p 
 at time of grant              -          -          -          -          -          -          - 
                          46.42p     78.56p     44.20p     76.88p     67.89p     78.68p     90.61p 
Risk-free interest         0.73%      0.70%      0.54%      0.23%      0.09%      0.14%      0.14% 
 rate                          -          -          -          -          -          -          - 
                           0.88%      0.91%      0.75%      0.56%      0.38%      0.39%      0.21% 
---------------------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 

Plan 2: IWG plc Co-Investment Plan (CIP) and Performance Share Plan (PSP)

The CIP operated in conjunction with the annual bonus whereby a gross bonus of up to 50% of basic annual salary was taken as a deferred amount of shares (Investment Shares) to be released at the end of a defined period of not less than three years, with the balance of the bonus paid in cash. Awards of Matching Shares are linked to the number of Investment Shares awarded and vest depending on the Company's future performance. The maximum number of Matching Shares which could be awarded to a participant in any calendar year under the CIP was 200% of salary. As such, the maximum number of Matching Shares which could be awarded, based on Investment Shares awarded, was in the ratio of 4:1.

The PSP provides for the Remuneration Committee to make standalone awards, based on normal plan limits, up to a maximum of 250% of base salary.

Reconciliation of outstanding share awards

 
                                           2020        2019 
                                     ----------  ---------- 
                                         Number      Number 
                                      of awards   of awards 
-----------------------------------  ----------  ---------- 
At 1 January                          2,370,535   1,991,250 
PSP awards granted during the year      915,739   1,058,578 
Lapsed during the year                        -   (679,293) 
Exercised during the year              (48,506)           - 
-----------------------------------  ----------  ---------- 
Outstanding at 31 December            3,237,768   2,370,535 
-----------------------------------  ----------  ---------- 
Exercisable at 31 December                    -      10,687 
-----------------------------------  ----------  ---------- 
 

There were no shares which were exercised during the year ended 31 December 2020. The weighted average share price at the date of exercise for share awards exercised during the year ended 31 December 2020 was 288.60p (2019: Nil).

 
                                                            At 31 
           Date of    Numbers                                 Dec     Release 
Plan         grant    granted        Lapsed  Exercised       2020        date 
-----  -----------  ---------  ------------  ---------  ---------  ---------- 
PSP     03/03/2016  1,038,179   (1,038,179)          -          -  03/03/2021 
PSP     01/03/2017  1,095,406     (512,367)          -    583,039  01/03/2022 
PSP     07/03/2018  1,278,350     (597,938)          -    680,412  07/03/2023 
PSP     07/03/2019  1,058,578             -          -  1,058,578  07/03/2024 
PSP     04/03/2020    915,739             -          -    915,739  04/03/2025 
-----  -----------  ---------  ------------  ---------  ---------  ---------- 
                    5,386,252   (2,148,484)          -  3,237,768 
 -----------------  ---------  ------------  ---------  ---------  ---------- 
 
 
                                                                       At 31 
                           Date of    Numbers                            Dec     Release 
Plan                         grant    granted       Lapsed  Exercised   2020        date 
---------------------  -----------  ---------  -----------  ---------  -----  ---------- 
CIP: Matching shares    05/03/2014    647,688    (536,698)  (110,990)      -  05/03/2019 
CIP: Matching shares    04/03/2015    831,808    (793,989)   (37,819)      -  04/03/2020 
---------------------  -----------  ---------  -----------  ---------  -----  ---------- 
                                    1,479,496  (1,330,687)  (148,809)      - 
 ---------------------------------  ---------  -----------  ---------  -----  ---------- 
 

Measurement of fair values

The fair value of the rights granted through the employee share purchase plan was measured based on the Monte Carlo simulation.

The inputs to the model are as follows:

 
                              04/03/2020  07/03/2019  07/03/2018  01/03/2017  03/03/2016  04/03/2015      06/03/2014 
                              ----------  ----------  ----------  ----------  ----------  ----------  -------------- 
                                     PSP         PSP         PSP         PSP         PSP         CIP             CIP 
----------------------------  ----------  ----------  ----------  ----------  ----------  ----------  -------------- 
Share price on grant date        356.50p     244.90p     240.90p     283.70p     300.00p     225.00p         253.30p 
Exercise price                       Nil         Nil         Nil         Nil         Nil         Nil             Nil 
Number of simulations            250,000     250,000     250,000     250,000     250,000     250,000         250,000 
Number of companies                   32          32          32          32          32          32              32 
Award life                       5 years     5 years     5 years     5 years     5 years     3 years         3 years 
Expected dividend                  1.95%       2.57%       2.37%       1.80%       1.50%       1.78%           1.66% 
Fair value of award at time     292.36p-     124.38p     124.92p     155.83p     183.08p      75.67p  83.11p-214.33p 
 of grant                        192.98p   - 188.43p   - 189.26p   - 236.08p   - 277.36p           - 
                                                                                              114.6p 
Risk-free interest rate            0.06%       0.79%       1.21%       0.56%       0.86%       1.01%     0.99%-1.47% 
----------------------------  ----------  ----------  ----------  ----------  ----------  ----------  -------------- 
 

It is recognised by the Remuneration Committee that the additional EPS targets represent a highly challenging goal and consequently, in determining whether they have been met, the Committee will exercise its discretion. The overall aim is that the relevant EPS targets must have been met on a run-rate or underlying basis. As such, an adjusted measure of EPS will be calculated to assess the underlying performance of the business.

2014 CIP Investment and matching grants

The total number of matching awards made in 2014 to each participant was divided into three separate equal amounts and is subject to future performance periods of three, four and five years respectively. The financial performance period resulted in 10,687 shares vesting in March 2019 pursuant to partial achievement of the relative total shareholder return (TSR) target over the respective period.

2015 CIP Investment and matching grants

The total number of matching awards made in 2015 to each participant was subject to a future performance period of three years which resulted in 37,819 shares vesting in March 2020, based on partial achievement of the relative total shareholder return (TSR) target.

2016 PSP Investment grant

The total number of shares awarded is subject to three different performance conditions which were not met and therefore all awards under this plan lapsed.

2017 PSP Investment grant

The total number of shares awarded was subject to three different performance conditions with one third subject to defined earnings per share (EPS) conditions, one third subject to relative total shareholder return (TSR) conditions and one third subject return on investment (ROI) conditions. These conditions were all achieved based on 2019 results and the total 583,039 shares vested subject to a holding period ending March 2021.

2018 PSP Investment grant

The total number of shares awarded was subject to three different performance conditions, with one third subject to defined earnings per share (EPS) conditions, one third subject to relative total shareholder return (TSR) conditions and one third subject to return on investment (ROI) conditions. These conditions are measured over three financial years commencing on 1 January 2018.

Based on results as of 31 December 2020, the relative TSR target of exceeding the comparator group median TSR by more than 10% was achieved in full, resulting in the vesting of 226,804 shares subject to a holding period ending March 2022. The performance targets for EPS and ROI were not met and the share awards pursuant to these targets lapsed.

2019 PSP Investment grant

The total number of shares awarded is subject to three different performance conditions. These conditions are measured over three financial years commencing on 1 January 2019. Thus, conditional on meeting these performance targets, these shares will vest in March 2024. One third is subject to defined earnings per share (EPS) conditions, one third is subject to relative total shareholder return (TSR) conditions and one third is subject to return on investment (ROI) conditions.

