APGN.L Regulatory News (APGN)

18 September 2020

Applegreen plc

Results for the six months ended 30 June 2020

Resilient performance given COVID-19 impact and strong recovery continues into Q3

Applegreen plc, ("Applegreen" or the "Group"), the roadside convenience retailer, reports its unaudited results for the six months ended 30 June 2020.

The Group has reported a resilient performance in H1 2020 in an unprecedented environment where COVID-19 impacted all of our markets. Encouragingly, there was a strong recovery in volumes after the initial lockdown in April and this positive momentum has carried into Q3. Our balance sheet has recovered strongly from the initial impact of COVID-19 giving us ample liquidity and asset strength to allow the business to continue to deliver on its strategic ambitions.

H1 2020 HIGHLIGHTS

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Financial highlights

· Group Revenue of €1.1bn, reflecting a sales reduction of 26.6% from the impact of COVID-19 lockdown restrictions (H1 2019: €1.5bn)

· Group adjusted EBITDA (pre-IFRS 16) of €25.3m (H1 2019: €58.9m)

· Adjusted EBITDA excluding Welcome Break (pre-IFRS 16) of €29.4m which represents +11% growth YOY (H1 2019: €26.5m)

· Targeted investment in the estate with capital expenditure of €24.9m

· Group net debt of €550.7m (pre-IFRS 16) (31 Dec 2019: €525.5m) represents leverage of 5.2x. Core Applegreen stand-alone leverage is 2.2x

· Strong fixed asset base - carrying value (cost less depreciation) of land and buildings at 30 June 2020 is €378.4m

· In order to preserve liquidity in the current environment, the Board is not recommending the payment of an interim dividend

Operational highlights

· Estate expansion continued with 559 sites at the end of June 2020

· Sites remained open throughout the crisis, albeit some with significantly reduced food franchise offerings

· Swift and decisive action taken across the Group to manage the cost base

Current trading and outlook

· Positive momentum exiting the period continued with the business trading ahead of management's expectations in Q3 to date

· The Group, and Welcome Break in particular, have seen a sharp recovery and positive momentum in Q2 and into Q3, aided by government stimulus, increased traffic volumes and staycations

o Sales volumes fell to 57% of the prior year period in April 2020 during the peak of the lockdown, improving significantly to 29% of the prior year in June 2020

o After the period end, this recovery continued as remaining food offers were reopened

· As separately announced, Group is part of a Consortium for the design, construction, financing, operation and maintenance of the 27 motorway service areas on the New York State Thruway

· Pre-IFRS 16 net debt (excluding shareholder loans) reduced significantly post-period end to €480.9m at 31 August 2020, representing cash balances of €216.7m and gross external debt of €697.6m

· Whilst management remain cautious around the on-going uncertainty caused by the COVID-19 pandemic, the Board is confident that Applegreen is well positioned to benefit from future opportunities

Bob Etchingham, Chief Executive Officer, commented:

"The first half of 2020 has been an unprecedented period due to the COVID-19 pandemic and I am immensely proud of the tremendous efforts of our people in supporting our customers and local communities throughout this challenging period.

"Applegreen carried good momentum from last year and traded strongly for the first ten weeks of the year, however, we saw a sudden and significant impact on the business from mid-March, particularly in our motorway service areas. This was most pronounced in April and May, but volumes recovered well by the end of the second quarter. To help mitigate some of this impact, the Group took swift and decisive action in managing our cost base and tailoring our retail offer for changing consumer needs.

"Encouragingly, this recovery has continued over the summer months with the further lifting of restrictions, government stimulus packages and the staycation trend, all of which has improved traffic volumes. This performance further demonstrates the resilience of our business model and of our sector. We have learnt a lot during this crisis and are confident that we will emerge as a stronger organisation that is well positioned to benefit from future opportunities across all of our markets."

Conference call details

Applegreen plc will host a webcast for analysts and institutional investors today at 8.30am (UK time). The investor presentation will be available on the Group's website at www.applegreenstores.com.

