Full Year Results

RNS Number : 5619R

IWG PLC

09 March 2021

 

9 March 2021

IWG plc - ANNUAL FINANCIAL REPORT ANNOUNCEMENT - YEAR ENDED 31 DECEMBER 2020

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

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

Key Highlights⁽¹⁾

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

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

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

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

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

-  Adjusted operating loss from continuing operations of £173.8m (2019: profit of £136.8m), in line with management expectations

Swift, comprehensive actions taken to reduce costs

-  Specific COVID-19 related adjusting items of £379.5m

-  Annualised cost savings anticipated to be in the range £325m to £375m; estimated cumulative benefit of c. £2.4bn

-  Cash flow before net growth capex, investments, share repurchase, dividends & adjusting items of £140.7m (2019: £224.6m)

Maintained strong financial position

-  Strengthened financial position following £320m equity placing and £350m convertible bond offering

-  Net debt at 31 December 2020 of £351.1m; net debt reduced in Q1 2021 with return of £283.7m of investment

-  £802.3m of available liquidity as at 31 December 2020

Strategic transformation to capital light model continues apace

-  Franchising remains a key focus area for growth

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

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

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

Well positioned to capture increased opportunities post COVID-19 recovery

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

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

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

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

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

Hybrid working driving surge in membership deals

-  Unprecedented demand for enterprise membership agreements

-  More than 1m future members in the pipeline

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

Annual results

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

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

2.  At constant currency

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

4.  Net debt in accordance with IFRS 16 includes lease liabilities of £6,558.5m

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

Mark Dixon, Chief Executive of IWG plc, said:

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

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

 

Details of results presentation

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

https://streams.merchantcantos.com/IWG2021

 

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

Dial in number:	[phone]
Access Pin:	2171389#

 

For further information, please contact:

IWG plc Tel: [phone] Mark Dixon, Chief Executive Officer Eric Hageman, Chief Financial Officer Wayne Gerry, Group Investor Relations Director For more information, please visit www.iwgplc.com

Brunswick Tel: [phone] Nick Cosgrove Oliver Sherwood

Chairman's statement

A year of challenge, action and opportunity

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

THE YEAR EVERYTHING CHANGED

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

FACING THE CHALLENGES

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

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

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

EMBRACING THE OPPORTUNITIES

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

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

PREPARING FOR RAPID GROWTH

Today IWG has by far the world's largest and most widely distributed flexible workspace footprint, which allows us to enable more people than anybody else to work from home, close to home and at other convenient meeting places. The accelerated shift to hybrid working habits is creating an opportunity for unprecedented growth. We plan to rapidly expand our already extensive network by continuing to pursue our capital-light model focusing on franchising, management contracts and other forms of partnership. During 2020 we raised equity capital and issued convertible bonds collectively worth £670m. These funds and the measures previously described will support IWG's future development as we broaden our network and service offerings through organic growth and M&A opportunities.

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

douglas sutherland

Chairman

9 March 2021

Chief executive officer's review

Our most challenging year demonstrates our business resilience

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

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

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

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

A new way of working

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

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

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

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

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

Group income statement

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

6.  Including joint ventures

Revenue and gross margin

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

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

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

A rapid, decisive response

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

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

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

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

Clear, compelling advantages

The appeal of the hybrid working model was underlined by the particularly strong sales activity we experienced during the second half of the year, although given the exceptional circumstances this was offset by increased customer churn. During the year, we also supported customers with a range of measures worth approximately £100m including payment deferrals.

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

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

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

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

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

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

Partnering for capital-light expansion

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

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

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

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

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

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

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

Creating services for a global industry

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

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

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

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

Our prudent approach to M&A

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

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

Outlook

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

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

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

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

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

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

Mark Dixon

Chief Executive Officer

9 March 2021

Chief financial officer's review

Despite COVID-19, cash performance has been resilient

Financial performance

The review below highlights the reported results in accordance with IFRS. Under IFRS 16, while total lease related charges over the life of a lease remain unchanged, the lease charges are characterised as depreciation and financing expenses with higher total expense in the early periods of a lease and lower total expense in the later periods of the lease.

The Group also presents the results in accordance with pre-IFRS 16 accounting standards(1) as it provides useful information to key stakeholders on how the Group is managed, operating performance targets are measured, and reporting for bank covenants and certain lease agreements are prepared.

COVID-19

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

As a result, in order to improve the transparency and usefulness of the financial information presented and improve year-on-year comparability, the Group has identified net charges of 389.8m (pre-IFRS 16: £379.5m(1)) relating to directly attributable expenses and gains resulting from COVID-19. These charges are adjusting items as they meet the Group's definition applied in previous years, being significant both in nature and value to the results of the Group for the year ended 31 December 2020.

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

-  Network rationalisation

-  Provision for expected credit losses

-  Transaction costs on deferred franchising deals

-  Goodwill impairment

-  Other one-off items

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

Network rationalisation

As previously announced, in direct response to the pandemic, decisions were taken to accelerate the rationalisation of underperforming centres to ensure we emerge a stronger business post COVID-19. The estimated net impact of network rationalisation is 322.3m (pre-IFRS 16: £312.0m(1)). This charge includes the impairment of right of use and non-moveable assets and exit costs incurred in the year, which are over and above the normal run rate for the Group.

Group income statement

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

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

8.  Overheads for 2020 include COVID-19 and other non-recurring items of £85.0m.

Goodwill impairment

Despite the continued uncertainty created by COVID-19, there are no long-term indicators of impairment identified for the US and UK and these businesses are expected to recover post COVID-19. However, as previously reported with the interim results, the COVID-19 crisis and linked restrictions have impacted our ability to trade our way to sustainable profitable growth in certain markets. As a result, the projected cash flows for the operations in certain insignificant markets no longer supported the carrying value of goodwill, and an impairment of £4.9m was taken as at 30 June 2020. No further impairment was taken in the second half.

Provision for expected credit losses

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

Considering the disruption of centres globally, the Group reviewed the recoverability of its debtor profile and recorded an increase in the expected credit-loss provision of £17.5m for 2020. This increase reflects the greater likelihood of credit default by the Group's debtors directly attributable to the impact of COVID-19 and the likelihood of recoverability of such outstanding balances payable to the Group.

The increase is relatively low compared to the overall debtor profile as the Group has not historically incurred significant credit losses and continues to maintain customer deposits as additional security in the rare event of non-performance of customer contracts.

Other one-off items including restructuring

During 2020, the Group incurred £8.2m of transaction costs in respect of master franchise agreements that have not completed as at 31 December 2020 because of COVID-19. The Group continues its pivot towards a franchising model and discussions on master franchise agreements have since resumed. Other net charges of £36.9m were also incurred in relation to restructuring the Group in respect of the COVID-19 crisis.

Estimated resulting cost benefit

The anticipated annualised cost benefit arising from these actions taken to respond to COVID-19, if fully implemented,
is expected to be in the range of £325m to £375m. The estimated cumulative benefit of these actions accruing to the Group in future years will be significant and is estimated to be approximately £2.4bn as previously announced.

Revenue

Total Group revenue(5) decreased from £2,648.9m to £2,480.2m, a 5.3% decline when compared at constant currency. This is a commendable outcome given the increasing quarterly year-on-year weakness experienced from the second quarter onwards, including double-digit revenue declines in the third and fourth quarters. The improvement achieved in sales activity has been offset by customer churn and the significant impact the pandemic has had on service revenue. Only EMEA recorded annual revenue growth, aided by the annualised benefit of acquisitions in late 2019, but even here revenue declined in the second half. Although the year-on-year trends for the Group after the first quarter were sequentially increasingly more negative, the absolute level of monthly revenues stabilised in the second half and showed some improvement in December.

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

Overall, open centre revenue(5) of £2,393.4m (2019: £2,408.1m) was broadly stable for the year, a 0.5% increase when compared at constant currency. Again, this performance is reflective of conditions becoming more challenging as we moved through the year. Open centre revenue in the first half increased 10.2% at constant currency, an outcome that was very much first quarter driven. The second quarter reduced to a small positive revenue increase and thereafter moved increasingly into negative territory as the impact of the pandemic continued to be felt on the business.

