GOAL.L Regulatory News (GOAL)

Goals Soccer Centres plcFinal Results for the year ended 31st December 2017

Goals Soccer Centres plc ("Goals", the "Company" or the "Group") a leading operator of outdoor small-sided soccer centres with 49 sites, including three in California, USA, announces its final results for the period ended 31st December 2017.

Statutory measures

Underlying performance 

Statutory measures have been adjusted to reflect like-for-like ownership of Goals Soccer Centers Inc:

· Underlying Sales1 of £33.1m (2016: £33.0m)

· Underlying Like-for-like sales1 decline of 0.3% (2016: +0.5%). The closure of the clubhouses at Ruislip, Beckenham, Glasgow South, Leeds and Wembley during refurbishment impacted like-for-like sales1 by 0.4%. Underlying Like-for-like sales1 adjusted for closures was +0.1%.

· Total System Sales1 of £33.8m (2016: £33.5m)

· Underlying EBITDA2 of £10.0m (2016: £11.2m) impacted by £1.1m of continued investment to support our strategic initiatives and cost headwinds

· Underlying Profit Before Tax3 of £6.2m (2016: £7.7m)

· Underlying Diluted Earnings Per Share4 of 6.3p (2016: 9.7p)

· No final dividend is proposed

Strategic Highlights

Significant progress in 2017 in delivering our strategic plan:

· Investment and upgrading of the UK estate is delivering improvement and remains ongoing:

o 248 of our 460 arenas have now been fully modernised and are delivering good returns at clubs where five or more arenas have been upgraded. Declines reduced at clubs with between one and four upgraded arenas

o First five "Clubhouse 2020" pilot sites opened during the year with encouraging results

o Further UK investment to be financed from existing cash flow until indebtedness ratio reduces 

· Continued expansion in the US:

o Entered a strategic 50:50, self-financing, Joint Venture (the "Joint Venture") with City Football Group ("CFG"), the global football group that owns Manchester City and New York City Football Clubs amongst others, to rollout the Goals brand in North America:

§ CFG has invested $16 million cash immediately and granted a licence to use its brands in North America

§ This will fully finance the planned rollout of the Goals brand in North America

o US trading continues to improve and the rollout of new clubs has been accelerated

§ Second US club in Pomona, California was opened in February 2017

§ Third US club in Rancho Cucamonga, California was opened in January 2018

§ Construction of a fourth US club in Covina, California is expected to commence during Q2 2018

· Andy Anson will join the Company as Chief Executive Officer with effect from 23 April 2018

Current Trading

For the 8 weeks to 24 February trading has been encouraging with like-for like sales up by 4.0%, benefitting from the investments last year. In common with many businesses Goals was impacted by the challenging weather conditions in weeks 9 and 10 and consequently like-for like sales for the first 10 weeks of our year to 10 March were -3.0%. It is anticipated that with more normal weather patterns sales will revert to positive territory.

Goals is a cash generative business and it is clear that where major investments have been made to more than five arenas at a club positive sales trends follow. We will only utilise existing cash resources to make further investments in the current year.

Michael Bolingbroke, Interim Chairman said:

"During 2017 we made significant progress towards achieving our strategic plan with investments in the UK making an encouraging start and improving sales. There remains work to do to unlock the potential inherent value within the UK estate and this will be the number one priority for the incoming CEO. Together with CFG, our JV partner, we are pleased with the pace of growth in the US and we are already California's leading 5 and 7-a-side pitch operator.

We look forward to the arrival of Andy Anson as CEO in late April who will look to execute our existing strategic plan whilst continuing to build on the strong foundations which have already been put in place.

We remain confident that we will deliver improved returns for Goals shareholders."

13th March 2018

Enquiries:

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Underlying and Adjusted Performance Measures

Management has presented the following performance measures as they are used throughout the annual report and financial statements. Management believe that presentation of the Group's results in this way gives a better understanding of the Group's financial performance. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and assists in providing a meaningful analysis of the trading results of the Group. This also facilitates comparison with prior periods to assess trends in financial performance more readily.

The Group applies judgement in identifying significant non-recurring items of income and expense that are recognised as exceptional or non-recurring to help provide an indication of the Group's underlying business. In determining whether an event or transaction is exceptional in nature, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence.

