Annual Financial Report Announcement

RNS Number : 7679E

IWG PLC

03 March 2020

3 March 2020

IWG plc - ANNUAL FINANCIAL REPORT ANNOUNCEMENT - YEAR ENDED 31 DECEMBER 2019

IWG plc, the global operator of leading cowork and workspace brands, today announces its annual results for the year ended 31 December 2019

Transformational year: Excellent franchising momentum, strong revenue growth and record profit

Key Highlights

Strong revenue growth and record profit

• Open centre revenue at constant currency up 15.0% to £2,569.8m, all regions contributing strongly

• Pre-2018 revenue and EBITDA up 3.6% and 15.0% respectively at constant currency

• Open centre operating profit up 11% at constant currency to £176.2m

• Operating profit up 8% at constant currency to £137.7m after continued significant investment

• Record profit before tax of £489.5m, including profit on master franchise agreements (MFAs)

Excellent franchising momentum, commitment of over 400 locations

• Long-term MFAs completed in Japan, Taiwan and Switzerland for a total cash consideration of £424.6m

• Completed MFA in respect of Gibraltar and Monaco in February 2020

• Regional franchise agreements signed with multiple partners across many geographies

• Strong pipeline of MFAs and regional franchises, more than 40 transactions under discussion

Strong demand

• Record enquiries as companies focus on sustainable and more flexible working practices

• New enterprise account wins across all geographies

• Strong growth from existing enterprise accounts

Record cash generation, strong balance sheet and increased returns to shareholders

• Cash flow pre-growth of £649.2m, 72.7p per share

• £107.7m returned to shareholders in the period via dividends and share repurchases

• Share repurchase programme increased back to £100m

• Net debt reduced from £460.8m to £294.1m; net debt : EBITDA ratio of 0.7x

Continued investment in company owned network and global platform infrastructure

• Now in 3,388 locations worldwide, with 62.5m sq. ft. of space

• Expanded network with 2 new countries and 43 new cities

Annual results

£m	2019 (IFRS 16)	2019 (IAS 17) ⁽¹⁾	2018 (IAS 17) ⁽¹⁾	% change constant currency (IAS 17) ⁽¹⁾	% change actual currency (IAS 17) ⁽¹⁾
Revenue	2,653.0	2,653.0	2,402.1	9.2%	10.4%
Open centre revenue	2,569.8	2,569.8	2,208.1	15.0%	16.4%
Pre-2018 revenue	2,251.4	2,251.4	2,145.5	3.6%	4.9%
Open centre operating profit	320.0	176.2	156.8	11%	12%
Operating profit - continuing operations	287.9	137.7	124.9	8%	10%
Profit before tax - continuing operations	55.9	119.5	109.6		9%
Profit before tax ⁽²⁾	430.1	489.5	138.7		253%
Profit after tax	450.6	503.1	105.7		376%
EPS - to ordinary shareholders (p)	50.5	56.4	11.7		383%
EPS - from continuing operations (p)	8.7	15.1	8.8		72%
DPS (p)	6.95	6.95	6.30		10%
EBITDA - including discontinued operations	1,482.8	428.3	389.9	8%	10%
Pre-2018 EBITDA ⁽³⁾	1,290.1	472.2	404.9	15%	17%
Cashflow pre net growth capex, repurchases and dividends	(451.6)	649.2	259.2		150%
Net debt ⁽⁴⁾	(6,840.1)	(294.1)	(460.8)
Net debt : EBITDA (x)	4.6	0.7	1.2

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

2. Includes the trading and MFA transaction profit before tax from Japan, Taiwan and Switzerland

3. Pre-2018 refers to the performance in the reported period for all operations opened on or before 31 December 2017 and which were open throughout the period

4. Net debt in accordance with IFRS 16 standard includes lease liabilities of £6,546.0m

Mark Dixon, Chief Executive of IWG plc, said:

"2019 has been a transformational year for IWG. We made significant progress in our pivot towards becoming a franchised organisation and delivered strong revenue growth and record profits. We continue to see strong demand globally and to welcome more great partners to the business. As organisations increasingly seek ways to address the challenges of climate change, we believe that more and more are recognising the role to be played by remote, distributed and flexible working strategies.

The outbreak of COVID-19 has led to brief closures of our centres in China and we are closely reviewing the ongoing developments worldwide. Whilst we cannot be certain how long this situation will last; we continue to monitor the situation and will act swiftly where necessary to help ensure the safety and wellbeing of our customers and employees. We are extremely grateful for the incredible effort of our teams in dealing with this global health emergency.

We will continue to work closely with our partners, develop our network and invest in our people, our brands and our services, to ensure that we remain the leading player in our industry. Even in this period of global, political and economic uncertainty, we are confident that the Group will continue to deliver strong returns for all our stakeholders, and this is reflected in the increased proposed dividend and new £100m share repurchase programme."

Details of results presentation

Mark Dixon, Chief Executive Officer, and Eric Hageman, Chief Financial Officer, are hosting a presentation today for analysts and investors at 9.30am GMT at Investec Bank plc, 30 Gresham Street, London EC2V 7QP.

For those unable to attend the presentation, please contact Jessica Kilby to obtain details for the webcast or conference call: jkilby@brunswickgroup.com or +44 (0) 20 7396 7466

For further information, please contact:

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

Chairman's statement

The right strategy at the right time

The growth potential for the flexible working sector is now widely understood. Organisations are increasingly aware of the significant benefits of using flexible workspace solutions. Landlords and developers are responding to this expanding demand by incorporating flexible workspace solutions into their plans.

Our multi-brand offering provides a wide variety of attractive working environments, and our plans to accelerate the growth of our extensive national networks through franchising are set to strengthen our global market leading position even further.

Performance 2019

Our results for 2019 are reported under the new accounting standard for leases, IFRS 16, and our results for 2018 were not restated and reflect pre-IFRS 16 (IAS 17) accounting standards. Comparative information and commentary is provided on an IAS 17 basis, because we believe it better represents the economics of our leases over their life cycle and is consistent with how we manage the business.

Our results for 2019 demonstrate strong revenue growth and record profitability. Group revenue increased from £2,402.1m to £2,653.0m, an increase of 9.2% at constant currency. This revenue performance includes the impact arising from our decision to proactively rationalise elements of our global network. Consequently, the 15.0% constant currency increase in open centre revenue to £2,569.8m indicates the strength of the ongoing business. The record profit before taxes for 2019 of £430.1m under IFRS 16 and £489.5m on an IAS 17 basis includes the profit from the signing of master franchise agreements during the year which were reported under discontinued operations. Operating profit from continuing operations was £287.9m under IFRS 16. With this being a transformational year for the Group, which has involved significant investment, we are pleased to report an 8% constant currency increase in operating profit to £137.7m (2018: £124.9m) on an IAS 17 basis. Excluding network rationalisation costs, operating profit was £176.2m.

The inherent cash generation of our business model, along with the £424.6m of cash from the completion of master franchise agreements during the year, leaves the Group in a strong financial position. Net debt under IFRS 16 was £6,840.1m and under IAS 17 net debt reduced to £294.1m (2018: £460.8m), notwithstanding returning £107.7m to shareholders and continued investment in our company owned network and global platform infrastructure.

Strategic update

We are committed to delivering long-term value to shareholders and understand this depends on executing against a strategy which provides value for all our stakeholders: customers, partners, employees and communities as well as shareholders.

We continue to pursue our profitable growth approach, the advantages of which were very evident during 2019. Achieving profitable growth requires significant discipline and hard work and encompasses much more than rigorous investment processes alone. We continue to use our deep industry knowledge to improve our digital platform and processes to enhance the customer experience and improve our employees' efficiency and job satisfaction. We are proud to be a business in which reducing environmental impact is an integral part of the strategy and which is also strongly founded on benefits being shared by all our stakeholder groups.

Customers benefit from our multi-brand strategy, which provides the largest choice of working environments for their people. We offer a far greater choice of location than our competitors, facilitating shorter commutes and timely alignment of workspace to customer needs, reducing costs related to under-utilised space. Organisations can therefore reduce their carbon footprint and save costs while improving employee satisfaction. When customers put their people in our flexible workspaces, we understand their desire to maintain the important aspects of their own culture. We therefore focus on customer service and continuously improving customer experience, delivering a great day at work whilst not distracting them from their own objectives.

Our operating model provides the opportunity for franchisees to invest for attractive returns while enabling us to accelerate growth. We gained many new franchising partnerships during 2019, including significant master franchising agreements with TKP covering Japan and Taiwan and the Safra/Peress Groups for Switzerland. For the first time, we invited our franchise partners to our senior leadership conference, held in Athens in January 2020. We are very excited about developing close relationships with them and the opportunities to learn from one another as we work together to grow the IWG flexible workspace network.

We also continue to develop our partnering approach with landlords and suppliers, building new, broader relationships for the future. Such relationships have proven to be mutually beneficial, bringing us access to buildings and enabling owners and landlords to promote and expand their position in their local real estate markets.

People update

Accelerating growth clearly means expanding career opportunities for our people, who are the key to delivering our strategy and our success on a daily basis. Their creativity, energy, commitment and tireless efforts to help are driving our performance through this period of rapid change. A new level of enthusiasm is evident in our people as we look forward to 2020 and delivering a great day at work is a clear objective for our own people as well as our customers. On behalf of the Board, I would like to give a special thanks to all our people for their many contributions to our achievements during 2019.

Board update

We welcomed two new members onto the Board during 2019: Eric Hageman as Chief Financial Officer and Laurie Harris as a Non-Executive Director and Chair of the Audit Committee. The Board remains very active as the Group pursues the unique opportunities currently presented by the rapid changes in the flexible workspace market. I would like to thank all my Board colleagues for their significant time commitments and valuable contributions during this transformational period.

Returns to shareholders

We continue to be committed to delivering cash to shareholders through distributions and share repurchases. We will continue with our underlying progressive dividend policy and are therefore recommending a 10.3% increase in the final dividend to 4.80p. This represents an increase in the full year dividend of 10.3% to 6.95p (2018: 6.30p). Having completed £49.5m of the current share repurchase programme with the purchase of 12,379,535 shares, we have increased the programme back to £100m (inclusive of the balance outstanding from the original programme) in line with our strategy of delivering cash to shareholders.

Douglas Sutherland

Chairman

3 March 2020

Chief executive officer's review

Well positioned in a fast-changing world

Three decades on from the Company's launch, 2019 proved to be a transformational year in the development of IWG.

2019 was a transformational year for IWG, with sweeping changes to our competitive landscape, a radical shift in the perspective of corporations and a rapid acceleration of our strategy for growth. Together, these developments have validated our long-held view that we are at the forefront of a revolution in the global corporate real estate market that is radically changing how businesses everywhere think about the places where their people work.

The positive developments affecting IWG were reflected in the strength of our financial results:

Our results for 2019 are reported under the new accounting standard for leases, IFRS 16, which became effective from 1 January 2019. Our results for 2018 are not restated and reflect pre-IFRS 16 accounting standards. To provide a more insightful view of the Group's year-on-year performance, the impact of IFRS 16 is summarised in the pro forma statements provided below and in the Chief Financial Officer's review. We believe providing commentary on the results in accordance with pre-IFRS 16 accounting standards provides a better representation of the Group's performance and is consistent with how we manage our business day-to-day and more closely reflects the economics and cash flows over the life cycle of our leases.

These results also reflect the significant franchising transactions in Japan, Taiwan and Switzerland which, in accordance with IFRS 5, are treated as discontinued operations. This is purely an accounting definition and does not reflect the commercial reality that these operations, now owned and operated by our partners, continue to be an important strategic component of the Group's overall network.

Group revenue increased 9.2% at constant currency to £2,653.0m. These Group numbers include the impact of the proactive acceleration of the rationalisation of the network. We rationalised approximately 6% of our opening network with the closure of 195 centres during the year. Consequently, a more representative indication of the performance of the continuing business is provided by open centre revenue which increased 15.0%, at constant currency, to £2,569.8m, with good double-digit growth maintained throughout the year despite strengthening comparatives.

Group income statement

Continuing £m	2019 (IFRS 16 basis)	IFRS 16 impact	2019 (IAS 17)	2018⁽⁵⁾ (IAS 17)	% change (constant currency)	% change (actual currency)
Revenue	2,653.0	-	2,653.0	2,402.1	9.2%	10.4%
Gross profit (centre contribution)	566.4	(151.3)	415.1	374.5	9%	11%
Overheads	(281.2)	(1.1)	280.1	(248.2)	12%	13%
Operating profit⁽⁶⁾	287.9	(150.2)	137.7	124.9	8%	10%
Profit before tax	55.9	63.6	119.5	109.6		9%
Taxation			15.4	(29.7)
Profit after tax			134.9	79.9		69%
EBITDA			428.3	389.9	8%	10%

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

6. Including joint ventures

After significant investment in the new 2018 and 2019 openings and the impact from the rationalisation programme, the Group generated a gross profit⁽¹⁾ of £415.1m (2018: £374.5m), an increase of 9% at constant currency. Excluding the impact of our investment in new centres and the network rationalisation, the gross profit⁽¹⁾ on pre-2018 business increased 17.9% to £495.1m.

Revenue and gross margin

		Revenue £m		Gross margin % (IAS 17 basis)
Continuing	2019	2018	% change (constant currency)	2019	2018(5)
2016 Aggregation	2,047.0	1,980.2	2.0%	22.9%	21.3%
New 17	204.4	165.3	23.3%	12.8%	-
Pre-2018	2,251.4	2,145.5	3.6%	22.0%	19.6%
New 2018	236.2	62.6	278.6%	(10.5)%	(47.9)%
New 2019	82.2	-	-	-	-
Open centre revenue	2,569.8	2,208.1	15.0%	17.4%	17.6%
Closures	83.2	194.0	(57.2)%	(37.0)%	(7.6)%
Group	2,653.0	2,402.1	9.2%	15.6%	15.6%

Group EBITDA⁽¹⁾ increased 8% at constant currency to £428.3m (2018: £389.9m). EBITDA generated from the pre-2018 estate increased 15% from £404.9m to £472.2m.

We have continued to invest significantly in the ongoing development of the business and resources to deliver our strategic goals. With this investment, overheads increased 12% at constant currency to £280.1m from £248.2m. This investment continued to be made within the Group's strong cost control framework. Consequently, the resultant increase in overheads as a percentage of revenue was 22bps (adjusted after rounding) to 10.6%.

After this investment in overheads, the start-up costs of new centre openings and the impact of the network rationalisation programme, which resulted in the closure of 195 locations, operating profit⁽¹⁾ increased 8% at constant currency to £137.7m. Excluding network rationalisation costs, operating profit was £176.2m.

In addition to investing in our rationalisation programme, which is already having a positive effect on the business, we have continued to invest in adding more attractive space to our network. Flexibility in the Group's lease portfolio, with variable leases and break clauses, enable the Group to respond quickly to market challenges. In 2019, we increased our net growth capital investment to £389.0m from £332.0m in 2018. In addition to adding 277 new locations and a record 8.4m sq. ft. of attractive space, the capital expenditure in 2019 includes a significant investment relating to locations due to open in 2020 and some that were opened in 2018. Reflecting the ongoing refurbishment programme, which we stepped up in 2018, we additionally invested £147.8m in maintenance capital expenditure in 2019 (2018: £112.0m).

Cash flow generation remains a very attractive feature of our business model. Notwithstanding the increase in maintenance capital expenditure, we generated £649.2m of cash flow, including the £424.6m cash received from the three master franchise agreements completed in the year. After the significant investment in growth capital expenditure, dividends of £58.2m and share repurchases of £49.5m, we were able to reduce net debt⁽¹⁾ from an opening position of £460.8m to £294.1m at 31 December 2019. This represents a net debt to EBITDA ratio⁽¹⁾ of 0.7x, which maintains our prudent approach to the Group's capital structure. Additionally, we continue to hold approximately £150m of property investments on the balance sheet.

30 years of accelerating change

As we marked 30 years since the creation of the business that is now IWG, 2019 was a natural moment to reflect on the changes we've seen during its lifetime and to consider the accelerating change we are experiencing today.

The way the world and our lives have evolved since 1989 is phenomenal. The internet has changed all our lives. The smartphone and social media have revolutionised how we communicate. What was unimaginable 30 years ago is the norm today. And the last decade has seen the sheer pace of changes ramp up.

But of all those 30 years, I believe that 2019 was the one in which the opinions and priorities of our partners, our customers and shareholders underwent the fastest and most significant change.

Environment: customer priority number one

All these factors remain important, of course. But today, a single factor, the environment, is at the top of just about every corporate agenda - just as it's at the top of ours at IWG. Futurologists, sector analysts, real estate consultancies and other experts agree that preoccupations with environmental issues and worker satisfaction will be the most powerful drivers of fundamental change in the way people work.

And this is set to have a major impact on companies' real estate strategies, significantly increasing their demand for flexible property solutions. JLL, one of the world's largest property brokers, predicts that the flexible proportion of the US office stock is set to increase to around 30% by 2030. Others anticipate similar growth. This presents a significant growth opportunity for IWG.

In recent years, we have talked about the 'workspace revolution' and it is clear that the world's largest companies are increasingly moving away from a large, single head office to base employees in flex spaces in their own communities away from large metropolitan centres. Before the end of this coming decade, flexible working close to home will be nothing other than the norm. As a result, the concept of the commute to work will become increasingly alien, reducing a major source of carbon emissions.

As a business, we are doing what we can to help address the environmental crisis, upgrading our buildings to reduce power consumption and cut emissions. As well as fully meeting the UK Compliance requirements of the CRC (formerly Carbon Reduction Commitment) and ESOS (Energy savings Opportunity Scheme), we voluntarily disclose our climate change management strategies to the Carbon Disclosure Project (CDP) who have assessed us as "taking coordinated action on climate issues" and given us a score higher than the market average.

So, as we enter a new decade, I am very excited to think that IWG is uniquely placed to help organisations across the world reduce their environmental impact by providing flexible and remote working capabilities that enable people everywhere to work closer to home.

Three foundations for growth

For us, it is now a case of fully developing the infrastructure, the tools and the capabilities needed to enable this to happen in every continent, region, country and community. These are the three key foundations supporting our growth.

Foundation 1: our global network

The most essential requirement is to create a global network of physical places for people to work, and this remains the overriding priority for IWG. We have spent three decades growing our centre numbers significantly. In 2019 we determined to increase our year-on-year growth rate to between 20% and 30% during the 2020s, to accelerate the expansion of our network.

The challenge is not unlike the one that McDonald's faced some years ago, realising that people could only eat their food if they had easy local access to a restaurant. In 2019, the company had over 38,000 restaurants in over 100 countries and surpassed $100bn in Systemwide sales. And the way that McDonald's rose to the expansion challenge was the same that we have adopted - through franchising.

2019 was the year in which our franchising activities were transformed, with our product and service offering that positions us for growth with our franchisees by aligning our success with theirs. This is enabling us to find more and more partners across the world to accelerate network growth to our target of ca. 50,000 centres, including master franchise agreements in Japan, Taiwan and Switzerland. We also entered into several smaller agreements in countries including Guyana, the Philippines, Germany, UK (and more) during 2019, meaning we now have a total of 30 franchise partners in 26 countries representing over 7% of our global network.

What is most exciting is that our partners too are committed to growth, meaning that we have growing numbers of routes to new centre openings. This allows us to generate revenues through franchising, brand licensing and services provision within a less capital-intensive framework.