For details of the webcast please contact Amy O'Sullivan at MHP Communications on amy.osullivan@mhpc.com or 0203 128 8778.

Contact information

About Applegreen

Applegreen is a high growth roadside convenience retailer, operating from motorway service areas and petrol filling stations, with a major presence in the Republic of Ireland, the United Kingdom and the USA.

The Applegreen brand is based on competitive fuel pricing that drives in-store footfall with an innovative food and beverage offer. Improving the customer journey to inspire loyalty is central to what we do, ensuring we provide a smooth and enjoyable experience. In the UK, we predominantly operate through our majority owned subsidiary, Welcome Break, which is one of the UK's leading motorway service operators with 38 forecourts.

Combined with organic growth from existing sites, our strategy is focused on establishing a presence in new markets by developing traditional fuel forecourts with a branded food offer and, when significant scale has been achieved, entering the larger service areas on strategic road networks and enhancing the more resilient non-fuel contribution.

As at 30 June 2020, the Group operates 559 sites, including 69 Motorway Service Area Sites. The Group employs c.11,145 employees across its core territories.

GROUP H1 2020 PERFORMANCE OVERVIEW

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H1 2020 Performance

The Group traded strongly and in line with management expectations for the first 10 weeks of 2020. However, footfall and volumes were severely impacted from mid-March as governments and customers took measures to contain the spread of the COVID-19 virus.

The majority of sites within the core Applegreen estate are located in communities in both towns and suburbs, with limited exposure to city centre locations where the footfall reduction was most pronounced. Our strong retail offer combined with positive fuel margins and tight cost management resulted in a very strong performance for this part of the business with adjusted EBITDA of €29.4m for the first six months, an increase of 11% compared to H1 2019. This growth was aided by a strong performance in the US, where more limited lockdown restrictions and estate expansion drove an increase in gross profit of 34% on 2019.

The Welcome Break estate was impacted more heavily due to significantly reduced motorway traffic and the closure of most of our branded food offers from 23 March with a phased reopening from mid-May. This resulted in a significant reduction in EBITDA.

Given that we are classified as an essential service provider, our sites remained open throughout the crisis, albeit some with significantly reduced food franchise offerings. As restrictions eased, we remobilised and adapted our stores to allow us to reopen our food outlets in compliance with social distancing guidelines.

Following a low point in April, we saw volumes increase consistently as restrictions eased and people started to travel again. April sales volumes for the Group were 57% below the prior year but improved significantly to 29% below the prior year for the month of June 2020.

The resilient performance of the Group was also aided by our geographic spread as lockdowns in the US were more limited than those in place in the Republic of Ireland and the UK during the period.

Current Trading and Outlook

Q3 has seen the positive momentum continue with the business trading ahead of management's expectations during the period. The strong recovery has been supported by staycations, government stimulus packages and the lifting of restrictions across our markets.

In July and August, the Group continued to re-open its remaining food offers to meet increased demand. The Motorway Service Area (MSA) sites have seen a strong recovery, particularly in Welcome Break where food volumes had recovered to less than 20% off the prior year by early September, with the strength of our international brand portfolio underpinning this performance. Strong store sales and fuel margins in the Petrol Filling Station (PFS) estate have also continued.

There is ongoing focus on cost optimisation across the business and continued tight working capital management.

The outlook for Q4 is clouded by potential for additional public health measures, however we look forward to the future with growing confidence whilst cognisant of the risks that may still impact the business in the future.

Post period end, the Group has announced that it is part of Empire State Thruway Partners which has been awarded and signed a conditional 33 year lease for the design, construction, financing, operation and maintenance of the 27 motorway service areas on the New York State Thruway. The terms of the financial plan and lease agreement are yet to be finalised and remain subject to final approval. A further announcement, as appropriate, will be made in due course. 

The roadside convenience retail sector has historically shown tremendous resilience to recover from economic downturns. The Board believes that the sharp and continued recovery of volumes through the summer months demonstrates the robustness of the business model and that Applegreen is well positioned to benefit from future opportunities.