The performance measures outlined below are not defined performance measures in IFRS. A reconciliation from these alternative performance measures to the nearest measure prepared in accordance with IFRS is presented below. The Group's definition of each performance measure may not be comparable with similarly titled performance measures and disclosures by other entities.

1. Sales

Total sales in 2017 consist of 12 months of UK sales and 7 months of USA sales. Total sales in 2016 consist of 12 months of UK sales and 12 months of USA sales. Therefore it is necessary to introduce some alternative performance measures that allow a greater degree of comparability between years.

Given the change in Group structure in the year, with the ownership of Goals Soccer Centers Inc moving into the JV at the end of July 2017, a Total System Sales comparative has been included below. This comparative assumes no change in ownership, so sales include 12 months of UK sales and 12 months of USA sales in both years.

In addition to Total System Sales, a Like-for-Like System Sales comparative has been included below. This comparative assumes no change in ownership, so sales include 12 months of UK sales and 12 months of USA sales in both years, with clubs that have been opened for less than 12 months are removed from the comparison. Our second club in the USA opened in Feb 17, and has therefore been removed from sales to give a L4L comparison of 2017 vs 2016.

An Underlying Sales comparative has been calculated assuming the same ownership structure in place at 31 Dec 2017 was in place at 31 Dec 2016 i.e. that sales from Goals USA are included from Jan - Jul 2016 only.

In addition to Underlying Sales, a Like-for-Like Underlying Sales comparative has been included below. This comparative assumes the same ownership structure in place at 31 Dec 2017 was in place at 31 Dec 2016 i.e. that sales from Goals USA are included from Jan - Jul 2016 only. Clubs that have been opened for less than 12 months are removed from the comparison. Our second club in the USA opened in Feb 17, and has therefore been removed from underlying sales to give a L4L Underlying Sales comparison of 2017 vs 2016.

2. Underlying EBITDA

Underlying EBITDA is Earnings Before Interest, Tax, Depreciation and Amortisation adjusted for the impact of the exceptional and non-recurring costs as shown below. In addition, 2016 has been adjusted to reflect the current ownership structure of Goals Soccer Centers Inc whereby it was a wholly owned subsidiary for 7 months and an equity-accounted joint venture for 5 months.

EBITDA is a common measure used by investors and analysts to evaluate the operating financial performance of companies. We consider underlying EBITDA to be a useful measure of our operating performance because it approximates the underlying operating cash flow by eliminating depreciation and amortisation.

3. Underlying Profit Before Tax

Underlying Profit Before Tax is Profit Before Tax adjusted for the impact of the exceptional and non-recurring costs as shown below. In addition, 2016 has been adjusted to reflect the current ownership structure of Goals Soccer Centers Inc whereby it was a wholly owned subsidiary for 7 months and an equity-accounted joint venture for 5 months.

Underlying PBT is a common measure used by investors and analysts to evaluate the operating financial performance of companies. We consider underlying PBT to be a useful measure of our profitability as it allows better analysis of the factors affecting the year's results compared to the prior period.

4. Underlying Diluted Earnings per Share

Underlying diluted earnings per share is diluted earnings per share adjusted for the net of tax impact of the exceptional and non-recurring costs as shown above.

Diluted earnings per share is calculated by dividing the underlying earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year plus the dilutive element of all outstanding relevant share options outstanding during the year. For the period ended 31 Dec 2017 this was 76,159,792 (2016: 67,663,242).

5. Underlying Free Cash Flow

Underlying free cash flow is net cash flow from operating activities adjusted for the cash impact of the exceptional and non-recurring costs as shown below. In addition, 2016 has been adjusted to reflect the current ownership structure of Goals Soccer Centers Inc whereby it was a wholly owned subsidiary for 7 months and an equity-accounted joint venture for 5 months.

6. Underlying Operating Profit

Underlying Operating Profit is Operating Profit adjusted for the impact of the exceptional and non-recurring costs as shown below. In addition, 2016 has been adjusted to reflect the current ownership structure of Goals Soccer Centers Inc whereby it was a wholly owned subsidiary for 7 months and an equity-accounted joint venture for 5 months.