This route to growth creates a platform business which is higher margin and highly cash generative as well as much easier for shareholders to understand and for us to manage.

Foundation 2: innovation

The second key foundation supporting our growth is innovation. We made strong progress during the year in this area, particularly through embedding digital technology and methods.

For example, today a single IWG employee can run one of our centres exclusively through a single app on a smartphone. That is transformational, as is our new 'Design your own office' solution which enables clients to do precisely as the name suggests. Drawing on our centralised services, they can choose exactly the furniture and fit-out they want - at any time during a contract, not just at renewal. Not only does this add value for our customers, making them more likely to stay with us for longer - it also adds a new income stream for us and provides further differentiation from our competition. We also developed several tools to make interaction easier with those large companies that increasingly represent more of our customer base.

Foundation 3: our people

Our people provide us with the third key foundation, particularly through their relationships with our customers. It is essential that each one of our customers is left with a highly favourable impression of our colleagues, our brands and our company as a whole.

During 2019, our investments in training to improve service and enable the use of efficient digital platforms paid off strongly, with our Net Promoter Score (NPS) hitting a record level of 50, up from 35 in 2018. Driving this even higher remains a key priority for 2020 and the years ahead.

On a personal level, I am extremely proud that when asked what their job is for, so many of our people will respond "To give our customers a great day at work." This demonstrates an essential understanding of what IWG exists to achieve.

Our key drivers

I have already touched on environmental considerations as a major driver of IWG's growth over the next decade, and I believe that this is fundamental to our future. However, there are three other major factors which will drive our future growth.

Key driver 1: what people want

The first of these is what people want from their working lives. In our most recent survey (www.iwgplc.com/global-workspace-survey-2019) of the most important factors involved in selecting a job, the desire to work closer to home was very important. Essentially, people are telling us not having to commute is the single factor that would do most to make their lives better.

The idea of getting up early to jump into their cars or overcrowded trains and travel many miles to a workplace will one day soon seem incredible. This is particularly the case given the fact that people who do so are almost invariably carrying with them the tools - laptops, tablets and smartphones - that they'll use to do the work when they get to their destinations. It simply does not make sense, and I am delighted that we can offer an alternative that does - for people and the planet.

Key driver 2: what companies want

The second force at play is what companies want. Essentially, they want a straightforward property "product" that gives them a range of cost, simplicity, flexibility and value advantages. Perhaps most important of all, they want to be able to hire and retain better people, wherever they are required all over the world.

All these requirements play directly into IWG's hands. As global market leader, we are strongly positioned to simply and cost-effectively create and adapt to their changing needs and provide a bespoke network of fully serviced multiple sites that their people love working in.

Key driver 3: IFRS 16

The third of these key drivers is the IFRS 16 accounting standard. This new standard, which was effective from 1 January 2019, requires organisations to recognise assets and liabilities for leases with a duration of 12 months or more.

As we anticipated when the new standard was introduced, this has caused organisations whose main business is not in property to question the need to commit material capital investments in long-term leases. As a result, the flexibility inherent in working with IWG has become even more attractive to them, and we are seeing significant increases in demand for our services as a consequence.

The role of our brands

While all our customers want flexible workspace solutions, they do not all want exactly the same style, working environment or service portfolio. Different parts of the same organisation often require an entirely different style and execution. This is why we are continuously addressing the make-up of our unique multi-brand portfolio, which allows us to meet the needs of business regardless of scale, market, location or image.

The value of our brands as corporate properties was highlighted during 2019 through their important role in attracting franchise partners and delivering licensed revenue streams. During the year, we expanded our brand portfolio, and saw significant growth for both Regus (with 122 new centres), and for our Spaces coworking format, which added 117 new locations.

An evolving competitive landscape

2019 was also a year in which the nature of our competitive landscape underwent significant change. I believe this highlighted the value of our approach over the long term - growing our model through return on capital and using a strong balance sheet to ensure we can deliver against the expectations we set.

The events of 2019 showed the world that, despite our own longevity and resilience as a business, we continue to be the market leader in an industry that is not yet mature. That balance sheet strength and our success in partnering with new franchisees across the globe means that we have the capacity to grow in market environments where others find it hard to raise funding or deliver on their aspirations.

The changing marketplace once again highlighted the dangers that competitors can face if they underestimate some of the complexities involved in transforming a building into a product that people can buy to experience a great day at work. Our view remains that while the barriers to entry in this market continue to be relatively low, the barriers to success are very high. We uniquely have the benefits of over 30 years' experience and continuous innovation and product development. As a result, we today deliver more than 120 service lines, which enhance our ability to deliver high customer service while driving around 28% of our revenues.

Our experience also helps us to flourish even in testing economic conditions that our competitors find challenging.

For us, economic downturn often delivers opportunity, and we therefore invest for the worst of times. In short, I believe that there will be more market consolidation in the years ahead, and we are well-placed to take advantage of any opportunities that this generates.

Looking ahead

2019 has been a transformational year for IWG. We made significant progress in our pivot towards becoming a franchised organisation and delivered strong revenue growth and record profits. We continue to see strong demand globally and to welcome more great partners to the business. As organisations increasingly seek ways to address the challenges of climate change, we believe that more and more are recognising the role to be played by remote, distributed and flexible working strategies.

MARK DIXON

Chief Executive Officer

3 March 2020

Chief financial officer's review

Strong revenue and operating profit growth

Strong revenue, profit and cash flow growth enable continued investment in our company and increased returns to shareholders.

Performance review

The review below highlights the reported results in accordance with IFRS 16 and a description of the change in profile of the Group's results due to the movement in many of the Group's metrics as a result of the adoption of the standard.

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. In order to provide greater clarity in understanding the underlying performance of the business, the Group has also presented the results below in accordance with pre-IFRS 16 accounting standards. The trading commentary is based on results in accordance with pre-IFRS 16 accounting standards, which more closely track with the cash flows over the life of a lease and are therefore continuing to be used for management reporting purposes. All pre-IFRS 16 numbers in the commentary below have been marked with (1) to provide clarity on the basis of preparation.

Change in accounting standard - IFRS 16 Leases

Our statutory results for the period to 31 December 2019 are reported under the new accounting standard for leases, IFRS 16. As the new standard is effective from 1 January 2019, our results for 2018 are not restated and reflect pre-IFRS 16 accounting standards. To provide a more insightful view of the Group's year-on-year performance, the impact of IFRS 16 on the current period results is summarised in the pro forma statements provided at the end of this announcement.

IFRS 16 introduces a single, on-balance sheet accounting model for leases. As previously announced, in applying the standard, the Group adopted a modified retrospective approach, choosing to measure the right-of-use asset at the retrospective amount as if IFRS 16 had been applied from the lease commencement dates. The most significant impact of this is the Group recognising a right-of-use asset of £5.1bn and a related lease liability of £5.6bn at 1 January 2019. Tables summarising the opening balance sheet impact are presented in note 2. The recognition of these balances does not impact the overall cash flows of the Group or cash generation per share. Adoption of IFRS 16 will have no impact on the Group's ability to comply with the covenant requirements of its revolving credit facility.

Transition to franchising model

Sale of territories under master franchise agreements (MFAs) results in accounting for the activities as discontinued and the profit on sale and trading performance, for the period up to sale and for the prior periods, being treated below the line. Only the franchise fees based on system sales of the territories franchised are included in Group revenue going forward.

With three MFAs completed in 2019 and the franchise fees only recorded for part of the year and therefore not material to the overall reported result, we believe it is too early to present system sales and franchise fees separately. This will continue to be reviewed as the Group further transitions towards a predominantly franchised model.

Revenue

Revenue increased by 9.2% at constant currency (10.4% at actual currency) from £2,402.1m to £2,653.0m. This increase was driven by 10.0% constant currency growth in reported revenues in the Americas (the Group's largest market) and 15.8% growth in EMEA (the Group's second largest market).

There is no impact on the Group's revenue arising out of the adoption of IFRS 16.

The growth in open centre revenue is particularly pleasing, with an increase of 15.0% at constant currency to £2,569.8m (2018: £2,208.1m). This is an important indicator for future revenue performance as it is not impacted by the network rationalisation programme.

Growth in pre-2018 revenue for the year was 3.6% at constant currency (4.9% at actual rates) to £2,251.4m. This performance has been delivered by a solid improvement in the pre-2017 business and the continued good development of the locations opened in 2017. Overall, average occupancy for the pre-2018 business improved 310bps year-on-year to 76.3% (from 73.2%), with a year-end exit rate of 78.4%.

Group income statement

£m	2019 (IFRS 16 basis)	2019 IFRS 16 impact	2019 (IAS 17 basis)	2018 As restated (IAS 17 basis)	% change constant currency (IAS 17 basis)	% change actual currency (IAS 17 basis)
Revenue	2,653.0	-	2,653.0	2,402.1	9.2%	10.4%
Gross profit (centre contribution)	566.4	(151.3)	415.1	374.5	9%	11%
Overheads	(281.2)	1.1	(280.1)	(248.2)	12%	13%
Joint ventures	2.7	-	2.7	(1.4)
Operating profit	287.9	(150.2)	137.7	124.9	8%	10%
Net finance costs	(232.0)	213.8	(18.2)	(15.3)
Profit before tax from continuing operations	55.9	63.6	119.5	109.6		9%
Taxation	22.3	(6.9)	15.4	(29.7)
Effective tax rate	(39.9)%		(12.9)%	27.1%
Profit after tax from continuing operations	78.2	56.7	134.9	79.9		69%
Profit after tax from discontinued operations	372.4	(4.2)	368.2	25.8
Profit for the period	450.6	52.5	503.1	105.7		376%
Basic EPS (p)
- From continuing operations	8.8		15.1	8.8		72%
- Attributable to shareholders	50.5		56.4	11.7		382%
Depreciation & amortisation	1,169.2		267.8	235.8
EBITDA	1,482.8		428.3	389.9	8%	10%

Gross profit

£m	Pre-2018 centres 2019	New centres 2019	Closed centres 2019	Total 2019 (IAS 17 basis)
Revenue	2,251.4	318.4	83.2	2,653.0
Cost of sales⁽¹⁾	(1,756.3)	(367.6)	(114.0)	(2,237.9)
Gross profit (centre contribution)⁽¹⁾	495.1	(49.2)	(30.8)	415.1
Gross margin	22.0%			15.6%

£m	Pre-2018 centres 2018	New centres 2018	Closed centres 2018	Total 2018 (IAS 17 basis) ⁽⁵⁾
Revenue	2,145.5	62.6	194.0	2,402.1
Cost of sales⁽¹⁾	(1,725.4)	(93.4)	(208.8)	(2,027.6)
Gross profit (centre contribution)⁽¹⁾	420.1	(30.8)	(14.8)	374.5
Gross margin	19.6%			15.6%

Gross profit⁽¹⁾ for the period was £415.1m, up from £374.5m in the corresponding period in 2018, an increase at constant currency of 9%. This is after a significantly higher investment in the development of the network, which resulted in a gross profit drag on the reported results of £49.2m compared to £30.8m in 2018, and £30.8m of network rationalisation costs compared to £14.8m in 2018. This led to an unchanged gross margin⁽¹⁾ of 15.6%. Excluding these two impacts, the gross profit margin for the pre-2018 centres increased from 19.6% to 22.0%, with a notable improvement in the Americas and EMEA.

The adoption of IFRS 16 has resulted in an increase in reported gross profit to £566.4m as the rent costs previously included in cost of sales have been replaced by a depreciation charge on the right-of-use assets and finance costs arising on the lease liabilities. Only depreciation is included in cost of sales recognised under IFRS 16.

During the period, a review of the estimated useful life for certain asset categories of property, plant and equipment resulted in a decreased depreciation expense, recognised in cost of sales of £14.5m. This change has no impact on cash flow and further details can be found in note 5.

The expected credit risk associated with accounts receivable was also reassessed, with a £8.2m release of the excess provision taken to the income statement. These releases were offset by the ongoing network rationalisation costs of £30.8m.

Pre-2018 performance by region

On a regional basis, pre-2018 revenue and gross profit can be analysed as follows:

		Revenue £m
	2019 (IFRS 16 basis)	IFRS 16 impact	2019 (IAS 17 basis)	2018 (IAS 17 basis)	% change constant currency	% change actual currency
Americas	1,079.6	-	1,079.6	978.4	7.1%	10.3%
EMEA	533.9	-	533.9	538.9	0.2%	(0.9)%
Asia Pacific	275.2	-	275.2	267.6	1.8%	2.8%
UK	353.7	-	353.7	355.7	(0.6)%	(0.6)%
Other	9.0	-	9.0	4.9
Total	2,251.4	-	2,251.4	2,145.5	3.6%	4.9%

		Gross profit (contribution)				Pre-2018 gross margin (%)
	2019 (IFRS 16 basis)	IFRS 16 impact	2019 (IAS 17 basis)	2018 (IAS 17 basis)	% change constant currency	2019	2018
Americas	328.6	(76.3)	252.3	190.9	28.1%	23.4%	19.5%
EMEA	150.9	(25.2)	125.7	122.0	4.1%	23.5%	22.6%
Asia Pacific	74.8	(24.4)	50.4	45.8	8.4%	18.3%	17.1%
UK	64.2	(10.4)	53.8	61.1	(11.9)%	15.2%	17.2%
Other	12.9	-	12.9	0.3
Total	631.4	(136.3)	495.1	420.1	16.2%	22.0%	19.6%

Americas

The Americas, our largest region, which represents c. 45% of the Group revenue, has performed well.

Revenue growth from open centres increased 13.7% at constant currency to reach £1,169.7m, up from £998.2m in the prior year (17.2% at actual rates). Total revenue (including closed centres) increased 10.0% at constant currency from £1,048.5m to £1,188.5m (13.4% at actual rates). Pre-2018 revenue in the region increased 7.1% at constant currency to £1,079.6m (10.3% at actual rates).

£m	2019	2018	% change constant currency	% change actual currency
Total revenue	1,188.5	1,048.5	10.0%	13.4%
Open centre revenue	1,169.7	998.2	13.7%	17.2%
Pre-2018 revenue	1,079.6	978.4	7.1%	10.3%
Pre-2018 occupancy	78.1%	74.2%	-	390bps
Number of centres	1,298	1,284	-	-

Average occupancy for the region in the pre-2018 business was 78.1% up 390 bps (2018: 74.2%) and there was a very good performance in the gross margin⁽¹⁾, which increased significantly from 19.5% to 23.4%.

The US is our largest market in the Americas with total revenue increasing from £883.7m to £999.4m, up 9% at constant currency (13% at actual rates). Our business in Canada also continued to perform strongly with total revenue growth in double-digits. In Latin America, we have seen good revenue recovery in Brazil, our largest market in Latin America, following the actions taken in 2018 to rationalise our network and reposition our Brazilian estate. There was also a strong recovery in Argentina, and Mexico showed good improvement in the fourth quarter.

A total of 57 new locations were added in the region, including 48 Spaces. These new locations take the total in the region to 1,298 at 31 December 2019 (2018: 1,284).

EMEA

Trading in EMEA has remained strong. Open centre revenue has increased 19.6% at constant currency to £661.2m. Total revenue increased 15.8%, at constant currency, to £685.1m (14.4% at actual rates). Pre-2018 revenue increased 0.2% at constant currency to £533.9m (down 0.9% at actual rates) as the region annualised against a strong second half performance in 2018. The pre-2018 gross margin⁽¹⁾ improved from 22.6% to 23.5% and average occupancy increased to 76.9%, up 180 bps (2018: 75.1%).

£m	2019	2018	% change constant currency	% change actual currency
Total revenue	685.1	598.8	15.8%	14.4%
Open centre revenue	661.2	559.5	19.6%	18.2%
Pre-2018 revenue	533.9	538.9	0.2%	(0.9)%
Pre-2018 occupancy	76.9%	75.1%	-	180bps
Number of centres	1,096	1,013	-	-

The overall performance in the region has continued to be driven by the key markets in continental Europe. France, Germany and the Netherlands delivered good revenue performances. There were also strong revenue performances from Italy, Spain, Portugal, Ireland, South Africa and in Russia as it responded positively to the actions taken in 2018 to restore performance. The results for EMEA now exclude Switzerland following the master franchise agreement with the Safra/Peress Groups, but the country continues to be an important and integral part of the network in the region.

A total of 145 new locations were added across this region, including 42 Spaces, and approximately one-third of the new locations involved various forms of partnering deals. These additions took the total number of locations, including franchised, in the region to 1,096 at 31 December 2019 (2018: 1,013).

Asia Pacific

Our business in Asia Pacific has delivered a solid performance overall. Revenue from all open centres increased 16.8% at constant currency to 326.5m. Total revenue from the region improved by 9.4% at constant currency to £343.9m (10.6% at actual rates). Pre-2018 revenue was 275.2m (2018: £267.6m) and pre-2018 occupancy increased to 74.1%, up 370 bps (2018: 70.4%). The pre-2018 gross margin⁽¹⁾ improved from 17.1% to 18.3%.

£m	2019	2018	% change constant currency	% change actual currency
Total revenue	343.9	310.9	9.4%	10.6%
Open centre revenue	326.5	276.5	16.8%	18.1%
Pre-2018 revenue	275.2	267.6	1.8%	2.8%
Pre-2018 occupancy	74.1%	70.4%	-	370bps
Number of centres	682	683	-	-

Several key markets contributed to the overall performance in Asia Pacific, including Australia, Thailand, India, New Zealand and South Korea. The performance of the region now excludes Japan and Taiwan, although these operations continue to be an important strategic component of the Group's overall network in the region.

A total of 53 new locations were added in the region, including 15 Spaces. Approximately two-thirds of these new locations involved various forms of partnering deals. These additions took the total in the region, including franchised, to 682 at 31 December 2019 (2018: 683).

UK

As the year progressed, we started to see encouraging evidence that the programme of actions taken in the UK were starting to have a positive impact on the overall performance of the business. This was particularly evident in the second half with the business returning to pre-2018 and total revenue growth. Revenue from open centres increased 9.3% to £403.4m at constant currency. This is a good indication of the strong performance of centres opened in 2018 and 2019 and demonstrates the continuing attractiveness of the UK market. Pre-2018 revenue was down 0.6% to £353.7m (2018: £355.7m) and total revenue in the UK decreased (2.8)% to £426.5m, reflecting the continued network rationalisation of 36 locations in the region.

£m	2019	2018	% change actual currency
Total revenue	426.5	439.0	(2.8)%
Open centre revenue	403.4	369.0	9.3%
Pre-2018 revenue	353.7	355.7	(0.6)%
Pre-2018 occupancy	73.8%	70.9%	290bps
Number of centres	312	326	-

Pre-2018 occupancy has increased to 73.8%, up 290bps (2018: 70.9%). The programme of actions taken to move the UK business back towards the desired level of performance involved significant investment and this has weighed on the pre-2018 gross margin, which reduced to 15.2% (2018: 17.2%).

A total of 22 new locations were added in the UK, including 12 Spaces. Half of these locations added involved various forms of partnering. The net of these additions and the network rationalisation led to an overall reduction of locations in the region to 312 at 31 December 2019 (326 at 31 December 2018).

EBITDA

EBITDA⁽¹⁾ increased £38.4m to £428.3m, up 8.0% at constant currency (10% at actual rates). It is important to note that this EBITDA⁽¹⁾ number reflects the significant drag from the investment in growth, which for the year ended 31 December 2019 was £48.5m (2018: £39.9m), and a further £25.2m in respect of the network rationalisation (2018: £14.1m). The pre-2018 EBITDA⁽¹⁾, which eliminates these factors and offers a more representative indication of the underlying earnings performance of the business, increased 15% at constant currency to £472.2m from £404.9m (17% at actual rates).