The EPS condition is based on the compound annual growth in EPS over the performance period measured from EPS in the financial year ending 31 December 2018 as follows:

 
                         % of one third of the award 
Vesting scale                             that vests 
------------------  -------------------------------- 
25%                                             100% 
                    On a straight-line basis between 
Between 5% and 25%                       0% and 100% 
5%                                                0% 
------------------  -------------------------------- 
 

The TSR condition is based on the performance of the Group's TSR growth against the median TSR growth of the comparator group as follows:

 
                                           % of one third of the award 
Vesting scale                                               that vests 
------------------------------------  -------------------------------- 
Exceeds the median by 10% or more                                 100% 
                                      On a straight-line basis between 
Exceeds the median by less than 10%                       25% and 100% 
Ranked at median                                                   25% 
Ranked below the median                                             0% 
------------------------------------  -------------------------------- 
 

The ROI condition is based on the ROI improvement over the performance period relative to ROI for the financial year ending 31 December 2018 as follows:

 
                                               % of one third of the award 
Vesting scale                                                   that vests 
----------------------------------------  -------------------------------- 
Exceeds 2018 ROI plus 300 basis points                                100% 
Exceeds 2018 ROI by less than 300 basis   On a straight-line basis between 
 points                                                        0% and 100% 
Equal to or less than the 2018 ROI                                      0% 
----------------------------------------  -------------------------------- 
 

2020 PSP investment grant

The total number of shares awarded is subject to relative total shareholder return (TSR) conditions, measured over three financial years commencing on 1 January 2020. Thus, conditional on meeting these performance targets, these shares will vest in December 2025.

The TSR condition is based on the performance of the Group's TSR growth against the median TSR growth of the comparator group as follows:

 
                                      % of the awards that vests 
------------------------------------  -------------------------- 
Exceeds the median by 10% or more                           100% 
                                        On a straight-line basis 
Exceeds the median by less than 10%         between 25% and 100% 
Ranked at median                                             25% 
Ranked below the median                                       0% 
------------------------------------  -------------------------- 
 

Plan 3: Deferred Share Bonus Plan

The Deferred Share Bonus Plan, established in 2016, enables the Board to award options to selected employees on a discretionary basis. The awards are conditional on the ongoing employment of the related employees for a specified period of time. Once this condition is satisfied, those awards that are eligible will vest three years after the date of grant.

In March 2020, an award of 172,354 ordinary shares of 1p each in the Company was granted to the Chief Executive Officer, Mark Dixon and an award of 91,923 ordinary shares of 1p each in the Company was granted to the Chief Financial Officer, Eric Hageman. The awards are conditional on continuous employment and awards that are eligible will vest in March 2023.

Reconciliation of outstanding share options

 
                                            2020        2019 
                                      ----------  ---------- 
                                          Number      Number 
                                       of awards   of awards 
------------------------------------  ----------  ---------- 
At 1 January                             495,678     383,664 
DSBP awards granted during the year      264,277     112,014 
Lapsed during the year                         -           - 
Exercised during the year              (383,664)           - 
------------------------------------  ----------  ---------- 
Outstanding at 31 December               376,291     495,678 
------------------------------------  ----------  ---------- 
Exercisable at 31 December                     -           - 
------------------------------------  ----------  ---------- 
 

The weighted average share price at the date of exercise for share awards exercised during the year ended 31 December 2020 was 360.62p (2019: Nil).

 
                                                    At 31 
           Date of   Numbers                          Dec     Release 
Plan         grant   granted  Lapsed  Exercised      2020        date 
-----  -----------  --------  ------  ---------  --------  ---------- 
DSBP    01/03/2017   383,664       -  (383,664)         -  01/03/2020 
DSBP    07/03/2019   112,014       -          -   112,014  07/03/2022 
DSBP    04/03/2020   264,277       -          -   264,277  04/03/2023 
-----  -----------  --------  ------  ---------  --------  ---------- 
                     759,955       -  (383,664)   376,291 
 -----------------  --------  ------  ---------  --------  ---------- 
 

Measurement of fair values

The fair value of the rights granted through the employee share purchase plan was measured based on the Black-Scholes formula. The expected volatility is based on the historic volatility adjusted for any abnormal movement in share prices.

The inputs to the model are as follows:

 
                                         March    March    March 
                                          2020     2019     2017 
-------------------------------------  -------  -------  ------- 
Share price on grant date                356.5  244.90p  283.70p 
Exercise price                             Nil      Nil      Nil 
Number of simulations                        -        -        - 
Number of companies                          -        -        - 
Award life                             3 years  3 years  3 years 
Expected dividend                        1.95%    2.57%    1.80% 
Fair value of award at time of grant   292.36p  188.42p  236.04p 
Risk-free interest rate                  0.00%    0.68%    0.23% 
-------------------------------------  -------  -------  ------- 
 

26. Retirement benefit obligations

The Group accounts for the Swiss and Philippines pension plans as defined benefit plans under IAS 19 - Employee Benefits.

The reconciliation of the net defined benefit liability and its components is as follows:

 
                                2020    2019 
                                GBPm    GBPm 
-----------------------------  -----  ------ 
Fair value of plan assets        4.8    11.0 
Present value of obligations   (6.9)  (12.5) 
-----------------------------  -----  ------ 
Net funded obligations         (2.1)   (1.5) 
-----------------------------  -----  ------ 
 

27. Acquisitions

Current period acquisitions

During the year ended 31 December 2020 the Group made various individually immaterial acquisitions for a total consideration of GBP28.5m.

 
                                                      Provisional 
                                                             fair  Provisional 
                                                            value         fair 
GBPm                                     Book value   adjustments        value 
---------------------------------------  ----------  ------------  ----------- 
Net assets acquired 
Right-of-use assets                             3.0             -          3.0 
Other property, plant and equipment             5.1             -          5.1 
Cash                                            1.7             -          1.7 
Other current and non-current assets           12.3             -         12.3 
Lease liabilities                             (3.0)             -        (3.0) 
Current liabilities                          (14.8)             -       (14.8) 
Non-current liabilities                       (5.9)             -        (5.9) 
---------------------------------------  ----------  ------------  ----------- 
                                              (1.6)             -        (1.6) 
Previously held share of net assets(1)                                     1.4 
Goodwill arising on acquisition                                           28.7 
---------------------------------------  ----------  ------------  ----------- 
Total consideration                                                       28.5 
 
Cash flow on acquisition 
Cash paid                                                                 28.5 
---------------------------------------  ----------  ------------  ----------- 
Net cash outflow                                                          28.5 
---------------------------------------  ----------  ------------  ----------- 
 

1. The 2020 acquisitions include one stepped-acquisition where the non-controlling interest in a former joint venture was acquired by the Group.

The goodwill arising on the 2020 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, GBP28.7m is expected to be deductible for tax purposes.

If the above acquisitions had occurred on 1 January 2020, the revenue and net retained profit arising from these acquisitions would have been GBP17.8m and GBP1.5m respectively. In the year, the equity acquisitions contributed revenue of GBP2.6m and net retained profit of GBP0.6m.

There was no contingent consideration arising on the 2020 acquisitions, nor was any contingent consideration paid during the current year with respect to milestones achieved on previous acquisitions. There are no contingent considerations held on the Group's balance sheet at 31 December 2020.

The acquisition costs associated with these transactions were GBP0.4m, recorded within administration expenses in the consolidated income statement.

For 2020'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 year ended 31 December 2019 the Group made an acquisition for a total consideration of GBP24.4m.

 
                                                          Final 
                                                           fair   Final 
                                                          value    fair 
GBPm                                   Book value   adjustments   value 
-------------------------------------  ----------  ------------  ------ 
Net assets acquired 
Right-of-use assets                          63.0             -    63.0 
Other property, plant and equipment           1.6             -     1.6 
Cash                                          5.5             -     5.5 
Other current and non-current assets          6.8             -     6.8 
Lease liabilities                          (63.0)             -  (63.0) 
Current liabilities                         (7.6)             -   (7.6) 
Non-current liabilities                     (4.5)             -   (4.5) 
-------------------------------------  ----------  ------------  ------ 
                                              1.8             -     1.8 
Goodwill arising on acquisition                                    22.6 
-------------------------------------  ----------  ------------  ------ 
Total consideration                                                24.4 
 
Cash flow on acquisition 
Cash paid                                                          24.4 
-------------------------------------  ----------  ------------  ------ 
Net cash outflow                                                   24.4 
-------------------------------------  ----------  ------------  ------ 
 

The goodwill arising on the 2019 acquisition 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, GBP22.6m was expected to be deductible for tax purposes.

If the above acquisition had occurred on 1 January 2019, the revenue and net retained profit arising from these acquisitions would have been GBP28.3m and GBP4.4m respectively. During 2019, the equity acquisition contributed revenue of GBP4.7m and net retained profit of GBP1.2m.

