APGN.L Regulatory News (APGN)

Applegreen plc

Results for the six months ended 30 June 2019

Dublin, London, 20 September 2019: Applegreen plc ('Applegreen' or 'the Group'), a major roadside retailer with Service Areas and Petrol Filling Station operations in the Republic of Ireland, the United Kingdom and the United States announces its unaudited interim results for the six months ended 30 June 2019.

Financial highlights:

·; Group revenue increased by 73% on H1 2018 to €1.5bn (70% on a constant currency basis)

·; Group gross profit increased by 145% on H1 2018 to €268.0m (142% on a constant currency basis)

·; Group adjusted EBITDA (pre IFRS 16) increased by 204% to €58.9m in H1 2019 from €19.4m in H1 2018 (201% on a constant currency basis). Adjusted EBITDA (post IFRS 16) was €92.8m

·; Applegreen's adjusted EBITDA, excluding Welcome Break, (pre IFRS 16) increased by 37% to €26.5m in H1 2019 aided by very strong LFL growth

·; Like for like growth in fuel revenue of 8.4% and fuel gross profit 14.3% (constant currency)

·; Like for like growth in non-fuel (food and store) revenue of 5.0% and non-fuel gross profit of 6.0% (constant currency)

·; Continued investment in the network with capex for the period of €33.5m

·; Interim dividend of 0.66 cent per share (H1 2018: 0.63 cent per share)

Operational highlights:

·; The integration of Welcome Break, which was acquired in October 2018, is going well and significant additional recurring synergies have been identified, which will be delivered in full by end 2021

·; Further expansion continues with US focus:

o Acquisition of 46 sites in the US Mid West announced on 26 June

o Acquisition of minority stake in Connecticut Service Plazas announced on 7 August

o 11 sites added to the estate in H1 in ROI and UK

·; The Group now has 483 sites at 30 June 2019 (30 June 2018: 368 sites)

Key figures (€m):

*EBITDA adjusted for share based payments, non-recurring operating charges and acquisition related adjustments and excluding IFRS 16 (see glossary)

** Profit before tax adjusted for share based payments, non-recurring operating charges, IFRS 16, interest on shareholder loans, non-recurring interest charges and acquisition related adjustments (see glossary)

*** Diluted EPS adjusted for share based payments, non-recurring operating charges, IFRS 16, interest on shareholder loans, non-recurring interest charges, acquisition related adjustments and the related minority interest and tax impact on these items (see glossary)

Commenting on the results, Bob Etchingham, CEO said:

"We are very pleased with our trading performance during the first half year especially from our core Applegreen business. Further initiatives were taken to further develop the business, including recently announced acquisitions in the US."

"Like for like revenue and profits from the underlying Applegreen estate, excluding Welcome Break, continued to show strong growth, whilst significant progress was made on the integration of the Welcome Break business acquired in the UK in Q4 last year. The delivery of anticipated synergy benefits is firmly on track and we see the opportunity for greater savings than originally expected going forward."

"We recently announced two significant acquisitions in the US. A portfolio acquisition of 46 sites located in Minnesota, Wisconsin and Michigan further expands Applegreen's footprint to this region, whilst our interest in a consortium acquisition of the Connecticut Service Plazas concession represents a significant strategic step in growing our presence in the US and establishing Applegreen as a recognised operator of larger Service Area sites on strategic road networks."

"The Welcome Break business has seen growth in core catering but trading was soft during Q1 in peripheral revenue streams. Traffic volumes and turn-ins continued to grow but a slight fall in conversion rates reflects weakened consumer confidence. Post period end, the key summer period demonstrated the resilience of Welcome Break, trading satisfactorily despite the uncertain political and macro-economic conditions."

"Our primary focus in the immediate term remains the delivery of further synergy benefits from Welcome Break, which we now expect to be significantly larger than our previous expectation, and the integration of recent US acquisitions, whilst continuing on the deleveraging trajectory for the Group."

About Applegreen

Established in 1992, Applegreen is a convenience food and beverage retailer and operator of petrol forecourts and motorway service areas with a major presence in the Republic of Ireland, the United Kingdom and the USA. The Group is focused on acquiring and developing new Service Area and Petrol Filling Station sites in each of the three markets in which it operates. As at 30 June 2019, the business operated 483 forecourt sites and employed c11,000 people.

The Group offers a distinctive convenience retail offering with three key elements:

·; A "low fuel prices, always" price promise to drive footfall to the stores;

·; A "Better Value Always" tailored retail offer; and

·; A strong food and beverage focus aiming to offer premium products and service to the customer.