EBITDA under IFRS 16 is £1,482.8m, due to the rental costs under IAS 17 being replaced by a depreciation charge on the right-of-use assets and finance costs arising on the lease liabilities. Both these costs are excluded from EBITDA.

Overhead investment

As planned, further overhead investment was made in 2019 to support the growth in the business, increasing management resource to facilitate the move towards a franchising model and the continued development of enterprise accounts. In total, overheads⁽¹⁾ increased 12% at constant currency to £280.1m (2018: £248.2m). Measured as a percentage of revenue, Group overheads⁽¹⁾ increased 22bps (adjusted after rounding) to 10.6%, as we continue to benefit from our scale.

Operating profit

Operating profit⁽¹⁾ for the year ended 31 December 2019 was £137.7m (2018: £124.9m). Excluding network rationalisation costs, operating profit was £176.2m. As well as the planned increased investment in overheads, operating profit also reflects a material drag from our increased growth investment of £106.7m (2018: £53.0m), in addition to £38.5m relating to network rationalisation (2018: £31.9m).

Group operating profit under IFRS 16 is £287.9m, which is not comparable to the £124.9m recorded in 2018 as, on adoption of IFRS 16, the rental costs incurred under IAS 17 have been replaced by a depreciation charge on the right-of-use assets and finance costs on the lease liabilities. Operating profit is stated before finance costs resulting in an increase compared to the prior year period.

Net finance costs

The Group's net finance costs⁽¹⁾ increased to £18.2m (2018: £15.3m). This primarily reflects the higher level of average outstanding debt over the course of the year before it substantially reduced at year-end, following the receipt of the proceeds from the Japanese, Taiwanese and Swiss partnership agreements, which materially reduced the utilisation of the revolving credit facility during the second half. In addition, there were fees relating to increasing the revolving credit facility in January to £950m from £750m.

The Group reported net finance costs under IFRS 16 for the year to 31 December 2019 of £232.0m. This is not comparable to the prior year due to the impact of finance costs arising on the lease liability recognised on the adoption of IFRS 16. On adoption, the lease liability is measured at the present value of the lease payments to be paid during the lease term, discounted using an incremental borrowing rate. The lease liability is subsequently increased by the interest cost on the lease liability arising from the unwind of the discounting. This non-cash interest cost is recognised within finance costs in the profit and loss account as it unwinds.

Taxation

As part of the Group's pivot towards franchising, in 2019 the Group recognised a deferred tax asset of £89.8m, and a corresponding deferred tax credit. This arises in connection with a restructure during the year involving the move of the Group's intellectual property ("IP") and franchising arrangements from Luxembourg to Switzerland. The deferred tax asset recognised is based on the expected future taxable profits available to utilise the tax deductible 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 (see note 8).

Secondly, the tax charge for the year includes the negative impact of the issue of final regulations by the US Treasury Department and the Internal Revenue Service regarding the base erosion and anti-abuse tax ("BEAT"). BEAT was introduced as part of the Tax Cuts and Jobs Act of 2017 and operates as a minimum tax with the intended purpose of preventing US corporations from unduly reducing their US taxable income through payments to related foreign parties.

On the adoption of IFRS 16, the Group recognised a deferred tax asset of £86.7m as at 1 January 2019, accounted for directly in retained earnings. An additional deferred tax asset of £6.9m was recognised through the income statement during the current year.

Overall, the effective tax rate for 2019 was a credit of 12.9% (2018: a charge of 27.1%). Dependent upon the continuing ownership of specific countries or regions in relation to potential future master franchise agreements, we currently anticipate an effective tax rate in future years to be similar to the rate in the years prior to 2019.

The gains arising on the strategic partnership transactions were exempt from tax in accordance with local regulations.

Earnings per share

Earnings per share⁽¹⁾ increased in the year ended 31 December 2019 to 56.4p (2018: 11.7p) including the gain on the strategic partnerships and deferred tax asset benefit. Diluted earnings per share⁽¹⁾ for the year were 55.4p (2018: 11.6p). The earnings per share⁽¹⁾ and diluted earnings per share⁽¹⁾ on a continuing operations basis for 2019 were 15.1p (2018: 8.8p) and 14.8p (2018: 8.7p) respectively.

Basic earnings per share under IFRS 16 were 50.5p from profits attributable to ordinary shareholders and 8.8p from profits from continuing operations. As noted above, the adoption of IFRS 16 results in the acceleration of lease related expenses (principally depreciation and finance costs) relative to the recognition pattern for operating leases under IAS 17, impacting Group profits and earnings per share under the new standard.

The weighted average number of shares in issue for the year was 892,737,688 (2018: 907,077,048). The weighted average number of shares for diluted earnings per share was 908,939,911 (2018: 914,206,379). Following the 6 August 2019 announcement of the commencement of a £100m share repurchase programme, the Group has acquired 12,379,535 shares at an average price of 399.9p, representing an investment of £49.5m. These shares are designated to be held in treasury to satisfy future exercises under various Group long-term incentive schemes. The Group reissued 2,061,120 shares from treasury to satisfy such exercises during the year. The share repurchase programme has continued since the year end and the current programme runs to 5 August 2020.

Cash flow and funding

Cash generation continues to be an attractive feature of our business model. Cash generated before net investment in growth capital expenditure and dividends increased by £390.0m to a record £649.2m including the completion of the strategic partnerships in Japan, Taiwan and Switzerland. Consequently, cash flow per share increased from 28.6p to 72.7p. The receipt of the cash proceeds following the completion of the strategic partnerships is included within other items in the cash flow statement.

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:

£m	2019 (IFRS 16 basis)	IFRS 16 impact	2019 (IAS 17 basis)	2018 (IAS 17 basis)
EBITDA	1,482.8	(1,054.5)	428.3	389.9
Working capital	(108.0)	375.2	267.2	166.4
Growth-related partner contributions	-	(263.0)	(263.0)	(144.8)
Maintenance capital expenditure	(108.7)	(39.1)	(147.8)	(112.0)
Taxation	(48.8)	-	(48.8)	(37.1)
Finance costs	(20.7)	-	(20.7)	(15.7)
Finance lease liability arising on new leases	(2,085.9)	2,085.9	-	-
Other items	437.7	(3.7)	434.0	12.5
Cash flow before growth capital expenditure, share repurchases and dividends	(451.6)	1,100.8	649.2	259.2

Gross growth capital expenditure	(547.6)	(104.4)	(652.0)	(476.8)
Growth-related partner contributions	263.0	-	263.0	144.8
Net growth capital expenditure	(284.6)	(104.4)	(389.0)	(332.0)

Total net cash flow from operations	(736.2)	996.4	260.2	(72.8)
Purchase of shares	(49.5)	-	(49.5)	(40.2)
Dividend	(58.2)	-	(58.2)	(53.7)
Corporate financing activities	5.4	-	5.4	1.9

Opening net debt	(6,104.2)	5,643.4	(460.8)	(296.4)
Exchange movement	102.6	(93.8)	8.8	0.4
Closing net debt	(6,840.1)	6,546.0	(294.1)	(460.8)

Capital investment

During the year, our net growth capital investment was £389.0m (2018: £332.0m). Net growth capital expenditure of £389.0m relates to the cash outflow in 2019. Accordingly, it includes capital expenditure related to locations added in 2018 and to be added in 2020, as well as those added in 2019. The total net investment in the period for 2018 and 2020 additions amounted to £106.3m.

The growth investment made, represented 277 locations and 8.4m sq. ft. of flexible space. Our current pipeline visibility on net growth capital investment for the whole of 2020 is approximately £150m, representing approximately 150 locations and 5.0m sq. ft. of new space.

As planned, the Group's refurbishment programme stepped up in the period with maintenance capital expenditure increasing to £147.8m (2018: £112.0m). After partner contributions received in the year, net maintenance capital expenditure was £108.7m (2018: £88.5m), which was in line with management's expectations.

Strong funding support

We increased our revolving credit facility in January 2019 from £750m to £950m and simultaneously improved the debt maturity profile by extending it to 2024 (previously 2023), with further options to extend to 2026.

The financial covenants on the increased revolving credit facility are unchanged and are not affected by the lease liabilities recognised on the adoption of IFRS 16.

Foreign exchange

The Group's results are exposed to translation risk from the movement in currencies. During 2019 key individual exchange rates have moved, as shown in the table below. For the year the movement in key exchange rates provided a tailwind.

Overall, the movement in exchange rates over the course of the year increased revenue, gross profit and operating profit by £30.5m, £5.4m and £2.6m respectively.

Foreign exchange rates

	At 31 December			Annual average
Per £ sterling	2019	2018	%	2019	2018	%
US dollar	1.32	1.28	3.1%	1.28	1.33	(3.8)%
Euro	1.18	1.12	5.4%	1.14	1.13	0.9%

Risk management

Effective management of risk is an everyday activity for the Group and, crucially, integral to our growth planning. A detailed assessment of the principal risks and uncertainties which could impact the Group's long-term performance and the risk management structure in place to identify, manage and mitigate such risks can be found on pages 48 to 55.

Brexit

In January 2020, the UK left the EU and has entered a transition period until the end of 2020 whilst it negotiates its future trading relationship with the EU. Whilst these developments have provided some clarity, significant uncertainty still remains on the impact of Brexit which is highlighted in the Group's principal risks.

The Group's dependency on the UK market has reduced as it has continued to grow in all markets across the globe. The Group is also prepared for a range of possibilities on Brexit including any disruption that may arise and continues to monitor the situation carefully.

Coronavirus

The outbreak of the COVID-19 has led to brief closures of our centres in China, and a close review of the ongoing developments worldwide. Whilst most of the Group's revenue is fixed in the short term, some service revenue is impacted from these closures. Whilst we cannot be certain how long this situation will last, we anticipate that this will have an adverse effect on performance but it is too early to determine the overall impact.

Our focus remains on taking actions and precautions to help ensure the safety and wellbeing of our customers and employees. We continue to monitor the situation, will act swiftly where necessary and are extremely grateful for the incredible effort of our teams in dealing with this global health emergency.

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 2019. Details of related party transactions that have taken place in the period can be found in note 30.

Dividends

In line with the Group's commitment to a progressive and sustainable dividend policy, the Board has, subject to shareholder approval, declared an increase in the final dividend for 2019 of 10.3% to 4.80p. This will be paid on Friday, 22 May 2020, to shareholders on the register at the close of business on Friday, 24 April 2020. This represents an increase in the full-year dividend of 10.3%, taking it from 6.30p to 6.95p for 2019.

ERIC HAGEMAN

Chief Financial Officer

3 March 2020

Consolidated income statement

	Notes	Year ended 31 Dec 2019 £m	Year ended 31 Dec 2018 Restated £m(1)
Revenue	3	2,653.0	2,402.1
Cost of sales		(2,086.6)	(2,027.6)
Gross profit (centre contribution)		566.4	374.5
Selling, general and administration expenses		(281.2)	(248.2)
Share of profit/(loss) of equity-accounted investees, net of tax	21	2.7	(1.4)
Operating profit	5	287.9	124.9
Finance expense	7	(232.5)	(15.8)
Finance income	7	0.5	0.5
Net finance expense		(232.0)	(15.3)
Profit before tax for the year from continuing operations		55.9	109.6
Income tax credit/(expense)	8	22.3	(29.7)
Profit after tax for the year from continuing operations		78.2	79.9
Profit after tax for the year from discontinued operations	9	372.4	25.8
Profit after tax for the year attributable to equity shareholders of the Group		450.6	105.7

Earnings per ordinary share (EPS):

Attributable to ordinary shareholders
Basic (p)	10	50.5	11.7
Diluted (p)	10	49.6	11.6

From continuing operations
Basic (p)	10	8.8	8.8
Diluted (p)	10	8.6	8.7

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

Consolidated statement of comprehensive income

	Notes	Year ended 31 Dec 2019 £m	Year ended 31 Dec 2018 £m
Profit for the year		450.6	105.7

Other comprehensive income 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)	0.1
Foreign exchange reclassified to profit or loss from discontinued operations	9	(8.8)	-
Foreign currency translation differences for foreign operations		(24.5)	9.2
Items that are or may be reclassified to profit or loss in subsequent periods		(33.8)	9.3

Other comprehensive income that will never be reclassified to profit or loss in subsequent periods:
Re-measurement of defined benefit liability, net of income tax	26	-	-
Items that will never be reclassified to profit or loss in subsequent periods		-	-

Other comprehensive income for the period, net of income tax		(33.8)	9.3

Total comprehensive income for the year		416.8	115.0

Consolidated statement of changes in equity

	Notes	Issued share capital £m	Treasury shares £m	Foreign currency translation reserve £m	Hedging reserve £m	Other reserves £m	Retained earnings £m	Total equity £m
Balance at 1 January 2018		9.2	(39.6)	63.2	0.2	25.8	668.9	727.7
Total comprehensive income for the year:
Profit for the year		-	-	-	-	-	105.7	105.7
Other comprehensive income:
Cash flow hedges - effective portion of changes in fair value		-	-	-	0.1	-	-	0.1
Foreign currency translation differences for foreign operations		-	-	9.2	-	-	-	9.2
Other comprehensive income, net of tax		-	-	9.2	0.1	-	-	9.3
Total comprehensive income for the year		-	-	9.2	0.1	-	105.7	115.0
Transactions with owners of the Company
Share-based payments		-	-	-	-	-	0.5	0.5
Ordinary dividend paid	11	-	-	-	-	-	(53.7)	(53.7)
Purchase of shares	22	-	(40.2)	-	-	-	-	(40.2)
Proceeds from exercise of share awards	22	-	5.7	-	-	-	(3.8)	1.9
Balance at 31 December 2018		9.2	(74.1)	72.4	0.3	25.8	717.6	751.2
Change in accounting policy	2	-	-	(4.2)	-	-	(179.2)	(183.4)
Restated 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	9	-	-	(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	11	-	-	-	-	-	(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

Other reserves include £10.5m 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, £37.9m arising from the Scheme of Arrangement undertaken on 14 October 2008, £6.5m relating to merger reserves and £0.1m to the redemption of preference shares partly offset by £29.2m arising from the Scheme of Arrangement undertaken in 2003.

Consolidated balance sheet

	Notes	As at 31 Dec 2019 £m	As at 31 Dec 2018 £m (1)
Non-current assets
Goodwill	12	674.6	679.2
Other intangible assets	13	45.0	42.5
Property, plant and equipment	14	7,190.7	1,751.2
Right-of-use asset	14	5,917.4	-
Other property, plant and equipment	14	1,273.3	1,751.2
Deferred tax assets	8	195.0	30.6
Non-current derivative financial assets	24	-	0.3
Other long-term receivables	15	61.0	86.0
Investments in joint ventures	21	13.8	12.2
Total non-current assets		8,180.1	2,602.0

Current assets
Inventory		1.3	-
Trade and other receivables	16	681.3	717.5
Corporation tax receivable	8	24.0	32.7
Cash and cash equivalents	23	66.6	69.0
Total current assets		773.2	819.2
Total assets		8,953.3	3,421.2

Current liabilities
Trade and other payables (including customer deposits)	17	788.8	1,058.9
Deferred income		322.6	320.0
Corporation tax payable	8	32.3	31.0
Bank and other loans	19	9.7	9.9
Lease liabilities	23	977.4	-
Provisions	20	8.9	9.7
Total current liabilities		2,139.7	1,429.5

Non-current liabilities
Other long-term payables	18	2.0	704.2
Bank and other loans	19	351.0	519.9
Lease liabilities	23	5,568.6	-
Non-current derivative financial liabilities	24	0.2	-
Provisions	20	6.9	9.4
Provision for deficit in joint ventures	21	2.9	5.5
Retirement benefit obligations	26	1.5	1.5
Total non-current liabilities		5,933.1	1,240.5
Total liabilities		8,072.8	2,670.0

Total equity
Issued share capital	22	9.2	9.2
Treasury shares	22	(116.9)	(74.1)
Foreign currency translation reserve		34.9	72.4
Hedging reserve		(0.2)	0.3
Other reserves		25.8	25.8
Retained earnings		927.7	717.6
Total equity		880.5	751.2
Total equity and liabilities		8,953.3	3,421.2

1. Based on the audited financial statements for the year ended 31 December 2018. The Group initially applied IFRS 16 at 1 January 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognised in retained earnings at the date of initial application.

Approved by the Board on 3 March 2020

Mark Dixon	ERIC HAGEMAN
Chief Executive Officer	Chief Financial Officer

Consolidated statement of cash flows

	Notes	Year ended 31 Dec 2019 £m	Year ended 31 Dec 2018 Restated £m (1)(2)
Operating activities
Profit before tax for the year from continuing operations		55.9	109.6
Adjustments for:
Profit before tax from discontinued operations	9	22.8	29.1
Net finance expense	7	232.0	15.3
Share of (profit)/loss of equity-accounted investees, net of tax	21	(2.7)	1.4
Depreciation charge	5, 14	1,153.1	225.4
Right-of-use asset	5, 14	1,010.0	-
Other property, plant and equipment	5, 14	143.1	225.4
Loss on impairment of goodwill	12	0.8	1.0
Loss on disposal of property, plant and equipment	5	32.7	13.6
Loss on disposal of intangible assets	5	0.3	0.1
Reversal of impairment of property, plant and equipment	5, 14	(2.1)	(0.1)
Amortisation of intangible assets	5, 13	9.7	10.4
Gain on disposal of other investments		-	(4.3)
Amortisation of acquired lease fair value adjustments	5	-	(2.0)
Negative goodwill arising on an acquisition	12, 27	-	(6.2)
(Decrease)/increase in provisions	20	(1.3)	9.7
Share-based payments		0.7	0.5
Other non-cash movements		(2.2)	(5.9)
Operating cash flows before movements in working capital		1,499.7	397.6
Increase in trade and other receivables		(108.7)	(133.4)
Increase in trade and other payables		0.7	299.8
Cash generated from operations		1,391.7	564.0
Interest paid		(21.2)	(16.2)
Tax paid		(48.8)	(37.1)
Net cash inflow from operating activities		1,321.7	510.7

Investing activities
Purchase of property, plant and equipment	14	(356.4)	(579.6)
Purchase of subsidiary undertakings, net of cash acquired	27	(24.2)	(2.3)
Disposal of other investments		-	4.4
Purchase of intangible assets	13	(12.8)	(6.9)
Purchase of joint ventures	21	(1.8)	-
Proceeds on sale of discontinued operations, net of cash disposed of	9	424.6	-
Proceeds on sale of property, plant and equipment		0.6	0.4
Interest received	7	0.5	0.5
Net cash inflow/ (outflow) from investing activities		30.5	(583.5)

Financing activities
Proceeds from issue of loans		850.5	644.3
Repayment of loans		(1,013.0)	(467.4)
Payment of lease liability	23	(1,091.5)	-
Purchase of treasury shares	22	(49.5)	(40.2)
Proceeds from exercise of share awards		2.9	1.9
Payment of ordinary dividend	11	(58.2)	(53.7)
Net cash (outflow)/ inflow from financing activities		(1,358.8)	84.9

Net (decrease)/increase in cash and cash equivalents		(6.6)	12.1
Cash and cash equivalents at the beginning of the year		69.0	55.0
Effect of exchange rate fluctuations on cash held		4.2	1.9
Cash and cash equivalents at the end of the year	23	66.6	69.0

1. The Group initially applied IFRS 16 at 1 January 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognised in retained earnings at the date of initial application.