Financial position

As the COVID-19 crisis unfolded, steps were taken to conserve cash through capital expenditure deferment, tight working capital management and cancelling dividend payments. In addition, we drew down our existing facilities within both the Applegreen plc banking group and the Welcome Break banking group, ensuring that ample cash was available through the period.

We engaged with our finance providers at an early stage to ensure we had sufficient covenant flexibility and access to additional borrowing facilities. Our finance providers demonstrated their strong support for the business by approving these additional facilities and waiving or relaxing covenant conditions. As a result, the Applegreen plc banking group and the Welcome Break banking group secured additional facilities of €52.5m and £25.4m respectively.

Despite the unprecedented impact of COVID-19, due to steps taken the Group, as at 30 June 2020, the Group's consolidated net external debt (pre-IFRS 16 and excluding shareholder loans) had only increased by €25.2m to €550.7m (31 Dec 2019: €525.5m) comprised of total external debt of €658.0m (31 Dec 2019: €664.2m) and total cash of €107.3m (31 Dec 2019: €138.7m):

• €69.9m cash and €258.0m external debt within the Applegreen plc banking group. Debt matures in October 2023; and

• €37.4m cash and €400.0m external debt within Welcome Break (non-recourse to Applegreen plc) with 50% in 10-year institutional term loans (2029 maturity) and 50% is a 7-year term loan (2026 maturity).

The strong trading over the summer months has seen the cash balance at 31 August 2020 rise to €216.7m with net external debt (pre-IFRS 16 and excluding shareholder loans) of €480.9m:

• €124.1m cash and €259.8m external debt within the Applegreen plc banking group; and

• €92.6m cash and €437.8m external debt within Welcome Break.

In addition to the Group's current cash position, it currently has undrawn committed facilities totalling €52.5m and undrawn overdraft facilities of €12m.

Although the Applegreen banking group covenant conditions had been waived or relaxed, the Group's financial forecasts indicate that the Applegreen plc banking group will not breach the original covenant conditions and will not require a drawdown of the additional facilities that were provided.

Welcome Break drew down the additional facilities of £25.4m in July and is expected to maintain comfortable headroom above its revised covenant conditions.

COVID-19 - Swift and Decisive action

Our teams continue to ensure the safety of all employees and to support customers as they continue to provide the essential service to the communities they serve. Throughout this turbulent time, our actions have been focussed on three main priorities:

· Our People: protecting the health and wellbeing of employees has been prioritised at all times. Measures taken have included segregation and zoning, use of appropriate personal protective equipment and increased sanitisation and screening measures and remote working where possible;

· Our Customers: ensuring continuity of essential service to our customers across our three markets despite challenges presented by the pandemic, adapting our offerings to address changing consumer demands and buying behaviours; and

· Our Communities: supporting our front-line workers with free fuel to transport patients and blood supplies and food donations to hospital staff and our charity partners.

As the nature and scale of the pandemic unfolded, a number of actions were taken by the Group to protect profitability and conserve cash:

· The Group temporarily reduced frontline headcount in late March with employees returning to the business as food offers were reopened and volumes increased;

· We secured a deferral of payroll taxes and VAT from HMRC and Irish Revenue;

· We benefited from the UK and Republic of Ireland government property rates moratoriums for twelve months and six months, respectively;

· We negotiated rental reductions or holidays with landlords;

· We reduced repairs and maintenance costs, a large component of the cost base, to minimal levels;

· We implemented a recruitment freeze and reduced headcount in selective areas;

· We implemented graduated salary cost reductions on a temporary basis for support staff across the organisation;

· We deferred executive director bonuses;

· We deferred development capital expenditure and reduced maintenance capital expenditure to its absolute minimum level; and

· Very tight management of working capital with a focus on reducing inventory levels and working with suppliers on payables.

H1 2020 FINANCIAL REVIEW

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Group Performance

Key figures (€m):

Group adjusted EBITDA (pre-IFRS 16) for H1 2020 was €25.3m (H1 2019: €58.9m). This was driven by a strong performance in the core Applegreen business (i.e. excluding Welcome Break) delivering €29.4m of adjusted EBITDA (pre-IFRS 16), up 11% on 2019, somewhat offsetting the reduced volumes experienced across the Welcome Break estate.

