Just Eat Regulatory News (JE.)

31 July 2018

Just Eat plc

("Just Eat", the "Company" or the "Group")

2018 Interim Results

Strong first half performance, upgraded full year revenue guidance

Just Eat plc (LSE: JE.), a leading global marketplace for online food delivery, today reports its results for the six months ended 30 June 2018 ("H1" or the "First Half").

Financial highlights

· Orders up 30% to 104.4 million (H1 2017: 80.4 million)

· Revenue up 45% to £358.4 million (H1 2017: £246.6 million), up 46% on a constant currency basis

· uEBITDA[1] up 12% to £82.7 million (H1 2017: £73.6 million)

· Profit before tax down 3% to £48.1 million (H1 2017: £49.5 million) given costs associated with the acquisition of Hungryhouse

· Basic earnings per share ("EPS") remains unchanged at 5.5p (H1 2017: 5.5p)

· Adjusted basic EPS[2] up 10% to 8.6p (H1 2017: 7.8p)

· Cash generated by operations up 13% to £77.2 million (H1 2017: £68.1 million)

Operational highlights

· UK revenue up 30%; Hungryhouse successfully migrated

· Canada revenue up 212%, or 227% at constant currency; driven by a strong performance from SkipTheDishes, Just Eat Canada merged with Skip

· Australia revenue down 8%, or down 2% at constant currency. Australia business transition to hybrid delivery underway

· International revenue up 36%, or 35% at constant currency driven by strong order growth in Italy, Spain and Mexico

· Orders via app: accounted for 54% of total orders (H1 2017: 46%)

Peter Plumb, Chief Executive Officer, commented:

"The Just Eat Group served 24 million customers with 104 million takeaways through the Group's platforms around the world. Our increased investments in technology, brand and delivery are on track to make our service even easier to use, whilst expanding our customer's choice. I'm pleased with the strong start to the year and excited by our opportunity to help many more people enjoy more of their takeaway moments through our platforms."

Outlook

The Board is confident in the current performance and strategy of the Group and is raising investment for long term growth from £50 million to £55 - £60 million. Therefore, revenue guidance is raised for 2018 to between £740 - £770 million, up from £660 - £700 million. Underlying EBITDA guidance for the Full Year remains unchanged between £165 - £185 million.

- Ends - 

Presentation

A presentation will be held for analysts and professional investors at 09.30am (UK time) at UBS, 5 Broadgate, London EC2M 2QS.

The presentation will be webcast live and will be accessible via the Just Eat website[3] at www.justeatplc.com/investors/results-reports.

An on-demand replay will also be available on the Just Eat website following the presentation.

Enquiries:

Forward-looking statements

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". By their nature, such statements involve risk and uncertainty since they relate to future events and circumstances. Actual results may, and often do, differ materially from any forward-looking statements. Any forward-looking statements in this announcement reflect management's view with respect to future events as at the date of this announcement. Save as required by law or by the Listing Rules of the UK Listing Authority, the Company undertakes no obligation to publicly revise any forward-looking statements in this announcement following any change in its expectations or to reflect subsequent events or circumstances following the date of this announcement.

About Just Eat

Just Eat plc operates a leading global marketplace for takeaway food delivery. Headquartered in London, we use proprietary technology to offer a quick and efficient digital ordering service for 24.0 million customers and 93,700 restaurant partners across the UK, Australia & New Zealand, Canada, Denmark, France, Ireland, Italy, Mexico, Norway, Spain, Switzerland and Brazil. Just Eat is a member of the FTSE 100 Index.

H1 2018 PERFORMANCE REVIEW

Overview

This has been a strong first six months for the Group, which has seen us add a net 11,400 restaurants and 5.6 million new customers. We sent our restaurant partners 104.4 million orders worth £2.0 billion, up 33% from £1.5 billion in the prior comparable period.

Group revenue was £358.4 million, up 45% (H1 2017: £246.6 million), and up 46% at constant currency. uEBITDA increased 12% to £82.7 million and we generated £77.2 million of cash from operations (H1 2017: £68.1 million). These results reflect increased investment, specifically in key areas such as marketing, technology and product development. These improvements are benefitting both sides of our marketplace and providing a solid platform for the launch of delivery services.

Our non-UK businesses now account for 49% of Group revenues (H1 2017: 43%) and we continue to see strong growth in the majority of those markets, with the exception of Australia where the launch of delivery is beginning to gain momentum.