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

Notes to the accounts

1. Authorisation of financial statements

The Group and Company financial statements for the year ended 31 December 2019 were authorised for issue by the Board of Directors
on 3 March 2020 and the balance sheets were signed on the Board's behalf by Mark Dixon and Eric Hageman. IWG plc is a public limited company incorporated in Jersey and registered and domiciled in Switzerland. The Company's ordinary shares are traded on the London
Stock Exchange.

IWG plc owns, 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 are presented on page 150.

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 2019 did not have a material effect on the Group financial statements, unless otherwise indicated.

The following standards, interpretations and amendments to standards were adopted by the Group for periods commencing on or after
1 January 2019:

IFRS 16	Leases
IFRIC 23	Uncertainty over Income Tax Treatments
Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)
Plan Amendments, Curtailment or Settlement (Amendments to IAS 19)
Annual Improvements to IFRSs 2015 - 2017 Cycle
Prepayment features with Negative Compensation (Amendments to IFRS 9)

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.

The Directors, having made appropriate enquiries, have a reasonable expectation that the Group and the Company have adequate resources
to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the consolidated financial statements on pages 101 to 149.

In adopting the going concern basis for preparing the consolidated financial statements, the Directors have considered the further information included in the business activities commentary as set out on pages 32 to 37 as well as the Group's principal risks and uncertainties as set out on pages 48 to 55.

Further details on the going concern basis of preparation can be found in note 24 to the notes to the consolidated financial statements.

These Group consolidated financial statements are presented in pounds sterling (£), 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.

Impact of the adoption of IFRS 16

IFRS 16 replaced existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement Contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The standard was effective for annual reporting periods beginning on or after 1 January 2019.

IFRS 16 introduced a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items.

The impact of applying IFRS 16 on the financial statements in the period of initial application depended on a variety of factors, including the Group's borrowing rate and credit rating, external interest rates, country risk factors, the composition of the Group's lease portfolio, the Group's assessment of whether it will exercise any lease renewal options and the extent to which the Group chooses to use practical expedients and recognition exemptions. Taking these considerations into account, on transition:

• The Group adopted the modified retrospective approach, choosing to measure the right-of-use asset at the retrospective amount as if IFRS 16 had been applied from lease commencement date. The Group elected to use the transition practical expedient to not reassess whether a contract is, or contains, a lease at 1 January 2019. Instead, the Group applied the standard only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application.

• The difference between the right-of use asset and the related lease liability is recognised directly in retained earnings after tax.

• In determining the right-of-use asset and lease liability to be recognised, the Group adopted incremental borrowing rates for its leases as at 1 January 2019. These rates were determined by taking currency-specific interest rates based on five-year external market rates (where available, which reflect the average centre lease duration) on transition and then considering adjustments to reflect subsidiary/country-specific credit ratings and adjustments to reflect the level of collateral. The incremental borrowing rates will be updated annually and applied to leases commencing in the subsequent year.

• The right-of-use asset recognised is being depreciated over the life of the lease. The life of the lease reflects the contracted lease term and any renewal periods that the Group is reasonably certain to extend.

The most significant impact identified is the right-of-use asset and related lease liability the Group recognised for its leases in respect of its global network, which were recognised based on the modified retrospective approach. The Group recorded a right-of-use asset of £5,132.4m and a related lease liability of £5,643.4m at 1 January 2019.

The standard has no impact on the actual cash flows or cash generation per share of the Group. However, as the standard requires the capitalisation and subsequent depreciation of costs that were previously expensed, the disclosures of cash flows within the cash flow statement are impacted. The amounts previously disclosed as operating cash outflows are instead capitalised and presented as financing cash outflows whilst the interest and depreciation expenses are presented in operating cash flows.

When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rates at 1 January 2019. The weighted-average rate applied was 3.7%.

The following tables summarise the opening balance impact, on transition to IFRS 16:

£m	Property, plant & equipment	Deferred tax asset	Trade & other receivables	Corporation tax receivable
Balance reported at 1 January 2019	1,751.2	30.6	717.5	32.7
Right-of-use asset & related lease liability(1)	5,132.4	-	-	-
Other adjustments(2)	(586.4)	-	(98.3)	-
Taxation	-	86.7	-	-
Restated balance at 1 January 2019	6,297.2	117.3	619.2	32.7

£m	Lease liabilities - Short term	Lease liabilities - Long term	Trade & other payables	Foreign currency translation reserve	Retained earnings
Balance reported at 1 January 2019	-	-	1,058.9	72.4	717.6
Right-of-use asset & related lease liability(1)	900.0	4,743.4	-	(4.2)	(506.8)
Other adjustments(2)	-	-	(925.6)	-	240.9
Taxation	-	-	-	-	86.7
Restated balance at 1 January 2019	900.0	4,743.4	133.3	68.2	538.4

1. During 2019, the Group continued to assess the valuation methodology implemented on the adoption of IFRS 16. On finalisation of this assessment, the Group revised its opening balances based on refinements to the overall methodology. Balances in the table are therefore adjusted, with the opening right-of-use assets increasing from £5.0bn to £5.1bn and the related lease liabilities increasing from £5.5bn to £5.6bn. While these changes are not considered material, the Group has elected to make this adjustment given the significant nature of its lease portfolio.

2. On transition, the remaining net book value of costs previously capitalised, such as costs directly incurred in preparing the business centre for trading (i.e. as part of property, plant and equipment), are derecognised and eliminated directly against retained earnings. Partner contributions are accounted for in property, plant and equipment on transition.

The following table reconciles the operating lease commitment at 31 December 2018 to the lease liability recognised at 1 January 2019:

	£m
Operating lease commitment at 31 December 2018 as disclosed in the Group's Annual Report and Accounts	6,641.5
Discounted using the incremental borrowing rates at 1 January 2019 (1)	(997.2)
Lease liabilities recognised at 1 January 2019	5,644.3
Recognition exemption for leases of low-value assets	(0.4)
Recognition exemption for leases with less than 12 months of lease term at transition (2)	(0.5)
Extension options reasonably certain to be exercised	-
Lease liabilities recognised at 1 January 2019	5,643.4

1. The incremental borrowing rates consider the relevant market interest rates, 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. The weighted-average rate applied was 3.7%.

2. The Group applied the practical expedient to classify leases for which the lease term ends within 12 months of the date of initial application of IFRS 16 as a short-term lease. The Group also applied the recognition exemption for short-term leases.

Impact for the period

The Group has recognised depreciation and inherent costs instead of the operating lease expense. During the year ended 31 December 2019, the Group recognised £983.4m of depreciation charges, as highlighted in note 5, and £213.2m of interest costs, as highlighted in note 7. Further detail is summarised in the pro forma statements at the end of this Annual Report.

The Group also considered the impact of lessor accounting, which is not considered to be material.

The Group adopted the exemptions permitted in respect of short-term and low-value leases, which are not material due to the relatively low number of these types of leases.

The Group does not expect the adoption of IFRS 16 to impact its ability to comply with the covenant requirements on its revolving credit facility described in note 24.

Summary of new accounting policies

The new accounting policies of the Group upon adoption of IFRS 16 are as follows:

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. The Group also tested its right-of-use assets for impairment on the date of transition and has recognised an impairment of £3.2m associated with the right-of-use asset.

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 if 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. 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 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.

Significant judgement in determining the lease term of contracts with renewal options and the incremental borrowing rate

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 determination of applicable incremental borrowing rates at the commencement of lease contracts also requires judgement.

Impact on key estimates and judgements

There is significant judgement in determining the lease term of contracts with renewal options and the applicable incremental borrowing rates at the commencement of lease contracts. For further detail see note 32.

The accounting policies relating to leases which applied for the comparative period are outlined on page 94 of the 2018 Annual Report and Accounts.

Impact of the adoption of IFRIC Interpretation 23 Uncertainty over Income Tax Treatment

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes. It does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest
and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following:

• Whether an entity considers uncertain tax treatments separately

• The assumptions an entity makes about the examination of tax treatments by taxation authorities

• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates

• How an entity considers changes in facts and circumstances

An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty needs to be followed.

The Group applies judgement in identifying uncertainties over income tax treatments. Since the Group operates in a complex multinational environment, it assessed whether the Interpretation had an impact on its consolidated financial statements.

Upon adoption of the Interpretation, 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.

IFRSs not yet effective

The following new or amended standards and interpretations that are mandatory for 2020 annual periods (and future years) are not expected to have a material impact on the Group financial statements, unless otherwise stated.

Amendments to References to Conceptual Framework in IFRS Standards	1 January 2020
Definition of a Business (Amendments to IFRS 3)	1 January 2020
Definition of Material (Amendments to IAS 1 and IAS 8)	1 January 2020
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform	1 January 2020
IFRS 17 Insurance Contracts	1 January 2021
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current Non-Current	1 January 2022

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.

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 at 30 September 2019. 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 are re-evaluated.

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

We evaluate the potential impairment of property, plant and equipment at the centre (CGU) level 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 our centres or elsewhere in the business that become obsolete or are damaged are assessed and impaired where appropriate.

Calculation of recoverable amount

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
Management agreements	Minimum duration of the contract

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.

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 and the losses that we incur early in the centre life.

Property, plant and equipment

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

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

The useful life of certain office equipment and telephones was revised in 2019, from 5 years to 10 years (note 14).

Revenue

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

The Group recognises revenue when it transfers control over service to a customer. It is measured based on the consideration specified in a contract with a customer. Control transfers 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 IWG 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 arrangement, except where noted above.

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 plan is determined using the projected unit credit method.

Re-measurements, comprising actuarial gains and losses, the effect of the asset ceiling, excluding net interest 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.

Share-based payments

The share awards programme entitles certain Directors and employees to acquire shares of the ultimate parent company; these awards
are granted by the ultimate parent 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.

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 accruals 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 a prepayment 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.

Financial assets

Financial assets are classified as 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 instruments, 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 changes 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.

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.

Foreign currency translation rates

	At 31 December		Annual average
	2019	2018	2019	2018
US dollar	1.32	1.28	1.28	1.33
Euro	1.18	1.12	1.14	1.13

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) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

The business is run on a worldwide basis but managed through four principal geographical segments (the Group's operating segments): the Americas; EMEA (Europe, Middle East and Africa); Asia Pacific; and the United Kingdom. These geographical segments exclude the Group's non-trading, holding and corporate management companies. 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
Continuing operations	2019 £m	2018 £m	2019 £m	2018 Restated £m	2019 £m	2018 Restated £m	2019 £m	2018 £m	2019 £m	2018 £m	2019 £m	2018 Restated £m
Revenue from external customers(1)	1,188.5	1,048.5	685.1	598.8	343.9	310.9	426.5	439.0	9.0	4.9	2,653.0	2,402.1
Mature business (2)	1,079.6	978.4	533.9	538.9	275.2	267.6	353.7	355.7	9.0	4.9	2,251.4	2,145.5
2018 Expansions (2)	67.5	19.8	89.8	20.6	40.5	8.9	38.4	13.3	-	-	236.2	62.6
2019 Expansions (2)	22.6	-	37.5	-	10.8	-	11.3	-	-	-	82.2	-
Closures (2)	18.8	50.3	23.9	39.3	17.4	34.4	23.1	70.0	-	-	83.2	194.0
Gross profit (centre contribution)(3)	303.5	173.8	150.3	111.8	61.1	33.3	38.6	55.3	12.9	0.3	566.4	374.5
Share of profit/(loss) of equity-accounted investees	-	-	2.6	(1.3)	(0.1)	(0.1)	0.2	-	-	-	2.7	(1.4)
Operating profit/(loss)(3)	237.7	122.6	86.7	51.0	34.3	3.9	9.8	36.1	(80.6)	(88.7)	287.9	124.9
Finance expense(3)											(232.5)	(15.8)
Finance income											0.5	0.5
Profit before tax for the year(3)											55.9	109.6

Depreciation and amortisation(3)	509.8	118.3	282.1	37.0	158.2	25.9	184.2	35.0	1.9	10.0	1,136.2	226.2

Assets	3,828.0	1,417.4	2,325.8	751.7	824.6	472.5	1,699.6	672.0	275.3	107.6	8,953.3	3,421.2
Liabilities	(3,473.8)	(1,042.5)	(2,091.3)	(502.9)	(733.6)	(316.4)	(1,426.5)	(310.7)	(347.6)	(497.5)	(8,072.8)	(2,670.0)
Net assets/(liabilities)(3)	354.2	374.9	234.5	248.8	91.0	156.1	273.1	361.3	(72.3)	(389.9)	880.5	751.2

Non-current asset additions(4)	1,013.2	228.7	865.5	141.5	220.6	84.1	404.0	112.8	23.6	19.4	2,526.9	586.5

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 -- Management basis" on pages 154 and 155.

3. The Group initially applied IFRS 16 at 1 January 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognised in retained earnings at the date of initial application.

4. Excluding deferred taxation.

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.

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 is as follows:

	2019		2018
£m	External revenue	Non-current assets(2)	External revenue	Non-current assets(2)
Country of tax domicile - Switzerland(1)	-	-	-	27.0
United States of America	999.4	3,102.2	883.7	1,022.1
United Kingdom	426.5	1,570.6	439.0	508.8
All other countries	1,227.1	3,312.3	1,079.4	1,013.5
	2,653.0	7,985.1	2,402.1	2,571.4

1. Revenue of £39.1m (2018: £32.1m) is included in discontinued operations.

2. Excluding deferred tax assets.

5. Operating profit - continuing operations

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

	Notes	2019 £m	2018 (1) Restated £m
Revenue		2,653.0	2,402.1

Depreciation on property, plant and equipment(2)	14	1,126.5	215.8
Right-of-use assets	14	983.4	-
Other property, plant and equipment	14	143.1	215.8
Amortisation of intangibles assets	13	9.7	10.4
Amortisation of partner contributions		-	(66.4)
Property rents payable in respect of leases		43.7	1,017.6
Property		-	987.5
Variable rents paid		43.7	30.1
Lease expense on low-value assets		0.9	3.1
Lease expense on short-term leases		2.3	0.3
Staff costs	6	373.2	365.9
Facility and other property costs		419.4	371.5
Expected credit losses of trade receivables	24	2.0	17.5
Loss on disposal of property, plant and equipment		32.7	13.6
Profit on disposal of right-of-use assets and related lease liabilities		0.9	-
Impairment of goodwill	12	0.8	1.0
Loss on disposal of intangible assets	13	0.3	0.1
Reversal of impairment of property, plant and equipment	14	(2.1)	(0.1)
Amortisation of acquired lease fair value adjustments		-	(2.0)
Negative goodwill arising on acquisition	12	-	(6.2)
Other costs		357.5	333.7
		285.2	126.3
Share of profit/(loss) of equity-accounted investees, net of tax	21	2.7	(1.4)
Operating profit		287.9	124.9

2. Excludes depreciation expenses related to discontinued operations for right-of-use assets of £26.6m (2018: £nil) and other property, plant and equipment of £6.6m (2018: £9.6m).

	2019 £m	2018 £m
Fees payable to the Group's auditor and its associates for the audit of the Group accounts	1.2	1.0
Fees payable to the Group's auditor and its associates for other services:
The audit of the Company's subsidiaries pursuant to legislation	2.3	2.2
Other services pursuant to legislation:
Tax services	-	-
Other services	0.1	-

Change in estimate

During 2019 the Group conducted a review of the estimated useful life for property, plant and equipment. On 1 January 2019, the expected useful life for certain office equipment and telephones was revised, from 5 years to 10 years (note 14) to more accurately reflect the period over which the assets are expected to be available for use by the Group. Based on this review, the Group adjusted depreciation by £14.5m. This resulted in an increase in operating profit.

During 2019 the Group conducted a review of the expected credit risk associated with accounts receivable balances. This review was performed in response to changing commercial circumstances, with the Group recognising a reduction in the provision for doubtful debts of £8.2m.

6. Staff costs

	2019⁽¹⁾ £m	2018(1) £m
The aggregate payroll costs were as follows:
Wages and salaries	315.0	311.5
Social security	51.8	49.4
Pension costs	5.7	4.5
Share-based payments	0.7	0.5
	373.2	365.9

1. Excludes staff costs related to discontinued operations of £10.6m (2018: £15.0m).

	2019 Average full time equivalents (2)	2018 Average full time equivalents (2)
The average number of persons employed by the Group (including Executive Directors), analysed by category and geography, was as follows:
Centre staff	7,599	7,096
Sales and marketing staff	462	484
Finance staff	749	784
Other staff	904	898
	9,714	9,262

Americas	3,195	3,001
EMEA	2,744	2,356
Asia Pacific	1,268	1,386
United Kingdom	913	926
Corporate functions	1,594	1,593
	9,714	9,262

2. The average full-time equivalents excludes employees for countries sold during 2019 of 221 (2018: 353).

Details of Directors' emoluments and interests are given on pages 79 to 92 in the Directors' Remuneration Report, with audited schedules identified where relevant.

7. Net finance expense

	2019 £m	2018 £m
Interest payable and similar charges on bank loans and corporate borrowings(1)	(13.7)	(12.3)
Interest payable on finance lease liabilities(2)(3)	(213.2)	-
Total interest expense	(226.9)	(12.3)
Other finance costs (including foreign exchange)	(5.4)	(3.3)
Unwinding of discount rates	(0.2)	(0.2)
Total finance expense	(232.5)	(15.8)

Total interest income	0.5	0.5
Total finance income	0.5	0.5

Net finance expense	(232.0)	(15.3)

1. Excludes interest payables related to discontinued operations of £nil (2018: £0.1m).

2. Excludes lease liability finance expense related to discontinued operations of £2.8m (2018: £nil)

8. Taxation

(a) Analysis of charge in the year

	2019 £m	2018 £m
Current taxation
Corporate income tax	(60.9)	(37.7)
Previously unrecognised tax losses and other differences	4.2	4.0
Under provision in respect of prior years	(0.6)	(4.4)
Total current taxation	(57.3)	(38.1)
Deferred taxation
Origination and reversal of temporary differences	79.0	(0.9)
Previously unrecognised tax losses and other differences	0.9	9.7
Under provision in respect of prior years	(0.3)	(0.4)
Total deferred taxation	79.6	8.4
Tax credit/ (charge) on continuing operations	22.3	(29.7)

(b) Reconciliation of taxation charge

	2019		2018
	£m	%	£m	%
Profit before tax from continuing operations	55.9		109.6
Tax on profit at 14.6% (2018: 14.6%)	(8.2)	(14.6)	(16.0)	(14.6)
Tax effects of:
Expenses not deductible for tax purposes	(38.5)	(68.9)	(26.7)	(24.4)
Items not chargeable for tax purposes	31.9	57.1	24.9	22.7
Recognition of previously unrecognised deferred tax assets	5.0	8.9	13.7	12.5
Movements in temporary differences in the year not recognised in deferred tax	(48.8)	(87.3)	(104.1)	(95.0)
Adjustment to tax charge in respect of previous years	(0.9)	(1.6)	(4.8)	(4.4)
Differences in tax rates on overseas earnings	81.8	146.3	83.3	76.0
	22.3	39.9	(29.7)	(27.1)

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.

For amounts recognised directly in equity which relate to the change in accounting policy for IFRS 16 - see note 2.