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

Pre-2019 revenue(5) for the year declined 7.4% at constant currency to £2,129.8m (2019: £2,328.7m), with all regions experiencing year-on-year revenue declines. A similar pattern emerged through the year. After a very strong first quarter, weakness was experienced in the second quarter resulting in a relatively flat first half performance with revenue up 0.2% at constant currency. This weakness continued into the second half with each quarter showing increasingly weaker year-on-year performance. As a result, pre-2019 revenue declined 15.8% at constant currency in the second half.

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

Open centre revenue performance by region

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

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

Americas

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

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

Revenue from open centres(5) declined 5.9% at constant currency to £1,034.2m as conditions increasingly deteriorated from the second quarter onwards due to COVID-19. Total revenue(5) declined 8.4% at constant currency to £1,066.5m after a reduction of 1.1% in the first half. Without the benefit of the maturation of the centres opened in 2019 and 2020, pre-2019 revenue(5) for the region decreased 10.1% at constant currency to £969.8m, with double-digit declines in almost all the major countries in the region. A notable exception among the top countries remained Mexico, where a strong first half resulted in mid-single digit growth for the year despite negative growth in the second half.

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

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

EMEA

The stronger performance in EMEA relative to the other regions reflects the previously reported strong start to 2020 in most of the major countries in the region and the annualised benefit of acquisitions completed in the second half of 2019. Otherwise the performance through the year was similar to the other regions, with much weaker performance in Q3 and Q4. Open centre revenue(5) has increased 12.6% to £688.9m at constant currency. Open centre revenue growth(5) was heavily weighted to the first half with growth of 22.3% followed by a 3.8% increase in the second half. Total revenue(5) increased 4.7%, at constant currency, to £715.1m. Pre-2019 revenue declined 1.6% at constant currency to £564.0m. The pre-2019 occupancy increased to 73.9% (2019: 72.5%).

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

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

Asia Pacific

Our business in Asia Pacific endured a challenging second half as the effect of the pandemic impacted revenue after delivering a good performance in the first half. Revenue from all open centres(5) increased 1.9% at constant currency to £285.0m. First half growth of 16.2% was followed by a decrease of 11.0% in the second half. Total revenue(5) from the region declined by 9.5% at constant currency to £304.2m. Pre-2019 revenue was down 6.4% to £252.2m (2019: £274.7m) and pre-2019 occupancy decreased to 70.4% (2019: 71.3%).

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

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

UK

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

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

Revenue from open centres(5) decreased 0.4% to £379.7m. Pre-2019 revenue(5) declined by 8.6% to £338.2m (2019: 370.1m) and total revenue(5) in the UK declined 8.8% to £388.8m, reflecting the continued network rationalisation in the UK. Pre-2019 occupancy decreased to 71.0% (2019: 71.4%).

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

EBITDA

Adjusted EBITDA as reported reduced to £1,233.9m (2019: £1,482.8m), due to the impact of COVID-19 on our business performance.

Under pre-IFRS 16 reporting, adjusted EBITDA(1) declined from £428.3m to 133.8m. Adjusted EBITDA still reflects the significant drag from the investment in growth, which in 2020 was £112.5m (2019: £27.6m), and a further £9.9m in respect of closed centres (2019: 10.3m). The pre-2019 EBITDA(1), which eliminates the drag from the investment in growth and therefore offers a more representative indication of the underlying earnings performance of the business, was £255.9m (2019: 435.3m).

Underlying performance has also been directly impacted as more of our markets went into lockdown, resulting in reduced profitability from the second quarter of 2020, that is expected to improve as global vaccination rollout programmes advance
and restrictions are lifted. The impact that COVID-19 has had on underlying trading performance is not recognised within adjusting items.

Overhead investment

Whilst reported Group overheads, excluding adjusting items(1) of £56.4m related to COVID-19, increased 12.3% at constant currency to £312.9m (2019: £281.0m), these included £30.6m of additional non-recurring costs related to corporate restructuring. This was also true under pre-IFRS 16 reporting, with Group overheads excluding adjusting items of £324.4m (2019: £280.0m). Excluding these non-recurring costs, overheads(1) increased by 4.9% to £293.8m, representing 11.8% of the Group's lower revenue reported for 2020 (2019: 10.6%). The increased investment in overheads, particularly in the second half, reflects the Group's continued development of enterprise accounts and pivot to a capital-light franchise growth model and a scaled platform of services.

Operating loss - continuing operations

Adjusted operating profit(5) as reported was £37.8m (2019: £286.8m). Including the adjusting items, the operating loss(5) was £352.0m compared to the profit of 286.8m in 2019 due to COVID-19.

Under pre-IFRS 16 reporting, adjusted operating loss(1)(5) for the year ended 31 December 2020 was £173.8m (2019: profit of £136.8m). In addition to the planned investment in overheads to develop the business platform, the operating profit(1)(5) continues to reflect the drag from growth investment of £175.3m (2019: £42.5m) as well as £23.8m (2019: £37.8m) from centres closed during 2020. Including the adjusting items of £379.5m, the operating loss(1)(5) was £553.3m compared to a profit(1)(5) of £136.8m in 2019.

Net finance costs

The Group reported net finance costs for the year to 31 December 2020 of 268.1m (2019: 231.8m), including £257.2m (2019: £213.5m) related to interest on the Group's lease liabilities.

Net finance costs in respect of bank lending decreased to £10.9m (2019: £18.3m) as there was less need for debt usage during the year. This primarily reflects the Group's laser focus on cash generation, the benefit for the entire year of the proceeds from the master franchise agreements completed last year, over seven months' benefit from the £320m share placing in May 2020 and the lower interest rate benefit from the £350m convertible bond issue at the start of December 2020.

Taxation

The reported effective tax rate for 2020 is (4.9)% (2019: (40.5)%). The effective tax rate(1)(5) on continuing operations under pre-IFRS 16 reporting was (7.7)% (2019: (13.1)%). Despite reporting a significant loss for the year resulting from challenging trading conditions due to COVID-19, the Group has incurred a tax charge due to several factors. These include the continuing profitability of certain countries and entities within the overall Group and following some internal restructuring during 2020, we have reduced the deferred tax asset of £89.8m recognised in 2019 by £20.1m, resulting in a 2020 deferred tax charge. The tax charge benefited in 2020 from no US BEAT (base erosion and anti-abuse tax) liabilities in contrast to the negative £17.5m impact in 2019. The 2020 tax charge also benefitted from the positive tax impact of the 2020 US CARES Act, resulting in a prior year current tax credit of £10.6m in the US.

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

Earnings per share

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

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

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

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

Cash flow and funding

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

Despite the negative impact the COVID-19 pandemic has had on business activity and customer growth, and the reported financial performance, the Group's cash performance has been very resilient with a cash inflow(1) of £140.7m before net investment in growth capital expenditure, investments, dividends, share repurchases and adjusting items (2019: £224.6m).

As previously reported, the Group deployed capital in the fourth quarter which included £276.2m on a potential investment which, post the year end, did not proceed, and has resulted in a return of that cash outflow in the first quarter of 2021.

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

Cash flow

The table below reflects the Group's cash flow:

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

9.  Net growth capital expenditure of £250.9m relates to the cash outflow in the year to 31 December 2020. Accordingly, it includes net capital expenditure related to locations added in 2019 and to be added in 2021, as well as those added in 2020. The total net investment in the period for 2019 and 2021 additions amounted to £93.4m.

Capital investment in the network

In line with the Group's expectations, net growth capital expenditure in 2020 reduced by £80.8m to £203.8m (2019: £284.6m). This reflects the dialling down of our growth programme as part of the mitigating actions taken to offset the impact of COVID-19 and the continued focus on pivoting to capital-light growth, which is expected to result in further reductions in capital expenditure in future years. Under pre-IFRS 16 reporting, net growth capital expenditure(1) reduced by £138.1m to £250.9m (2019: 389.0m).

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

Maintenance capital expenditure(1) also reduced year on year. After the completion of the planned stepped up refurbishment programme, notably in the first quarter, which increased investment in the first half of the year to 80.7m (pre-IFRS 16: £91.5m), investment slowed from the second quarter. Consequently, maintenance capital expenditure(1) for 2020 reduced from £108.7m in 2019 to £81.9m (pre-IFRS 16: from £147.8m in 2019 to 96.9m). A further slowdown is anticipated for 2021.

Strong financial position

The Group has maintained a strong financial position throughout 2020. At 31 December 2020, the Group had significant liquidity headroom of £802.3m.