There was no contingent consideration arising on the above acquisition. Contingent consideration of GBP5.3m was paid during the prior year with respect to milestones achieved on a previous acquisition.

The acquisition costs associated with this transaction were GBP0.3m, recorded within administration expenses in the consolidated income statement.

The prior year comparative information has not been restated due to the immaterial nature of the final fair value adjustments recognised in 2019.

28. Capital commitments

 
                                                       2020   2019 
                                                       GBPm   GBPm 
----------------------------------------------------  -----  ----- 
Contracts placed for future capital expenditure not 
 provided for in the financial statements             147.0  196.4 
----------------------------------------------------  -----  ----- 
 

These commitments are principally in respect of centre fit-out obligations. There are no capital commitments in respect of joint ventures at 31 December 2020 (2019: GBPNil).

29. Contingent assets and 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 GBP143.9m (2019: GBP144.5m). There are no material lawsuits pending against the Group.

30. Related parties

Parent and subsidiary entities

The consolidated financial statements include the results of the Group and its subsidiaries listed in note 31.

Joint ventures

The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year.

 
                                  Amounts   Amounts 
                     Management      owed      owed 
                  fees received        by        to 
                   from related   related   related 
GBPm                    parties     party     party 
---------------  --------------  --------  -------- 
2020 
Joint ventures              2.6      17.6       4.3 
---------------  --------------  --------  -------- 
2019 
Joint ventures              3.6      15.5       4.9 
---------------  --------------  --------  -------- 
 

As at 31 December 2020, none of the amounts due to the Group have been provided for as the expected credit losses arising on the balances are considered immaterial (2019: GBPNil). All outstanding balances with these related parties are priced on an arm's length basis. None of the balances are secured.

Key management personnel

No loans or credit transactions were outstanding with Directors or Officers of the Company at the end of the year or arose during the year that are required to be disclosed.

Compensation of key management personnel (including Directors)

Key management personnel include those personnel (including Directors) that have responsibility and authority for planning, directing and controlling the activities of the Group:

 
                                  2020   2019 
                                  GBPm   GBPm 
-------------------------------  -----  ----- 
Short-term employee benefits       6.7    8.2 
Retirement benefit obligations     0.2    0.4 
Share-based payments               1.9    1.4 
-------------------------------  -----  ----- 
                                   8.8   10.0 
-------------------------------  -----  ----- 
 

Share-based payments included in the table above reflect the accounting charge in the year. The full fair value of awards granted in the year was GBP6.8m (2019: GBP2.0m). These awards are subject to performance conditions and vest over three, four and five years from the award date (refer to note 25 for further details).

Transactions with related parties

During the year ended 31 December 2020 the Group acquired goods and services from a company indirectly controlled by

a Director of the Company amounting to GBP5,629 (2019: GBP18,764). There was a GBP5,629 balance outstanding at the year-end

(2019: GBP18,764).

All transactions with these related parties are priced on an arm's length basis and are to be settled in cash. None of the balances are secured.

31. Principal Group companies

The Group's principal subsidiary undertakings at 31 December 2020, their principal activities and countries of incorporation are set out below:

 
                                                   % of                                                   % of 
                                                    ordinary                                               ordinary 
                                                    shares                                                 shares 
                                                    and                                                    and 
                               Country              votes                              Country             votes 
Name of undertaking             of incorporation    held      Name of undertaking       of incorporation   held 
-----------------------------  ------------------  ---------  -----------------------  -----------------  --------- 
Trading companies                                             Management companies 
Regus Australia Management                                    RGN Management Limited 
 Pty Ltd                       Australia           100         Partnership             Canada             100 
Regus Belgium SA               Belgium             100        Pathway IP II Sarl       Switzerland        100 
                                                              Franchise International 
Regus do Brasil Ltda           Brazil              100         GmbH                    Switzerland        100 
Regus Business Service                                        Regus Service Centre 
 (Shenzen) Ltd                 China               100         Philippines B.V.        Philippines        100 
                                                              Regus Global Management 
Regus Management ApS           Denmark             100         Centre SA               Switzerland        100 
Regus Management (Finland)                                    Regus Group Services 
 Oy                            Finland             100         Ltd                     United Kingdom     100 
                                                              IW Group Services (UK) 
RBC Deutschland GmbH           Germany             100         Ltd                     United Kingdom     100 
Regus HK Management                                           Regus Management Group 
 Ltd                           Hong Kong           100         LLC                     United States      100 
Regus CME Ireland Limited      Ireland             100 
Regus Business Centres         Israel              100        Holding and finance 
 Limited                                                       companies 
Regus Business Centres 
 Italia Srl                    Italy               100        IWG Enterprises Sarl     Switzerland        100 
Regus Management Malaysia                                     IWG Group Holdings 
 Sdn Bhd                       Malaysia            100         Sarl                    Luxembourg         100 
Regus Management de 
 Mexico, SA de CV              Mexico              100        Genesis Finance Sarl     Switzerland        100 
Regus New Zealand Management 
 Ltd                           New Zealand         100        Pathway Finance Sarl     Switzerland        100 
Regus Business Centre                                         Pathway Finance EUR 
 Norge AS                      Norway              100         2 Sarl                  Switzerland        100 
                                                              Pathway Finance USD 
IWG Management Sp z.o.o.       Poland              100         2 Sarl                  Switzerland        100 
Regus Management Singapore 
 Pte Ltd                       Singapore           100        Regus Group Limited      United Kingdom     100 
Regus Management Espana 
 SL                            Spain               100        Regus Corporation        United States      100 
IWG Management (Sweden) 
 AB                            Sweden              100 
Avanta Managed Offices 
 Ltd                           United Kingdom      100 
Basepoint Centres Limited      United Kingdom      100 
H Work LLC                     United States       100 
RGN National Business 
 Centre LLC                    United States       100 
RB Centres LLC                 United States       100 
 
 

During the year, Redox plc was deconsolidated from the Group due to the loss of control of the entity subsequent to it being placed into formal bankruptcy proceedings. In addition, a further 132 entities incorporated in the USA, Canada and the UK are currently in administration processes but have not been deconsolidated as they have not met the requirements for deconsolidation as at 31 December 2020.

32. Key judgemental and estimates areas adopted in preparing these accounts

The preparation of consolidated financial statements in accordance with IFRS requires management to make certain judgements and assumptions that affect reported amounts and related disclosures.

Key judgements

Adjusting items

Adjusting items are separately disclosed by the Group so as to provide readers with helpful additional information on the performance of the business across periods. In 2020, items arising specifically from the impact of the COVID-19 pandemic have been deemed to meet the definition of adjusting items. Each of these items are considered to be significant in nature and/or size and are also consistent with items treated as adjusting in prior periods in which significant non-recurring transactions occurred. The exclusion of these items is consistent with how the business performance is planned by, and reported to, the Board and the Operating Committee. The profit before tax and adjusting items measure is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies. The classification of adjusting items requires significant management judgement after considering the nature and intentions of a transaction or provision.

Tax assets and liabilities

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. Where appropriate, the Group assesses the potential risk of future tax liabilities arising from the operation of its business in multiple tax jurisdictions and includes provisions within tax liabilities for those risks that can be estimated reliably. Changes in existing tax laws can affect large international groups such as IWG and could result in additional tax liabilities over and above those already provided for.

Determining the lease term of contracts with renewal and termination options

IFRS 16 defines the lease term as the non-cancellable period of a lease together with the options to extend or terminate a lease, if the lessee were reasonably certain to exercise that option. Where a lease includes the option for the Group to extend the lease term, the Group makes a judgement as to whether it is reasonably certain that the option will be taken. This will take into account the length of time remaining before the option is exercisable, macro-economic environment, socio-political environment and other lease specific factors.

The lease term represents the period from lease inception up to either:

   a.     The earliest point at which the lease could be broken, where break clauses exist; 

b. The point at which the lease could be extended, but no further, where extension options exist; or

   c.     To the end of the contractual lease term in all other cases. 