Strategic progress

At our 2017 preliminary results announcement in March, we noted that 2018 would be a year when we would invest to grow and at our Capital Markets Day ("CMD") in June, we outlined our vision to unlock the £57 billion market opportunity across our core geographies, with a further £26 billion in Latin America where we operate through our associate, iFood. It is this prize that created our ambition to serve every customer's takeaway moment.

At the CMD, we shared the knowledge that we had gained, and introduced the strategic pillars that underpin how the Group intends to target this opportunity. These are to: Build our marketplace to be world-class; Engineer delivery services to complement our marketplace; and Lead a world-class digital global team, supporting extraordinary local customer experts.

Build our marketplace to be world-class

Creating a more engaging user experience and building a stronger brand are essential tenets to driving customer attraction, order frequency and retention. We have an opportunity and a plan to create a world-class customer experience, measured by top of mind awareness and Net Promotor Score, which at a Group level increased by seven percentage points to 36 in the first six months of 2018.

In respect of technology investment, in the first half we spent £46.7 million (H1 2017: £35.6 million) in improving both the customer and our restaurant partner experience. Building brands is a long-term commitment, and marketing spend over the First Half was £69.6 million up 29% on the comparable period (H1 2017: £54.0 million).

App users are more loyal and order more frequently than other customers. We are rapidly improving the user experience of our apps to encourage increasing numbers of customers to connect with us through that channel. We are pleased to note that 54% of orders over the First Half were made via the app (H1 2017: 46%).

Over the First Half, average order frequency across the Group on an annualised basis improved to 8.1 (H1 2017: 8.0).

We also added 11,400 net new restaurants onto our platform, with approximately 70% of our estate now being in tier 2-5 cities, reflecting the wide reach of our leading marketplace businesses.

At our preliminary results in March, we committed to rolling out our restaurant device, Orderpad, to all restaurants. We're pleased to note that as at 30 June, Orderpad was in 34,300 restaurants (H1 2017: 15,400), including 18,800 in UK restaurants. Orderpad provides significant benefits to all parties. The technology helps our restaurant partners run better businesses through greater control and insight, whilst offering the potential to improve customer service by enabling direct contact with restaurants rather than through our contact centres.

Engineer delivery services to complement our marketplace

Delivery revenue grew by 238% to £81.9 million (H1 2017: £24.2 million), representing 23% of Group revenue (H1 2017: 10%). At constant currency, delivery revenue grew 249%. This was led by Canada where we are merging our Just Eat business with SkipTheDishes and, following further development of a French language version of the platform, we will leverage our existing marketplace business to bring the Skip business to Quebec during the second half.

In the UK, we made significant progress in the First Half, expanding delivery services to major cities such as Leeds, Liverpool and Manchester. Our courier partners are able to deploy resource across non-competing industries and, consequently, pass on significantly reduced delivery costs and improved service times.

At the beginning of April, we launched delivery services in Australia with strong collaboration between our Menulog, SkipTheDishes and technology teams. Whilst there remains more to do to emulate the full SkipTheDishes experience in Australia, by the end of June, we were live in seven delivery zones covering a population of 2 million people and are adding a new zone every ten days.

Lead a world-class digital global team, supporting extraordinary local customer experts

We have significantly strengthened our team over the First Half. In the period, we appointed Peter Duffy as our first Chief Customer Officer. Peter will lead our new initiatives to put our customers at the heart of everything we do with responsibility for Marketing, Digital, Customer Relationship Management (CRM), Business Intelligence (BI), Data, Machine Learning and Group Operations - all of which are vital for Just Eat to offer our customers the best and easiest way to find and order their takeaway treat. Furthermore, we continue to strengthen our technology team with the addition of new development resource.

2018 strategic investment

As a result of encouraging H1 learnings, the Board have increased growth investment from £50 million to £55 - £60 million. We successfully invested £24 million in the First Half, which included:

· Driving continued exceptional growth in Canada and launching SkipTheDishes technology into Australia

· Scaling delivery for branded restaurants and working to improve the delivery economics in the UK

· Further nurturing and growing our businesses in earlier stage markets.

Segment results

At our Capital Markets Day we set out new reporting segments which reflect how we now manage the business. We are reporting according to these segments for the first time.

United Kingdom

Strong growth in the UK business continued during the period, with orders up 20% to 59.3 million (H1 2017: 49.5 million), including 2.2m orders through the Hungryhouse platform, which was fully integrated, ahead of plan, on 22 May 2018. Revenue was up by 30% to £182.7 million (H1 2017: £140.1 million), driven by order growth and Average Revenue Per Order ("ARPO") growth of 9% (H1 2017: 6%).