Net debt at 31 December 2020 has increased to £6,909.6m from £6,840.1m at 31 December 2019. Excluding debt related to lease liabilities, the Group had net borrowings(1) of £351.1m (2019: 294.1m). The year-end position is below the interim position at 30 June 2020 of £7,067.9m reflecting the network rationalisation programme and related actions taken by the Group in response to COVID-19.

The year-end net debt position includes £320m of gross proceeds raised through the equity placing on 28 May 2020, £350m from the convertible bond offering on 2 December 2020 less the debt element of the convertible bonds, and £527.1m deployment of cash for organic and inorganic growth and investments. The Group, as previously announced, also increased the net debt to EBITDA covenant on its £950m revolving credit facility. The new capital raised and increased covenant flexibility will enable the Group to further execute its stated strategy.

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

Foreign exchange

The Group's results are exposed to translation risk from the movement in currencies. During 2020 key individual exchange rates have moved, as shown in the table below. Overall, these exchange rate movements had a mixed but modest impact on the Group's results. Revenue was reduced by £27.3m but gross profit and operating profit increased by £9.5m and £27.1m respectively, reflecting the relative contribution to Group profit from our US business.

Risk management

Effective management of risk is an everyday activity for the Group and, crucially, integral to our strategic planning. A detailed assessment of the principal risks and uncertainties which could impact the Group's long-term performance and the risk management structure in place to identify, manage and mitigate such risks can be found on pages 48 to 55 of the 2020 Annual Report and Accounts.

Related parties

There have been no changes to the type of related party transactions entered into by the Group that had a material effect on the financial statements for the period ended 31 December 2020. Details of related party transactions that have taken place in the period can be found in note 30.

Foreign exchange rates

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

Dividends and share repurchase programme

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

Going concern

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

The Directors have assessed the potential cash generation of the Group against a range of illustrative COVID-19 scenarios (including a severe but plausible outcome), the liquidity of the Group, funding available under the Group's bank facility and mitigating actions to reduce operating costs and optimise cash flows during the current environment.

In addition, the Group successfully raised £320m of equity in May 2020 and issued £350m of unsubordinated unsecured Guaranteed Convertible Bonds in December 2020 to take advantage of growth opportunities and strengthen the Group's global leadership position.

On the basis of these actions and assessments, the Directors consider it appropriate to continue to adopt the going concern basis in preparing the financial statements of the Group.

OUTLOOK

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

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

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

Eric Hageman

Chief Financial Officer

9 March 2021

Consolidated income statement

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

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

Consolidated statement of comprehensive income

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

Consolidated statement of changes in equity

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

Other reserves include £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

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

Approved by the Board on 9 March 2021

Mark Dixon	ERIC HAGEMAN
Chief Executive Officer	Chief Financial Officer

CoNSOLIDATED STATEMENT OF CASH FLOWS

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

1.  The comparative information has been restated to reflect the impact of discontinued operations (note 9), interest charges on lease liabilities and
partner contributions (note 2).

Notes to the accounts

1. Authorisation of financial statements

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

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

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

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

2. Accounting policies

Basis of preparation

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

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

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

-  Interest charges on lease liabilities of £213.2m within the 'payment of lease liabilities' balance (£1,091.5m) within financing activities.

-  Partner contributions of £302.1m offset within 'Increase in trade and other payables' for reimbursements for landlord assets (£98.0m) and 'Proceeds for lease incentives' for lease incentives (£204.1m).

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

-  Cash flows related to lease interest payments (£213.2m in 2019) are material and should be disclosed separately as operating cash flows, consistent with the treatment of other interest payments. The 'payment of lease liabilities' balance in 2019 has been adjusted accordingly.

-  Cash flows related to partner contributions (both reimbursements and lease incentives) are material and should be disclosed separately with contributions received for reimbursements (£98.0m in 2019) as operating cash flows and contributions received for lease incentives (£204.1m in 2019) as financing cash flows, with 'movement in trade and other payables' restated for these changes respectively.

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

Amendments to References to Conceptual Framework in IFRS Standards

Definition of a Business (Amendments to IFRS 3)

Definition of Material (Amendments to IAS 1 and IAS 8)

Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform

COVID-19 Related Rent Concessions (Amendments to IFRS 16)(1)

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

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

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

GOING CONCERN

The Group reported a loss after tax of £650.2m from continuing operations for the year. This result includes a significant amount of non-cash related charges. Net cash of £968.9m was generated from operations during the year. Although the Group's balance sheet at 31 December 2020 reports a net current liability position of £1,330.4m the Directors do not consider that this gives rise to a liquidity risk. A large portion of the net current liabilities comprise non-cash liabilities such as deferred income which will be recognised through future periods in the income statement. The Group also holds customer deposits which are spread across a large number of customers with no deposit for any individual customer being material. Excluding deferred income and short-term lease liabilities, the Group had net current assets of £18.1m at 31 December 2020.

The Group maintains a 12-month rolling forecast and a three-year strategic outlook. It also monitors the covenants in its facilities to manage the risk of breach. The Group expects to remain within covenants throughout the forecast period. The Directors have assessed the potential cash generation of the Group against a range of illustrative COVID-19 scenarios (including a severe but plausible outcome), mitigating actions to reduce operating costs and optimise cash flows during the ongoing global restrictions, the liquidity of the Group and funding available under the Group's £950.0m Revolving Credit Facility. £731.3m was available and undrawn at 31 December 2020. This facility is committed until March 2025 with an option to extend until 2026 (note 24).

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

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

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

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

IFRs not yet effective

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

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

There are no other IFRS standards or interpretations that are not yet effective that would be expected to have a material impact on the Group.

The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

Basis of consolidation

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

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

Leases

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

1. Right-of-use assets

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

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

2. Lease liabilities

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

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

3. Lease modifications

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

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

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

5. Lessor accounting

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

6. Partner contributions

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

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

7. Lease term

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

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

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

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

8. Lease break penalties

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

DILAPIDATIONS

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

Impairment of non-financial assets

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

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

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

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

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

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

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

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

Goodwill

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

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

Intangible assets

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

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

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

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

Acquisitions of non-controlling interests

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

Property, plant and equipment

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

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

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

Revenue

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

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

1. Workstations

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

2. Customer service income

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

3. Management and franchise fees

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

4. Membership card income

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

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

ADJUSTING ITEMS

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

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

Employee benefits

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

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

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

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

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

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

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

Share-based payments

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

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

Taxation

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

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

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

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

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

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

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

Provisions

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

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

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

Equity

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

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

Inventory

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

Net finance expense

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

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

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

Interest-bearing borrowings and other financial liabilities

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

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

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

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

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

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

Derivative financial instruments

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

Financial assets

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

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

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

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

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

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

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

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

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

Customer deposits

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

Foreign currency transactions and foreign operations

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

Cash and cash equivalents

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

Discontinued operations

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

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

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

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

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

Foreign currency translation rates

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

3. Segmental analysis

An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses. An operating segment's results are reviewed regularly by the chief operating decision-maker (the Board of Directors of the Group) on a pre-IFRS 16 basis to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. The segmental information is presented on the same basis on which the chief operating decision-maker received reporting during the year. The presentation of reported segment profit or loss has changed in 2020 to a pre-IFRS 16 basis (2019: in accordance with IFRS) and comparatives have been restated on this basis. Segmental assets and liabilities continue to be presented in accordance with IFRS.

The business is run on a worldwide basis but managed through four principal geographical segments (the Group's operating segments): the Americas; EMEA (Europe, Middle East and Africa); Asia Pacific; and the United Kingdom. These geographical segments exclude the Group's non-trading, holding and corporate management companies, which are included in the "Other" segment. The results of business centres in each of these regions form the basis for reporting geographical results to the chief operating decision-maker. All reportable segments are involved in the provision of global workplace solutions.

The Group's reportable segments operate in different markets and are managed separately because of the different economic characteristics that exist in each of those markets. Each reportable segment has its own discrete senior management team responsible for the performance of the segment.

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

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

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

3.  Presented on a basis consistent with IFRS 16.

4.  Excluding deferred taxation.

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

Operating profit in the "Other" category is generated from services related to the provision of workspace solutions, including fees from franchise agreements, offset by corporate overheads.