Key estimates

Valuation of intangibles and goodwill

We evaluate the fair value of goodwill and other indefinite life intangible assets to assess potential impairments on an annual basis, or during the year if an event or other circumstance indicates that we may not be able to recover the carrying amount of the asset. We evaluate the carrying value of goodwill based on our CGUs aggregated at a country level and make that determination based upon future cash flow projections which assume certain growth projections which may or may not occur. We record an impairment loss for goodwill when the carrying value of the asset is less than its estimated recoverable amount. Further details of the methodology and assumptions applied to the impairment review in the year ended 31 December 2020, including the sensitivity to changes in those assumptions, can be found in note 13.

Deferred tax assets

We base our estimate of deferred tax assets and liabilities on current tax laws and rates and, in certain cases, business plans and other expectations about future outcomes. Changes in existing laws and rates, and their related interpretations, and future business results may affect the amount of deferred tax liabilities or the valuation of deferred tax assets over time. Our accounting for deferred tax consequences represents management's best estimate of future events that can be appropriately reflected in the accounting estimates. It is current Group policy to recognise a deferred tax asset to the extent that it is probable that future taxable profits will be available against which the assets can be used.

Given the significant level of corporate developments in the Group, the determination of the period of time representing foreseeable future requires judgement to be exercised, using the Group's business forecasting processes.

Impairment of property, plant and equipment

We evaluate the potential impairment of property, plant and equipment at a centre (CGU) level where there are indicators of impairment at the balance sheet date. In the assessment of value-in-use, key judgemental areas in determining future cash flow projections include: an assessment of the location of the centre; the local economic situation; competition; local environmental factors; the management of the centre; and future changes in occupancy, revenue and costs of the centre.

While impairment of property, plant and equipment was noted as a key estimate in the 2019 Annual Report and Accounts, COVID-19 has accelerated the need for further network rationalisation. We evaluate the potential impairment of property, plant and equipment at a centre (CGU) level where there are indicators of impairment at the balance sheet date and for centres which have been identified as part of the Group's rationalisation programme. The key area of estimation involved is in determining the recoverable amount of the rationalised centres, over what period the rationalisation will take place, and the level of moveable assets that will be utilised in other centres.

The Group has considered the impact of COVID-19 with respect to all judgements and estimates it makes in the application of its accounting policies. This included assessing the impairment of property, plant and equipment, goodwill and the recoverability of trade receivables. The result of these reviews is detailed in note 10.

Estimating the incremental borrowing rates on leases

The determination of applicable incremental borrowing rates on leases at the commencement of lease contracts also requires judgement. The Group determines its incremental borrowing rates by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease. The Group considers the relevant market interest rate, based on the weighted average of the timing of the lease payments under the lease obligation. In addition, a spread over the market rate is applied based on the cost of funds to the Group, plus a spread that represents the risk differential of the lessee entity compared to the Group funding cost.

Valuation of embedded conversion option (Level 3) in convertible bonds

The embedded conversion option relating to the Group's issue of convertible bonds is measured at mark-to-market with reference to the traded price of the convertible bonds as well as external valuation inputs based on credit comparables and bond spreads across competitors and wider markets.

Fair value accounting for business combinations

For each business combination, we assess the fair values of assets and liabilities acquired. Where there is not an active market in the category of the non-current assets typically acquired with a business centre or where the books and records of the acquired company do not provide sufficient information to derive an accurate valuation, management calculates an estimated fair value based on available information and experience.

The main categories of acquired non-current assets where management's judgement has an impact on the amounts recorded include tangible fixed assets, customer list intangibles and the fair market value of leasehold assets and liabilities. For significant business combinations management also obtains third-party valuations to provide additional guidance as to the appropriate valuation to be included in the financial statements.

Parent company accounts

Summarised extract of UNAUDITED Company balance sheet

(Accounting policies are based on the Swiss Code of Obligations)

 
                                                 As at       As at 
                                                31 Dec      31 Dec 
                                                  2020        2019 
                                                  GBPm        GBPm 
-------------------------------------------  ---------  ---------- 
 
Trade and other receivables                        1.1        14.4 
Prepayments                                        0.5         0.1 
-------------------------------------------  ---------  ---------- 
Total current assets                               1.6        14.5 
Investments                                    3,272.3       644.6 
-------------------------------------------  ---------  ---------- 
Total non-current assets                       3,272.3       644.6 
 
Total assets                                   3.273.9       659.1 
 
Trade and other payables                           7.0         6.3 
Accrued expenses                                   1.1         2.7 
-------------------------------------------  ---------  ---------- 
Total short-term liabilities                       8.1         9.0 
Long-term interest-bearing liabilities            99.3       332.3 
-------------------------------------------  ---------  ---------- 
Total long-term liabilities                       99.3       332.3 
 
Total liabilities                                107.4       341.3 
-------------------------------------------  ---------  ---------- 
 
Issued share capital                              10.5         9.2 
Share premium                                    312.6           - 
Reserves from capital contributions            2,126.8     2,126.8 
Retained earnings                            (1,699.1)      (32.4) 
Profit/(loss) for the year                     2,569.8   (1,668.9) 
Treasury shares                                (154.1)     (116.9) 
-------------------------------------------  ---------  ---------- 
Total shareholders' equity                     3,166.5       317.8 
 
Total liabilities and shareholders' equity     3,273.9       659.1 
-------------------------------------------  ---------  ---------- 
 

The values of the investments recognised have been considered by the Directors and are considered fully recoverable.

Approved by the Board on 9 March 2021

 
Mark Dixon               ERIC HAGEMAN 
Chief Executive Officer  Chief Financial Officer 
 

Accounting policies

Basis of preparation

These financial statements were prepared in accordance with accounting policies based on the Swiss Code of Obligations.

The Company is included in the consolidated financial statements of IWG plc.

The balance sheet has been extracted from the non-statutory accounts of IWG plc for the year ended 31 December 2020, which are available from the Company's registered office, Dammstrasse 19, CH-6300, Zug, Switzerland.

Investments

During 2020, the Company acquired the direct investments in IWG Enterprises Sarl and Umbrella Management Limited as part of an internal restructuring. This transaction resulted in the Company recognising a dividend in specie of GBP2,966.0m and a corresponding impairment in its investment of IWG Global Investments Sarl of GBP360.0m. The value of the investments

recognised have been considered by the Directors and are considered fully recoverable.

IFRS 16 Pro forma statements

Consolidated income statement (unaudited)

The purpose of these unaudited pages is to provide a reconciliation from the 2020 financial results to the pro forma statements

in accordance with the previous pre-IFRS 16 policies adopted by the Group, and thereby give the reader greater insight into

the impact of IFRS 16 on the results of the Group. The pro forma statements also reflect the impact of the adjusting items

during 2020.