Underlying Operating Profit is a common measure used by investors and analysts to evaluate the operating financial performance of companies. We consider underlying PBT to be a useful measure of our operating performance

Chairman's Statement

2017 has been an important year in rebuilding and refocusing the Company, following the strategy put in place in mid-2016. We have made significant progress with each of the strategic priorities:

· Grow and innovate the UK core estate

· Develop new capabilities and gain competitive advantage

· Expand our brand and physical presence internationally

· Unlock underlying asset potential

Our arena modernisation programme is well advanced with 248 arenas (53% of our estate) having been upgraded. Following our investment, the average pitch age has reduced from 7.0 years to 4.1 years, with the majority of this work completed by the end of H1.

Our investment strategy remains focused around delivering better performance and a clear trend has been established in football sales during H2: 28 Clubs with five arenas or more upgraded delivered sales growth of 5.3%, 11 clubs with four or fewer arenas upgraded have slowed the sales decline to 2.8% and the remaining 7 clubs in which we have not invested recorded a decline of 7.2%.

Our arena estate is now of a much higher quality and the future focus will be on investing in the 18 clubs that have four or less upgraded arenas with the aim of reversing the sales decline that we are witnessing at these underperforming clubs.

Five "Clubhouse 2020" refurbishment projects were completed during the year at Ruislip, Beckenham, Glasgow South, Leeds and Wembley of which three were completed in H1 and two in H2. During H2, like-for-like sales1 at the three clubs completed in H1 were 7.6% higher with football sales growing by 5.2% and non-football sales growing by 14.6%.

Underlying free cash flow5 generated during 2017 was £6.4m (2016: £9.3m). Any further UK investment to be financed from existing cash flow until indebtedness ratio reduces.

We have completed an extensive review of our range of services within the vibrant junior and youth markets and decided that there is significant potential to drive sales in this area. Consequently, we have launched Goals Junior Academy at two of the 2020 clubs during H2. Initial returns are encouraging and we plan to roll this out across the estate during 2018.

In July 2017, we entered into an important strategic 50:50 Joint Venture with City Football Group ("CFG"), the global football group which owns a number of leading football clubs including Manchester City and New York City, to facilitate the acceleration of the growth of the Goals brand in North America. All of Goals' North American operations, which include all existing and pipeline sites, were transferred into a Joint Venture and CFG has provided $16 million of initial committed expansion capital which, combined with cash flow from the Joint Venture, will self-finance new site openings in North America.

The Joint Venture combines Goals' existing North American operational expertise and site sourcing capabilities with CFG's soccer, marketing and commercial expertise. The substantial new funding will accelerate the growth of Goals' existing North American presence and will also allow the Company to focus UK cash flow on investment in the Arena upgrade programme and clubhouse modernisation project in the UK.

The Joint Venture has a licence to use the brands which CFG owns, including Manchester City, to drive its North American marketing activity where appropriate. The Joint Venture will also be able to engage in targeted promotional initiatives across CFG's fan networks.

As Goals US is now a Joint Venture it has been accounted for using the equity method of accounting since August 2017. The Underlying measures and Total System Sales1 have been included within the Business Review to give a like-for-like comparison.

Our second US club at Pomona in Los Angeles, California opened in Q1 2017 and our third US club opened at Rancho Cucamonga in Los Angeles, California in January 2018. Construction of our fourth US club Covina, also in Los Angeles, California, is expected to commence during Q2 2018. Further sites are in negotiation and there remains a strong pipeline of potential future sites.

We have value engineered our US club design during the period and successfully reduced development costs from $4.2m to approximately $3.3m for future projects.

People

In order for the Company to increase its strategic emphasis on the development of our North American Joint Venture business and international prospects Nick Basing handed over the responsibilities of the Chairmanship of Goals to myself in February 2018. Nick remains Chairman of the Joint Venture and will focus on developing this business. He remains a Non-Executive Director of Goals. A search process has commenced for a new Chairman.

Shortly after the financial year end our Chief Executive Mark Jones left the Company. On behalf of the board I would like to thank him for his contribution over the past 18 months. He will be replaced by Andy Anson who will join the Company on 23 April 2018. Andy brings a wealth of experience in consumer-facing industries and is a leading figure in the world of sports and leisure in the UK and internationally. He has held senior roles at The Walt Disney Company, at Channel 4 in the UK, was Commercial Director for Manchester United plc and served as the Chief Executive for the England 2018 FIFA World Cup bid and ATP Europe.

Our success depends on the enthusiasm, hard work and professionalism of our staff and I would like to thank them all for their enormous contribution. Their relentless drive to deliver results across all levels of the business is what will continue to ensure Goals remains a market leading business.