The operating segment's results presented on a pre-IFRS 16 basis reconcile to the financial statements as follows:

	Americas		EMEA		Asia Pacific		United Kingdom		Other		Total
Continuing operations	2020 £m	2019 £m	2020 £m	2019 Restated(5) £m	2020 £m	2019 Restated(5) £m	2020 £m	2019 £m	2020 £m	2019 £m	2020 £m	2019 Restated(5) £m
Gross profit (centre contribution)	(101.7)	220.5	23.0	123.4	(13.9)	28.4	(80.0)	28.9	2.7	12.9	(169.9)	414.1
Rent	445.4	454.1	308.4	249.7	148.3	158.1	147.9	149.8	1.2	(0.1)	1,051.2	1,011.6
Depreciation of right-of-use assets/property, plant and equipment	(339.5)	(376.8)	(275.7)	(235.0)	(137.4)	(128.6)	(130.9)	(140.2)	(1.0)	6.2	(884.5)	(874.4)
Other	(9.0)	5.2	17.5	11.8	7.8	2.7	7.1	0.2	(0.3)	(6.1)	23.1	13.8
Gross profit (centre contribution) - Reported	(4.8)	303.0	73.2	149.9	4.8	60.6	(55.9)	38.7	2.6	12.9	19.9	565.1

	Americas		EMEA		Asia Pacific		United Kingdom		Other		Total
Continuing operations	2020 £m	2019 £m	2020 £m	2019 Restated(5) £m	2020 £m	2019 Restated(5) £m	2020 £m	2019 £m	2020 £m	2019 £m	2020 £m	2019 Restated(5) £m
Operating (loss)/profit	(184.6)	155.6	(60.4)	60.2	(44.8)	1.8	(116.7)	0.4	(146.8)	(81.2)	(553.3)	136.8
Rent	445.5	454.1	308.4	249.7	148.3	158.1	160.8	149.8	2.2	-	1,065.2	1,011.7
Depreciation of right-of-use assets/property, plant and equipment	(339.5)	(376.8)	(275.7)	(235.0)	(137.4)	(128.6)	(131.5)	(140.5)	(2.9)	5.4	(887.0)	(875.5)
Other	(9.1)	5.0	17.1	11.4	7.4	2.7	7.0	0.1	0.7	(5.4)	23.1	13.8
Operating (loss)/profit - Reported	(87.7)	237.9	(10.6)	86.3	(26.5)	34.0	(80.4)	9.8	(146.8)	(81.2)	(352.0)	286.8

	Americas		EMEA		Asia Pacific		United Kingdom		Other		Total
Continuing operations	2020 £m	2019 £m	2020 £m	2019 Restated(5) £m	2020 £m	2019 Restated(5) £m	2020 £m	2019 £m	2020 £m	2019 £m	2020 £m	2019 Restated(5) £m
Depreciation and amortisation	161.4	133.0	60.9	45.8	33.1	29.3	41.2	43.7	10.6	8.8	307.2	260.6
Depreciation of right-of-use assets/property, plant and equipment	339.5	376.8	275.7	236.7	137.4	127.0	131.5	140.5	2.9	(6.9)	887.0	874.1
Depreciation and amortisation - Reported	500.9	509.8	336.6	282.5	170.5	156.3	172.7	184.2	13.5	1.9	1,194.2	1,134.7

	Americas		EMEA		Asia Pacific		United Kingdom		Other		Total
Continuing operations	2020 £m	2019 £m	2020 £m	2019 Restated(5) £m	2020 £m	2019 Restated(5) £m	2020 £m	2019 £m	2020 £m	2019 £m	2020 £m	2019 Restated(5) £m
Impairment of assets	-	(0.7)	-	0.2	-	(1.2)	-	(0.4)	-	-	-	(2.1)
Impairment of right-of-use assets/property, plant and equipment	161.3	-	25.2	-	14.1	-	45.4	-	-	-	246.0	-
Impairment of assets - Reported	161.3	(0.7)	25.2	0.2	14.1	(1.2)	45.4	(0.4)	-	-	246.0	(2.1)

4. Segmental analysis - entity-wide disclosures

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

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

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

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

1.  Revenue of £nil (2019: £39.1m) is included in discontinued operations, following sale of master franchise agreement.

2.  Excluding deferred tax assets.

5. Operating (LOSS)/profit - continuing operations

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

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

1.  Excludes depreciation expenses related to discontinued operations for right-of-use assets of £0.6m (2019: £27.7m) and other property, plant and equipment of £0.2m (2019: £6.7m).

2.  Of the £34.8m expected credit loss, £17.5m relates to COVID-19 adjusting items (note 10).

3.  Of the £246.0m impairment charge, £244.8m relates to COVID-19 adjusting items (note 10).

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

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

6. Staff costs

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

1.  Excludes staff costs related to discontinued operations of £0.1m (2019: £11.0m).

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

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

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

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

7. Net finance expense

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

1.  Excludes lease liability finance expense related to discontinued operations of £0.1m (2019: £2.9m).

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

8. Taxation

(a) Analysis of charge in the year

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

(b) Reconciliation of taxation charge

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

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

(c) Factors that may affect the future tax charge

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

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

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

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

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

(d) Corporation tax

	2020 £m	2019 £m
Corporation tax payable	(40.0)	(32.3)
Corporation tax receivable	29.1	24.0

 

(e) Deferred taxation

The movement in deferred tax is analysed below:

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

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

At the balance sheet date, the temporary difference arising from unremitted earnings of overseas subsidiaries was £11.9m (2019: £12.1m). The only tax that would arise on these reserves would be non-recoverable withholding tax.

As part of the Group's pivot towards franchising in 2019, the Group recognised a deferred tax asset of £89.8m and a corresponding deferred tax credit. This arose in connection with a restructure during 2019 involving the move of the Group's intellectual property (IP) and franchising arrangements from Luxembourg to Switzerland, and was based on the expected future value of annual amortisation on the fair market value of the IP at the date of the restructuring, which is deductible for Swiss corporate income tax purposes.

Further restructuring of Group cost allocations in 2020 has resulted in a reduction in the recognition of the deferred tax asset to £69.7m, resulting in a deferred tax charge of £20.1m, based on the updated future value of annual amortisation on the fair market value of the IP.

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

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

9. Discontinued operations

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

Disposal of operations

During 2020, the Group completed the sale of individually immaterial operations for a consideration of £3.3m (2019: 104.3m). The results of these operations up to the date of disposal were as follows:

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

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

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

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

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

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

Disposal of the Japanese operations (2019)

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

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

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

	2020 £m	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 were as follows:

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

10. Covid-19 related adjusting items

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

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

In order to improve the transparency and usefulness of the financial information presented and improve year-on-year comparability, the Group has identified net charges of £389.8m relating to directly attributable charges resulting from COVID-19. These charges are considered to be adjusting items as they meet the Group's definition, as disclosed in previous annual reports, being both significant in nature and value to the results of the Group in the current period. £333.4m of these charges have been recognised as adjusting items to cost of sales and £56.4m of these charges have been recognised as adjusting items to selling, general and administration expenses in the Group's income statement.

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

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

1.  Included as an adjusting item in cost of sales.

2.  Included as an adjusting item in selling, general and administration.

3.  Included as adjusting items in selling, general and administration except for £6.4m in respect of worldwide financial support schemes which is included
in costs of sales.

-  Impairments of property, plant and equipment (including right-of-use assets)

The continuation of COVID-19, including new and extended preventative measures in most of the Group's markets, is expected to prolong the impact on our business in 2021. As a result of these measures, management carried out a comprehensive review exercise for potential impairments across the whole portfolio at a cash-generating units (CGUs) level.

The impairment review formed part of the Group's rationalisation process undertaken throughout the year due to the impact
of COVID-19. This review compared the value-in-use of CGUs, based on management's assumptions regarding likely future trading performance, to the carrying values at 31 December 2020. Following this review, a charge of £244.8m was recorded within net operating expenses. Of this charge, £80.9m was recorded against property, plant and equipment and a charge of £163.9m was recorded against right-of-use assets.

-  Impairments of goodwill

COVID-19 and linked restrictions has impacted our ability to trade our way to sustainable profitable growth in certain markets. As a result, the projected cash flows for the operations in certain countries no longer supported the carrying value of the CGUs and an impairment of £4.9m was recognised during 2020.

-  Provision for expected credit losses

In light of the temporary closure of centres globally, the Group reviewed the recoverability of its trade receivables profile and booked an increase of the expected credit loss provision of £17.5m. This increase reflects the greater likelihood of credit default by the Group's debtors directly attributable to the impact of COVID-19 and the significant change in the ageing profile of trade receivables as a direct consequence of COVID-19.