In addition to its own proprietary Bakewell brand, the Group enjoys established partnerships with a portfolio of high quality international brands. Following the Welcome Break acquisition, new brand partners include Starbucks, Waitrose, WH Smith, KFC, Pizza Express, Harry Ramsden and the Ramada and Days Inn hotel brands. These are in addition to existing brands including Burger King, Subway, Costa Coffee, Greggs, Lavazza, Chopstix, Freshii and 7-Eleven, some of which also have an existing presence on the Welcome Break network.

Applegreen is the number one Motorway Service Area operator in the Republic of Ireland and the number two Motorway Service Area operator in the United Kingdom.

Conference call details - analysts and institutional investors

Applegreen plc will host a conference call for analysts and institutional investors today, 20 September 2019 at 8.30am (BST). the investor presentation will be available on the Group's website at www.applegreenstores.com. Dial in details are as follows:

Ireland Telephone Number: +353 (0)1 246 5638

UK Telephone Number: +44(0) 330 336 9125

Passcode: 1278133

For further enquiries, please contact:

Applegreen +353 (0) 1 512 4800

Bob Etchingham (CEO)

Niall Dolan (CFO)

Drury Porter Novelli (Ireland PR Adviser) +353 (0) 1 260 5000

Paddy Hughes

MHP Communications (UK PR Adviser) +44 (0) 20 3128 8100

Simon Hockridge

Peter Hewer

Guy Featherstone

Shore Capital +44 (0) 20 7408 4090

Stephane Auton

Patrick Castle

Daniel Bush

Goodbody +353 (0) 1 667 0420

Joe Gill

Siobhan Wall

Richard Tunney

Applegreen H1 2019 Performance Overview and Outlook

The performance in H1 2019 was driven by significant contribution from the prior year acquisitions and strong LFL performance from the underlying Applegreen estate.

The performance of the underlying Applegreen estate (ex Welcome Break) for the period was very strong with EBITDA increasing by 37% from €19.4m to €26.5m. This was driven by excellent LFL growth, particularly in fuel gross profit (14.3% increase) as well as good performance from the 2018 acquisitions.

Overall Welcome Break trading has seen growth in core catering brands but some softness in peripheral revenue streams. Significant additional synergies have been identified and we expect to deliver £2.5m in year with at least £10m p.a. synergies delivered by end 2021 which is twice our original expectation.

While we achieved strong LFL fuel gross profit in H1 2019 in each of our three markets, non-fuel gross profit has increased significantly due to the incorporation of the Welcome Break business into the Group. 75% of gross profit now comes from non-fuel revenue streams in line with our strategy of reducing our dependency on fuel.

Republic of Ireland

In the six months ended 30 June 2019, revenue in the Republic of Ireland ('ROI') increased by 14.1% and gross profit increased by 11.8%.

Total fuel gross profit increased by 16.0% compared to H1 2018 and increased by 9.2% on a LFL basis. This reflected favourable market conditions, particularly in May and June, as well as improved LFL volumes. In addition, the comparable period in 2018 was impacted by weather disruption in much of ROI in February and March.

Like for like food and store sales and gross profit increased year on year by 3.4% and 5.3%, respectively, driven by organic growth in existing food outlets. Food and store sales in H1 2018 would also have been impacted by the weather disruption.

Our dealer and fuel card volumes have continued to grow and now account for 35% of ROI fuel volumes on a combined basis.

During the period, we expanded our Republic of Ireland estate by six sites which included one Service Area site, one Petrol Filling Station site and four dealer sites. 89% of the ROI estate is branded Applegreen (H1 2018: 88%). There were a total of 199 sites trading at the end of the period.

United Kingdom

The results incorporate the Welcome Break business and as a result we have seen significant growth in reported revenue which increased by 127.8% and gross profit by 470.9%. The Welcome Break business is seasonal, with a significant portion of trade in the months of July and August. Revenue and gross profit growth year on year on a constant currency basis was 126.2% and 466.9%, respectively.

On a like for like basis (excluding Welcome Break), total UK revenue grew by 3.6% (at constant currency) and gross profit grew by 9.6% (at constant currency). Total fuel gross profit in the UK increased by 19.4% on a like for like basis (at constant currency) which reflects a very strong performance compared to a weaker H1 2018 which was impacted by adverse weather events, unfavourable commodity price movements and more intense competitive landscape. Total non-fuel sales were slightly below H1 2018 on a constant currency basis (1.4%), due to very strong comparators that benefited from very good early summer weather and the football World Cup. Non-fuel gross profit grew by 1.5% (at constant currency) reflecting the mix being weighted more towards food in 2019.