Financial Review

Since July 2017, when the Joint Venture with CFG was completed, the financial results of Goals Soccer Centers Inc have been accounted for using the equity method of accounting. The Underlying measures and Total System Sales have been included within the Financial Review to give a like-for-like comparison.

Despite the significant progress we have made with each of our strategic priorities in 2017, it was a disappointing year financially for the Group.

Total Group Sales declined by 1.4% to £33.1m (2016: £33.5m) and Underlying Group Sales1 increased by 0.1% to £33.1m (2016: £33.0m). Underlying Like-for-like sales1 declined by 0.3% (2016: +0.5%). The closure of the clubhouses at Ruislip, Beckenham, Glasgow South, Leeds and Wembley during refurbishment impacted like-for-like sales1 by 0.4%. Underlying Like-for-like sales1 adjusted for closures was +0.1%.

Total System Sales1, which include a full year contribution from Goals US, increased by 0.7% to £33.8m (2016: £33.5m) and Total System Like-For-Like Sales1 declined by 0.4%.

Underlying Group EBITDA2 declined by 10.1% to £10.0m (2016: £11.2m). This decline has been driven by an increase in UK overheads of £1.0m (5.6%) due to investment to support our strategic initiatives and well publicised cost headwinds: strengthened leadership team £0.2m; statutory increases in Living Wage and Business Rates £0.5m; and other inflationary increases £0.3m.

Depreciation and amortisation increased by 21.4% to £3.6m (2016: £2.9m) due to the increased level of capital expenditure over the last 2 years.

Operating Profit increased by 43.1% to £6.0m (2016: £4.2m) due to exceptional operating expenses of £3.5m in 2016. Underlying Operating Profit6 declined by 21.3% to £6.5m (2016: £8.3m).

Financial expenses reduced by 37.1% to £0.3m (2016: £0.5m) and Underlying EBITDA2 bank interest cover was 32.0 times at 31 December 2017 (2016: 20.8 times). Net debt at 31 December 2017 stood at £29.8m (2016: £24.1m) and current leverage of net debt to EBITDA is 2.97 times (2016: 2.1 times). The Company will endeavour to reduce Debt/EBITDA throughout H1 2018 by restricting capital expenditure to essential items only.

The Company generated an exceptional gain of £2.8m on the sale of Goals Soccer Centers Inc to the Joint Venture with CFG. In 2016 the Company incurred exceptional operating expenses of £3.5m.

Profit before tax increased by 122.7% to £8.2m (2016: £3.7m). Underlying Profit Before Tax3 reduced by 20.5% to £6.2m (2016: £7.7m).

The tax charge for the year translated to an effective rate of 14.1% (2016: 24.0%). This rate is 5.2% lower than the UK corporation tax rate due to the non-taxable gain on sale of Goals Soccer Centers Inc of 6.2% and timing differences of 0.2% offset by non-deductible expenses of 1.2%. The Underlying Effective Tax Rate was 21.5% (2016: 14.9%).

Diluted earnings per share increased by 124.4% to 9.2p (2016: 4.1p) principally due to the gain on sale of Goals Soccer Centers Inc. Underlying earnings per share4 declined by 34.8% to 6.3p (2016: 9.7p) due to the decline in Underlying profit3 of 20.5%, an increase in the underlying tax rate of 6.6% and an increase in the diluted weighted average number of ordinary shares of 12.6%.

Underlying free cash flow decreased by 31.5% to £6.4m (2016: £9.3m). The Group invested £11.6m (2016: £10.5m) in capital expenditure during the year. £3.0m (2016: £3.7m) was incurred on our new centres in the US and £7.6m (2016: £6.3m) on upgrading our mature centres. The Group invested £0.2m (2016: £0.2m) on information technology and £0.8m (2016: £0.3m) on software development and call centre systems during the year.

The Group's balance sheet remains well capitalised with net assets of £98.4m (2016: £91.7m). The Group has a long term non-amortising bank facility with Bank of Scotland of £42.5m which expires in July 2019. The substantial investment by CFG into the Joint Venture will fully finance the planned rollout of the Goals brand in North American and allow the Company to focus UK cash flow on investment in the Arena upgrade programme and clubhouse modernisation projects in the UK.