The increase is relatively low compared to the overall debtor profile as the Group has not historically incurred significant
credit losses and continues to maintain customer deposits as additional security in the event of non-performance of
customer contracts.

-  Network rationalisation

£77.5m of charges were incurred relating to network rationalisations that occurred in the year, which includes the write off of the book value of assets and direct closure costs related to these centres. A separate rationalisation charge of £15.3m has also been recorded which is not included as adjusting items.

-  Other one-off items including restructuring

During the year, the Group incurred £8.2m of transaction costs in respect of master franchise agreements that did not complete due to the outbreak of COVID-19. The Group fully expects to resume its pivot towards a franchising model in due course.

Other charges of £43.3m were also incurred, including severance costs and restructurings arising from mitigating actions taken by the Group in respect of COVID-19, completed by 31 December 2020 as well as claims in respect of centre closures. In addition, during the year, the Group received a total of £6.4m in respect of worldwide financial support schemes to fund staff costs.

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

11. Earnings per ordinary share (basic and diluted)

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

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

The Group issued £350.0m of convertible bonds in December 2020. The bond issue creates a potential 76,408,203 shares for bondholders. This represents a potential 7.1% dilutive impact at time of issue.

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

12. Dividends

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

The Group initially declared a final dividend of 4.80 pence, equating to £42.4m, on 3 March 2020, for the year ended 31 December 2019. However, in response to COVID-19, the Group announced on 23 March 2020 the prudent and precautionary decision to not pay this final dividend. Consequently, the resolution in respect of the 2019 final dividend was not proposed at the AGM held on 12 May 2020 and no dividends were paid during the year (2019: £58.2m). The Company has proposed to shareholders that no final dividend will be paid for the year ended 31 December 2020 (2019: Nil).

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

13. Goodwill

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

1.  Net of £Nil (2019: £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:	2020 £m	2019 £m
Americas	307.0	290.9
EMEA	142.5	138.6
Asia Pacific	26.6	26.2
United Kingdom	219.4	218.9
	695.5	674.6

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

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

The indefinite life intangible asset relates to the Regus brand.

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

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

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

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

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

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

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

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

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

Management has considered the following sensitivities:

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

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

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

14. Other intangible assets

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

Included within the brand value is £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 13).

15. Property, plant and equipment

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

1.  Right-of-use assets consist of property related leases.

2.  Modifications includes lease modifications and extensions.

3.  Includes depreciation expenses related to discontinued operations for right-of-use assets of £0.6m (2019: £27.7m) and other property, plant and equipment of £0.2m (2019: £6.7m).

4.  Included disposals related to discontinued operations for right-of-use assets of £0.7m (2019: £274.6m) and other property, plant and equipment of £1.2m (2019: £42.3m).

Impairment tests for property, plant and equipment (including right-of-use assets) are performed on a cash-generating unit basis when impairment triggers arise. Cash-generating units (CGUs) are defined as individual business centres, being the smallest identifiable group of assets that generate cash flows that are largely independent of other groups of assets. The Group assesses whether there is an indication that a CGU may be impaired, including persistent operating losses, net cash outflows and poor performance against forecasts. During the year, and as a direct result of the challenging economic circumstances arising from COVID-19, this gave rise to impairment tests in relation to various centres where impairment indicators were identified.

The recoverable amounts of property, plant & equipment are based on the higher of fair value less costs to sell and value in use. The Group considered both fair value less costs to dispose and value in use in the impairment testing on a centre by centre level. Value in use calculations are based on cash flow projections and discount rates for items of property, plant and equipment, on the same basis as described in note 13. Impairment charges are recognised within cost of sales in the consolidated income statement. In 2020, the Group recorded impairment charges of £163.9m in respect of right-of-use assets and £82.1m in respect of leasehold improvements.

16. Other long-term receivables

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

17. Trade and other receivables

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

Included within other receivables is £276.2m (2019: £Nil) of mezzanine and senior debt in an acquisition target that the Group did not control as at 31 December 2020. This classification as a current asset reflects the status of the counterparty in default and that the debt was technically repayable on demand. The balances have been recognised at amortised cost of £276.2m at 31 December 2020 and, as the acquisition did not complete, the debts were fully repaid to the Group in February 2021.

18. Trade and other payables (including customer deposits)

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

19. Borrowings

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

Bank and other loans

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

1.  Includes convertible bond debt of £298.8m (2019: £Nil).

The Group issued £350.0m convertible bonds in December 2020, raising £343.2m, net of transaction fees. At the date of issue the convertible bonds were bifurcated between:

-  A financial liability recognised at amortised cost of £298.2m, by using the discounted cash flow of interest payments and the bonds' nominal value; and subsequently remeasured at amortised cost of £298.8m at 31 December 2020. The financial liability is included in the above, falling due in more than two but not more than five years.

-  A derivative financial liability of £51.8m, not being closely related to the host financial liability, is recognised separately and measured at fair value through profit or loss (see note 24). A gain has been recognised at 31 December 2020 of £2.4m through net finance expenses, resulting in a year-end liability of £49.4m.

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

20. Provisions

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

Closures

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

Other

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

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

21. Investments in joint ventures

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

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

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

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

22. Share capital

Ordinary equity share capital

	2020		2019
	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 issued for cash in the year	133,891,213	1.3	-	-
Ordinary 1p shares in IWG plc at 31 December	1,057,248,651	10.5	923,357,438	9.2

On 28 May 2020 the Group announced the placement of 133,891,213 new ordinary shares, with a par value of 1.0 pence each. The price of 239.0 pence represented a discount of 8.1% to the middle market closing price of 260.2 pence on 27 May 2020, with the Group recognising net proceeds of £313.9m, with share premium of £312.6m recognised.

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

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

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

23. Analysis of financial assets/(liabilities)

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

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

2.  Includes £298.8m (2019: £Nil) convertible bond liability.

3.  Excludes the convertible bond derivative liability element at the issue date value of £51.8m.

4.  Includes early termination of lease liabilities of £362.8m (2019: £344.0m) of which £0.8m (2019: £281.1m) is related to discontinued operations.

Cash and cash equivalent balances held by the Group that are not available for use amounted to £4.1m at 31 December 2020 (2019: £8.3m). Of this balance, £1.6m (2019: £2.9m) is pledged as security against outstanding bank guarantees and a further £2.5m (2019: £5.4m) is pledged against various other commitments of the Group.

Cash flows on lease liabilities consist of principal payments of £898.1m (2019: £878.3m) and interest payments of £249.4m (2019: £213.2m). Total cash outflows of £1,212.4m (2019: £1,135.2m) for leases, including variable payments of £64.9m (2019: £43.7m), were incurred in the year.

Non-cash movements of £1,166.7m (2019: £2,087.9m) represent the movements on lease liabilities in relation to new leases, lease modifications/remeasurements and lease cessations.

Cash flows on debt due within, and after, one year relate to movements in the revolving credit facility and other borrowings. These net movements align with the activities reported in the cash flow statement after taking into consideration the £51.8m derivative liability recognised separately.

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

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

24. Financial instruments and financial risk management

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

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

Going concern

The Strategic Report on pages 1 to 65 of the Annual Report and Accounts sets out the Group's strategy and the factors that are likely to affect the future performance and position of the business. The financial review on pages 40 to 47 within the Strategic Report reviews the trading performance, financial position and cash flows of the Group. The Group's net debt position increased by £69.5m to a net debt position of £6,909.6m as at 31 December 2020. Excluding the IFRS 16 lease liabilities, the net debt position increased to 351.1m (2019: £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 2025 with an option to extend until 2026. As at 31 December 2020, £731.3m of the RCF was available and undrawn.

Although the Group has net current liabilities of £1,330.4m (2019: £1,366.5m), the Group does not consider that this gives rise to a liquidity risk. A large proportion of the net current liabilities comprise non-cash liabilities such as deferred income which will be recognised in future periods through the income statement. The Group holds customer deposits of £423.6m (2019: £476.8m) which are spread across a large number of customers and no deposit held for an individual customer is material. Therefore, the Group does not believe the balance represents a liquidity risk. Excluding short-term lease liabilities and deferred income, the Group has net current assets of £18.1m at 31 December 2020 (2019: net current liabilities of £66.5m).