Key highlights of the First Half include:

· Achieving the 400 millionth UK order since launch

· Increasing the Active customer[4] base by 16% to 11.3 million customers (H1 2017: 9.7 million)

· An acceleration of delivery orders, driven by an increase in the number of branded restaurants we are working with and significantly improved economics. As well as working with third party couriers, we intend to launch SkipTheDishes technology in selected cities during the second half of 2018.

The uEBITDA margin was 49% (H1 2017: 52%), reflecting investment in marketing, technology and delivery. We anticipate increased expenditure in the second half of the year as we continue to roll out delivery services and enhance our brand, particularly with our recently announced sponsorship of X Factor for a second season.

Canada

Canada saw orders up by 189% to 12.7 million (H1 2017: 4.4 million) and revenue of £73.0 million (H1 2017: £23.4 million), up by 212% or 227% at constant currency. This was driven by a strong performance from SkipTheDishes.

Key highlights of the First Half include:

· Launched SkipTheDishes outside of Canada for the first time, bringing its leading technology and expertise to Australia

· Established a centre of excellence for delivery services, particularly courier management, in Winnipeg

· Completed the integration of SkipTheDishes and Just Eat Canada business.

Canadian uEBITDA losses were £8.5 million (H1 2017: £3.1 million loss).

Australia & New Zealand

Over the First Half, the Menulog Group achieved 6.5 million orders (H1 2017: 7.4 million), generating revenue of £21.6 million (H1 2017: £23.6 million), down 8% or 2% on a currency neutral basis. uEBITDA decreased by £2.1 million to £4.4 million (H1 2017: £6.5 million). These results demonstrate the importance in this region of complementing our marketplace business with a delivery capability which has been introduced since 31 December 2017.

During the First Half we launched delivery services under the Menulog brand using SkipTheDishes' expertise and we are now present in seven delivery zones in Sydney and Melbourne. Whilst this enables access to more than 2 million potential customers to supplement our marketplace business, there remains significant further engineering work to do to create an outstanding customer experience.

International

This segment contains eight countries - Denmark, France, Ireland, Italy, Mexico, Norway, Spain and Switzerland. In the First Half they generated 25.9 million orders (H1 2017: 19.0 million), an increase of 36%, and revenue of £81.1 million (H1 2017: £59.5 million), up 36% or 35% on a currency neutral basis.

Italy, Spain and Mexico had strong performances, with Spain achieving one million orders in a month for the first time. Mexico is responding well to increased investment, although this remains an early stage market. France performed well as we continue to add restaurants to diversify the French business, with fewer than 60% of orders now coming from Greater Paris. During the half we also rebranded the French business to Just Eat from Allo Resto. In Switzerland we saw an acceleration of order growth in the First Half.

This segment achieved uEBITDA of £4.3 million (H1 2017: £4.2 million), with the additional scale of more established markets being mitigated by stronger investment in earlier stage markets.

iFood ("IF-JE")

We saw continued excellent performance over the First Half of the year from iFood, generating 45.0 million orders (H1 2017: 21.7 million), an increase of 107%. This drove revenue of £52.7 million (H1 2017: £31.4 million), up 68% (up 98% on a constant currency basis). The business remains predominantly Brazil-based and has significant long-term potential. During the First Half, we increased our stake in IF-JE to 33% as the last minority holders were bought out.

Profit before tax

Profit before tax was £48.1 million, down 3% from the comparable period (H1 2017: £49.5 million). The scale benefit of a 45% increase in revenue was offset by a reduction in gross margin as a result of the higher level of delivery orders, exceptional costs pertaining to the acquisition of Hungryhouse and an increase in depreciation and amortisation associated with this transaction.

Taxation

The income tax expense was recognised based on management's best estimate of the annual income tax rate expected for each jurisdiction for the full financial year applied to profit before tax for the interim period, jurisdiction by jurisdiction. On this basis, the Group's tax charge was £11.9 million (H1 2017: £13.1 million). The adjusted effective tax rate, after taking account of the impact of long-term employee incentive costs, exceptional items, other gains and losses, foreign exchange gains and losses, amortisation in respect of acquired intangibles and an adjustment for the associates uEBITDA, was 21.2% (H1 2017: 23.4%). The effective tax rate, based on profit before tax, was 24.7% (H1 2017: 26.5%). 