 
                                                                                                                  Year 
                                                      Year                                                       ended 
                                                     ended       Rent                                           31 Dec 
                                                    31 Dec          &                                             2020 
                                                      2020    finance                       Other             pre-IFRS 
GBPm                                   Notes   As reported      costs  Depreciation   adjustments  Taxation         16 
-------------------------------------  -----  ------------  ---------  ------------  ------------  --------  --------- 
Revenue                                    3       2,480.2          -             -             -         -    2,480.2 
Total costs of sales                             (2,425.5)  (1,051.2)         884.5        (23.1)         -  (2,615.3) 
-------------------------------------  -----  ------------  ---------  ------------  ------------  --------  --------- 
Cost of sales                                    (2,108.4)  (1,051.2)         884.5        (33.3)         -  (2,308.4) 
Adjusting items to cost of sales          10        (71.1)          -             -       (235.8)         -    (306.9) 
(Loss) on impairment of property, 
 plant, equipment and right-of-use 
 assets                                    5       (246.0)          -             -         246.0         -          - 
-------------------------------------  -----  ------------  ---------  ------------  ------------  --------  --------- 
Expected credit losses on trade 
 receivables                               5        (34.8)          -             -             -         -     (34.8) 
-------------------------------------  -----  ------------  ---------  ------------  ------------  --------  --------- 
Gross profit/(loss) (centre 
 contribution)                                        19.9  (1,051.2)         884.5        (23.1)         -    (169.9) 
Total selling, general and 
 administration 
 expenses                                          (371.9)     (14.0)           2.5             -         -    (383.4) 
-------------------------------------  -----  ------------  ---------  ------------  ------------  --------  --------- 
Selling, general and administration 
 expenses                                          (312.9)     (14.0)           2.5             -         -    (324.4) 
Adjusting items to selling, general 
 and administration expenses              10        (56.4)          -             -             -               (56.4) 
Share of (loss)/profit of 
 equity-accounted 
 investees, net of tax                    21         (2.6)          -             -             -         -      (2.6) 
-------------------------------------  -----  ------------  ---------  ------------  ------------  --------  --------- 
Operating (loss)/profit                    5       (352.0)  (1,065.2)         887.0        (23.1)         -    (553.3) 
Finance expense                            7       (271.1)      249.4             -           7.8         -     (13.9) 
Finance income                             7           3.0          -             -             -         -        3.0 
-------------------------------------  -----  ------------  ---------  ------------  ------------  --------  --------- 
Net finance expense                                (268.1)      249.4             -           7.8         -     (10.9) 
-------------------------------------  -----  ------------  ---------  ------------  ------------  --------  --------- 
(Loss)/profit before tax for the 
 year from continuing operations                   (620.1)    (815.8)         887.0        (15.3)         -    (564.2) 
Income tax expense                         8        (30.1)          -             -             -    (13.2)     (43.3) 
(Loss)/profit after tax for the 
 year from continuing operations                   (650.2)    (815.8)         887.0        (15.3)    (13.2)    (607.5) 
-------------------------------------  -----  ------------  ---------  ------------  ------------  --------  --------- 
Profit after tax for the period 
 from discontinued operations              9           3.4      (1.2)           0.7           0.2         -        3.1 
(Loss)/profit for the period 
 attributable 
 to equity shareholders of the parent              (646.8)    (817.0)         887.7        (15.1)    (13.2)    (604.4) 
-------------------------------------  -----  ------------  ---------  ------------  ------------  --------  --------- 
 
Earnings per ordinary share (EPS): 
 
Attributable to ordinary shareholders 
                                                     (67.9 
Basic (p)                                 11             )                                                      (63.5) 
                                                     (67.9 
Diluted (p)                               11             )                                                      (63.5) 
 
From continuing operations 
                                                     (68.3 
Basic (p)                                 11             )                                                      (63.8) 
                                                     (68.3 
Diluted (p)                               11             )                                                      (63.8) 
-------------------------------------  -----  ------------  ---------  ------------  ------------  --------  --------- 
 

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.

Consolidated balance sheet (unaudited)

 
                                               Right-of-use 
                                                     assets                                                      As at 
                                        As at             &                                                     31 Dec 
                                       31 Dec       related    Rent &  Depreciation                               2020 
                                         2020         lease   finance       & lease         Other             pre-IFRS 
GBPm                      Notes   As reported     liability     costs      payments   adjustments  Taxation         16 
------------------------  -----  ------------  ------------  --------  ------------  ------------  --------  --------- 
Non-current assets 
Goodwill                     13         695.5             -         -             -             -         -      695.5 
Other intangible assets      14          53.3             -         -             -             -         -       53.3 
Property, plant and 
 equipment                   15       6,855.9     (6,758.9)     871.3         900.9         248.1         -    2,117.3 
------------------------  -----  ------------  ------------  --------  ------------  ------------  --------  --------- 
Right-of-use assets          15       5,646.9     (6,758.9)         -         946.0         166.0         -          - 
Other property, plant 
 and 
 equipment                   15       1,209.0             -     871.3        (45.1)          82.1         -    2,117.3 
------------------------  -----  ------------  ------------  --------  ------------  ------------  --------  --------- 
Deferred tax assets           8         188.2             -         -             -             -   (107.0)       81.2 
Other long-term 
 receivables                 16          55.0             -         -             -           0.5         -       55.5 
Investments in joint 
 ventures                    21          11.3             -         -             -             -         -       11.3 
------------------------  -----  ------------  ------------  --------  ------------  ------------  --------  --------- 
Total non-current assets              7,859.2     (6,758.9)     871.3         900.9         248.6   (107.0)    3,014.1 
------------------------  -----  ------------  ------------  --------  ------------  ------------  --------  --------- 
 
Current assets 
Inventory                                 1.3             -         -             -             -         -        1.3 
Trade and other 
 receivables                 17       1,003.7             -     145.9             -             -         -    1,149.6 
Corporation tax 
 receivable                   8          29.1             -         -             -             -         -       29.1 
Cash and cash 
 equivalents                 23          71.0             -         -             -             -         -       71.0 
------------------------  -----  ------------  ------------  --------  ------------  ------------  --------  --------- 
Total current assets                  1,105.1             -     145.9             -             -         -    1,251.0 
Total assets                          8,964.3     (6,758.9)   1,017.2         900.9         248.6   (107.0)    4,265.1 
 
Current liabilities 
Trade and other payables 
 (incl. customer 
 deposits)                   18       1,007.6             -     400.8             -             -         -    1,408.4 
Deferred income                         328.9             -         -             -             -         -      328.9 
Corporation tax payable       8          40.0             -         -             -             -         -       40.0 
Bank and other loans         19          21.9             -         -             -             -         -       21.9 
Lease liabilities            23       1,019.6       (921.9)   (249.3)         151.6             -         -          - 
Provisions                   20          17.5             -         -             -         247.8         -      265.3 
------------------------  -----  ------------  ------------  --------  ------------  ------------  --------  --------- 
Total current 
 liabilities                          2,435.5       (921.9)     151.5         151.6         247.8         -    2,064.5 
------------------------  -----  ------------  ------------  --------  ------------  ------------  --------  --------- 
 
Non-current liabilities 
Other long-term payables                  5.9             -     949.2             -           0.5         -      955.6 
Deferred tax liability        8           0.2             -         -             -         (0.2)         -          - 
Bank and other loans         19         400.2             -         -             -             -         -      400.2 
Lease liabilities            23       5,538.9     (6,534.8)         -         995.9             -         -          - 
Non-current derivative 
 financial liabilities       24          49.6             -         -             -             -         -       49.6 
Provisions                   20          13.5             -         -             -           2.1         -       15.6 
Provision for deficit on 
 joint ventures              21           4.6             -         -             -             -         -        4.6 
Retirement benefit 
 obligations                 26           2.1             -         -             -             -         -        2.1 
------------------------  -----  ------------  ------------  --------  ------------  ------------  --------  --------- 
Total non-current 
 liabilities                          6,015.0     (6,534.8)     949.2         995.9           2.4         -    1,427.7 
Total liabilities                     8,450.5     (7,456.7)   1,100.7       1,147.5         250.2         -    3,492.2 
 
Total equity 
Issued share capital         22          10.5             -         -             -             -         -       10.5 
Issued share premium         22         312.6             -         -             -             -         -      312.6 
                                       (154.1 
Treasury shares              22             )             -         -             -             -         -    (154.1) 
Foreign currency 
 translation 
 reserve                                 36.2        (14.8)         -             -             -         -       21.4 
Hedging reserve                        (0.2 )             -         -             -             -         -      (0.2) 
Other reserves                           25.8             -         -             -             -         -       25.8 
Retained earnings                       283.0         712.6    (83.5)       (246.6)         (1.6)   (107.0)      556.9 
------------------------  -----  ------------  ------------  --------  ------------  ------------  --------  --------- 
Total equity                            513.8         697.8    (83.5)       (246.6)         (1.6)   (107.0)      772.9 
------------------------  -----  ------------  ------------  --------  ------------  ------------  --------  --------- 
Total equity and 
 liabilities                          8,964.3     (6,758.9)   1,017.2         900.9         248.6   (107.0)    4,265.1 
------------------------  -----  ------------  ------------  --------  ------------  ------------  --------  --------- 
 

Consolidated statement of cash flows (unaudited)