Five new sites were added in period bringing the total number of sites at 30 June 2019 to 163 with 60% trading under the Applegreen or Welcome Break brand.

United States

Revenue in the US increased by 117.1% and gross profit by 96.8%, primarily due to the full year impact of the acquisitions in Florida and South Carolina during 2018. On a like for like basis, fuel gross profit has increased by 20.4% (at constant currency), reflecting strong margins, particularly in the North East. Non-fuel gross profit has increased by 14.7% on a like for like, constant currency basis which was primarily driven by the uplift in revenue following the conversion of a number of stores to 7-Eleven convenience stores.

The total number of sites trading at 30 June 2019 was 121 with 29 in the North East and 92 in the South East.

We have further expanded our relationship with 7-Eleven in the both the North East and the South East and have rebranded two convenience stores to 7-Eleven during the period. A further three 7-Eleven convenience stores have been added since the period end. In addition, we are developing our first US TRSA in Sturbridge, Massachusetts which will include a Burger King and Dunkin Donuts and sell Mobil branded fuel.

Costs

Including Welcome Break, selling and distribution expenses (excluding rent, depreciation and amortisation) rose by 142.8% while administrative expenses (excluding share-based payment expense, non-recurring costs and depreciation) grew by 63.0%.

Excluding Welcome Break, selling and distribution expenses (excluding rent, depreciation and net impairments charges) increased by 25.1% which is driven by the 19% increase in site numbers. Administrative expenses (excluding share-based payment expense, non-recurring costs and depreciation) increased by 17.4%, this increase is moderating following a significant investment in management resources in prior years to facilitate the growth in the business. Excluding Welcome Break, the Group's rent cost (pre IFRS 16) increased by €4.2m to €16.0m which is primarily due to the leasehold site acquisitions in Florida and South Carolina during 2018.

Interest costs have increased due to the higher debt levels in the Group following the Welcome Break acquisition, which relate to the additional debt in Applegreen plc to finance the acquisition and the existing debt in Welcome Break.

Net Debt

Net debt on a pre IFRS 16 basis (excluding shareholder loans) was €470.7m at 30 June 2019 (31 December 2018: €506.9m). The Group has total external borrowings of €605.3m and total cash of €134.6m at the balance sheet date. Of the total external borrowings, €391.1m is held in Welcome Break and is non-recourse to Applegreen plc.

The pro forma adjusted leverage for the Group at 30 June 2019 was 3.5x (31 December 2018: 3.9x) and the pro forma adjusted basis for Applegreen excluding non-recourse Welcome Break debt was 2.0x (31 December 2018: 2.2x).

A refinancing of the existing Welcome Break senior debt is expected to be completed in Q4 2019. The arrangement will involve £330m senior term facilities, plus £40m of capex and revolving credit and includes a 10-year Institutional term loan of £165m, with the balance in the form of 7-year bank facilities.

IFRS 16

Applegreen has adopted IFRS 16 Leases with effect from 1 January 2019 and the Group's leasing activities have been accounted for under the new standard for the first time in the current set of results. The Group has adopted IFRS 16 using the modified retrospective approach and the prior year results have not been restated.

The key changes (all non-cash) arising from the adoption of IFRS 16 for the period are as follows:

·; Adjusted EBITDA has increased from €58.9m to €92.8m following the elimination of the adjusted rental cost

·; Depreciation cost has increased from €20.0m to €35.5m due to the depreciation of the right of use asset

·; Finance cost has increased from €14.0m to €38.4m due to the imputed interest calculated on the lease liabilities

·; Adjusted Diluted EPS has decreased from 12.80 cent per share to 8.12 cent per share due to the overall net decrease in profit after tax arising from the adjustments above

·; Group leverage as at 30 June 2019 has increased from 3.5x to 5.6x (increase of 2.1x)

·; Non current assets as at 30 June 2019 have increased from €1.1bn to €1.6bn due to the recognition of a right of use asset

·; Net debt as at 30 June 2019 has increased by €642.9m from €470.7m to €1.1bn due to the recognition of lease liabilities

·; The Group's weighted average discount rate was 8%

Further Network Expansion Activities

We continue to develop our network and have added four new sites since 30 June 2019. In addition, we commenced a Welcome Break pilot fuel supply branding and pricing trial at Hopwood Park at the end of July. The forecourt and store have been rebranded from Shell to Welcome Break and we are trialling a new fuel pricing strategy, at a significant discount to average MSA prices. Early indications are positive; however, the trial period has not yet run for long enough to draw any conclusions or to determine whether the pilot will be extended across the estate.