Earnings per share

Adjusted basic EPS was 8.6p (H1 2017: 7.8p), an increase of 10% in the period. Adjusted basic EPS is calculated using the adjusted profit attributable to the holders of ordinary shares. Basic EPS for the period was unchanged at 5.5p (H1 2017: 5.5p).

Cash flow and net debt

The Group continued its high level of cash conversion, benefiting from collecting the gross order value ahead of making net payments to its restaurant partners. Cash generated by operations was £77.2 million (H1 2017: £68.1 million).

To fund the purchase of Hungryhouse, we drew down £145.0 million from the Group's £350 million revolving credit facility. At the balance sheet date, the Group had cash balances of £156.7 million (H1 2017: £177.5 million). Excluding cash remitted to restaurants following the end of the period, the Group assessed its net debt to be £6.8 million (H1 2017: £142.9 million net cash)[5].

Capital structure and dividend

No dividends were declared during the period (H1 2017: nil). Whilst Just Eat generates strong earnings and has high cash conversion, the Board continues to prioritise investment to drive strong long-term revenue growth and profitability. The Board regularly reviews its capital allocation and return policy in order to maximise long-term returns to shareholders.

Outlook

The Board is confident in the current performance and strategy of the Group and is raising investment for long term growth from £50 million to £55 - £60 million. Therefore, revenue guidance is raised for 2018 to between £740 - £770 million, up from £660 - £700 million. Underlying EBITDA guidance for the Full Year remains unchanged between £165 - £185 million.

Audit Tender

Just Eat will shortly be holding a competitive tender process to select and formalise the appointment of the external auditor for the financial year ending 31 December 2019.

Deloitte LLP have acted as Just Eat's external auditor since 2009 and will undertake the audit of the financial statements for the year ending 31 December 2018.

An announcement will be made in due course to confirm the appointment of an external auditor following the conclusion of the audit tender process.

Principal risks and uncertainties

The principal risks and uncertainties set out in the last annual report remain valid at the date of this report. In summary, these include:

· Inability to offer compelling service propositions

· User experience fails to meet expectations

· Changes in regulation and legislation

· Brand is harmed by an event or strategy

· Sustain a cyber security breach

· Prolonged outage of critical platforms and infrastructure

· Challenges in growing and scaling the business

· Significant delays and challenges with integration of new acquisitions

· Key talent leaves the business or talent acquisition is ineffective

· Global economic or political events weaken performance.

Directors' responsibility statement

The Directors confirm that, to the best of their knowledge:

· The Interim Financial Statements, which have been prepared in accordance with IAS 34 Interim Financial Reporting, give a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4R

· The Interim Management Report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year)

· The Interim Management Report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

Peter Plumb Paul Harrison

Chief Executive Officer Chief Financial Officer

Consolidated Income Statement

For the period ended 30 June 2018

Consolidated Statement of Other Comprehensive Income

For the period ended 30 June 2018

Consolidated Balance Sheet

As at 30 June 2018

Consolidated Statement of Changes in Equity

For the period ended 30 June 2018

Consolidated Statement of Changes in Equity

Year ended 31 December 2017

Consolidated Cash Flow Statement 

For the period ended 30 June 2018

Notes to the Interim Financial Statements

1. General information

The Directors of Just Eat plc (the "Company") present their interim report and the unaudited condensed consolidated financial statements for the period ended 30 June 2018 ("Interim Financial Statements"). The Company is a public limited company, incorporated and domiciled in the UK. Its registered address is Masters House, 107 Hammersmith Road, London, W14 0QH.

The Interim Financial Statements have been reviewed, but not audited, by Deloitte LLP and were approved by the Board of Directors on 30 July 2018.

The information for the period ended 30 June 2018 does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The Interim Financial Statements should be read in conjunction with the Annual Report and Financial Statements, for the year ended 31 December 2017, which were prepared in accordance with European Union endorsed International Financial Reporting Standards ("IFRS") and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Annual Report and Financial Statements for the year ended 31 December 2017 were approved by the Board of Directors on 5 March 2018 and delivered to the Registrar of Companies. The auditor's report on those financial statements was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498(2) or (3) of the Companies Act 2006.

2. Basis of preparation

The Interim Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting as endorsed by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

The Interim Financial Statements are presented in pounds sterling, rounded to the nearest £0.1 million, unless otherwise stated. They were prepared under the historical cost convention, except for assets and liabilities acquired as part of a business combination, deferred contingent consideration, available-for-sale investments, derivative financial instruments, and other financial assets and liabilities recognised at fair value through profit or loss, which have been measured at fair value.