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

	2019 £m	2018 £m
2019	-	5.6
2020	13.9	20.5
2021	31.7	31.7
2022	37.7	40.5
2023	50.2	54.2
2024	64.0	31.5
2025	44.9	37.6
2026	47.1	17.8
2027 and later	490.2	414.2
	779.7	653.6
Available indefinitely	640.9	671.8
Tax losses available to carry forward	1,420.6	1,325.4
Amount of tax losses recognised in deferred tax assets	488.5	207.8
Total tax losses available to carry forward	1,909.1	1,533.2

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

	2019 £m	2018 £m
Intangibles	410.8	17.0
Accelerated capital allowances	17.7	39.3
Tax losses	347.3	336.8
Rent	11.2	7.9
Leases	23.1	-
Short-term temporary differences	5.6	9.8
	815.7	410.8

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

(d) Corporation tax

	2019 £m	2018 £m
Corporation tax payable	(32.3)	(31.0)
Corporation tax receivable	24.0	32.7

(e) Deferred taxation

The movement in deferred tax is analysed below:

	Intangibles £m	Property, plant and equipment £m	Tax losses £m	Rent £m	Leases £m	Short-term temporary differences £m	Total £m
Deferred tax asset
At 1 January 2018	(29.4)	(17.5)	26.9	47.1	-	(4.1)	23.0
Current year movement	(1.6)	(6.2)	19.2	2.7	-	(6.5)	7.6
Prior year movement	0.1	-	(0.3)	-	-	(0.2)	(0.4)
Transfers	(0.1)	-	-	0.1	-	0.1	0.1
Exchange rate movements	(2.5)	(1.1)	-	2.5	-	1.4	0.3
At 31 December 2018	(33.5)	(24.8)	45.8	52.4	-	(9.3)	30.6
Adjustments on adoption of IFRS 16	-	-	-	-	86.7	-	86.7
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

Deferred tax liability
At 1 January 2018	(0.5)	(5.1)	3.2	0.9	-	0.2	(1.3)
Current year movement	(0.1)	0.4	1.8	(0.4)	-	(0.3)	1.4
Prior year movement	0.3	-	(0.4)	0.1	-	-	-
Transfers	0.1	-	-	(0.1)	-	(0.1)	(0.1)
Exchange rate movements	-	-	-	-	-	-	-
At 31 December 2018	(0.2)	(4.7)	4.6	0.5	-	(0.2)	-
Adjustments on adoption of IFRS 16	-	-	-	-	-	-	-
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	-	-	-

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 £12.1m (2018: £23.2m). The only tax that would arise on these reserves would be non-recoverable withholding tax. The adoption of IFRS 16 has resulted in the recognition of a deferred tax assets of £86.7m at transition.

As part of the Group's pivot towards franchising, the Group recognised a deferred tax asset of £89.8m in 2019, and a corresponding deferred tax credit in the Income Statement. This arises in connection with a restructure during the year involving the intra-group move of the Group's intellectual property (IP) and franchising arrangements from Luxembourg to Switzerland. The deferred tax asset recognised is 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. The utilisation of the amortisation deduction is dependent on the future taxable profits of the Group.

The Directors have exercised judgement in determining the appropriate timescale 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 2019, the Group completed the sale of various country operations through the signing of master franchise agreements. The positive 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 the Japanese operations

On 31 May 2019, the Group completed the sale of its Japanese operations to TKP Corporation for a consideration of £320.3m, with final adjustments recognised during the second half of 2019.

	2019 £m	2018 £m
Revenue	46.9	94.4
Expenses	(31.9)	(72.7)
Profit before tax for the year	15.0	21.7
Income tax expense	(2.8)	(2.3)
Profit after tax for the year	12.2	19.4
Gain on the sale of discontinued operations	266.9	-
Profit for the year, net of tax	279.1	19.4

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

	2019 £m
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 are as follows:

	2019 £m	2018 £m
Operating	6.6	18.0
Investing	(5.2)	(6.3)
Financing	-	-
Net cash inflow	1.4	11.7

Disposal of the other operations

During 2019, the Group completed the sale of other individually immaterial operations for a consideration of £104.3m.

	2019 £m	2018 £m
Revenue	46.2	38.9
Expenses	(38.4)	(31.5)
Profit before tax for the year	7.8	7.4
Income tax credit/(expense)	1.0	(1.0)
Profit after tax for the year	8.8	6.4
Gain on the sale of discontinued operations	84.5	-
Profit for the year, net of tax	93.3	6.4

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

	2019 £m
Total assets	141.2
Total liabilities	(124.2)
Net assets	17.0
Costs directly associated with the disposal	5.0
Foreign exchange recycled to profit and loss	(2.2)
	19.8
Consideration on disposal (net of cash and debt)	104.3
Gain on sale of discontinued operations	84.5

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

	2019 £m	2018 £m
Operating	13.2	14.6
Investing	(17.8)	(12.2)
Financing	(0.3)	(0.3)
Net cash (outflow)/inflow	(4.9)	2.1

10. Earnings per ordinary share (basic and diluted)

	2019	2018
Basic and diluted profit for the year attributable to shareholders (£m)	450.6	105.7
Basic earnings per share (p)	50.5	11.7
Diluted earnings per share (p)	49.6	11.6
Basic and diluted profit for the year from continuing operations (£m)	78.2	79.9
Basic earnings per share (p)	8.8	8.8
Diluted earnings per share (p)	8.6	8.7
Basic and diluted profit for the year from discontinued operations (£m)	372.4	25.8
Basic earnings per share (p)	41.7	2.9
Diluted earnings per share (p)	41.0	2.8
Weighted average number of shares for basic EPS	892,737,688	907,077,048
Weighted average number of shares under option	34,671,862	13,715,757
Weighted average number of shares that would have been issued at average market price	(19,932,772)	(8,736,525)
Weighted average number of share awards under the CIP, PSP, DSBP and One-off Award	1,463,133	2,150,099
Weighted average number of shares for diluted EPS	908,939,911	914,206,379

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 average market price of one share during the year was 338.28p (2018: 253.22p).

11. Dividends

	2019	2018
Dividends per ordinary share proposed	4.80p	4.35p
Interim dividends per ordinary share declared and paid during the year	2.15p	1.95p

Dividends of £58.2m were paid during the year (2018: £53.7m). The Company has proposed to shareholders that a final dividend of 4.80p per share will be paid (2018: 4.35p), equating to £42.4m. Subject to shareholder approval at the AGM on 12 May 2020, it is expected that the dividend will be paid on 22 May 2020.

12. Goodwill

	£m
Cost
At 1 January 2018	666.7
Recognised on acquisition of subsidiaries(1)	(7.5)
Negative goodwill	6.2
Goodwill impairment	(1.0)
Exchange rate movements	14.8
At 31 December 2018	679.2
Recognised on acquisition of subsidiaries	22.6
Disposal of goodwill	(10.9)
Goodwill impairment	(0.8)
Exchange rate movements	(15.5)
At 31 December 2019	674.6

Net book value
At 31 December 2018	679.2
At 31 December 2019	674.6

1. Net of £8.5m 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:

Carrying amount of goodwill included within:	2019 £m	2018 £m
Americas	290.9	299.7
EMEA	138.6	125.4
Asia	26.2	35.2
United Kingdom	218.9	218.9
	674.6	679.2

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:

	Goodwill £m	Intangible assets £m	2019 £m	2018 £m
USA	268.7	-	268.7	277.1
United Kingdom	218.9	11.2	230.1	230.1
Other countries	187.0	-	187.0	183.2
	674.6	11.2	685.8	690.4

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 a further four years from 2020 that follow a budgeting process (2018: average annual growth rate of the three-year average inflation rate of the country);

• 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. Cash flows beyond 2022 have been extrapolated using the same three-year average inflation growth rate which management believes is a reasonable long-term growth rate for any of the markets in which the relevant countries operate. 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 businesses; 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 increased from 10.4% in 2018 to 12.4% in 2019 (post-tax WACC: 9.9%). The country-specific pre-tax WACC reflecting the respective market risk adjustment has been set between 9.9% and 15.7% (2018: 9.7% to 14.1%).

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 24% over the next five years. Revenue and costs grow at 1.9% per annum from 2022. A terminal value centre gross margin of 23% is adopted from 2024, with a 1.9% long-term growth rate assumed on revenue and costs into perpetuity. The cash flows have been discounted using a pre-tax discount rate of 14% (2018: 14%).

The UK model assumes an average centre contribution of 12% over the next five years. Revenue and costs grow at 2% per annum from 2022. A terminal value centre gross margin of 13% is adopted from 2024, with a 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 12% (2018: 10%).

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 59% (2018: 20%) for the US and 15% (2018: 12%) 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 would have to decrease by 17% (2018: 4%) for the US and 2% (2018: 2%) for the UK.

13. Other intangible assets

	Brand £m	Customer lists £m	Software £m	Total £m
Cost
At 1 January 2018	60.9	32.2	60.5	153.6
Additions at cost	-	-	6.9	6.9
Acquisition of subsidiaries(1)	-	0.1	-	0.1
Disposals	-	-	(1.8)	(1.8)
Exchange rate movements	2.7	0.2	0.5	3.4
At 31 December 2018	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

Amortisation
At 1 January 2018	33.0	30.9	44.3	108.2
Charge for year	2.5	0.8	7.1	10.4
Disposals	-	-	(1.7)	(1.7)
Exchange rate movements	1.9	0.6	0.3	2.8
At 31 December 2018	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

Net book value
At 1 January 2018	27.9	1.3	16.2	45.4
At 31 December 2018	26.2	0.2	16.1	42.5
At 31 December 2019	23.4	0.2	21.4	45.0

1. Includes £0.1m on the finalisation of the accounting for prior year acquisitions previously reported on a provisional basis.

Included within the brand value is £11.2m 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 12).

The remaining amortisation life for definite life brands is five years.

14. Property, plant and equipment

	Right-of-use assets £m	Land and buildings £m	Leasehold improvements £m	Furniture and equipment £m	Computer hardware £m	Total £m
Cost
At 1 January 2018	-	131.4	1,688.3	660.5	128.0	2,608.2
Additions	-	6.4	474.1	84.6	14.5	579.6
Acquisition of subsidiaries	-	8.6	0.2	0.3	-	9.1
Disposals	-	-	(125.8)	(56.2)	(7.0)	(189.0)
Exchange rate movements	-	(0.1)	49.0	19.9	1.4	70.2
At 31 December 2018	-	146.3	2,085.8	709.1	136.9	3,078.1
Recognition of right-of-use asset(2)	8,304.9	-	(630.8)	-	-	7,674.1
Adjusted balance 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

Accumulated depreciation At 1 January 2018	-	2.4	739.6	402.7	96.3	1,241.0
Charge for the year(1)	-	2.8	155.6	52.3	14.7	225.4
Disposals	-	-	(114.4)	(53.6)	(7.0)	(175.0)
Reversal of impairment	-	-	(0.1)	-	-	(0.1)
Exchange rate movements	-	0.1	22.2	11.8	1.5	35.6
At 31 December 2018	-	5.3	802.9	413.2	105.5	1,326.9
Recognition of right-of-use asset(2)	3,172.5	-	(44.4)	-	-	3,128.1
Adjusted balance at 1 January 2019	3,172.5	5.3	758.5	413.2	105.5	4,455.0
Charge for the year(1)	1,010.0	1.7	89.6	48.8	9.6	1,159.7
Disposals	(706.9)	(0.1)	(115.0)	(26.4)	(10.1)	(858.5)
Reversal of impairment	-	-	(2.1)	-	-	(2.1)
Exchange rate movements	46.4	(0.1)	(27.3)	(13.2)	(3.1)	2.7
At 31 December 2019	3,522.0	6.8	703.7	422.4	101.9	4,756.8

Net book value
At 1 January 2018	-	129.0	948.7	257.8	31.7	1,367.2
At 31 December 2018	-	141.0	1,282.9	295.9	31.4	1,751.2
At 31 December 2019	5,917.4	149.6	765.8	327.3	30.6	7,190.7

1. Includes depreciation expenses related to discontinued operations for right-of-use assets of £26.6m (2018: £nil) and other property, plant and equipment of £6.6m
(2018: £9.6m).

2. Right-of-use assets have been recognised on adoption of the IFRS 16 Leases. Refer to note 2 for further details of the opening balance sheet considerations and related accounting policies.

Change in estimate

The Group conducted a review of the estimated useful life for property, plant and equipment. On 1 January 2019, the expected useful life for certain asset categories were adjusted to more accurately reflect the period over which the assets are expected to be available for use by the Group. The positive effect of these changes on the depreciation expense, recognised in costs of sales, in the current period and expected in future years is as follows:

£m	2019	2020	2021	2023	2024	After
Impact on the income statement	14.5	8.9	4.3	0.3	(3.7)	(24.3)

15. Other long-term receivables

	2019 £m	2018 £m
Deposits held by landlords against rent obligations	59.3	82.4
Other receivables	1.3	-
Amounts owed by joint ventures	0.4	-
Acquired lease fair value asset	-	3.6
Total non-current	61.0	86.0

16. Trade and other receivables

	2019 £m	2018 £m
Trade receivables, net	242.1	229.8
Prepayments and accrued income(1)	134.3	213.3
Other receivables	226.8	164.3
VAT recoverable	73.0	103.1
Deposits held by landlords against rent obligations	5.1	6.0
Acquired lease fair value asset	-	1.0
Total current	681.3	717.5

Change in estimate

The Group conducted a review of the expected credit risk associated with accounts receivable balances during 2019. This review was performed in response to changing commercial circumstances, with the Group recognising a reduction in the provision for doubtful debts of £8.2m.

17. Trade and other payables (including customer deposits)

	2019 £m	2018 £m
Customer deposits	476.8	483.2
Deferred rents (1)	-	147.6
Other accruals (1)	96.8	132.3
Trade payables	116.4	110.0
VAT payable	46.2	79.2
Deferred partner contributions	-	78.7
Other payables	47.0	21.4
Other tax and social security	5.6	4.8
Acquired lease fair value liability	-	1.7
Total current	788.8	1,058.9

18. Other long-term payables

	2019 £m	2018 £m
Deferred partner contributions	-	389.6
Deferred rents(1)	-	305.9
Other payables	2.0	6.4
Acquired lease fair value liability	-	2.3
Total non-current	2.0	704.2

19. Borrowings

The Group's total loan and borrowing position at 31 December 2019 and at 31 December 2018 had the following maturity profiles:

Bank and other loans

	2019 £m	2018 £m
Repayments falling due as follows:
In more than one year but not more than two years	8.1	8.7
In more than two years but not more than five years	341.3	506.3
In more than five years	1.6	4.9
Total non-current	351.0	519.9
Total current	9.7	9.9
Total bank and other loans	360.7	529.8

20. Provisions

	2019			2018
	Onerous leases and closures £m	Other £m	Total £m	Onerous leases and closures £m	Other £m	Total £m
At 1 January	16.1	3.0	19.1	3.6	5.8	9.4
Change in accounting policy(1)	(2.0)	-	(2.0)	-	-	-
Restated balance at 1 January	14.1	3.0	17.1	3.6	5.8	9.4
Provided in the period	20.4	2.6	23.0	16.0	1.3	17.3
Utilised in the period	(7.3)	(1.8)	(9.1)	(1.6)	(3.8)	(5.4)
Provisions released	(13.6)	(1.1)	(14.7)	(1.9)	(0.3)	(2.2)
Exchange rate movements	(0.6)	0.1	(0.5)	-	-	-
At 31 December	13.0	2.8	15.8	16.1	3.0	19.1
Analysed between:
Current	6.9	2.0	8.9	8.3	1.4	9.7
Non-current	6.1	0.8	6.9	7.8	1.6	9.4
At 31 December	13.0	2.8	15.8	16.1	3.0	19.1

1. The change in accounting policy is disclosed in note 2 under the impact of the adoption of IFRS 16 paragraphs.

Onerous leases and closures

Provisions for onerous leases and closure costs relate to the estimated future costs of centre closures and onerous property leases. With the adoption of IFRS 16 by the Group, from 1 January 2019, onerous lease provisions previously recognised as at 31 December 2018 were reversed, with the related right-of-use asset assessed for impairment. The current year provision relates to closure costs only.

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.

21. Investments in joint ventures

	Investments in joint ventures £m	Provision for deficit in joint ventures £m	Total £m
At 1 January 2018	12.4	(3.8)	8.6
Share of profit/(loss)	0.3	(1.7)	(1.4)
Exchange rate movements	(0.5)	-	(0.5)
At 31 December 2018	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

The Group has 59 joint ventures (2018: 52) 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:

	2019 £m	2018 £m
Income statement
Revenue	30.2	27.6
Expenses	(34.3)	(31.1)
Loss before tax for the year	(4.1)	(3.5)
Tax charge	(0.7)	(0.3)
Loss after tax for the year	(4.8)	(3.8)
Balance sheet
Non-current assets	67.0	15.7
Current assets	52.0	43.5
Current liabilities	(74.3)	(57.0)
Non-current liabilities	(52.8)	(2.7)
Net liabilities	(8.1)	(0.5)

22. Share capital

Ordinary equity share capital

	2019		2018
	Number	Nominal value £m	Number	Nominal value £m
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 in IWG plc at 31 December	923,357,438	9.2	923,357,438	9.2

On 19 December 2016, under a Scheme of Arrangement between Regus plc, the former holding company of the Group, and its shareholders, under Article 125 of the Companies (Jersey) Law 1991, and as sanctioned by The Royal Court of Jersey, all the issued shares in Regus plc were cancelled and an equivalent number of new shares in Regus plc were issued to IWG plc in consideration for the allotment to shareholders of one ordinary share in IWG plc for each ordinary share in Regus plc that they held on the record date 18 December 2016. The establishment of IWG plc as the new parent company was accounted for as a common control transaction under IFRS. Consequently, no fair value acquisition adjustments were required, and the aggregate of the Group reserves have been attributed to IWG plc.

Treasury share transactions involving IWG plc shares between 1 January 2019 and 31 December 2019

During the year, 12,379,535 shares were purchased in the open market and 2,061,120 treasury shares held by the Group were utilised to satisfy the exercise of share awards by employees. As at 3 March 2020, 42,814,824 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.

	2019		2018
	Number of shares	£m	Number of shares	£m
1 January	28,736,954	74.1	12,986,745	39.6
Purchase of treasury shares in IWG plc	12,379,535	49.5	17,489,685	40.2
Treasury shares in IWG plc utilised	(2,061,120)	(6.7)	(1,739,476)	(5.7)
31 December	39,055,369	116.9	28,736,954	74.1

23. Analysis of financial assets/(liabilities)

	Cash and cash equivalents £m	Gross cash £m	Debt due within one year £m	Debt due after one year £m	Lease due within one year ⁽²⁾ £m	Lease due after one year ⁽²⁾ £m	Gross debt £m	Net financial assets/ (liabilities) £m
At 1 January 2018	55.0	55.0	(8.5)	(342.9)	-	-	(351.4)	(296.4)
Cash flow	12.1	12.1	(1.4)	(175.5)	-	-	(176.9)	(164.8)
Non cash movements	-	-	-	-	-	-	-	-
Exchange rate movements	1.9	1.9	-	(1.5)	-	-	(1.5)	0.4
At 31 December 2018	69.0	69.0	(9.9)	(519.9)	-	-	(529.8)	(460.8)
Recognition of lease liability(1)	-	-	-	-	(900.0)	(4,743.4)	(5,643.4)	(5,643.4)
At 1 Jan 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)

1. Finance lease liabilities have been recognised on adoption of IFRS 16 Leases. Refer to note 2 for further details of the opening balance sheet considerations and related accounting policies.