Goals UK

Our UK sales and like-for-like sales1 for the year declined by 0.3% (H1: +1.6%, H2: -2.3%) to £32.2m (2016: £32.3m). Average sales per club declined by 0.3% to £700,000 (2016: £702,000). Our overall gross profit margin remained constant at 89%.

The increase in Living Wage pay rates produced some headwinds and resulted in a £0.3m (4.7%) increase in club salary costs. A strong focus on overhead costs was maintained throughout the year and this combined with other efficiency measures restricted the increase in like-for-like overheads to 4.5%. Consequently, average EBITDA per club fell 5.0% to £288,000 (2016: £304,000).

The senior management team was strengthened during the year resulting in a 10.9% increase in Head Office costs to £3.3m.

Ongoing increases in the Living Wage, and further increases in Business Rates, are likely to produce overhead headwinds for the foreseeable future, and so efficiency savings have been targeted to mitigate the impact of these.

Goals USA

Total System Sales1 at Goals Soccer Centers Inc increased by 22.7% to $2.0m (2016: $1.7m) and Like-for-Like Total System Sales1 declined by 5.1% (2016: -4.3%) resulting in a decline in Like-for-like Club EBITDA of 13.8% to $584,000 (2016: $677,000). We opened our second club at Pomona in Q2 2017 and this incurred opening losses of $0.5m. Our third club opened at Rancho Cucamonga in January 2018 and initial trading is encouraging.

The full financial performance of Goals Soccer Centers Inc has been included within consolidated results until July 2017. During this period it generated sales of $1.1m and Underlying EBITDA2 of $0.1m. Thereafter, Goals Soccer Centers Inc has been accounted for as an equity-accounted investee and generated a loss of $0.5m during the period which includes start-up losses and Joint Venture set up costs of $0.5m.

Together with CFG, our JV partner, we are pleased with the pace of growth in the US and we are already California's leading 5 and 7-a-side pitch operator.

Accounting Standards

The IASB has issued IFRS 9, 15 & 16 and we have reviewed the potential impact of each of these. The adoption of IFRS 9 & 15 are unlikely to have a material impact on the results reported in the financial statements. IFRS 16 provides a new model for lease accounting in which all leases, other than short-term and small-ticket-item leases, will be accounted for by the recognition on the balance sheet of a right-to-use asset and a lease liability, and the subsequent amortisation of the right-to-use asset over the lease term. IFRS 16 will be effective for the group's year ending 31 December 2019. The Group has completed an initial assessment of the potential impact on its consolidated financial statements but has not yet completed its detailed assessment. The actual impact of applying IFRS 16 on the financial statements in the period of initial application will depend on future economic conditions, including the Group's borrowing rate at 1 January 2019 and the composition of the Group's lease portfolio at that date. However, it is expected to have a significant effect on the group's financial statements, increasing the group's recognised assets and liabilities and potentially affecting the presentation and timing of recognition of certain amounts in the income statement.

Given that the Group is UK based with clubs in the UK and USA, our current assessment is that Brexit will not have a significant impact on the Group performance.

Dividend

The Directors propose not to pay a final dividend and intend to recommence dividends when appropriate.

Michael BolingbrokeInterim Chairman13th March 2018

Consolidated statement of profit or loss and other comprehensive income

for the year ended 31 December 2017

The accompanying notes form an integral part of these financial statements.

Balance sheets

at 31 December 2017

These financial statements were approved by the board of directors on 13 March 2018 and were signed on its behalf by:

William BG Gow

Chief Financial Officer

Company registered number: SC202545

The accompanying notes form an integral part of these financial statements.

Statements of cash flows

for the year ended 31 December 2017

Notes

(forming part of the financial statements)

1 Accounting policies

Goals Soccer Centres plc (the "Company") is a company domiciled in the United Kingdom. The consolidated financial statements for the year ended 31 December 2017 comprise those of the company and its subsidiaries (together referred to as the Group). The parent company's financial statements present information about the company as a separate entity and not about the Group. Under section 408 of the Companies Act 2006 the company is exempt from the requirement to present its own income statement and related notes.

Statement of compliance

Both the parent company financial statements and Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("adopted IFRSs") that are effective (or available for early adoption) at 31 December 2017. Based on these adopted IFRSs, the directors have applied the accounting policies, as set out below. The adopted IFRSs have been applied in accordance with the provisions of the Companies Act 2006.