We have a good pipeline of further developments of both Service Area sites and Petrol Filling Stations across our markets.

Dividend

The Board has declared an interim dividend of 0.66 cent per share (H1 2018: 0.63 cent per share) which will be paid on 18 October 2019 to shareholders on the register as at 4 October 2019.

Outlook

The underlying Applegreen business continues to grow at a satisfactory rate and, whilst there is currently no certainty around the timing and impact of Brexit, the resilient nature of our business and our "self help" initiatives should help protect us from potential downsides. We therefore remain confident in the prospects for the business for 2019 and beyond.

UNAUDITED CONSOLIDATED INCOME STATEMENT

PERIOD ENDED 30 JUNE 2019

Earnings per share from continuing operations attributable to the owners of the parent company during the year

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

PERIOD ENDED 30 JUNE 2019

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2019

UNAUDITED Consolidated statement of changes in equity

AS AT 30 JUNE 2019

UNAUDITED Consolidated statement of changes in equity

AS AT 30 JUNE 2019

UNAUDITED Consolidated statement of cash flows

PERIOD ENDED 30 JUNE 2019

Notes to the unaudited consolidated financial information

1. General information and basis of preparation

Applegreen plc ('the Company') is a company incorporated in the Republic of Ireland. The Unaudited Consolidated Financial Information of the Company for the six months ended 30 June 2019 (the 'Financial Information') includes the Company and its subsidiaries (together referred to as the 'Group'). The Company is incorporated and tax resident in Ireland. The address of its registered office is Block 17, Joyce Way, Parkwest, Dublin 12.

The consolidated financial statements of the Group are prepared in accordance with Irish law and International Financial Reporting Standards ('IFRS') and their interpretations issued by the International Accounting Standards Board ('IASB') and adopted by the European Union ('EU'). The financial information in this report has been prepared in accordance with the Group's accounting policies. Full details of the accounting policies adopted by the Group are contained in the Consolidated Financial Statements included in the Group's annual report for the year ended 31 December 2018 which is available on the Group's website: http://applegreenstores.com.

The accounting policies and methods of computation and presentation adopted in the preparation of the Financial Information are consistent with those described and applied in the annual report for the year ended 31 December 2018 with the exception of the treatment of foreign exchange on investments in foreign operations and the adoption of IFRS 16, Leases, which are described below. A number of other changes to IFRS became effective in 2019; however, they did not have a material effect on the financial information included in this report.

The Interim Financial Statements do not constitute statutory financial statements. The statutory financial statements for the year ended 31 December 2018, extracts of which are included in these Interim Financial Statements, were prepared under IFRS as adopted by the EU and have been filed with the Companies Registration Office. The auditors' report on those financial statements was unqualified and did not contain an emphasis of matter paragraph.

The Financial Information is presented in Euro, rounded to the nearest thousand, which is the functional currency of the parent company and also the presentation currency of the Group.

The preparation of the Financial Information requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results could differ materially from these estimates. In preparing the Financial Information, the critical judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2018 as set out on page 119 in those financial statements, with the addition of the following:

Lease terms

The Group adopted IFRS 16 from 01 January 2019. IFRS 16 eliminates the classification of leases as either operating leases or finance leases under IAS 17 and introduces a single lessee accounting model with some exceptions. See below for further details.

Notes to the unaudited consolidated financial information

1. General information and basis of preparation (continued)

Many of the Group's leases have options to renew or terminate. The Group applies judgement in evaluating the length of the lease. Management consider all relevant factors and, in particular, if an economic incentive exists to renew or terminate. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognised. The Group periodically assesses this or more frequently if circumstances change.

Calculation of incremental borrowing rate

Under IFRS 16 'Leases', discount rates are used to determine the present value of the lease payments to value the lease liability and applicable right of use asset. This discount rate can be either the interest rate implicit in the lease or the lessee's incremental borrowing rate (IBR). As the interest rate implicit in the lease was not readily determined, the Group used the IBR approach.

The incremental borrowing rate is derived from country specific risk-free interest rates over the relevant lease term, adjusted for the finance margin attainable by each lessee and asset specific adjustments designed to reflect the underlying asset's location and condition. To determine the IBR, the Group engaged external valuers to assess this on a lease by lease basis. Management then reviewed the work and assessed the appropriateness of the results.