 
                                                                                                                 Year 
                                                              Year                                              ended 
                                                             ended                                             31 Dec 
                                                            31 Dec              Depreciation                     2020 
                                                              2020        Rent       & lease         Other   pre-IFRS 
GBPm                                           Notes   As reported   & finance      payments   adjustments         16 
---------------------------------------------  -----  ------------  ----------  ------------  ------------  --------- 
Operating activities 
Loss for the year from continuing operations               (650.2)     (815.8)         887.0        (28.5)    (607.5) 
Adjustments for: 
Profit from discontinued operations                9           0.6       (1.2)           0.7           0.2        0.3 
Net finance expense                                7         268.1     (249.4)             -         (7.8)       10.9 
Share of loss on equity-accounted investees, 
 net of income tax                                21           2.6           -             -             -        2.6 
Depreciation charge                               15       1,186.3           -       (887.7)             -      298.6 
---------------------------------------------  -----  ------------  ----------  ------------  ------------  --------- 
Right-of-use assets                               15         946.0           -       (946.0)             -          - 
Other property, plant and equipment               15         240.3           -          58.3             -      298.6 
---------------------------------------------  -----  ------------  ----------  ------------  ------------  --------- 
Loss on impairment of goodwill                    13           4.9           -             -             -        4.9 
Loss on disposal of property, plant 
 and equipment                                     5          93.1           -             -        (11.5)       81.6 
Profit on disposal of right-of-use                5, 
 assets and related lease liabilities             23        (25.7)           -             -          25.7          - 
Loss on disposal of intangible assets              5           0.1           -             -             -        0.1 
                                                  5, 
Impairment of property, plant and equipment       15          82.1           -             -        (82.1)          - 
                                                  5, 
Impairment of right-of-use assets                 15         163.9           -             -       (163.9)          - 
                                                  5, 
Amortisation of intangible assets                 14           8.7           -             -             -        8.7 
Gain on disposal of other investments             21           1.6           -             -             -        1.6 
Tax expense                                      8,9          30.4           -             -             -       30.4 
Expected credit losses on trade receivables        5          34.8           -             -             -       34.8 
Increase in provisions                            20          15.2           -             -         247.8      263.0 
Share-based payments                                           6.4           -             -             -        6.4 
Other non-cash movements                                     (4.4)           -             -           0.3      (4.1) 
---------------------------------------------  -----  ------------  ----------  ------------  ------------  --------- 
Operating cash flows before movements 
 in working capital                                        1,218.5   (1,066.4)             -        (19.8)      132.3 
---------------------------------------------  -----  ------------  ----------  ------------  ------------  --------- 
Proceeds from partner contributions 
 (reimbursement of costs)                         15          38.4           -        (38.4)             -          - 
Increase in trade and other receivables                     (76.4)        14.7             -             -     (61.7) 
Increase in trade and other payables                          77.3       955.6       (748.7)          19.8      304.0 
---------------------------------------------  -----  ------------  ----------  ------------  ------------  --------- 
Cash generated from operations                             1,257.8      (96.1)       (787.1)             -      374.6 
---------------------------------------------  -----  ------------  ----------  ------------  ------------  --------- 
Interest paid and similar charges on 
 bank loans and corporate borrowings                        (17.6)           -             -             -     (17.6) 
Interest paid on lease liabilities                23       (249.4)       249.4             -             -          - 
Tax paid                                                    (21.9)           -             -             -     (21.9) 
Net 
 cash inflows from operating activities                      968.9       153.7       (787.1)             -      335.1 
---------------------------------------------  -----  ------------  ----------  ------------  ------------  --------- 
 
Investing activities 
Purchase of property, plant and equipment         15       (257.4)     (153.7)             -             -    (411.1) 
Purchase of subsidiary undertakings, 
 net of cash acquired                             27        (26.8)           -             -             -     (26.8) 
Purchase of intangible assets                     14        (16.5)           -             -             -     (16.5) 
Purchase of joint ventures                        21             -           -             -             -          - 
Purchase of current assets                        17       (276.2)           -             -             -    (276.2) 
Proceeds on the sale of discontinued 
 operations, net of cash disposed of               9           3.3           -             -             -        3.3 
Proceeds on sale of property, plant 
 and equipment                                                 8.2           -             -             -        8.2 
Interest received                                  7           0.6           -             -             -        0.6 
Net cash outflows from investing activities                (564.8)     (153.7)             -             -    (718.1) 
---------------------------------------------  -----  ------------  ----------  ------------  ------------  --------- 
 
Financing activities 
Proceeds from issue of loans                                 876.5           -             -             -      876.5 
Repayment of loans                                       (1,109.8)           -             -             -  (1,109.8) 
Proceeds from issue of convertible 
 bonds (net of transaction costs)                 19         343.2           -             -             -      343.2 
Payment of lease liabilities                      23       (898.1)           -         898.1             -          - 
Proceeds from partner contributions 
 (lease incentives)                               15         111.0           -       (111.0)             -          - 
Proceeds from issue of ordinary shares, 
 net of costs                                     22         313.9           -             -             -      313.9 
Purchase of treasury shares                       22        (43.7)           -             -             -        2.2 
Proceeds from exercise of share awards                         2.2           -             -             -          - 
Payment of ordinary dividend                      12             -           -             -             -          - 
Net cash (outflows)/inflows from financing 
 activities                                                (515.8)           -         787.1             -      382.3 
---------------------------------------------  -----  ------------  ----------  ------------  ------------  --------- 
 
Decrease in cash and cash equivalents                        (0.7)           -             -             -      (0.7) 
Cash and cash equivalents at beginning 
 of year                                                      66.6           -             -             -       66.6 
Effect of exchange rate fluctuations 
 on cash held                                                  5.1           -             -             -        5.1 
Cash and cash equivalents at end of 
 the year                                         23          71.0           -             -             -       71.0 
---------------------------------------------  -----  ------------  ----------  ------------  ------------  --------- 
 

SEGMENTAL ANALYSIS

Segmental analysis - based on estimates (unaudited)

 
                                                                                United 
                                      Americas         EMEA  Asia Pacific      Kingdom        Other        Total 
                                          2020         2020          2020         2020         2020         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) 
---  ----------------------------  -----------  -----------  ------------  -----------  -----------  ----------- 
     Pre2019(1) 
 Workstations(4)                       194,127      138,942        79,810       94,240            -      507,119 
 Occupancy (%)                           74.1%        73.9%         70.4%        71.0%            -        72.9% 
 Revenue (GBPm)                          969.8        564.0         252.2        338.2          5.6      2,129.8 
                                   -----------  -----------  ------------  -----------  -----------  ----------- 
 REVPOW (GBP)                            6,742        5,491         4,488        5,052            -        5,761 
 
     2019 Expansions(2) 
 Workstations(4)                        23,258       41,765        11,766       11,698            -       88,487 
 Occupancy (%)                           49.9%        55.4%         59.4%        60.2%            -        55.1% 
 Revenue (GBPm)                           53.4        103.4          27.1         31.5            -        215.4 
                                   -----------  -----------  ------------  -----------  -----------  ----------- 
 
     2020 Expansions(5) 
 Workstations(4)                         8,092       14,005         3,061        4,784            -       29,942 
 Occupancy (%)                           24.2%        36.5%         35.9%        33.6%            -        32.7% 
 Revenue (GBPm)                           11.0         21.5           5.7         10.0            -         48.2 
                                   -----------  -----------  ------------  -----------  -----------  ----------- 
 
     Network rationalisations(3) 
 Workstations(4)                         8,578        7,076         7,319        2,277            -       25,250 
 Occupancy (%)                           45.5%        63.0%         61.7%        66.6%            -        57.0% 
 Revenue (GBPm)                           32.3         26.2          19.2          9.1            -         86.8 
                                   -----------  -----------  ------------  -----------  -----------  ----------- 
 
     Total 
 Workstations(4)                       234,055      201,788       101,956      112,999            -      650,798 
 Occupancy (%)                           68.9%        67.1%         67.5%        68.2%            -        68.0% 
 Revenue (GBPm)                        1,066.5        715.1         304.2        388.8          5.6      2,480.2 
                                   -----------  -----------  ------------  -----------  -----------  ----------- 
 REVPAW (GBP)                            4,557        3,544         2,984        3,441            -        3,811 
 --------------------------------  -----------  -----------  ------------  -----------  -----------  ----------- 
 