Going concern

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of at least 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the Interim Financial Statements.

Accounting policies

The accounting policies adopted in the preparation of the Interim Financial Statements are consistent with those applied in the preparation of the Group's consolidated financial statements for the year ended 31 December 2017.

New and amended standards adopted by the Group

The Group have implemented IFRS 9 Financial Instruments and IFRS 15 Revenue from contracts with customers, both effective for the first time for the financial year beginning on 1 January 2018. Neither standard has had a material impact on the Group's financial position or performance therefore no restatement of the comparative figures has been required.

Critical accounting judgements and key sources of estimation uncertainty

In the course of preparing the financial statements, management necessarily makes judgements and estimates that can have a significant impact on the financial statements. The most critical accounting judgements relate to capitalised development costs. Key sources of estimation uncertainty relate to the fair value calculations on acquired intangible assets in respect of business combinations, the impairment of goodwill and intangible assets, and the impact of uncertain tax provisions. The use of inaccurate assumptions in assessments made for any of these judgements and estimates could result in a significant impact on the financial results.

With the exception of the additional estimation uncertainty concerning the fair value of the business combination in the period, these critical accounting judgements and key sources of estimation uncertainty are the same as those disclosed in note 2 of the Group's 2017 Annual Report, which can be obtained from the Company's registered office or from the Company's website www.justeatplc.com.

3. Operating segments

The Group's segmental reporting is designed to give greater transparency to the reader of the Group's financial statements by disclosing the Group's results on geographical basis, where each market has similar economic characteristics. Due to both the current and expected future size of the Canada and Australia & New Zealand ("ANZ") segments, the Group has changed its reporting segments to be: United Kingdom, ANZ, Canada and International (which consists of Denmark, France, Ireland, Italy, Mexico, Norway, Spain and Switzerland). The comparative segmental disclosures below have been restated for this change in operating segments.

Each of the businesses aggregated within International have similar economic characteristics as they have similar business models and therefore are expected to have similar long-term uEBITDA margins. The chief operating decision maker ("CODM") is Peter Plumb, the Group's Chief Executive Officer, who manages and reports to the Board on the same basis as the new reporting segments. The principal measure of profit used by the CODM to assess and manage performance is uEBITDA. It is defined as earnings before finance income and costs, taxation, depreciation and amortisation ("EBITDA"), and additionally excludes long-term employee incentive costs, exceptional items, foreign exchange gains and losses, other gains and losses, and the share of results from associates falling outside this definition.

At a segmental level, uEBITDA incorporates an allocation of Group technology and central costs.

Order-driven revenue by segment was as follows: United Kingdom £171.4 million (H1 2017: £130.9 million), ANZ £20.3 million (H1 2017: £22.8 million), Canada £71.1 million (H1 2017: £22.2 million) and International £71.1 million (H1 2017: £52.0 million).

3. Operating segments (continued)

4. Long-term employee incentive costs

During the period ended 30 June 2018, the Group recognised a charge in respect of long-term employee incentive costs of £3.1 million (H1 2017: £3.3 million; year ended 31 December 2017: £6.6 million). This charge was in respect of the Group's share-based long-term incentive plans and related employer's national insurance (or local equivalent). During the period, the Company granted awards of 84,740 shares under the Group's long-term employee incentive plans (period ended 30 June 2017: 2,217,059 shares).

5. Exceptional items

Impairment charges

During the year ended 31 December 2017, an impairment charge of £180.4 million was recorded in respect of the Group's Australia & New Zealand ("ANZ") businesses. The charge was driven by lower projected cash flows in the business' plans, resulting in management's reassessment of expected future business performance in light of the current trading environment.

The Australian market is unique in the Just Eat portfolio with a substantial part of the population living in just two cities, Sydney and Melbourne. This characteristic makes Australia an attractive market for delivery focussed competitors, with the consequence that Australia is today one of our most competitive markets. As a consequence, success will be partly dependent on our ability to add delivery capability to complement our marketplace business.

During the period, the Group's Australian business commenced delivery operations by utilising the SkipTheDishes technology. Along with the additional security, scalability and stability that the new platform brings, this integration will be crucial to ensure the continued growth in the ANZ market through the addition of the logistics capability. The technology built by SkipTheDishes allows forecasting of consumer demand, driver allocation and delivery times with very high levels of accuracy. Whilst it will take time to deploy, it is this technology that will place the business in a good position for solid future growth.