2. Significant accounting policies

The accounting policies applied in the Financial Information are consistent with those applied in the consolidated financial statements as at and for the year ended 31 December 2018, and are described in those financial statements on pages 108 to 118, except for the impact of the matters described below.

Hedge of net investment in foreign operation

Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognised in Other Comprehensive Income to the extent that the hedge is effective and are presented within Equity in the foreign exchange translation reserve. To the extent that the hedge is ineffective, such differences are recognised in profit or loss. When the hedged part of a net investment is disposed of, the associated cumulative amount in equity is transferred to profit or loss as an adjustment to the profit or loss on disposal. This has increased the charge in the Consolidated Statement of Comprehensive Income by €0.2m for the period ended 30 June 2019.

New standards adopted by the Group

The Group adopted IFRS 16, Leases, with effect from 01 January 2019.

IFRS 16 Leases

IFRS 16, Leases, issued in January 2016 by the IASB replaces IAS 17, Leases, and related interpretations. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both the lessee and the lessor. For lessees, IFRS 16 eliminates the classification of leases as either operating leases or finance leases and introduces a single lessee accounting model with some exemptions for short-term and low-value leases. The lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments.

Notes to the unaudited consolidated financial information

2. Significant accounting policies (continued)

The Group leases a range of assets including property and motor vehicles. As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease. Under IFRS 16, the Group applies a single recognition and measurement approach for all leases, except for short-term and low-value assets and recognises right-of use assets and lease liabilities.

The Group has adopted IFRS 16 using the modified retrospective approach, with the date of initial application of 01 January 2019. Under this method, the impact of the standard is calculated retrospectively, however, the cumulative effect arising from the new leasing rules is recognised in the opening balance sheet at the date of initial application. Accordingly, the comparative information presented for 2018 has not been restated.

Under IFRS 16, a contract is, or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. The Group recognises a right-of-use asset and a lease liability at the lease commencement date.

The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurements of the lease liability. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, restoration costs and lease payments made at or before the commencement date less any lease incentives received. The right-of-use asset is depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Where the lease contains a purchase option the asset is written off over the useful life of the asset when it is reasonably certain that the purchase option will be exercised. Right-of-use assets are subject to impairment testing.

The lease liability is initially measured at the present value of certain lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as an expense in the period in which the event or condition that triggers the payment occurs. The Group has elected to avail of the practical expedient not to separate lease components from any associated non-lease components.

The lease payments are discounted using the lessee's incremental borrowing rate as the interest rate implicit in the lease is generally not readily determinable.

After the commencement date, the lease liability is subsequently increased by the interest cost on the lease liability and decreased by the lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

Notes to the unaudited consolidated financial information

2. Significant accounting policies (continued)

The Group has elected to apply the recognition exemptions for short-term and low-value leases and recognises the lease payments associated with these leases as an expense in profit or loss on a straight-line basis over the lease term. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise certain items of IT equipment and small items of office furniture.

Transition

On transition to IFRS 16, the Group has elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed.

For leases classified as operating leases under IAS 17, lease liabilities were measured at the present value of the remaining lease payments, discounted at the lessee's incremental borrowing rate as at 01 January 2019.

Right-of-use assets were measured at either:

·; their carrying amount as if IFRS 16 had been applied since the commencement date, discounted using the lessee's incremental borrowing rate at the date of initial application - the Group applied this approach for certain property leases; or

·; an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments - the Group applied this approach to all other leases.

The Group applied the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

·; Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.

·; Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

·; Relied on its assessment of whether leases are onerous under IAS 37 immediately before the date of initial application to meet the impairment requirement.

For leases previously classified as finance leases under IAS 17, the carrying amount of the right-of-use asset and the lease liability at 01 January 2019 were determined as the carrying amount of lease asset and lease liability under IAS 17 immediately before that date.

Notes to the unaudited consolidated financial information

2. Significant accounting policies (continued)

Impacts on transition

The impact on the Group's Consolidated Statement of Financial Position as at 01 January 2019 is as follows:

When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using the lessee's incremental borrowing rate at 01 January 2019. The weighted average rate applied was 8%.