Estate expansion continued with 559 sites at the end of June 2020. One PFS site was added in the UK and two dealer sites were added in the Republic of Ireland since 31 December 2019.

As noted in previous announcements, the Group traded strongly and in line with management expectations for the first 10 weeks of 2020. However, in mid-March the COVID-19 virus impacted footfall and volumes as governments and customers took measures to contain the spread.

The core Applegreen business traded strongly with EBITDA ahead of prior year, highlighting the resilient nature of the business. The Welcome Break acquired assets were impacted significantly due to government mandated travel restrictions, which resulted in the majority of food outlets being closed from 23 March with a phased reopening starting in mid-May.

The Group, and Welcome Break in particular, has seen a sharp recovery and positive momentum in late Q2 and into Q3, aided by government stimulus, increased traffic volumes and staycations.

Applegreen plc adjusted leverage was 2.2x at 30 June 2020 with Group consolidated adjusted leverage of 5.2x at 30 June 2020 (both pre IFRS 16).

Geographic Performance Review

· ROI recovering well with lifting of restrictions

· Good performance in Store and Fuel

· Network increased by two dealer sites

Fuel volumes were impacted considerably in March and April but have seen a significant improvement since then. Strong fuel margins have largely offset the volume decline.

The food performance declined by 33% in the first half of the year, with many food units closed during the period. Our timely strategic investments in technology and new product development aided performance. The Burger King food outlets remained open, aided by self-service kiosks in store, online ordering, home delivery and drive thru facilities.

Store performance was exceptionally strong with the average basket value increasing as communities shopped locally. The sites are located in communities in towns and suburbs, away from city centre locations where the retail footfall was most impacted. Our central distribution centre ensured security of supply throughout the period and allowed us to adapt quickly to changing consumer preferences.

The swift and decisive action on reducing the cost base has mitigated the volume impact on EBITDA.

· UK PFS performance ahead of last year

· Welcome Break significantly impacted in the period, with a strong recovery as a phased re-opening programme was implemented

· Swift and decisive cost reduction actions taken

UK PFS had an impressive half year performance with strong fuel margin and store sales delivering EBITDA ahead of the prior year. The UK PFS estate sales mix is predominantly fuel and store.

Store sales were boosted by an increase in sales in grocery staples and seasonal offerings such as barbeque and gardening items as customers avoided larger outlets.

The mandated government travel restrictions had a considerable impact on food outlets, with the majority closed from 23 March with a phased reopening starting in mid-May.

Welcome Break was significantly impacted by the restrictions but has experienced a vastly improved recovery trajectory post lockdown. Welcome Break led the market in the phased reopening of food outlets from mid-May, adapting store layouts to adhere to social distance guidelines. Following the easing of restrictions, volumes have sharply recovered driven by stronger UK traffic volumes, government stimulus and the staycation trend.

The rebranding of the Welcome Break forecourts has resumed and has had a positive impact on increasing volumes and rates of shop participation. Parking volumes have also recovered well.

· Limited lockdowns restrictions

· Mid-West acquisition included in 2020 figures

· Good performance in fuel and store

The US market had more limited lockdown restrictions imposed during the period and performed impressively, benefitting from strong fuel margins across the US states.

We commenced a rebranding of the fuel offer in the Mid-West sites at the start of the year which is still ongoing.

Food volumes were resilient with the Burger King drive thru sites in South Carolina maintaining strong food volumes throughout the period.

Store sales performed exceptionally well with higher sales than 2019 through the summer months.

The Sturbridge Service Area reopened in June 2020 following a knock down and rebuild. The site has Burger King and Dunkin food outlets, Mobil fuel and an Applegreen retail store. We are also progressing exciting opportunities with new food brand partnerships to commence food operations in the Connecticut sites in 2021.