M&A transaction costs

M&A transaction costs relate to legal, due diligence and other costs incurred as a result of the Group's acquisitions and aborted acquisitions. For the period ended 30 June 2018, they include £1.0 million (H1 2017: £1.1 million; year ended 31 December 2017: £1.3 million) of costs in respect of the acquisition of Hungryhouse Holdings Limited ("Hungryhouse"), which completed on 31 January 2018.

Acquisition integration costs

The acquisition integration costs relate to the integration of recently acquired businesses into the Group.

For the period ended 30 June 2018, £1.4 million relates to accrued consideration (separate to the acquisition consideration) of SkipTheDishes' management providing certain services to the Group post-completion (H1 2017: £nil; year ended 31 December 2017: £9.0 million).

Also included in the period ended 30 June 2018 is £8.1 million related to the integration of Hungryhouse into the Group. These costs include non-recurring costs of running two offices and platforms during employee consultation processes, redundancy costs, lease termination costs and related advisers' fees.

6. Other gains and losses

7. Taxation

UK corporation tax was calculated at 19% (H1 2017: 19.25%; year ended 31 December 2017: 19.25%) of the taxable profit for the year. The UK government announced, in the summer 2015 budget, a reduction in the standard rate of corporation tax from 20% to 19% effective from 1 April 2017. The Finance Bill 2016 subsequently reduced the main rate of corporation tax to 17%, effective from 1 April 2020.

Taxation for territories outside of the UK was calculated at the rates prevailing in the respective jurisdictions.

Taxation on items taken directly to equity in respect of share options was a net credit of £0.4 million (H1 2017: £0.8 million; year ended 31 December 2017: £2.0 million), which comprised of a credit of £0.5 million relating to current tax and a debit of £0.1 million relating to deferred tax.

The effective tax rate on underlying profits ("Underlying ETR") is 21.2% (H1 2017: 23.4%; year ended 31 December 2017: 23.7%). Underlying profit is defined as profit before tax before long-term employee incentive costs, exceptional items, other gains and losses, foreign exchange gains and losses, amortisation in respect of acquired intangible assets and share of results from associates below uEBITDA.

The total tax charge of £11.9 million (H1 2017: £13.1 million; year ended 31 December 2017: £27.5 million) is made up of a current tax charge of £13.2 million (H1 2017: £13.2 million; year ended 31 December 2017: £37.7 million), primarily consisting of corporate tax arising in the UK, Denmark, France, Ireland and Switzerland; and a net deferred tax credit of £1.3 million (H1 2017: £0.1 million; year ended 31 December 2017: £10.2 million) resulting from the unwinding of the deferred tax asset on tax losses arising in Australia and the unwinding of deferred tax liabilities arising on acquired intangibles.

As a result of the geographical spread of the Group's operations and the varied, increasingly complex nature of local and global tax law, there are some transactions for which the ultimate tax determination is uncertain during the ordinary course of business. The provision held in relation to uncertain tax items totalled £17.6 million (H1 2017: £10.0 million; as at 31 December 2017: £17.4 million). Included within this provision is an amount held in relation to an ongoing transfer pricing audit in Denmark (as disclosed in note 10 of the Group's 2017 Annual Report). There has been no movement in claim proceedings since the 2017 Annual Report and the Group's view of the expected outcome of the claim remains unchanged. This remains a key source of estimation uncertainty as outlined in Note 2.

8. Earnings per share

Basic earnings per share was calculated by dividing the profit for the year attributable to equity shareholders by the weighted average number of shares outstanding during the year, excluding unvested shares held pursuant to the Group's Joint Share Ownership Plan ("JSOP") and Share Incentive Plan ("SIP").

Diluted earnings per share was calculated by adjusting the weighted average number of shares outstanding to assume conversion of all potentially dilutive shares. The Group has potentially dilutive shares in the form of share options and unvested shares held pursuant to the Group's JSOP and SIP.

Adjusted earnings per share is the main measure of earnings per share used by the Group and is calculated using an underlying profit measure attributable to equity shareholders, which is defined as profit attributable to equity shareholders, before long-term employee incentive costs, exceptional items, other gains and losses, foreign exchange gains and losses, amortisation of acquired intangible assets, adjustment for associates uEBITDA, and the tax impact of these adjusting items.

Basic and diluted earnings per share have been calculated as follows:

9. Goodwill