2. There are no significant lease commitments for leases not commenced at 31 December 2019.

Cash and cash equivalent balances held by the Group that are not available for use amounted to £8.3m at 31 December 2019 (2018: £4.2m). Of this balance, £2.9m (2018: £1.9m) is pledged as security against outstanding bank guarantees and a further £5.4m (2018: £2.3m) is pledged against various other commitments of the Group.

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 63 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. During the year ended 31 December 2019, the Group made a significant investment in growth and was impacted by the adoption of IFRS 16. The Group's net debt position increased, based on the new leasing standard IFRS 16, by £6,379.3m to a net debt position of £6,840.1m as at 31 December 2019. Excluding the IFRS 16 impact, the net debt position decreased to 294.1m. 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 £950.0m revolving credit facility (RCF) provided by a group of relationship banks with a final maturity in 2024 with an option to extend until 2026. As at 31 December 2019, £485.9m of the RCF was available and undrawn.

After making enquiries, 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 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.

	2019 £m	2018 £m
Americas	40.2	33.3
EMEA	98.3	94.8
Asia Pacific	39.9	51.7
United Kingdom	63.7	50.0
	242.1	229.8

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 2019 £m	Provision 2019 £m	Gross 2018 £m	Provision 2018 £m
Not overdue	178.2	-	175.6	-
Past due 0 - 30 days	32.1	-	38.2	-
Past due 31 - 60 days	13.1	-	11.6	-
More than 60 days	26.4	(7.7)	26.6	(22.2)
	249.8	(7.7)	252.0	(22.2)

At 31 December 2019, the Group maintained a provision of £7.7m for expected credit losses (2018: £22.2m) arising from trade receivables. The Group had provided £2.0m (2018: £17.7m) in the year, utilised £8.3m (2018: £17.3m) and released £8.2m (2018: £nil). Customer deposits of £476.8m (2018: £483.2m) 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 of £476.8m (2018: £483.2m) held at the end of the year.

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.

Change in estimate

Liquidity risk

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. The Group has free cash and liquid investments (excluding blocked cash) of £58.3m (2018: £64.8m). In addition to cash and liquid investments, the Group had £485.9m 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. In January 2019, the amount of the facility was increased from £750.0m to £950.0m and the final maturity extended to January 2024 with an option to extend until 2026. As at 31 December, £485.9m was available and undrawn under this facility.

The debt provided under the credit facility is floating rate, however, as part of the Group's balance sheet management and to protect against a future increase in interest rates, £30.0m was swapped into a fixed rate liability of 1.2%, maturing in February 2021.

Although the Group has net current liabilities of £1,366.5m (2018: £610.3m), increasing on the adoption of IFRS 16, 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 £476.8m (2018: £483.2m) 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. The net current liabilities, excluding short-term lease liabilities and deferred income, was £66.5m at 31 December 2019 (2018: £290.3m).

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 2019 no cash was invested for a period exceeding three months (2018: £nil).

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 sterling are of a long-term nature and the Group does not normally hedge such foreign currency translation exposures.

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:

	2019
£m		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)

	2018
£m		GBP	EUR	USD
Trade and other receivables		1.1	20.8	2.3
Trade and other payables		(0.8)	(3.9)	(8.6)
Net statement of financial position exposure		0.3	16.9	(6.3)

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 2019, it is estimated that a general increase of one percentage point in interest rates would have decreased the Group's profit before tax by approximately £3.8m (2018: decrease of £4.0m) with a corresponding decrease in total equity.

It is estimated that a five-percentage point weakening in the value of the US dollar against sterling would have decreased the Group's profit before tax by approximately £12.9m for the year ended 31 December 2019 (2018: decrease of £13.4m). It is estimated that a five-percentage point weakening in the value of the euro against sterling would have decreased the Group's profit before tax by approximately £5.9m for the year ended 31 December 2019 (2018: decrease of £0.8m).

It is estimated that a five-percentage point weakening in the value of the US dollar against sterling would have decreased the Group's total equity by approximately £11.1m for the year ended 31 December 2019 (2018: £11.6m). It is estimated that a five-percentage point weakening in the value of the euro against sterling would have decreased the Group's total equity by approximately £6.1m for the year ended 31 December 2019 (2018: decrease of £3.0m).

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 70. 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 the major shareholder of the Company. Details of the Directors' shareholdings can be found in the report of the Remuneration Committee on pages 79 to 92. 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 2019 and 31 December 2019

The Company declared and paid an interim dividend of 2.15p per share (2018: 1.95p) during the year ended 31 December 2019 and proposed
a final dividend of 4.80p per share (2018: 4.35p per share), a 10% increase on the 2018 dividend.

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. Interest payments are excluded from the table.

The undiscounted cash flow and fair values of these instruments is not materially different from the carrying value.

As at 31 December 2019

	Effective interest rate %	Carrying value £m	Contractual cash flow £m	Less than 1 year £m	1-2 years £m	2-5 years £m	More than 5 years £m
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(2)	-	59.7	59.7	-	30.0	29.7	-
Financial assets (3)		673.3	681.1	621.4	30.0	29.7	-

Non-derivative financial liabilities(4):
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(5)	-	(788.8)	(788.8)	(788.8)	-	-	-
Other long-term payables(5)	-	(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)

As at 31 December 2018

	Effective interest rate %	Carrying value £m	Contractual cash flow £m	Less than 1 year £m	1-2 years £m	2-5 years £m	More than 5 years £m
Cash and cash equivalents	-	69.0	69.0	69.0	-	-	-
Trade and other receivables(1)	-	503.2	525.4	525.4	-	-	-
Other long-term receivables(2)	-	82.4	82.4	-	41.2	41.2	-
Derivative financial assets:
Interest rate swaps
• Outflow	-	-	-	-	-	-	-
• Inflow	-	0.3	0.3	0.3	-	-	-
Financial assets(3)		654.9	677.1	594.7	41.2	41.2	-

Non-derivative financial liabilities(4):
Bank loans and corporate borrowings	2.9%	(505.4)	(505.4)	(0.1)	(2.0)	(503.3)	-
Other loans	1.4%	(24.4)	(24.4)	(9.8)	(6.7)	(3.0)	(4.9)
Trade and other payables(5)	-	(830.9)	(830.9)	(830.9)	-	-	-
Other long-term payables(5)	-	(6.4)	(6.4)	-	(6.4)	-	-
Financial liabilities		(1,367.1)	(1,367.1)	(840.8)	(15.1)	(506.3)	(4.9)

1. Excluding prepayments and accrued income and acquired lease fair value asset.

2. Excluding acquired lease fair value asset.

3. Financial assets are all held at amortised cost.

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

5. Excluding deferred rents, deferred partner contributions and acquired lease fair value liability.

Fair value disclosures

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

31 December 2019	Carrying amount				Fair value
£m	Cash, loans and receivables	Other financial liabilities	Cash flow - hedging instruments	Total	Level 1	Level 2	Level 3	Total
Cash and cash equivalents	66.6	-	-	66.6	-	-	-	-
Trade and other receivables	547.0	-	-	547.0	-	-	-	-
Other long-term receivables	59.7	-	-	59.7	-	-	-	-
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)	-	-	-	-
	673.3	(1,151.5)	(0.2)	(478.4)		(0.2)		(0.2)
Unrecognised gain								-

31 December 2018	Carrying amount				Fair value
£m	Cash, loans and receivables	Other financial liabilities	Cash flow - hedging instruments	Total	Level 1	Level 2	Level 3	Total
Cash and cash equivalents	69.0	-	-	69.0	-	-	-	-
Trade and other receivables	503.2	-	-	503.2	-	-	-	-
Other long-term receivables	82.4	-	-	82.4	-	-	-	-
Derivative financial asset	-	-	0.3	0.3	-	0.3	-	0.3
Bank loans and corporate borrowings	-	(505.4)	-	(505.4)	-	-	-	-
Other loans	-	(24.4)	-	(24.4)	-	-	-	-
Trade and other payables	-	(830.9)	-	(830.9)	-	-	-	-
Other long-term payables	-	(6.4)	-	(6.4)	-	-	-	-
	654.6	(1,367.1)	0.3	(712.2)	-	0.3	-	0.3
Unrecognised gain								-

During the years ended 31 December 2019 and 31 December 2018, there were no transfers between levels for fair value measured instruments, and no financial instruments requiring level 3 fair value measurements were held.

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 fair values and methods used for financial assets and liabilities not measured at fair value:

Type	Valuation technique
Cash and cash equivalents, trade and other receivables/payables and customer deposits	For cash and cash equivalents, receivables/payables with a remaining life of less than one year and customer deposits, the book value approximates the fair value because of their short-term nature.
Loans and overdrafts	The fair value of bank loans, overdrafts and other loans approximates the carrying 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 and interest rate swaps	The fair values are based on a combination of broker quotes, forward pricing and swap models.

There was no significant unobservable input used in our valuation techniques.

Derivative financial instruments

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

	2019 GBP m	2018 GBP m
Derivatives used for cash flow hedging	30.0	100.0

	2019 USD m	2018 USD m
Derivatives used for cash flow hedging	-	30.0

Committed borrowings

	2019 Facility £m	2019 Available £m	2018 Facility £m	2018 Available £m
Revolving credit facility	950.0	485.9	750.0	125.4

The Group maintains a revolving credit facility provided by a group of international banks. During the year, the amount of the facility was increased from £750.0 million to £950.0 million and the final maturity extended to January 2024 with an option to extend until 2026. As at
31 December, £485.9m was available and undrawn under this facility.

The debt provided under the credit facility is floating rate, however, as part of the Group's balance sheet management and to protect against
a future increase in interest rates, £30.0m was swapped into a fixed rate liability of 1.2%, maturing in February 2021.

The £950.0m 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.

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

	2019		2018
	Number of share options	Weighted average exercise price per share	Number of share options	Weighted average exercise price per share
At 1 January	36,441,222	191.87	18,259,790	179.79
Granted during the year	918,829	362.69	21,885,127	200.95
Lapsed during the year	(2,787,736)	205.68	(2,159,407)	182.91
Exercised during the year	(2,061,120)	143.37	(1,544,288)	129.27
Outstanding at 31 December	32,511,195	200.34	36,441,222	191.87
Exercisable at 31 December	4,807,175	142,44	5,999,946	136.24

Date of grant	Numbers granted	Weighted average exercise price per share	Lapsed	Exercised	At 31 Dec 2019		Exercisable from	Expiry date
23/03/2010	3,986,000	100.50	(3,473,779)	(478,602)	33,619	(1)	23/03/2013	23/03/2020
28/06/2010	617,961	75.00	(541,798)	(70,726)	5,437	(1)	28/06/2013	28/06/2020
01/09/2010	160,646	69.10	(146,728)	(13,918)	-	(1)	01/09/2013	01/09/2020
01/04/2011	2,400,000	114.90	(954,402)	(481,866)	963,732	(1)	01/04/2014	01/04/2021
30/06/2011	9,867,539	109.50	(4,905,047)	(4,593,296)	369,196	(1)	30/06/2014	30/06/2021
13/06/2012	11,189,000	84.95	(3,805,914)	(6,332,726)	1,050,360	(1)	13/06/2015	13/06/2022
12/06/2013	7,741,000	155.60	(4,306,000)	(2,614,546)	820,454	(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	(7,447,050)	(649,996)	4,778,750		05/11/2017	04/11/2024
19/05/2015	1,906,565	250.80	(1,829,565)	-	77,000		19/05/2018	18/05/2025
22/12/2015	1,154,646	322.20	(350,186)	(15,000)	789,460		22/12/2018	22/12/2025
29/06/2016	444,196	272.50	(367,735)	(11,009)	65,452		29/06/2019	29/06/2026
28/09/2016	249,589	258.00	(214,313)	(7,055)	28,221		28/09/2019	28/09/2026
01/03/2017	1,200,000	283.70	-	-	1,200,000		01/03/2020	01/03/2027
14/12/2017	1,000,507	197.00	(315,228)	-	685,279		14/12/2020	14/12/2027
10/10/2018	685,127	223.20	(150,000)	-	535,127		10/10/2021	10/10/2028
21/12/2018 (Grant 1)	300,000	203.10	-	-	300,000		21/12/2021	21/12/2028
28/12/2018 (Grant 2)	20,900,000	199.80	(1,000,000)	-	19,900,000		28/12/2021	28/12/2028
15/05/2019	613,872	341.90	(61,421)	-	552,451		15/05/2022	15/05/2029
13/09/2019	196,608	402.30	-	-	196,608		13/09/2022	13/09/2029
19/12/2019	108,349	408.60	-	-	108,349		19/12/2022	19/12/2029
Total	81,042,901		(32,935,999)	(15,595,707)	32,511,195

1. All options have vested as of 31 December 2019.

Performance conditions for share options

November 2014 share option plan

The options awarded in November 2014 are conditional on the ongoing employment of the related employees and the achievement of margin targets. The dates and percentage of options vesting are dependent on the year in which the margin targets are achieved. The earliest dates on which the options are eligible to vest is as follows:

	Proportion to vest
November 2017	1/5
November 2018	1/5
November 2019	1/5
November 2020	1/5
November 2021	1/5

May 2015 share option plan

The options awarded in May 2015 are conditional on the ongoing employment of the related employees and the achievement of margin targets. The dates and percentage of options vesting are dependent on the year in which the margin targets are achieved. The earliest dates on which the options are eligible to vest is as follows:

	Proportion to vest
May 2018	1/5
May 2019	1/5
May 2020	1/5
May 2021	1/5
May 2022	1/5

December 2015 share option plan

The Group performance targets for the options awarded in December 2015, based on Group operating profit for the year ending 31 December 2016, were met. Those options that are eligible to vest will vest as follows:

	Proportion to vest
December 2018	1/5
December 2019	1/5
December 2020	1/5
December 2021	1/5
December 2022	1/5

June 2016 share option plan

The Group performance targets for the options awarded in June 2016, based on Group operating profit for the year ending 31 December 2016, were met. Those options that are eligible to vest will vest as follows:

	Proportion to vest
June 2019	1/5
June 2020	1/5
June 2021	1/5
June 2022	1/5
June 2023	1/5

September 2016 share option plan

The options awarded in September 2016 are conditional on the ongoing employment of the related employee for a specified period of time.
Once this condition is satisfied, those options that are eligible to vest will vest as follows:

	Proportion to vest
September 2019	1/5
September 2020	1/5
September 2021	1/5
September 2022	1/5
September 2023	1/5

March 2017 share option plan

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 2017. Thus, conditional on meeting these performance targets, these shares will vest in March 2020. 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 2016 as follows:

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

Vesting scale	% of one third of the award that vest
Exceeds the median by 10% or more	100%
Exceeds the median by less than 10%	On a straight-line basis between 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 2016 as follows:

Vesting scale	% of one third of the award that vest
Exceeds 2016 ROI plus 300 basis points	100%
Exceeds 2016 ROI by less than 300 basis points	On a straight-line basis between 0% and 100%
Equal to or less than the 2016 ROI	0%

Once this condition is satisfied, those options that are eligible to vest will vest as follows:

	Proportion to vest
September 2020	1/3
September 2021	1/3
September 2022	1/3

December 2017 share option plan

The options awarded in December 2017 are conditional on the ongoing employment of the related employee for a specified period of time and are also subject to Group performance targets based on Group operating profit and employee's key performance indicators. Once performance conditions are satisfied those options that are eligible to vest will vest as follows:

	Proportion to vest
December 2020	1/3
December 2021	1/3
December 2022	1/3

October 2018 share option plan

The options awarded in October 2018 are conditional on the ongoing employment of the related employees for a specified period of time and are also subject to Group performance targets based on Group operating profit. Once performance conditions are satisfied those options that are eligible to vest will vest as follows:

	Proportion to vest
October 2021	1/3
October 2022	1/3
October 2023	1/3

December 2018 (Grant 1) share option plan

The options awarded in December 2018 are conditional on the ongoing employment of the related employee for a specified period of time and are also subject to the achievement of a TSR performance condition.

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:

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

Once performance conditions are satisfied those options that are eligible to vest will vest as follows:

	Proportion to vest
December 2021	1/3
December 2022	1/3
December 2023	1/3

December 2018 (Grant 2) share option plan

The options awarded in December 2018 are conditional on the ongoing employment of the related employee for a specified period of time and are also subject to various non-market performance targets. Once performance conditions are satisfied, those options that are eligible to vest will vest as follows:

	Proportion to vest
December 2021	1/3
December 2022	1/3
December 2023	1/3

May 2019 share option plan

The options awarded in May 2019 are conditional on the ongoing employment of the related employees for a specified period of time and are also subject to Group performance targets based on Group operating profit and various non-market performance targets. Once performance conditions are satisfied those options that are eligible to vest will vest as follows:

	Proportion to vest
May 2022	1/3
May 2023	1/3
May 2024	1/3

September 2019 share option plan

The options awarded in September 2019 are conditional on the ongoing employment of the related employee for a specified period of time and are also subject to Group performance targets based on Group operating profit and relative total shareholder return (TSR).

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:

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

Once performance conditions are satisfied those options that are eligible to vest will vest as follows:

	Proportion to vest
September 2022	1/5
September 2023	1/5
September 2024	1/5
September 2025	1/5
September 2026	1/5

December 2019 share option plan

The options awarded in December 2019 are conditional on the ongoing employment of the related employee for a specified period of time and are also subject to Group performance targets based on Group operating profit and relative total shareholder return (TSR).

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:

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

Once performance conditions are satisfied those options that are eligible to vest will vest as follows:

	Proportion to vest
December 2022	1/5
December 2023	1/5
December 2024	1/5
December 2025	1/5
December 2026	1/5

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 2019	September 2019	May 2019	December 2018 (Grant 2)	December 2018 (Grant 1)	October 2018	December 2017
Share price on grant date	408.60p	402.30p	341.90p	199.80p	203.10p	223.20p	197.00p
Exercise price	408.60p	402.30p	341.90p	199.80p	203.10p	223.20p	197.00p
Expected volatility	36.24% - 44.72%	36.33% - 44.83%	38.84% - 45.75%	37.66% - 44.35%	37.63% - 44.25%	37.15% - 43.32%	33.31% - 35.93%
Option life	3-7 years	3-7 years	3-5 years	3-5 years	3-5 years	3-5 years	3-5 years
Expected dividend	1.59%	1.62%	1.85%	2.95%	2.90%	2.64%	2.69%
Fair value of option at time of grant	141.77p - 172.84p	137.79p - 169.19p	120.77p - 141.08p	58.77p - 69.33p	39.36p - 46.42p	67.69p - 78.56p	40.06p - 44.20p
Risk-free interest rate	0.57% - 0.65%	0.48% - 0.50%	0.52% - 0.60%	0.87% - 1.01%	0.73% - 0.88%	0.70% - 0.91%	0.54% - 0.75%

	March 2017	September 2016	June 2016	December 2015	May 2015	November 2014	May 2014
Share price on grant date	283.70p	258.00p	272.50p	322.20p	250.80p	188.40p	191.00p
Exercise price	283.70p	258.00p	272.50p	322.20p	250.80p	186.00p	187.20p
Expected volatility	27.42% - 29.87%	27.45% - 32.35%	27.71% - 34.81%	24.80% - 37.08%	27.23% - 30.12%	24.67% - 33.53%	27.30% - 41.91%
Option life	3-5 years	3-7 years	3-7 years	3-7 years	3-7 years	3-7 years	3-5 years
Expected dividend	1.80%	1.80%	1.71%	1.40%	1.59%	2.02%	2.00%
Fair value of option at time of grant	44.51p - 76.88p	40.96p - 67.89p	44.28p - 78.68p	29.76p -90.61p	42.35p - 69.12p	27.24p - 54.58p	30.80p - 59.63p
Risk-free interest rate	0.23% - 0.56%	0.09% - 0.38%	0.14% - 0.39%	0.14% - 0.21%	0.81% - 1.53%	0.90% - 1.81%	0.99% - 1.47%

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

The CIP operates in conjunction with the annual bonus whereby a gross bonus of up to 50% of basic annual salary will be 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 will vest depending on the Company's future performance. The maximum number of Matching Shares which can be awarded to a participant in any calendar year under the CIP is 200% of salary. As such, the maximum number of Matching Shares which can be awarded, based on Investment Shares awarded, is 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

	2019	2018
	Number of awards	Number of awards
At 1 January	1,991,250	3,321,464
PSP awards granted during the year	1,058,578	1,278,350
Lapsed during the year	(679,293)	(2,413,376)
Exercised during the year	-	(195,188)
Outstanding at 31 December	2,370,535	1,991,250
Exercisable at 31 December	10,687	-

There were no shares which were exercised during the year end 31 December 2019. The weighted average share price at the date of exercise for share awards exercised during the year ended 31 December 2019 was 0.00p (2018: 234.00p).