The financial statements for the year ended 31 December 2017 were approved by the board of directors on 13 March 2018.

Basis of preparation

The financial statements are prepared on the historical cost basis. The preparation of the financial statements requires the directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

These financial statements of the Group and Company are presented in pounds sterling. All financial information has been rounded to the nearest thousand.

The accounting policies have been applied consistently to all periods presented, except for the adoption of the standards described below which have had no impact on the reported numbers but may affect the accounting for future transactions and events.

Going concern

The Group and Company meet their overall funding requirements through their facility arrangements. The directors have reviewed the Group and Company's forecasts and projections which indicate that the Group and Company are expected to be able to operate within their current facilities for the next twelve months.

After making enquiries, the directors have a reasonable expectation that the Group and Company has adequate resources to continue in operational existence for the next twelve months. Accordingly they continue to adopt the going concern basis in preparing the financial statements.

2 Segmental reporting

IFRS 8 'Operating Segments' requires a "management approach" under which segment information is presented on the same basis as that used for internal reporting purposes to the Chief Operating Decision Maker, which is the Board. As each club has similar economic characteristics, provides the same services to similar customers and operates in a similar manner, the directors, therefore, consider that there is one reporting segment relating to the operation of outdoor soccer centres which includes the two (2016: one) clubs outside of the UK owned by the Joint Venture.

Geographical information

In presenting information on the basis of geography, segment revenue is based on the geographical location of customers and segment assets are based on the geographical location of the assets.

The non-current assets represent property, plant and equipment, intangible assets and other non-current receivables. All US non-current assets have been transferred to the equity-accounted investee Goals City US Limited.

3 Operating profit

Contained within operating expenses are the following main costs associated with the sites:

4 Financial expense

5 Exceptional items

In July 2017, Goals entered into a strategic 50:50 Joint Venture with CFG, the global football group which owns a number of leading football clubs including Manchester City and New York City, to accelerate the growth of the Goals brand in North America. A separate entity, Goals City US Limited has been created as the Joint Venture vehicle. Goals Soccer Centres Inc, the previously wholly owned subsidiary, has been disposed of by the group with share ownership transferring to Goals City US Limited. The transaction and associated costs has resulted in a gain on sale of £2.8m which has been treated as exceptional.

During 2016, the directors reviewed the carrying value of each club operated by the Company, resulting in an impairment charge of £2.5m. This principally relates to one club which has underperformed. In addition, restructuring costs of £0.9m were incurred to implement the outcome of the strategic review. A further £0.1m was incurred on separate strategic projects.

A number of costs have been expensed in the year which, although not exceptional in nature, have been added back to calculate underlying profits.

The Company completed the modernisation of 64 pitches (2016: 136) during the year resulting in a loss on disposal of £0.2m (2016: £0.1m) on old pitch surfaces.

Our second US club at Pomona in Los Angeles, California opened in Q1 2017. The club incurred launch costs of £0.2m in H1 and made further losses of £0.2m in H2. These losses have been classified as non-recurring in nature.

Following the award of LTIPs to Senior Management, £0.1m of share option costs have been expensed in the year.

In 2016, the Company incurred non-recurring costs in relation to the development and rollout of the new Goals brand and values of £0.5m. 

6 Taxation

Reconciliation of effective tax rate

Income tax recognised directly in equity

A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the company's future current tax charge accordingly. The deferred tax liability at 31 December 2017 has been calculated based on these rates.

7 Dividends

8 Earnings per share

Basic earnings per ordinary share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year which was 75,215,060 (2016: 67,251,945).

Diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year plus the dilutive element of all outstanding relevant share options outstanding during the year. For the year ended 31 December 2017 this was 76,159,792 (2016: 67,663,242).

The diluted weighted average number of shares is calculated as follows:

* Adjusted basic earnings per share is calculated by adding back the net of tax impact of the exceptional items, non-recurring costs and loss on disposal to the earnings attributable to ordinary shareholders and dividing by the weighted average number of ordinary shares in issue during the year.

** Adjusted diluted earnings per share is calculated by adding back the net of tax impact of the exceptional items, non-recurring costs and loss on disposal to the earnings attributable to ordinary shareholders and dividing by the weighted average number of ordinary shares in issue during the year plus the dilutive element of all outstanding relevant share options outstanding during the year.

9 Property, plant and equipment