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

Credit risk

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

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

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

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

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

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

The ageing of trade receivables at 31 December was:

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

At 31 December 2020, the Group maintained a provision of £25.7m for expected credit losses (2019: £7.7m) arising from trade receivables. The Group had provided £34.8m (2019: £2.0m) in the year, utilised £16.8m (2019: £8.3m) and released £Nil (2019: £8.2m). Customer deposits of £423.6m (2019: £476.8m) are held by the Group, mitigating the risk of default.

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

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

Liquidity risk

Liquidity risk represents the risk that the Group will not be able to meet their obligations as they fall due. The Group manages liquidity risk by closely monitoring the global cash position, the available and undrawn credit facilities, and forecast capital expenditure and expects to have sufficient liquidity to meet its financial obligations as they fall due. During 2020, there has been a sharp focus on cash generation by reducing cost, renegotiating rents and rationalising the network. More than 1,500 leases were renegotiated or restructured which resulted in short or long term cash benefits. The Group has free cash and liquid investments (excluding blocked cash) of £66.9m (2019: £58.3m). In addition to cash and liquid investments, the Group had £731.3m available and undrawn under its committed borrowings. The Directors consider the Group has adequate liquidity to meet day-to-day requirements.

The Group maintains a revolving credit facility provided by a group of international banks. At 31 December 2020, the amount of the facility remains £950.0m (2019: £950.0m) and the final maturity extended in March 2020 to March 2025 with an option to extend until 2026.

The Group actively reviews its exposure to interest rate movements. The issuance of the fixed rate convertible bond significantly reduces the Group's exposure to an increase in interest rates. The final interest rate swap taken to hedge against the floating interest rate obligations of debt drawn under the revolving credit facility matured in February 2021. This has a nominal amount of £30.0m and a fixed rate of 1.2%.

Market risk

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

Interest rate risk

The Group manages its exposure to interest rate risk through the relative proportions of fixed rate debt and floating rate debt. Any surplus cash balances are invested short-term, and at the end of 2020 no cash was invested for a period exceeding three months (2019: £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 pounds sterling are of a long-term nature and the Group does not normally hedge such foreign currency translation exposures.

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

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

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

	2020
£m		GBP	EUR	USD
Trade and other receivables		0.1	1.8	1.3
Trade and other payables		(0.4)	(4.1)	(1.8)
Net statement of financial position exposure		(0.3)	(2.3)	(0.5)

	2019
£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)

Other market risks

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

Sensitivity analysis

For the year ended 31 December 2020, it is estimated that a general increase of one percentage point in interest rates would have increased the Group's loss before tax by approximately £1.8m (2019: decrease in profit of £3.8m) with a corresponding decrease in total equity.

It is estimated that a five-percentage point weakening in the value of the US dollar against pounds sterling would have increased the Group's loss before tax by approximately £2.9m for the year ended 31 December 2020 (2019: decrease in profit of £12.9m). It is estimated that a five-percentage point weakening in the value of the euro against pounds sterling would have increased the Group's loss before tax by approximately £1.0m for the year ended 31 December 2020 (2019: decrease in profit of £5.9m).

It is estimated that a five-percentage point weakening in the value of the US dollar against pounds sterling would have decreased the Group's total equity by approximately £6.3m for the year ended 31 December 2020 (2019: decrease of £11.1m). It is estimated that a five-percentage point weakening in the value of the euro against pounds sterling would have decreased the Group's total equity by approximately £5.4m for the year ended 31 December 2020 (2019: decrease of £6.1m).

Capital management

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

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

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

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

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

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

Effective interest rates

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

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

As at 31 December 2020

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

As at 31 December 2019

	Effective 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	-	61.0	61.0	-	31.3	29.7	-
Financial assets (2)		674.6	682.4	621.4	31.3	29.7	-
Non-derivative financial liabilities(3):
Bank loans and corporate borrowings	3.2%	(340.2)	(340.2)	(0.1)	(2.0)	(338.1)	-
Lease liabilities	3.5%	(6,546.0)	(8,965.4)	(1,168.6)	(1,164.7)	(2,942.2)	(3,689.9)
Other loans	0.8%	(20.5)	(20.5)	(9.6)	(6.1)	(3.2)	(1.6)
Trade and other payables(4)	-	(788.8)	(788.8)	(788.8)	-	-	-
Other long-term payables(4)	-	(2.0)	(2.0)	-	(2.0)	-	-
Derivative financial liabilities:
Interest rate swaps
-  Outflow	-	(0.2)	(0.2)	(0.2)	-	-	-
-  Inflow	-	-	-	-	-	-	-
Financial liabilities		(7,697.7)	(10,117.1)	(1,967.3)	(1,174.8)	(3,283.5)	(3,691.5)

1.  Excluding prepayments.

2.  Financial assets are all held at amortised cost.

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

4.  Excluding deferred rents.

Fair value disclosures

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

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

Included within other receivables is £276.2m relating to mezzanine and senior debts acquired in December 2020. The balances have been recognised at fair value of £276.2m at 31 December 2020. The mezzanine and senior debt receivable balances have been settled in full in February 2021.

At the date of issue, the £350.0m was bifurcated at £298.2m and £51.8m between corporate borrowings (debt) and a derivative financial liability respectively. At 31 December 2020, the debt was valued at its amortised cost, £298.8m and the derivative liability at its fair value, £49.4m.

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	61.0	-	-	61.0		-	-	-	-
Derivative financial liabilities	-	-	(0.2)	(0.2)		-	(0.2)	-	(0.2)
Bank loans and corporate borrowings	-	(340.2)	-	(340.2)		-	-	-	-
Other loans	-	(20.5)	-	(20.5)		-	-	-	-
Trade and other payables	-	(788.8)	-	(788.8)		-	-	-	-
Other long-term payables	-	(2.0)	-	(2.0)		-	-	-	-
	674.6	(1,151.5)	(0.2)	(477.1)		-	(0.2)	-	(0.2)

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

Valuation techniques

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

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

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

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

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

Type	Valuation technique
Cash and cash equivalents, trade and other receivables/payables, customer deposits and investment loan receivables	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, overdrafts and debt element of convertible bonds	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, interest rate swaps and derivative element of convertible bonds	The fair values are based on a combination of broker quotes, forward pricing, and swap models. The fair value of the derivative element of convertible bonds has been calculated with reference to unobservable credit spreads.

Derivative financial instruments

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

	2020 £m	2019 £m
Derivatives used for cash flow hedging	30.0	30.0

Committed borrowings

	2020 Facility £m	2020 Available £m	2019 Facility £m	2019 Available £m
Revolving credit facility	950.0	731.3	950.0	485.9

The Group maintains a revolving credit facility provided by a group of international banks. At 31 December 2020, the amount of the facility remains £950.0m (2019: £950.0m) and the final maturity extended in March 2020 to March 2025 with an option to extend until 2026. As at 31 December, £731.3m was available and undrawn under this facility.

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.

The Group actively reviews its exposure to interest rate movements. The issuance of the fixed rate convertible bond significantly reduces the Group's exposure to an increase in interest rates. The final interest rate swap taken to hedge against the floating interest rate obligations of debt drawn under the revolving credit facility matured in February 2021. This has a nominal amount of £30.0m and a fixed rate of 1.2%.

CONVERTIBLE BONDS

In December 2020 the Group issued a £350.0m convertible bond, issued by IWG Group Holdings Sarl, a subsidiary of Group

and guaranteed by IWG plc, which is due for repayment in 2027 if not previously converted into shares. If the conversion option
is exercised by the holder of the option, the issuer has the choice to settle by cash or equity shares in the Group. The holders of the bond have the right to put the bonds back to the Group in 2025 at par. The bond carries a fixed coupon of 0.5% per annum. The bond liability is split between corporate borrowings (debt) and a derivative financial liability. At the date of issue, the £350.0m was bifurcated at £298.2m and £51.8m between corporate borrowings (debt) and a derivative financial liability respectively.
At 31 December 2020, the debt was valued at its amortised cost, £298.8m and the derivative liability at its fair value, £49.4m.

The derivative liability represents a level 3 instrument, which has been valued with reference to the total convertible bond price (a level 1 valuation) minus the level 3 valuation of the debt host. A change of 10 basis points in the credit spread that is indirectly used to value the derivative liability would have increased or decreased profit or loss by £1.1m.