     Period end workstations(7) 
 Mature                                193,629      143,256        81,959       96,237            -      515,081 
 2019 Expansions                        23,339       42,939        12,070       11,880            -       90,228 
 2020 Expansions                        10,809       21,142         4,659        9,295            -       45,905 
 Total                                 227,777      207,337        98,688      117,412            -      651,214 
 --------------------------------  -----------  -----------  ------------  -----------  -----------  ----------- 
 

Segmental analysis - based on estimates (unaudited)

 
                                                                                United 
                                      Americas         EMEA  Asia Pacific      Kingdom        Other        Total 
                                          2019         2019          2019         2019         2019         2019 
                                     (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-2019(1) 
 Workstations(4)                       195,316      135,864        84,238       91,886            -      507,304 
 Occupancy (%)                           77.2%        72.5%         71.3%        71.4%            -        73.9% 
 Revenue (GBPm)                        1,099.8        575.1         274.7        370.1          9.0      2,328.7 
 REVPOW (GBP)                            7,296        5,835         4,577        5,640            -        6,211 
 
     2019 Expansions(2) 
 Workstations(4)                         9,682       17,261         6,218        7,629            -       40,790 
 Occupancy (%)                           40.0%        40.3%         37.4%        32.5%            -        38.3% 
 Revenue (GBPm)                           20.7         36.8          10.6         11.3            -         79.4 
 
     Network rationalisations(6) 
 Workstations(4)                        11,516       12,021        11,390        9,976            -       44,903 
 Occupancy (%)                           63.1%        66.3%         62.6%        57.1%            -        62.5% 
 Revenue (GBPm)                           67.4         71.1          57.4         44.9            -        240.8 
 
     Total 
 Workstations(4)                       216,514      165,146       101,846      109,491            -      592,997 
 Occupancy (%)                           74.8%        68.7%         68.2%        67.4%            -        70.6% 
 Revenue (GBPm)                        1,187.9        683.0         342.7        426.3          9.0      2,648.9 
 REVPAW (GBP)                            5,486        4,136         3,365        3,893            -        4,467 
 --------------------------------  -----------  -----------  ------------  -----------  ----------- 
 

Notes:

1. The pre-2019 business comprises centres not opened in the current or previous financial year.

2. Expansions include new centres opened and acquired businesses.

3. A network rationalisation for the 2020 data is defined as a centre closed during the period from 1 January 2020 to 31 December 2020.

4. Workstation numbers are calculated as the weighted average for the year.

5. 2020 expansions include any costs incurred in 2020 for centres which will open in 2021.

6. A network rationalisation for the 2019 comparative data is defined as a centre closed during the period from 1 January 2019 to 31 December 2020.

7. Workstations available at year-end.

POST-TAX CASH RETURN ON NET INVESTMENT

The purpose of this unaudited page is to reconcile some of the key numbers used in the returns calculation, on a pre-IFRS 16 basis, back to the Group's IFRS 16 pro forma statements, and thereby give the reader greater insight into the returns

calculation drivers.

2020

 
                                                        2018         2019         2020         2021 
Description                   Reference          Aggregation   Expansions   Expansions   Expansions  Closures    Total 
----------------------  ----------------------  ------------  -----------  -----------  -----------  --------  ------- 
Post-tax cash return 
 on net investment (unaudited)                          5.8%            -            -            -         -     1.2% 
----------------------------------------------  ------------  -----------  -----------  -----------  --------  ------- 
 
                              Pro forma 
                           income statement, 
Revenue                          p154                2,129.8        215.4         48.2            -      86.8  2,480.2 
                              Pro forma 
                           income statement, 
Centre contribution              p154                  277.5       (65.7)       (32.4)       (14.2)    (12.0)    153.2 
                         EBIT reconciliation 
Loss on disposal of            (analysed 
 assets                         below)                     -            -            -            -      80.4     80.4 
----------------------  ----------------------  ------------  -----------  -----------  -----------  --------  ------- 
Underlying centre contribution                         277.5       (65.7)       (32.4)       (14.2)      68.4    233.6 
Selling, general and          Pro forma 
 administration            income statement, 
 expenses                        p154                (249.6)       (45.8)       (17.0)        (0.2)    (11.8)  (324.4) 
----------------------  ----------------------  ------------  -----------  -----------  -----------  --------  ------- 
                         EBIT reconciliation 
                               (analysed 
EBIT                            below)                  27.9      (111.5)       (49.4)       (14.4)      56.6   (90.8) 
Depreciation and amortisation(1)                       230.5         49.0         13.8            -      13.9    307.2 
Amortisation of partner 
 contributions                                        (70.3)       (18.0)        (6.1)            -    (29.8)  (124.2) 
Amortisation of acquired 
 lease fair value adjustments                          (0.5)            -            -            -       0.3    (0.2) 
----------------------------------------------  ------------  -----------  -----------  -----------  --------  ------- 
Non-cash items                                         159.7         31.0          7.7            -    (15.6)    182.8 
Taxation(2)                                            (5.7)         22.3          9.9          2.9    (11.3)     18.1 
----------------------------------------------  ------------  -----------  -----------  -----------  --------  ------- 
Adjusted net cash profit                               181.9       (58.2)       (31.8)       (11.5)      29.7    110.1 
                         Capital expenditure 
Maintenance capital            (analysed 
 expenditure                    below)                  96.9            -            -            -         -     96.9 
                        Partner contributions 
                               (analysed 
Partner contributions           below)                (14.6)            -            -            -         -   (14.6) 
----------------------  ----------------------  ------------  -----------  -----------  -----------  --------  ------- 
Net maintenance capital 
 expenditure                                            82.3            -            -            -         -     82.3 
----------------------------------------------  ------------  -----------  -----------  -----------  --------  ------- 
Post-tax cash return                                    99.6       (58.2)       (31.8)       (11.5)      29.7     27.8 
----------------------------------------------  ------------  -----------  -----------  -----------  --------  ------- 
 
                         Capital expenditure 
Growth capital                 (analysed 
 expenditure                    below)               2,210.2        602.0        328.2         40.2         -  3,180.6 
                        Partner contributions 
                               (analysed 
Partner contributions           below)               (505.3)      (206.8)      (116.5)       (13.7)         -  (842.3) 
----------------------  ----------------------  ------------  -----------  -----------  -----------  --------  ------- 
Net investment (unaudited)                           1,704.9        395.2        211.7         26.5         -  2,338.3 
----------------------------------------------  ------------  -----------  -----------  -----------  --------  ------- 
 

2020

 
                                                          2018         2019         2020         2021 
EBITDA reconciliation                              Aggregation   Expansions   Expansions   Expansions  Closed    Total 
---------------------------  -------------------  ------------  -----------  -----------  -----------  ------  ------- 
Centre contribution                                      277.6       (65.7)       (32.4)       (14.2)  (12.0)    153.2 
Selling, general and 
 administration expenses                               (249.6)       (45.8)       (17.0)        (0.2)  (11.8)  (324.4) 
Depreciation and amortisation                            230.5         49.0         13.8            -    13.9    307.2 
------------------------------------------------  ------------  -----------  -----------  -----------  ------  ------- 
                                                         258.5       (62.5)       (35.6)       (14.4)   (9.9)    136.1 
                                  Pro forma 
Share of profit in joint      income statement, 
 ventures                            p154                (2.6)            -            -            -       -    (2.6) 
---------------------------  -------------------  ------------  -----------  -----------  -----------  ------  ------- 
EBITDA on continuing 
 operations                                              255.9       (62.5)       (35.6)       (14.4)   (9.9)    133.5 
------------------------------------------------  ------------  -----------  -----------  -----------  ------  ------- 
 

1. Excludes depreciation expenses related to discontinued operations of GBP0.1m.

2. Based on EBIT at the Group's long-term effective tax rate of 20%.

2020

 
Movement in capital expenditure           2018         2019         2020         2021 
 (unaudited)                       Aggregation   Expansions   Expansions   Expansions  Closures    Total 
--------------------------------  ------------  -----------  -----------  -----------  --------  ------- 
December 2019                          2,343.5        528.8         93.7            -         -  2,966.0 
2020 Capital expenditure(3)                  -         82.8        232.3         40.2         -    355.3 
Properties acquired                          -            -          2.2            -         -      2.2 
Centre closures(4)                     (133.3)        (9.6)            -            -         -  (142.9) 
--------------------------------  ------------  -----------  -----------  -----------  --------  ------- 
December 2020                          2,210.2        602.0        328.2         40.2         -  3,180.6 
--------------------------------  ------------  -----------  -----------  -----------  --------  ------- 
 

3. 2021 expansions relate to costs and investments incurred in 2020 for centres which will open in 2021.