Costs

Selling and Distribution Expenses

Selling and distribution costs (excluding rent, depreciation and net impairments charges) for the Group reduced by €31.0m compared to H1 2019. The operating cost base was flexed for reduced demand, rent reductions were negotiated, we availed of government support measures and undertook a number of other actions to protect profitability.

Administration Expenses

Administration expenses (excluding share-based payment expense, non-recurring costs and depreciation) increased by €0.9m to support the growing estate.

Dividend

Whilst the business has shown a strong recovery, the Board is conscious of the need to preserve cash and has not proposed an interim dividend payment for 2020. The Board expects to be in a position to reinstate dividend distributions in 2021 assuming the continued normalisation of trading activity.

UNAUDITED CONSOLIDATED INCOME STATEMENT

PERIOD ENDED 30 JUNE 2020

(Loss)/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 2020

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2020

UNAUDITED Consolidated statement of changes in equity

AS AT 30 JUNE 2020

UNAUDITED Consolidated statement of changes in equity

AS AT 30 JUNE 2019

UNAUDITED Consolidated statement of cash flows

PERIOD ENDED 30 JUNE 2020

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 2020 (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 2019 which is available on the Group's website: https://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 2019 with the exception of treatment of COVID 19 related rent concessions and government grants and assistance, as described in note 2.

The Interim Financial Information does not constitute statutory financial statements. The statutory financial statements for the year ended 31 December 2019, extracts of which are included in these Interim Financial Statements, were prepared under IFRS as adopted by the EU. 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 2019 as set out on page 149-150 in those financial statements.

Going concern and the impact of COVID-19

Trade and operations of the Group were severely impacted from mid-March as governments and customers took increasing measures to contain the spread of the COVID-19 virus. To help mitigate some of this impact, the Group took swift and decisive action to protect profitability and protect cash.

Finance providers were engaged at an early stage to ensure there was sufficient covenant flexibility and access to additional borrowing facilities. Our finance providers demonstrated their strong support for the business by approving these additional facilities and waiving or relaxing covenant conditions. Applegreen plc banking group and the Welcome Break banking group secured additional facilities of €52.5m and £25.4m respectively. The debt in the Welcome Break banking group is ring-fenced to that group of companies and is non-recourse to the wider Applegreen group.

Notes to the unaudited consolidated financial information

1. General information and basis of preparation (continued)

Two scenarios were considered for the Group in preparing our going concern assessment being a management case and another scenario using a set of severe but plausible downside assumptions to that management case. Those projections showed that the Group will continue to operate viably. Although the Applegreen banking group covenant conditions had been waived or relaxed, the Group's financial forecasts indicate that the Applegreen plc banking group will not breach the original covenant conditions and will not require a further drawdown of the additional facilities that were provided. Welcome Break have subsequently drawn down the additional facilities of £25.4m in July.

At 30 June 2020, the Group had consolidated net external debt (pre-IFRS 16) of €551m comprised of total external debt of €658m and total cash of €107m. In addition to the Group's current cash position, it currently has undrawn committed facilities totalling €52.5m and undrawn overdraft facilities of €12m.

Having considered the above factors, the Directors are of the view that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of twelve months following the date of this report. For this reason, they continue to adopt the going concern basis for preparing the interim financial statements.

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 2019, and are described in those financial statements on pages 138 to 148, except for the impact of the matters described below:

Leases

On 28 May 2020, the IASB issued "COVID-19-Related Rent Concessions", an amendment to IFRS 16 'Leases'. The amendment is applicable for reporting periods beginning on or after 1 June 2020 (subject to endorsement by the European Union). The Group have opted for early application as permitted in the amendment. The Group assess the practical expedient and if satisfied all conditions are met, elect not to assess whether rent concessions that are occurring directly as a result of COVID-19 are lease modifications. Changes in lease payments that arise from such rent concessions have been recognised in the Unaudited Consolidated Income Statement.