Plan	Date of grant	Numbers granted	Lapsed	Exercised	At 31 Dec 2019	Release 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
		4,470,513	(2,148,484)	-	2,322,029

Plan	Date of grant	Numbers granted	Lapsed	Exercised	At 31 Dec 2019	Release date(1)
CIP: Matching shares	05/03/2014	647,688	(536,698)	(100,303)	10,687	05/03/2019
CIP: Matching shares	04/03/2015	831,808	(793,989)	-	37,819	04/03/2020
		1,479,496	(1,330,687)	(100,303)	48,506

2. Based on the outstanding shares as at 31 December 2019.

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:

	07/03/2019	07/03/2018	01/03/2017	03/03/2016	04/03/2015	05/03/2014
	PSP	PSP	PSP	PSP	CIP	CIP
Share price on grant date	244.90p	240.90p	283.70p	300.00p	225.00p	253.30p
Exercise price	Nil	Nil	Nil	Nil	Nil	Nil
Number of simulations	250,000	250,000	250,000	250,000	250,000	250,000
Number of companies	32	32	32	32	32	32
Award life	5 years	5 years	5 years	5 years	3 years	3 years
Expected dividend	2.57%	2.37%	1.80%	1.50%	1.78%	1.66%
Fair value of award at time of grant	124.38p - 188.43p	124.92p - 189.26p	155.83p - 236.08p	183.08p - 277.36p	75.67p - 114.6p	83.11p - 214.33p
Risk-free interest rate	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. Thus, conditional on meeting the performance targets, the first amount will vest in March 2017, the second will vest in March 2018 and the third will vest in March 2019. These vesting dates relate to the financial years ending 31 December 2016, 31 December 2017 and 31 December 2018 respectively. The vesting of these awards is subject to the achievement of challenging corporate performance targets. 75% of each of the three amounts is subject to defined adjusted earnings per share (EPS) targets over the respective performance periods. The remaining 25% of each will be subject to relative total shareholder return (TSR) targets over the respective periods. The targets are as follows:

	Adjusted EPS targets for the financial years ending
% of awards eligible for vesting	2016	2017	2018
25%	14.3p	16.1p	17.1p
50%	15.2p	17.4p	18.9p
75%	16.1p	18.8p	20.7p
100%	17.0p	20.2p	22.5p

No shares will vest in each respective year unless the minimum adjusted EPS target for that year is achieved.

% of awards eligible for vesting	IWG TSR % achieved relative to FTSE All Share Total Return index(1)
Below index	0%
Median	25%
Upper quartile or above	100%

3. Over the three-, four- or five-year performance period.

2015 CIP Investment and matching grants

The total number of matching awards made in 2015 to each participant is subject to a future performance period of three years. Conditional on meeting the performance targets, the matching shares will vest in March 2020. The vesting date relates to the adjusted earnings per share (EPS) performance in the last financial year of the performance period, being 31 December 2017. The vesting of these awards is subject to the achievement of challenging corporate performance targets. 75% is subject to defined adjusted EPS targets over the performance period. The remaining 25% will be subject to relative total shareholder return (TSR) targets over the period. The targets are as follows:

% of awards eligible for vesting	Compound annual growth in adjusted EPS over the performance period
25%	24%
100%	32%

The target is based on compound annual growth from an equivalent "base year" EPS figure for 2014 of 7.4p.

% of awards eligible for vesting	IWG TSR % achieved relative to FTSE 350 Index (excluding financial services and mining companies)
Below index	0%
Median	25%
Upper quartile or above	100%

2016 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 2016. Thus, conditional on meeting these performance targets, these shares will vest in March 2021. 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 2015 as follows:

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

Vesting scale	% of one third of the award that vest
Exceeds the median by 10% or more	100%
Exceeds the median by less than 10%	On a straight-line basis between 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 2015 as follows:

Vesting scale	% of one third of the award that vest
Exceeds 2015 ROI plus 300 basis points	100%
Exceeds 2015 ROI by less than 300 basis points	On a straight-line basis between 0% and 100%
Equal to or less than the 2015 ROI	0%

2017 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 2017. Thus, conditional on meeting these performance targets, these shares will vest in March 2022. 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 2016 as follows:

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

Vesting scale	% of one third of the award that vest
Exceeds the median by 10% or more	100%
Exceeds the median by less than 10%	On a straight-line basis between 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 2016 as follows:

Vesting scale	% of one third of the award that vest
Exceeds 2016 ROI plus 300 basis points	100%
Exceeds 2016 ROI by less than 300 basis points	On a straight-line basis between 0% and 100%
Equal to or less than the 2016 ROI	0%

2018 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 2018. Thus, conditional on meeting these performance targets, these shares will vest in March 2023. 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 2017 as follows:

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

Vesting scale	% of one third of the award that vest
Exceeds the median by 10% or more	100%
Exceeds the median by less than 10%	On a straight-line basis between 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 2017 as follows:

Vesting scale	% of one third of the award that vest
Exceeds 2017 ROI plus 300 basis points	100%
Exceeds 2017 ROI by less than 300 basis points	On a straight-line basis between 0% and 100%
Equal to or less than the 2017 ROI	0%

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:

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

Vesting scale	% of one third of the award that vest
Exceeds the median by 10% or more	100%
Exceeds the median by less than 10%	On a straight-line basis between 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:

Vesting scale	% of one third of the award that vest
Exceeds 2018 ROI plus 300 basis points	100%
Exceeds 2018 ROI by less than 300 basis points	On a straight-line basis between 0% and 100%
Equal to or less than the 2018 ROI	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 2019, an award of 112,014 ordinary shares of 1p each in the Company was granted to the Chief Executive Officer, Mark Dixon. The award is conditional on continuous employment and awards that are eligible will vest in March 2020.

Reconciliation of outstanding share options

	2019	2018
	Number of awards	Number of awards
At 1 January	383,664	383,664
DSBP awards granted during the year	112,014	-
Lapsed during the year	-	-
Exercised during the year	-	-
Outstanding at 31 December	495,678	383,664
Exercisable at 31 December	-	-

There were no shares which were exercisable during the year ended 31 December 2019 (2018: nil).

Plan	Date of grant	Numbers granted	Lapsed	Exercised	At 31 Dec 2019	Release date
DSBP	01/03/2017	383,664	-	-	383,664	01/03/2020
DSBP	07/03/2019	112,014	-	-	112,014	07/03/2022
		495,678	-	-	495,678

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 2019	March 2017
Share price on grant date	244.90p	283.70p
Exercise price	Nil	Nil
Number of simulations	-	-
Number of companies	-	-
Award life	3 years	3 years
Expected dividend	2.57%	1.80%
Fair value of award at time of grant	188.42p	236.04p
Risk-free interest rate	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 are as follows:

	2019 £m	2018 £m
Fair value of plan assets	11.0	9.9
Present value of obligations	(12.5)	(11.4)
Net funded obligations	(1.5)	(1.5)

27. Acquisitions

Current period acquisitions

During the year ended 31 December 2019 the Group made an acquisition for a total consideration of £24.4m.

£m	Book value	Provisional fair value adjustments	Provisional fair value
Net assets acquired
Right-of-use asset	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,
£22.6m is 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 this acquisition would have been £28.3m and £4.4m respectively. In the year, the equity acquisition contributed revenue of £4.7m and net retained profit of £1.2m.

There was £nil contingent consideration arising on the 2019 acquisition. Contingent consideration of £5.3m was also paid during the current year with respect to milestones achieved on previous acquisitions.

The acquisition costs associated with this transaction were £0.3m, recorded within administration expenses in the consolidated income statement.

For 2019's acquisition, 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 date and any adjustments reported in future reports.

Prior period acquisitions

During the year ended 31 December 2018 the Group made individually immaterial acquisitions for a total consideration of £1.5m.

£m	Book value	Provisional fair value adjustments	Provisional fair value	Final fair value adjustments	Final fair value
Net assets acquired
Property, plant and equipment	0.6	-	0.6	-	0.6
Cash	0.7	-	0.7	-	0.7
Other current and non-current assets	1.0	-	1.0	-	1.0
Current liabilities	(1.7)	-	(1.7)	-	(1.7)
Non-current liabilities	(0.1)	-	(0.1)	-	(0.1)
	0.5	-	0.5	-	0.5
Goodwill arising on acquisition			1.0	-	1.0
Total consideration			1.5	-	1.5
Less: Contingent consideration			0.3	-	0.3
			1.2	-	1.2
Cash flow on acquisition
Cash paid			1.2	-	1.2
Net cash outflow			1.2	-	1.2

The goodwill arising on the 2018 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, £0.3m is expected to be deductible for tax purposes.

If the above acquisitions had occurred on 1 January 2018, the revenue and net retained profit arising from these acquisitions would have been £4.6m and £0.1m respectively. In the year, the equity acquisitions contributed revenue of £1.7m and net retained profit of £0.6m.

There was £0.3m contingent consideration arising on the above acquisitions. Contingent consideration of £1.8m was also paid during the prior year with respect to milestones achieved on previous acquisitions.

The acquisition costs associated with these transactions were £0.2m, recorded within administration expenses within 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 2018.

28. Capital commitments

	2019 £m	2018 £m
Contracts placed for future capital expenditure not provided for in the financial statements	196.4	79.9

These commitments are principally in respect of fit-out obligations. There are no capital commitments in respect of joint ventures at
31 December 2019 (2018: nil).

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 £144.5m (2018: £152.7m). 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.

£m	Management fees received from related parties	Amounts owed by related party	Amounts owed to related party
2019
Joint ventures	3.6	15.5	4.9
2018
Joint ventures	2.8	12.8	3.4

As at 31 December 2019, none of the amounts due to the Group have been provided for as the expected credit losses arising on the balances are considered immaterial (2018: £nil). 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:

	2019 £m	2018 £m
Short-term employee benefits	8.2	7.9
Retirement benefit obligations	0.4	0.4
Share-based payments	1.4	1.0
	10.0	9.3

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 £2.0m (2018: £2.1m). 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 2019 the Group acquired goods and services from a company indirectly controlled by a Director
of the Company amounting to £18,764 (2018: £43,288). There was a £18,764 balance outstanding at the year end (2018: £53,630).

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 2019, their principal activities and countries of incorporation are set out below:

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

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

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.

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 2019, including the sensitivity to changes in those assumptions, can be found in note 12.

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.

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.

Dilapidations

Certain of our leases with landlords include a clause obliging the Group to hand the property back in the condition as at the date of signing the lease. The costs to bring the property back to that condition are not known until the Group exits the property so the Group estimates the costs at each balance sheet date. However, given that landlords often regard the nature of changes made to properties as improvements, the Group estimates that it is unlikely that any material dilapidation payments will be necessary. A provision is recognised for those potential dilapidation payments when it is probable that an outflow will occur and can be reliably estimated.

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.

Key estimates

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.

Estimating the incremental borrowing rates

The determination of applicable incremental borrowing rates 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.

Parent company accounts

Summarised extract of Company balance sheet

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

	As at 31 Dec 2019 £m	As at 31 Dec 2018 £m

Trade and other receivables	14.4	9.4
Prepayments	0.1	0.2
Total current assets	14.5	9.6
Investments	644.6	2,295.4
Total non-current assets	644.6	2,295.4

Total assets	659.1	2,305.0

Trade and other payables	6.3	4.3
Accrued expenses	2.7	2.3
Total short-term liabilities	9.0	6.6
Long-term interest-bearing liabilities	332.3	207.7
Total long-term liabilities	332.3	207.7

Total liabilities	341.3	214.3

Issued share capital	9.2	9.2
Legal capital reserves	-	-
Reserves from capital contributions	2,126.8	2,185.0
Retained earnings	(32.4)	(15.1)
Loss for the year	(1,668.9)	(14.3)
Treasury shares	(116.9)	(74.1)
Total shareholders' equity	317.8	2,090.7

Total liabilities and shareholders' equity	659.1	2,305.0

Approved by the Board on 3 March 2020

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 2019, which are available from the Company's registered office, Dammstrasse 19, CH-6300, Zug, Switzerland.

Investments

The value of the investment held in IWG Group investment is measured at acquisition cost.

During 2019, the Company acquired the direct investment in IWG Global Investments Sarl (formerly Umbrella Global Holdings Sarl), as part of an internal restructuring. At the same time, the Company disposed of its investment in Regus plc to IWG Group Holdings Sarl. The investment was recorded at £2,295.4m in the Company audited Financial Statements as at 31 December 2018. This transaction resulted in the Company recognising a dividend in specie of £644.6m and a corresponding impairment in its investment of Regus plc of £2,292.1m.

IFRS 16 Pro forma statements

Consolidated income statement (unaudited)

The purpose of these unaudited pages is to provide a reconciliation from the 2019 financial results to the pro forma statements in accordance with the previous IAS 17 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 adjust for the impact of closed centres.

	Notes	Year ended 31 Dec 2019 As reported £m	Rent & finance costs £m	Depreciation £m	Other adjustments £m	Taxation £m	Year ended 31 Dec 2019 per IAS 17 £m	Closures £m	Year ended 31 Dec 2019 per IAS 17⁽¹⁾ £m
Revenue	3	2,653.0	-	-	-	-	2,653.0	(83.2)	2,569.8
Cost of sales		(2,086.6)	(1,011.6)	874.4	(14.1)	-	(2,237.9)	114.0	(2,123.9)
Gross profit (centre contribution)		566.4	(1,011.6)	874.4	(14.1)	-	415.1	30.8	445.9
Selling, general and administration expenses		(281.2)	(0.1)	1.1	0.1	-	(280.1)	7.7	(272.4)
Share of profit/(loss) of equity-accounted investees, net of tax	21	2.7	-	-	-	-	2.7	-	2.7
Operating profit	5	287.9	(1,011.7)	875.5	(14.0)	-	137.7	38.5	176.2
Finance expense	7	(232.5)	213.5	-	0.3	-	(18.7)	-	(18.7)
Finance income	7	0.5	-	-	-	-	0.5	-	0.5
Net finance expense		(232.0)	213.5	-	0.3	-	(18.2)	-	(18.2)
Profit before tax for the year from continuing operations		55.9	(798.2)	875.5	(13.7)	-	119.5	38.5	158.0
Income tax credit/(expense)	8	22.3	-	-	-	(6.9)	15.4	1.3	16.7
Profit after tax for the year from continuing operations		78.2	(798.2)	875.5	(13.7)	(6.9)	134.9	39.8	174.7
Profit after tax for the year from discontinued operations	9	372.4	(25.4)	26.0	(4.8)	-	368.2	-	368.2
Profit after tax for the year		450.6	(823.6)	901.5	(18.5)	(6.9)	503.1	39.8	542.9
Aggregated profit before tax		430.1	(823.6)	901.5	(18.5)	-	489.5	38.5	528.0
Earnings per ordinary share (EPS):
Attributable to ordinary shareholders
Basic (p)	10	50.5					56.4		60.8
Diluted (p)	10	49.6					55.4		59.8
From continuing operations
Basic (p)	10	8.8					15.1		19.6
Diluted (p)	10	8.6					14.8		19.2

1. Reflects open centre performance after excluding the impact of closures.

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 asset and related lease liability

These adjustments reflect the right-of-use asset recognised on transition, together with the related lease liability. The initial lease liability is 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

Since the adoption of IFRS 16 conventional rent charges are no longer 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 asset and related lease liability noted above. The lease liability is 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 asset 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 liability recognised in the balance sheet.

4. Other adjustments

On transition, the remaining net book value of costs previously capitalised, such as costs directly incurred in preparing the business centre for trading (i.e. as part of property, plant and equipment), are derecognised and eliminated directly against retained earnings. Leasehold improvements are also reported net of partner contributions.

5. Taxation

The underlying tax charge is impacted by the change in the profit before tax and deferred tax assets recognised.

6. Closures

Adjusting for the impact of closed centres.