4. The growth capital expenditure for an estate is reduced by the investment in centres closed during the year, but only where that investment has been

fully recovered.

2020

 
Movement in partner contributions          2018         2019         2020         2021 
 (unaudited)                         Expansions   Expansions   Expansions   Expansions  Closures   Total 
----------------------------------  -----------  -----------  -----------  -----------  --------  ------ 
December 2019                             531.7        194.3         39.4            -         -   765.4 
2020 Partner contributions                    -         16.0         77.1         13.7         -   106.8 
Centre closures(5)                       (26.4)        (3.5)            -            -         -  (29.9) 
----------------------------------  -----------  -----------  -----------  -----------  --------  ------ 
December 2020                             505.3        206.8        116.5         13.7         -   842.3 
----------------------------------  -----------  -----------  -----------  -----------  --------  ------ 
 

5. The partner contributions for an estate are reduced by the partner contributions for centres closed during the year.

2020

 
EBIT reconciliation (unaudited)     Reference                        GBPm 
----------------------------------  ----------------------------  ------- 
EBIT                                                               (90.8) 
                                    Pro forma statement of 
Loss on disposal of assets           cash flows, p157              (80.4) 
                                    Pro forma income statement, 
Share of profit in joint ventures    p154                           (2.6) 
Adjusting items                     note 10, p125                 (379.5) 
                                    Pro forma income statement, 
Operating profit                     p154                         (533.3) 
----------------------------------  ----------------------------  ------- 
 

2020

 
Partner contributions (unaudited)          Reference      GBPm 
-----------------------------------------  ----------  ------- 
Opening partner contributions                            640.0 
                                                       ------- 
 
  *    Current                                           105.5 
 
  *    Non-current                                       534.5 
                                                       ------- 
Acquired in the period                                     2.5 
Received in the period                                   121.7 
                                                       ------- 
 
  *    Maintenance partner contributions                  14.6 
 
  *    Growth partner contributions                      107.1 
                                                       ------- 
Utilised in the period                                 (126.7) 
Business disposal                                            - 
Exchange differences                                     (4.2) 
-----------------------------------------------------  ------- 
Closing partner contributions                            633.3 
-----------------------------------------------------  ------- 
 
  *    Current                                           109.1 
 
  *    Non-current                                       524.2 
                                                       ------- 
 

2020

 
Capital expenditure (unaudited)                    Reference                 GBPm 
-------------------------------------------------  -----------------------  ----- 
Maintenance capital expenditure                    CFO review, p46           96.9 
Growth capital expenditure                         CFO review, p46          357.5 
                                                                            ----- 
 
  *    2020 Capital expenditure                                             355.3 
 
  *    Properties acquired                                                    2.2 
--------------------------------------------------------------------------  ----- 
Total capital expenditure 
Analysed as 
                                                   Pro forma statement of 
  *    Purchase of subsidiary undertakings          cash flows, p157         26.8 
                                                   Pro forma statement of 
  *    Purchase of property, plant and equipment    cash flows, p157        411.1 
                                                   Pro forma statement of 
  *    Purchase of intangible assets                cash flows, p157         16.5 
-------------------------------------------------  -----------------------  ----- 
 

FIVE-YEAR SUMMARY

 
                                                           31 Dec     31 Dec     31 Dec     31 Dec 
                                                31 Dec       2019       2018       2017       2016 
                                                  2020   Restated   Restated   Restated   Restated 
                                                  GBPm       GBPm       GBPm       GBPm       GBPm 
-------------------------------------------  ---------  ---------  ---------  ---------  --------- 
Income statement (full year ended) 
Revenue                                        2,480.2    2,648.9    2,398.2    2,237.8    2,127.7 
Cost of sales                                (2,425.5)  (2,081.8)  (2,006.9)  (1,845.2)  (1,694.5) 
Expected credit losses on trade 
 receivables                                    (34.8)      (2.0)     (17.7)     (16.2)     (10.3) 
-------------------------------------------  ---------  ---------  ---------  ---------  --------- 
Gross profit (centre contribution)                19.9      565.1      373.6      376.4      422.9 
Administration expenses                        (369.3)    (281.0)    (248.0)    (231.8)    (255.0) 
Share of (loss)/profit of equity-accounted 
 investees, net of tax                           (2.6)        2.7      (1.4)      (0.8)      (0.8) 
-------------------------------------------  ---------  ---------  ---------  ---------  --------- 
Operating profit                               (352.0)      286.8      124.2      143.8      167.1 
Finance expense                                (271.1)    (232.3)     (15.9)     (14.1)     (11.6) 
Finance income                                     3.0        0.5        0.5        0.3        0.1 
-------------------------------------------  ---------  ---------  ---------  ---------  --------- 
(Loss)/profit before tax for the 
 year from continuing operations               (620.1)       55.0      108.8      130.0      155.6 
Income tax (expense)/credit                     (30.1)       22.3     (29.6)     (32.8)     (35.0) 
-------------------------------------------  ---------  ---------  ---------  ---------  --------- 
(Loss)/profit for the year from 
 continuing operations                         (650.2)       77.3       79.2       97.2      120.6 
Profit after tax for the year from 
 discontinued operations                           3.4      373.3       26.5       16.8       18.2 
-------------------------------------------  ---------  ---------  ---------  ---------  --------- 
(Loss)/profit after tax for the 
 year                                          (646.8)      450.6      105.7      114.0      138.8 
-------------------------------------------  ---------  ---------  ---------  ---------  --------- 
 
Earnings per ordinary share (EPS): 
 
Attributable to ordinary shareholders 
Basic (p)                                       (67.9)       50.5       11.7       12.4       14.9 
Diluted (p)                                     (67.9)       49.6       11.6       12.3       14.7 
Weighted average number of shares 
 outstanding ('000s)                           951,891    892,738    907,077    915,676    929,830 
 
From continuing operations 
Basic (p)                                       (68.3)        8.7        8.7       10.6       13.0 
Diluted (p)                                     (68.3)        8.5        8.7       10.5       12.8 
Weighted average number of shares 
 outstanding ('000s)                           951,891    892,738    907,077    915,676    929,830 
-------------------------------------------  ---------  ---------  ---------  ---------  --------- 
 
Balance sheet data (as at) 
Intangible assets                                748.8      719.6      721.7      712.1      738.1 
Right-of-use assets                            5,646.9    5,917.4          -          -          - 
Property, plant and equipment                  1,209.0    1,273.3    1,751.2    1,367.2    1,194.4 
Deferred tax assets                              188.2      195.0       30.6       23.0       29.3 
Other assets                                   1,100.4      781.4      848.7      702.7      649.2 
Cash and cash equivalents                         71.0       66.6       69.0       55.0       50.1 
-------------------------------------------  ---------  ---------  ---------  ---------  --------- 
Total assets                                   8,964.3    8,953.3    3,421.2    2,860.0    2,661.1 
-------------------------------------------  ---------  ---------  ---------  ---------  --------- 
Current liabilities                            2,435.5    2,139.7    1,429.5    1,224.7    1,183.1 
Non-current liabilities                        6,015.0    5,933.1    1,240.5      907.6      736.0 
Equity                                           513.8      880.5      751.2      727.7      742.0 
-------------------------------------------  ---------  ---------  ---------  ---------  --------- 
Total equity and liabilities                   8,964.3    8,953.3    3,421.2    2,860.0    2,661.1 
-------------------------------------------  ---------  ---------  ---------  ---------  --------- 
 

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