Impacts for the period

The impact on the Group's Consolidated Income Statement for the period to 30 June 2019 is as follows:

Notes to the unaudited consolidated financial information

3. Segmental analysis

Applegreen plc is a forecourt retail business headquartered in Dublin, Ireland. Operating segments are reported in a manner consistent with internal reporting provided to the Chief Operating Decision Maker (CODM). The CODM has been identified as the Board of Executive Directors.

The board considers the business from both a geographic and product perspective. Geographically, management considers the performance in Ireland, the UK and the USA. From a product perspective, management separately considers retail activities in respect of the sale of fuel, food groceries and other within Ireland, the UK and in the USA. Other primarily relates to income arising from the operation of hotels and gaming machines in the UK sites.

The Group is organised into the following operating segments:

Retail Ireland - Involves the sale of fuel, food and store within the Republic of Ireland.

Retail UK - Involves the sale of fuel, food and store along with hotel related revenue, gaming machines and other retail revenues within the United Kingdom.

Retail USA - Involves the sale of fuel, food and store within the United States of America.

The CODM monitors Revenue and Gross Profit of segments separately in order to allocate resources between segments and to assess performance.

Information regarding the results of each reportable segment is included within this note. Segment performance measures are revenue and gross profit as included in the internal management reports that are reviewed by the executive directors. These measures are used to monitor performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. The CODM also reviews adjusted EBITDA on a consolidated basis. Assets and liabilities are reviewed by the CODM for the Group in its entirety and as such segment information is not provided for these items.

Notes to the unaudited consolidated financial information

3. Segmental analysis (continued)

Notes to the unaudited consolidated financial information

3. Segmental analysis (continued)

Reconciliation of profit before income tax to earnings before interest, tax, depreciation and amortisation (EBITDA), share based payments and other non-recurring charges (Adjusted EBITDA):

4. Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares which comprise share options issued under the share incentive plan.

Notes to the unaudited consolidated financial information

5. Expenses

Profit before tax is stated after charging/(crediting):

(1) Non recurring charges relate to business combination acquisition costs and costs incurred in relation to the upgrade of our financial ERP system.

6. Finance costs and income

Notes to the unaudited consolidated financial information

7. Taxation

Notes to the unaudited consolidated financial information

8. Intangible assets

Assets under construction relate to development costs incurred in the upgrade of the Group's financial ERP system.

Notes to the unaudited consolidated financial information

9. Property, plant and equipment

Assets under construction as at 30 June 2019 includes the following significant projects; to eight service stations in the Republic of Ireland (€9.8 million) and three service stations in the US (€3 million). The remaining amounts relate to several other developments across all regions.

Notes to the unaudited consolidated financial information

10. Inventories

The cost of inventories recognised as an expense and included in 'cost of sales' amounted to €1.2 billion (June 2018: €0.7 billion).

11. Trade and other receivables

Current trade and other receivables are non-interest bearing and are generally less than 30 day credit terms. Non-current debtors relates to loans advanced to our dealer network. The fair values of non-current trade and other receivables is equivalent to their carrying value. The fair value has been determined on the basis of discounted cash flows.

Notes to the unaudited consolidated financial information

12. Cash and cash equivalents

Cash and cash equivalents included in the Unaudited Consolidated Statement of Financial Position and Unaudited Consolidated Statement of Cash Flows are analysed as follows:

Cash and cash equivalents include the following for the purposes of the statement of cash flows:

13. Borrowings

Following the adoption of IFRS 16 as of 01 January 2019, the Group recognised an increase of €640 million in Leases. See note 2 for details.

Notes to the unaudited consolidated financial information

14. Trade and other payables

Following the adoption of IFRS 16 as of 01 January 2019, the Group recognised a decrease in deferred income of €6 million. See note 2 for details.

15. Share capital

Notes to the unaudited consolidated financial information

16. Post period end events

On 26 June 2019, the Group announced that it has reached agreement for acquisition of 46 sites in Michigan, Minnesota and Wisconsin, USA under an initial 10 year lease agreement. This deal has now closed and are opening as of September 2019.

The Group has also agreed to acquire a 40% holding in 23 on-highway services plazas in Connecticut, USA for approximately $37.6 million (excluding transaction fees). Completion of this transaction is subject to Connecticut Department of Transportation approval and, pending satisfaction of this condition, is expected to complete in Q3 2019.

The Directors have proposed an interim dividend of 0.66 cent per ordinary share (June 2018: 0.63 cent per share). This will be paid on 25 October 2019 to shareholders on the register at 04 October 2019.

Glossary of financial terms

The key financial terms used by the Group in this report are as follows:

Glossary of financial terms (continued)