25. Share-based payments

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

Plan 1: IWG Group Share Option Plan

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

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

Reconciliation of outstanding share options

	2020		2019
	Number of share options	Weighted average exercise price per share	Number of share options	Weighted average exercise price per share
At 1 January	32,511,195	200.34	36,441,222	191.87
Granted during the year	20,198,148	167.21	918,829	362.69
Lapsed during the year	(11,124,669)	209.91	(2,787,736)	205.68
Exercised during the year	(1,535,999)	145.00	(2,061,120)	143.37
Outstanding at 31 December	40,048,675	183.10	32,511,195	200.34
Exercisable at 31 December	4,477,253	156.40	4,807,175	142.44

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

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

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

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

The vesting of share options is subject to an ongoing employment condition. As at 31 December 2020 there were 4,477,253 (2019: 4,807,175) outstanding share options which had fully vested with no further performance or holding period requirements and which had a weighted average exercise price of £156.40 (2019: £142.44).

Performance conditions for share options

November 2014 share options

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

May 2015 share options

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

December 2015 share options 

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

June 2016 share options

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

September 2016 share options

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

March 2017 share options

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

December 2018 (Grant 1) share options

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

December 2018 (Grant 2) share options

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

May 2019 share options

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

September 2019 share options

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

December 2019 share options

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

April 2020 share options

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

May 2020 share options

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

August 2020 share options

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

September 2020 share options

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

Measurement of fair values

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

The inputs to the model are as follows:

	September 2020	August 2020	May 2020	April 2020	December 2019	September 2019	May 2019	December 2018 (Grant 2)
Share price on grant date	291.00p	222.60p	202.00p	165.00p	408.60p	402.30p	341.90p	199.80p
Exercise price	291.00p	222.60p	202.00p	165.00p	408.60p	402.30p	341.90p	199.80p
Expected volatility	51.81% - 62.96%	51.88% - 63.17%	50.15% - 61.06%	49.02% - 59.29%	36.24% - 44.72%	36.33% - 44.83%	38.84% - 45.75%	37.66% - 44.35%
Option life	3-7 years	3-7 years	3-7 years	3-7 years	3-7 years	3-7 years	3-5 years	3-5 years
Expected dividend	2.39%	3.12%	3.44%	4.21%	1.59%	1.62%	1.85%	2.95%
Fair value of option at time of grant	122.93p - 146.68p	84.95p - 102.54p	71.39p - 86.80p	50.79p - 62.29p	141.77p - 172.84p	137.79p - 169.19p	120.77p - 141.08p	58.77p - 69.33p
Risk-free interest rate	(0.08%) - (0.04%)	(0.08%) - (0.04%)	0.00% - 0.06%	0.00% - 0.06%	0.57% - 0.65%	0.48% - 0.50%	0.52% - 0.60%	0.87% - 1.01%

	December 2018 (Grant 1)	October 2018	December 2017	March 2017	September 2017	June 2016	December 2015
Share price on grant date	203.10p	223.20p	197.00p	283.70p	258.00p	272.50p	322.20p
Exercise price	203.10p	223.20p	197.00p	283.70p	258.00p	272.50p	322.20p
Expected volatility	37.63% - 44.25%	37.15% - 43.32%	33.31% - 35.93%	27.42% - 29.87%	27.45% - 32.35%	27.71% - 34.81%	24.80% - 37.08%
Option life	3-5 years	3-5 years	3-5 years	3-5 years	3-7 years	3-7 years	3-7 years
Expected dividend	2.90%	2.64%	2.69%	1.80%	1.80%	1.71%	1.40%
Fair value of option at time of grant	39.36p - 46.42p	67.69p - 78.56p	40.06p - 44.20p	44.51p - 76.88p	40.96p - 67.89p	44.28p - 78.68p	29.76p - 90.61p
Risk-free interest rate	0.73% - 0.88%	0.70% - 0.91%	0.54% - 0.75%	0.23% - 0.56%	0.09% - 0.38%	0.14% - 0.39%	0.14% - 0.21%

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

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

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

Reconciliation of outstanding share awards

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

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

Plan	Date of grant	Numbers granted	Lapsed	Exercised	At 31 Dec 2020	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
PSP	04/03/2020	915,739	-	-	915,739	04/03/2025
		5,386,252	(2,148,484)	-	3,237,768

Plan	Date of grant	Numbers granted	Lapsed	Exercised	At 31 Dec 2020	Release date
CIP: Matching shares	05/03/2014	647,688	(536,698)	(110,990)	-	05/03/2019
CIP: Matching shares	04/03/2015	831,808	(793,989)	(37,819)	-	04/03/2020
		1,479,496	(1,330,687)	(148,809)	-

Measurement of fair values

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

The inputs to the model are as follows:

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

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

2014 CIP Investment and matching grants

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

2015 CIP Investment and matching grants

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

2016 PSP Investment grant

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

2017 PSP Investment grant

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

2018 PSP Investment grant

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

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

2019 PSP Investment grant

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

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

Vesting scale	% of one third of the award that vests
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 vests
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 vests
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%

2020 PSP investment grant

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

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

	% of the awards that vests
Exceeds the median by 10% or more	100%
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%

Plan 3: Deferred Share Bonus Plan

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

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

Reconciliation of outstanding share options

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

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

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

Measurement of fair values

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

The inputs to the model are as follows:

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

26. Retirement benefit obligations

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

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

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

27. Acquisitions

Current period acquisitions

During the year ended 31 December 2020 the Group made various individually immaterial acquisitions for a total consideration of £28.5m.

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

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

The goodwill arising on the 2020 acquisitions reflects the anticipated future benefits IWG can obtain from operating the businesses more efficiently, primarily through increasing occupancy and the addition of value-adding products and services. Of the above goodwill, £28.7m is expected to be deductible for tax purposes.

If the above acquisitions had occurred on 1 January 2020, the revenue and net retained profit arising from these acquisitions would have been £17.8m and £1.5m respectively. In the year, the equity acquisitions contributed revenue of £2.6m and net retained profit of £0.6m.

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

The acquisition costs associated with these transactions were £0.4m, recorded within administration expenses in the consolidated income statement.

For 2020's acquisitions, the fair value of assets acquired has only been provisionally assessed, pending completion of a fair value assessment which has not yet been completed due to the limited time available between the date of acquisitions and the year-end date. The main changes in the provisional fair values expected are primarily for customer relationships and plant, property and equipment. The final assessment of the fair value of these assets will be made within 12 months of the acquisition dates and any adjustments reported in future reports.

Prior period acquisitions

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

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

The goodwill arising on the 2019 acquisition reflects the anticipated future benefits IWG can obtain from operating the businesses more efficiently, primarily through increasing occupancy and the addition of value-adding products and services. Of the above goodwill, £22.6m was expected to be deductible for tax purposes.

If the above acquisition had occurred on 1 January 2019, the revenue and net retained profit arising from these acquisitions would have been £28.3m and £4.4m respectively. During 2019, the equity acquisition contributed revenue of £4.7m and net retained profit of £1.2m.

There was no contingent consideration arising on the above acquisition. Contingent consideration of £5.3m was paid during the prior year with respect to milestones achieved on a previous acquisition.

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

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

28. Capital commitments

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

These commitments are principally in respect of centre fit-out obligations. There are no capital commitments in respect of joint ventures at 31 December 2020 (2019: £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 £143.9m (2019: £144.5m). There are no material lawsuits pending against the Group.

30. Related parties

Parent and subsidiary entities

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

Joint ventures

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

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

As at 31 December 2020, none of the amounts due to the Group have been provided for as the expected credit losses arising on the balances are considered immaterial (2019: £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:

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

Share-based payments included in the table above reflect the accounting charge in the year. The full fair value of awards granted in the year was £6.8m (2019: £2.0m). These awards are subject to performance conditions and vest over three, four and five years from the award date (refer to note 25 for further details).

Transactions with related parties

During the year ended 31 December 2020 the Group acquired goods and services from a company indirectly controlled by
a Director of the Company amounting to £5,629 (2019: £18,764). There was a £5,629 balance outstanding at the year-end
(2019: £18,764).