Consolidated balance sheet (unaudited)

	Notes	As at 31 Dec 2019 £m	Right-of-use asset & related lease liability £m	Rent & finance costs £m	Depreciation & lease payments £m	Other adjustments £m	Taxation £m	Year ended 31 Dec 2019 per IAS 17 £m
Non-current assets
Goodwill	12	674.6	-	-	-	-	-	674.6
Other intangible assets	13	45.0	-	-	-	-	-	45.0
Property, plant and equipment	14	7,190.7	(6,929.3)	940.4	901.5	1.9	-	2,105.2
Right-of-use asset	14	5,917.4	(6,929.3)	-	1,010.0	1.9	-	-
Other property, plant and equipment	14	1,273.3	-	940.4	(108.5)	-	-	2,105.2
Deferred tax assets	8	195.0	-	-	-	-	(93.6)	101.4
Non-current derivative financial assets	24	-	-	-	-	-	-	-
Other long-term receivables	15	61.0	-	-	-	1.3	-	62.3
Investments in joint ventures	21	13.8	-	-	-	-	-	13.8
Total non-current assets		8,180.1	(6,929.3)	940.4	901.5	3.2	(93.6)	3,002.3

Current assets
Inventory		1.3	-	-	-	-	-	1.3
Trade and other receivables	16	681.3	-	161.5	-	-	-	842.8
Corporation tax receivable	8	24.0	-	-	-	-	-	24.0
Cash and cash equivalents	23	66.6	-	-	-	-	-	66.6
Total current assets		773.2	-	161.5	-	-	-	934.7
Total assets		8,953.3	(6,929.3)	1,101.9	901.5	3.2	(93.6)	3,937.0

Current liabilities
Trade and other payables (incl. customer deposits)	17	788.8	-	372.4	-	-	-	1,161.2
Deferred income		322.6	-	-	-	-	-	322.6
Corporation tax payable	8	32.3	-	-	-	-	-	32.3
Bank and other loans	19	9.7	-	-	-	-	-	9.7
Lease liabilities	23	977.4	(932.9)	(216.2)	171.7	-	-	-
Provisions	20	8.9	-	-	-	-	-	8.9
Total current liabilities		2,139.7	(932.9)	156.2	171.7	-	-	1,534.7

Non-current liabilities
Other long-term payables	18	2.0	-	922.9	-	1.3	-	926.2
Bank and other loans	19	351.0	-	-	-	-	-	351.0
Lease liabilities	23	5,568.6	(6,477.9)	-	909.3	-	-	-
Non-current derivative financial liabilities	24	0.2	-	-	-	-	-	0.2
Provisions	20	6.9	-	-	-	1.9	-	8.8
Provision for deficit in joint ventures	21	2.9	-	-	-	-	-	2.9
Retirement benefit obligations	26	1.5	-	-	-	-	-	1.5
Total non-current liabilities		5,933.1	(6,477.9)	922.9	909.3	3.2	-	1,290.6
Total liabilities		8,072.8	(7,410.8)	1,079.1	1,081.0	3.2	-	2,825.3

Total equity
Issued share capital	22	9.2	-	-	-	-	-	9.2
Treasury shares	22	(116.9)	-	-	-	-	-	(116.9)
Foreign currency translation reserve		34.9	(8.7)	-	-	8.2	-	34.4
Hedging reserve		(0.2)	-	-	-	-	-	(0.2)
Other reserves		25.8	-	-	-	-	-	25.8
Retained earnings		927.7	490.2	22.8	(179.5)	(8.2)	(93.6)	1,159.4
Reported balance / profit for the year		1,106.9	(20.0)	262.9	(179.5)	(4.0)	(6.9)	1,159.4
Directly in reserves - on adoption of IFRS 16		(179.2)	510.2	(240.1)	-	(4.2)	(86.7)	-
Total equity		880.5	481.5	22.8	(179.5)	-	(93.6)	1,111.7
Total equity and liabilities		8,953.3	(6,929.3)	1,101.9	901.5	3.2	(93.6)	3,937.0

Consolidated statement of cash flows (unaudited)

	Notes	Year ended 31 Dec 2019 £m	Rent & finance costs £m	Depreciation & lease payments £m	Other adjustments £m	Year ended 31 Dec 2019 per IAS 17 £m
Operating activities
Profit before tax for the year from continuing operations		55.9	(798.2)	875.5	(13.7)	119.5
Adjustments for:
Profit before tax from discontinued operations	9	22.8	(25.4)	26.0	(0.6)	22.8
Net finance expense	7	232.0	(213.5)	-	(0.3)	18.2
Share of profit of equity-accounted investees, net of tax	21	(2.7)	-	-	-	(2.7)
Depreciation charge	14	1,153.1	-	(901.5)	-	251.6
Right-of-use asset	14	1,010.0	-	(1,010.0)	-	-
Other property, plant and equipment	14	143.1	-	108.5	-	251.6
Loss on impairment of goodwill	12	0.8	-	-	-	0.8
Loss on disposal of property, plant and equipment	5	32.7	-	-	(8.1)	24.6
Loss on disposal of intangible assets	5	0.3	-	-	-	0.3
Reversal of impairment of property, plant and equipment	5, 14	(2.1)	-	-	-	(2.1)
Amortisation of intangible assets	5, 13	9.7	-	-	-	9.7
Decrease in provisions	20	(1.3)	-	-	-	(1.3)
Share-based payments		0.7	-	-	-	0.7
Other non-cash movements		(2.2)	-	-	(0.5)	(2.7)
Operating cash flows before movements in working capital		1,499.7	(1,037.1)	-	(23.2)	439.4
(Increase)/decrease in trade and other receivables		(108.7)	(73.7)	-	13.8	(168.6)
Increase/(decrease) in trade and other payables		0.7	1,506.7	(1,081.0)	9.4	435.8
Cash generated from operations		1,391.7	395.9	(1,081.0)	-	706.6
Interest paid		(21.2)	-	-	-	(21.2)
Tax paid		(48.8)	-	-	-	(48.8)
Net cash inflow/(outflow) from operating activities		1,321.7	395.9	(1,081.0)	-	636.6

Investing activities
Purchase of property, plant and equipment	14	(356.4)	(406.4)	-	-	(762.8)
Purchase of subsidiary undertakings, net of cash acquired	27	(24.2)	-	-	-	(24.2)
Purchase of intangible assets	13	(12.8)	-	-	-	(12.8)
Purchase of joint ventures	21	(1.8)	-	-	-	(1.8)
Proceeds on sale of discontinued operations, net of cash disposed of	9	424.6	-	-	-	424.6
Proceeds on sale of property, plant and equipment		0.6	-	-	-	0.6
Interest received	7	0.5	-	-	-	0.5
Net cash inflow/(outflow) from investing activities		30.5	(406.4)	-	-	(375.9)

Financing activities
Proceeds from issue of loans		850.5	-	-	-	850.5
Repayment of loans		(1,013.0)	-	-	-	(1,013.0)
Payment of lease liability	23	(1,091.5)	10.5	1,081.0	-	-
Purchase of treasury shares	22	(49.5)	-	-	-	(49.5)
Proceeds from exercise of share awards		2.9	-	-	-	2.9
Payment of ordinary dividend	11	(58.2)	-	-	-	(58.2)
Net cash (outflow)/inflow from financing activities		(1,358.8)	10.5	1,081.0	-	(267.3)

Net decrease in cash and cash equivalents		(6.6)	-	-	-	(6.6)
Cash and cash equivalents at the beginning of the year		69.0	-	-	-	69.0
Effect of exchange rate fluctuations on cash held		4.2	-	-	-	4.2
Cash and cash equivalents at the end of the year	23	66.6	-	-	-	66.6

SEGMENTAL ANALYSIS

Segmental analysis - based on estimates (unaudited)

	Americas 2019 (IAS 17 Basis)	EMEA 2019 (IAS 17 Basis)	Asia Pacific 2019 (IAS 17 Basis)	United Kingdom 2019 (IAS 17 Basis)	Other 2019 (IAS 17 Basis)	Total 2019 (IAS 17 Basis)
Mature(1)
Workstations(4)	183,211	108,421	76,263	82,216	-	450,111
Occupancy (%)	78.1%	76.9%	74.1%	73.8%	-	76.3%
Revenue (£m)	1,079.6	533.9	275.2	353.7	9.0	2,251.4
Contribution (£m)	252.3	125.7	50.4	53.8	12.9	495.1
Impact of IFRS 16	76.3	25.2	24.4	10.4	-	136.3
Contribution (£m) - IFRS 16	328.6	150.9	74.8	64.2	12.9	631.4
REVPOW (£)	7,544.0	6,407.0	4,868.0	5,830.0	-	6,551.0

2018 Expansions(2)
Workstations(4)	19,103	35,247	14,971	13,886	-	83,207
Occupancy (%)	64.7%	58.1%	54.7%	56.4%	-	58.7%
Revenue (£m)	67.5	89.8	40.5	38.4	-	236.2
Contribution (£m)	(11.0)	(1.3)	(4.3)	(8.2)	-	(24.8)
Impact of IFRS 16	6.4	4.9	3.9	3.9	-	19.1
Contribution (£m) - IFRS 16	(4.6)	3.6	(0.4)	(4.3)	-	(5.7)

2019 Expansions(2)
Workstations(4)	10,190	17,261	6,369	7,629	-	41,449
Occupancy (%)	39.3%	40.3%	36.9%	32.5%	-	38.1%
Revenue (£m)	22.6	37.5	10.8	11.3	-	82.2
Contribution (£m)(5)	(13.5)	(1.7)	(3.3)	(5.9)	-	(24.4)
Impact of IFRS 16	(0.8)	(6.7)	(1.4)	(2.1)	-	(11.0)
Contribution (£m) - IFRS 16	(14.3)	(8.4)	(4.7)	(8.0)	-	(35.4)

Closures(6)
Workstations(4)	4,077	4,539	4,421	5,915	-	18,952
Occupancy (%)	60.4%	66.6%	58.3%	49.0%	-	57.8%
Revenue (£m)	18.8	23.9	17.4	23.1	-	83.2
Contribution (£m)	(6.9)	1.1	(14.1)	(10.9)	-	(30.8)
Impact of IFRS 16	0.6	3.1	5.5	(2.4)	-	6.8
Contribution (£m) - IFRS 16	(6.3)	4.2	(8.6)	(13.3)	-	(24.0)

Total
Workstations(4)	216,581	165,468	102,024	109,646	-	593,719
Occupancy (%)	74.8%	68.8%	68.3%	67.4%	-	70.6%
Revenue (£m)	1,188.5	685.1	343.9	426.5	9.0	2,653.0
Contribution (£m)	220.9	123.8	28.7	28.8	12.9	415.1
Impact of IFRS 16	82.6	26.5	32.4	9.8	-	151.3
Contribution (£m) - IFRS 16	303.5	150.3	61.1	38.6	12.9	566.4
REVPAW (£)	5,488	4,140	3,371	3,890	-	4,469

Period end workstations(7)
Mature	183,980	110,151	77,974	85,917	-	458,022
2018 Expansions	19,936	35,352	15,176	14,474	-	84,938
2019 Expansions	26,131	35,695	11,732	11,752	-	85,310
Total	230,047	181,198	104,882	112,143	-	628,270

Segmental analysis - based on estimates (unaudited)

	Americas 2018 (IAS 17 Basis)	EMEA 2018 (IAS 17 Basis)	Asia Pacific 2018 (IAS 17 Basis)	United Kingdom 2018 (IAS 17 Basis)	Other 2018 (IAS 17 Basis)	Total 2018 (IAS 17 Basis)
Mature(1)
Workstations(4)	183,714	105,904	76,294	78,068	-	443,980
Occupancy (%)	74.2%	75.1%	70.4%	70.9%	-	73.2%
Revenue (£m)	978.4	538.9	267.6	355.7	4.9	2,145.5
Contribution (£m)	190.9	122.0	45.8	61.1	0.3	420.1
REVPOW (£)	7,176	6,778	4,979	6,429	-	6,603

2018 Expansions(2)
Workstations(4)	9,395	14,827	6,630	5,933	-	36,785
Occupancy (%)	37.5%	32.4%	26.8%	30.5%	-	32.4%
Revenue (£m)	19.8	20.6	8.9	13.3	-	62.6
Contribution (£m)	(12.3)	(7.9)	(5.7)	(4.9)	-	(30.8)

Closures(3)
Workstations(4)	10,215	8,715	10,270	13,335	-	42,535
Occupancy (%)	64.7%	65.6%	60.5%	62.9%	-	63.3%
Revenue (£m)	50.3	39.3	34.4	70.0	-	194.0
Contribution (£m)	(4.8)	(2.3)	(6.8)	(0.9)	-	(14.8)

Total
Workstations(4)	203,324	129,446	93,194	97,336	-	523,300
Occupancy (%)	72.0%	69.5%	66.2%	67.3%	-	69.5%
Revenue (£m)	1,048.5	598.8	310.9	439.0	4.9	2,402.1
Contribution (£m)	173.8	111.8	33.3	55.3	0.3	374.5
REVPAW (£)	5,157	4,625	3,337	4,510	-	4,590

Notes:

1. The mature business comprises centres not opened in the current or previous financial year.

2. Expansions include new centres opened and acquired businesses.

3. A closure for the 2018 comparative data is defined as a centre closed during the period from 1 January 2018 to 31 December 2019.

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

5. 2019 expansions includes any costs incurred in 2019 for centres which will open in 2020.

6. A closure for the 2019 date is defined as a centre closed during the period from 1 January 2019 to 31 December 2019.

7. Workstations available at period 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.

2019

Description	Reference	2017 Aggregation	2018 Expansions	2019 Expansions	2020 Expansions	Closures	Total
Post-tax cash return on net investment (unaudited)		15.6%	-	-	-	-	8.4%

Revenue	Pro forma income statement, p151	2,251.4	236.2	82.2	-	83.2	2,653.0
Centre contribution	Pro forma income statement, p151	495.1	(24.8)	(23.7)	(0.7)	(30.8)	415.1
Loss on disposal of assets	EBIT reconciliation (analysed below)	0.6	-	-	-	16.9	17.5
Underlying centre contribution		495.7	(24.8)	(23.7)	(0.7)	(13.9)	432.6
Selling, general and administration expenses(1)	Pro forma income statement, p151	(214.9)	(36.6)	(20.8)	(0.1)	(7.7)	(280.1)
EBIT	EBIT reconciliation (analysed below)	280.8	(61.4)	(44.5)	(0.8)	(21.6)	152.5
Depreciation and amortisation		189.3	42.6	15.7	-	13.2	260.8
Amortisation of partner contributions		(63.6)	(14.8)	(6.8)	-	(2.4)	(87.6)
Amortisation of acquired lease fair value adjustments		(0.9)	-	-	-	(0.1)	(1.0)
Non-cash items		124.8	27.8	8.9	-	10.7	172.2
Taxation(2)		(56.2)	12.3	8.9	0.2	4.3	(30.5)
Adjusted net cash profit		349.4	(21.3)	(26.7)	(0.6)	(6.6)	294.2
Maintenance capital expenditure	Capital expenditure (analysed below)	147.8	-	-	-	-	147.8
Partner contributions	Partner contributions (analysed below)	(39.1)	-	-	-	-	(39.1)
Net maintenance capital expenditure		108.7	-	-	-	-	108.7
Post-tax cash return		240.7	(21.3)	(26.7)	(0.6)	(6.6)	185.5


Growth capital expenditure	Capital expenditure (analysed below)	1,927.1	416.4	528.8	93.7	-	2,966.0
Partner contributions	Partner contributions (analysed below)	(388.0)	(143.7)	(194.3)	(39.4)	-	(765.4)
Net investment (unaudited)		1,539.1	272.7	334.5	54.3	-	2,200.6

2019

EBITDA reconciliation	2017 Aggregation	2018 Expansions	2019 Expansions	2020 Expansions	Closed	Total
Centre contribution	495.1	(24.8)	(23.7)	(0.7)	(30.8)	415.1
Selling, general and administration expenses(1)	(214.9)	(36.6)	(20.8)	(0.1)	(7.7)	(280.1)
Depreciation and amortisation	189.3	42.6	15.7	-	13.2	260.8
	469.5	(18.8)	(28.8)	(0.8)	(25.3)	395.8
Share of profit in joint ventures	2.7	-	-	-	-	2.7
EBITDA on continuing operations	472.2	(18.8)	(28.8)	(0.8)	(25.3)	398.5

1. Including research and development expenses.

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

2019

Movement in capital expenditure (unaudited)	2017 Aggregation	2018 Expansions	2019 Expansions	2020 Expansions	Closures	Total
December 2018	2,280.4	381.1	57.8	-	-	2,719.3
2019 Capital expenditure(3)	-	83.8	467.6	86.8	-	638.2
Properties acquired	-	-	6.9	6.9	-	13.8
Centre closures(4)	(353.3)	(48.5)	(3.5)	-	-	(405.3)
December 2019	1,927.1	416.4	528.8	93.7	-	2,966.0

3. 2020 expansions relate to costs and investments incurred in 2019 for centres which will open in 2020.

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.

2019

Movement in partner contributions (unaudited)	2017 Aggregation	2018 Expansions	2019 Expansions	2020 Expansions	Closures	Total
December 2018	421.4	128.2	4.6	-	-	554.2
2019 Partner contributions	-	31.8	191.8	39.4	-	263.0
Centre closures(5)	(33.4)	(16.3)	(2.1)	-	-	(51.8)
December 2019	388.0	143.7	194.3	39.4	-	765.4

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

2019

EBIT reconciliation (unaudited)	Reference	£m
EBIT		152.5
Loss on disposal of assets	Pro forma statement of cash flows, p153	(17.5)
Share of profit in joint ventures	Pro forma income statement, p151	2.7
Centre contribution - Closed		30.8
Selling, general and administration expenses - Closed		7.7
Operating profit	Pro forma income statement, p151	176.2

2019

Partner contributions (unaudited)	Reference	£m
Opening partner contributions		468.3
• Current	Note 17, p126	78.7
• Non-current	Note 18, p126	389.6
Acquired in the period		-
Received in the period		302.1
• Maintenance partner contributions		39.1
• Growth partner contributions		263.0
Utilised in the period		(87.6)
Business disposal		(26.0)
Exchange differences		(16.8)
Closing partner contributions		640.0
• Current		105.5
• Non-current		534.5

2019

Capital expenditure (unaudited)	Reference	£m
Maintenance capital expenditure	CFO review, p46	147.8
Growth capital expenditure	CFO review, p46	652.0
• 2019 Capital expenditure		638.2
• Properties acquired		13.8
Total capital expenditure		799.8
Analysed as
• Purchase of subsidiary undertakings	Pro forma statement of cash flows, p153	24.2
• Purchase of property, plant and equipment	Pro forma statement of cash flows, p153	762.8
• Purchase of intangible assets	Pro forma statement of cash flows, p153	12.8

FIVE-YEAR SUMMARY

	31 Dec 2019 £m	31 Dec 2018 Restated £m	31 Dec 2017 Restated £m	31 Dec 2016 Restated £m	31 Dec 2015 Restated £m
Income statement (full year ended)
Revenue	2,653.0	2,402.1	2,240.0	2,129.6	1,850.3
Cost of sales	(2,086.6)	(2,027.6)	(1,863.7)	(1,706.4)	(1,440.1)
Gross profit (centre contribution)	566.4	374.5	376.3	423.2	410.2
Administration expenses	(281.2)	(248.2)	(231.9)	(255.1)	(260.3)
Share of profit/(loss) of equity-accounted investees, net of tax	2.7	(1.4)	(0.8)	(0.8)	0.3
Operating profit	287.9	124.9	143.6	167.3	150.2
Finance expense	(232.5)	(15.8)	(14.0)	(11.6)	(15.0)
Finance income	0.5	0.5	0.3	0.1	0.6
Profit before tax for the year from continuing operations	55.9	109.6	129.9	155.8	135.8
Income tax credit/(expense)	22.3	(29.7)	(32.9)	(35.0)	(25.0)
Profit for the year from continuing operations	78.2	79.9	97.0	120.8	110.8
Profit after tax for the year from discontinued operations	372.4	25.8	17.0	18.0	9.1
Profit after tax for the year	450.6	105.7	114.0	138.8	119.9

Earnings per ordinary share (EPS):

Attributable to ordinary shareholders
Basic (p)	50.5	11.7	12.4	14.9	12.8
Diluted (p)	49.6	11.6	12.3	14.7	12.6
Weighted average number of shares outstanding ('000s)	892,738	907,077	915,676	929,830	933,458

From continuing operations
Basic (p)	8.8	8.8	10.6	13.0	11.9
Diluted (p)	8.6	8.7	10.5	12.8	11.6
Weighted average number of shares outstanding ('000s)	892,738	907,077	915,676	929,830	933,458

Balance sheet data (as at)
Intangible assets	719.6	721.7	712.1	738.1	666.0
Right-of-use asset	5,917.4	-	-	-	-
Property, plant and equipment	1,273.3	1,751.2	1,367.2	1,194.4	917.0
Deferred tax assets	195.0	30.6	23.0	29.3	36.4
Other assets	781.4	848.7	702.7	649.2	644.3
Cash and cash equivalents	66.6	69.0	55.0	50.1	63.9
Total assets	8,953.3	3,421.2	2,860.0	2,661.1	2,327.6
Current liabilities	2,139.7	1,429.5	1,224.7	1,183.1	1,085.7
Non-current liabilities	5,933.1	1,240.5	907.6	736.0	658.2
Equity	880.5	751.2	727.7	742.0	583.7
Total equity and liabilities	8,953.3	3,421.2	2,860.0	2,661.1	2,327.6

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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