Government grants and assistance policy

Government grants represent the transfers of resources to the Group from governments in the key trading regions in which it operates, on condition that certain criteria relating to the Group's operating activities are met. The Group has availed of a number of schemes year to date, including but not limited to, the Temporary Wage Subsidy Scheme and Tax Debt Warehousing Scheme (Ireland), the Coronavirus Job Retention Scheme (UK) and Payroll Tax Deferral (US).

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. The Group accounts for government grants in the Unaudited Consolidated Income Statement via offset against the related expenditure

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

4. (Loss)/earnings per share

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

Diluted (loss)/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

(Loss)/profit before tax is stated after charging/(crediting):

(1) Non recurring charges in 2020 include costs that relate to business combination acquisition costs and expenses incurred in relation to COVID-19. In 2019 costs relate to business combination acquisition costs and 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 2020 includes the following significant projects; six service stations in the Republic of Ireland (€12.2 million) and one service station in the US (€7.9 million). The remaining amounts relate to several other developments across all regions.

Notes to the unaudited consolidated financial information

10. Impairment

Impairment of goodwill

Goodwill arising on business combinations is not amortised but is reviewed for impairment on an annual basis, or more frequently if there are indications that goodwill may be impaired. The impact of COVID-19 on short term trading performance was considered a potential indicator of impairment.

Goodwill acquired through business combination activity has been allocated to cash generating units (CGUs) that are expected to benefit from the synergies in that combination. The CGUs represent the lowest level at which the associated goodwill is monitored for internal management purposes, and are not larger than the operating segments determined in accordance with IFRS 8, Operating Segments. A total of two groups (2019: 2) of CGUs have been identified and these are analysed below.

Impairment testing methodology and results

The recoverable amount of each CGU is based on a value in use calculation. Cash flows used in the value in use assessment are calculated based on management's best estimate of pre-tax cash flow for the CGU for the coming three years and forecasted thereafter over the remaining useful life of the assets in the CGU using a long-term growth rate of 2%. The growth rate used does not exceed the long-term average growth rate in the United Kingdom, the country in which both CGUs operate. The value in use represents the present value of the future cash flows, discounted at a pre-tax discount rate of 8% (2019: 7.65%). The interim goodwill impairment testing process has not identified any impairments. No impairments were identified in 2019.

Impairment of property, plant and equipment and intangibles (other than goodwill)

The Group operates a number of service station sites in Ireland, the UK and the USA. The Group considers each individual site as a cash generating unit (CGU) for the purpose of impairment assessment in accordance with IAS 36 'Impairment of assets'. Impairment assessments are conducted at this level when indicators of impairment are considered to exist. The recoverable amounts of sites that are assessed for impairment have been determined based on the higher of value-in-use methodology or fair value less costs of disposal.

Significant assumptions used in the value in use assessments are summarised below:

Notes to the unaudited consolidated financial information

10. Impairment (continued)

Cash flows used in the value in use assessment are calculated based on management's best estimate of pre-tax cash flow for each individual site for the coming three years and forecasted thereafter over the remaining useful lives of the assets in the site using long term growth rates. Cash flows used in the value in use assessment also include maintenance capital expenditure required to maintain the site assets in their current condition.

An impairment charge of €1.4 million (30 June 2019: €1.1million) was recognised in the Consolidated Income Statement within selling and distribution costs. The impairment charge relates to service stations in Ireland, UK and US. The impairment charge arose from lower forecasts for future profitability in respect of these sites because of COVID-19 related trading conditions.

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

Notes to the unaudited consolidated financial information

14. Trade and other payables

15. Share capital

16. Post period end events

On 8 September 2020 the Group announced that it is part of Empire State Thruway Partners (the "Consortium"), which has been awarded and signed a conditional 33 year lease for the design, construction, financing, operation and maintenance of the 27 motorway service areas on the New York State Thruway.

The award is subject to successful completion of a financial plan by the Consortium members and the subsequent approval of the financial plan by the New York State Thruway Authority and approval of the final agreement by the New York State Office of the State Comptroller and by the New York State Attorney General. The award is also subject to the Consortium securing financing for the project, a process which is ongoing.

Glossary of financial terms

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

Glossary of financial terms (continued)