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

31. Principal Group companies

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

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 GmbH	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 Enterprises Sarl	Switzerland	100
Regus Management Malaysia Sdn Bhd	Malaysia	100		IWG Group Holdings Sarl	Luxembourg	100
Regus Management de Mexico, SA de CV	Mexico	100		Genesis Finance Sarl	Switzerland	100
Regus New Zealand Management Ltd	New Zealand	100		Pathway Finance Sarl	Switzerland	100
Regus Business Centre Norge AS	Norway	100		Pathway Finance EUR 2 Sarl	Switzerland	100
IWG Management Sp z.o.o.	Poland	100		Pathway Finance USD 2 Sarl	Switzerland	100
Regus Management Singapore Pte Ltd	Singapore	100		Regus Group Limited	United Kingdom	100
Regus Management Espana SL	Spain	100		Regus Corporation	United States	100
IWG Management (Sweden) AB	Sweden	100
Avanta Managed Offices Ltd	United Kingdom	100
Basepoint Centres Limited	United Kingdom	100
H Work LLC	United States	100
RGN National Business Centre LLC	United States	100
RB Centres LLC	United States	100

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

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

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

Key judgements

Adjusting items

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

Tax assets and liabilities

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

Determining the lease term of contracts with renewal and termination options

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

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

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

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

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

Key estimates

Valuation of intangibles and goodwill

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

Deferred tax assets

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

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

Impairment of property, plant and equipment

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

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

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

Estimating the incremental borrowing rates on leases

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

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

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

Fair value accounting for business combinations

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

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

Parent company accounts

Summarised extract of UNAUDITED Company balance sheet

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

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

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

Approved by the Board on 9 March 2021

Mark Dixon	ERIC HAGEMAN
Chief Executive Officer	Chief Financial Officer

Accounting policies

Basis of preparation

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

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

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

Investments

During 2020, the Company acquired the direct investments in IWG Enterprises Sarl and Umbrella Management Limited as part of an internal restructuring. This transaction resulted in the Company recognising a dividend in specie of £2,966.0m and a corresponding impairment in its investment of IWG Global Investments Sarl of £360.0m. The value of the investments
recognised have been considered by the Directors and are considered fully recoverable.

IFRS 16 Pro forma statements

Consolidated income statement (unaudited)

The purpose of these unaudited pages is to provide a reconciliation from the 2020 financial results to the pro forma statements
in accordance with the previous pre-IFRS 16 policies adopted by the Group, and thereby give the reader greater insight into
the impact of IFRS 16 on the results of the Group. The pro forma statements also reflect the impact of the adjusting items
during 2020.

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

 

Pro forma adjustments recognised

The performance of the Group is impacted by the following significant adjustments in adopting IFRS 16. The recognition of these balances will not impact the overall cash flows of the Group or the cash generation per share.

1. Right-of-use assets and related lease liabilities

These adjustments reflect the right-of-use assets recognised on transition, together with the related lease liabilities. The initial lease liabilities are equal to the present value of the lease payments during the lease term that have not yet been paid. The cost
of the right-of-use asset comprises the amount of the initial measurement of the lease liability, plus any additional direct costs associated with setting up the lease.

2. Rent and finance costs

Under IFRS 16 conventional rent charges are not recognised in the profit or loss. The payments associated with these charges instead form part of the lease payments used in calculating the right-of-use assets and related lease liabilities noted above. The lease liabilities are measured in subsequent periods using the effective interest rate method, based on the applicable interest rate determined at the date of transition. The related finance costs arising on subsequent measurement are recognised directly through profit or loss.

3. Depreciation and lease payments

Depreciation on the right-of-use assets recognised is depreciated over the life of the lease on a straight-line basis, adjusted for any period between the lease commencement date and the date the related centre opens, reflecting the lease related costs directly incurred in preparing the business centre for trading. Lease payments reduce the lease liabilities recognised in the balance sheet.

4. Taxation

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

5. Other adjustments

These adjustments primarily reflect the impairment of the right-of-use assets and other property, plant and equipment as well as the reversal of the closure cost provision on a pre-IFRS 16 basis. Certain parking, storage and brokerage costs are also reversed, as they form part of the lease payments.

Consolidated balance sheet (unaudited)

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

Consolidated statement of cash flows (unaudited)

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

SEGMENTAL ANALYSIS

Segmental analysis - based on estimates (unaudited)

		Americas 2020 (pre-IFRS 16 Basis)	EMEA 2020 (pre-IFRS 16 Basis)	Asia Pacific 2020 (pre-IFRS 16 Basis)	United Kingdom 2020 (pre-IFRS 16 Basis)	Other 2020 (pre-IFRS 16 Basis)	Total 2020 (pre-IFRS 16 Basis)
	Pre2019(1)
	Workstations(4)	194,127	138,942	79,810	94,240	-	507,119
	Occupancy (%)	74.1%	73.9%	70.4%	71.0%	-	72.9%
	Revenue (£m)	969.8	564.0	252.2	338.2	5.6	2,129.8
	REVPOW (£)	6,742	5,491	4,488	5,052	-	5,761
	2019 Expansions(2)
	Workstations(4)	23,258	41,765	11,766	11,698	-	88,487
	Occupancy (%)	49.9%	55.4%	59.4%	60.2%	-	55.1%
	Revenue (£m)	53.4	103.4	27.1	31.5	-	215.4
	2020 Expansions(5)
	Workstations(4)	8,092	14,005	3,061	4,784	-	29,942
	Occupancy (%)	24.2%	36.5%	35.9%	33.6%	-	32.7%
	Revenue (£m)	11.0	21.5	5.7	10.0	-	48.2
	Network rationalisations(3)
	Workstations(4)	8,578	7,076	7,319	2,277	-	25,250
	Occupancy (%)	45.5%	63.0%	61.7%	66.6%	-	57.0%
	Revenue (£m)	32.3	26.2	19.2	9.1	-	86.8
	Total
	Workstations(4)	234,055	201,788	101,956	112,999	-	650,798
	Occupancy (%)	68.9%	67.1%	67.5%	68.2%	-	68.0%
	Revenue (£m)	1,066.5	715.1	304.2	388.8	5.6	2,480.2
	REVPAW (£)	4,557	3,544	2,984	3,441	-	3,811
	Period end workstations(7)
	Mature	193,629	143,256	81,959	96,237	-	515,081
	2019 Expansions	23,339	42,939	12,070	11,880	-	90,228
	2020 Expansions	10,809	21,142	4,659	9,295	-	45,905
	Total	227,777	207,337	98,688	117,412	-	651,214

Segmental analysis - based on estimates (unaudited)

		Americas 2019 (pre-IFRS 16 Basis)	EMEA 2019 (pre-IFRS 16 Basis)	Asia Pacific 2019 (pre-IFRS 16 Basis)	United Kingdom 2019 (pre-IFRS 16 Basis)	Other 2019 (pre-IFRS 16 Basis)	Total 2019 (pre-IFRS 16 Basis)
	Pre-2019(1)
	Workstations(4)	195,316	135,864	84,238	91,886	-	507,304
	Occupancy (%)	77.2%	72.5%	71.3%	71.4%	-	73.9%
	Revenue (£m)	1,099.8	575.1	274.7	370.1	9.0	2,328.7
	REVPOW (£)	7,296	5,835	4,577	5,640	-	6,211
	2019 Expansions(2)
	Workstations(4)	9,682	17,261	6,218	7,629	-	40,790
	Occupancy (%)	40.0%	40.3%	37.4%	32.5%	-	38.3%
	Revenue (£m)	20.7	36.8	10.6	11.3	-	79.4
	Network rationalisations(6)
	Workstations(4)	11,516	12,021	11,390	9,976	-	44,903
	Occupancy (%)	63.1%	66.3%	62.6%	57.1%	-	62.5%
	Revenue (£m)	67.4	71.1	57.4	44.9	-	240.8
	Total
	Workstations(4)	216,514	165,146	101,846	109,491	-	592,997
	Occupancy (%)	74.8%	68.7%	68.2%	67.4%	-	70.6%
	Revenue (£m)	1,187.9	683.0	342.7	426.3	9.0	2,648.9
	REVPAW (£)	5,486	4,136	3,365	3,893	-	4,467

Notes:

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

2.  Expansions include new centres opened and acquired businesses.

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

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

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

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

7.  Workstations available at year-end.

POST-TAX CASH RETURN ON NET INVESTMENT

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

2020

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

2020

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

1.  Excludes depreciation expenses related to discontinued operations of £0.1m.

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

2020

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

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

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

2020

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

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

2020

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

2020

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

2020

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

FIVE-YEAR SUMMARY

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

 

END

 

 

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