2018 Strategic Performance Review

Year ended 31 December 2018

Overview

2018 was a transformational year for Just Eat. Revenue increased 43% to £779.5 million with uEBITDA up 6% to £173.9 million, after investing £51 million in our strategic initiatives to deliver on our hybrid strategy. Overall growth was driven by the combination of strong underlying marketplace order growth, accelerating growth of delivery orders and the inclusion of HungryHouse (acquired 31 January 2018).

 

We continued to invest in our people, brands and platforms as we helped our 100,000+ Restaurant Partners serve over 221 million takeaways to more than 26 million active customers. Consumers continued to choose Just Eat as their destination of choice when ordering food with order frequency per customer improving by 5% to 8.4 times per annum compared to last year.

 

The business remains highly cash generative with strong cash conversion and £197.6 million net cash generated by operations. As at 31 December 2018, Just Eat had net cash of £3.5 million and substantial headroom against its covenants.

 

Creating a leading hybrid marketplace

We are creating a leading hybrid offering by combining our unrivalled marketplace with the targeted rollout of delivery. The broad reach of our marketplace combined with our enhanced range from adding delivery provides customers with the best choice and an even better experience. In turn, this drives greater customer acquisition, retention and frequency - ultimately driving incremental orders for all of our Restaurant Partners and strengthening the network effects of our business. Our leading hybrid model enables us to optimise profitability by algorithmically managing the customer search experience to match demand with available courier capacity, driving greater courier utilisation and lower cost per order.

 

During the year, we introduced three strategic pillars that underpin how we intend to unlock our hybrid strategy and increase our market opportunity from £16 billion to £57 billion across our core geographies, with a further £26 billion in Latin America where we operate through our associate, iFood. The strategic pillars are: (i) Enhancing our unrivalled marketplace foundation; (ii) Targeted world-class delivery to complement our marketplace; and (iii) Highly experienced team, supporting extraordinary local customer experts.

 

In order to deliver our initiatives we invested £51 million during the year. This comprised £19 million to drive continued exceptional growth in Canada and launching SkipTheDishes technology into Australia; £21 million in scaling delivery for Branded Restaurant Groups and working to improve the delivery economics in the UK; and a £11 million investment in brand building for our early stage marketplace business in Mexico. This was less than our guidance of between £55 to £60 million due to the outperformance of Skip in Canada. The results of these initiatives are outlined in detail below.

 

(i) Enhancing our unrivalled marketplace foundation

Our marketplace business achieved orders of 186.5 million (2017: 161.6 million) and revenue of £569.6 million (2017: £473.1 million constant currency) during the year. We have re-invested to create a world-class experience for both our customers and Restaurant Partners to drive increased engagement, order frequency and retention.

 

We continued to invest in marketing our brands which resulted in record levels of awareness and numerous record trading days, including over almost 1,500 orders per minute during the X Factor Final in the UK. Our investments in product and technology have enabled us to create a leading user experience for customers via the Just Eat App. Total orders via the App are now at 56% (2017: 50%). We have also significantly improved our marketing and data toolset with the launch of new CRM tools creating the foundation for greater curation and personalisation, ultimately driving further efficiencies and improving returns on our marketing investment.

 

We continue to help our Restaurant Partners to reach more customers, grow their business and improve standards in the industry. Over 80% of our Restaurant Partners are now using Just Eat Orderpad enabling them to 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. During the year, we significantly improved customer service levels through the launch of new tools enabling the automatic resolution of cancelled and missing items and providing a better, more consistent customer experience.

 

In 2018, our investment in Mexico drove record customer and partner acquisition with orders up almost 100% during the year and Restaurant Partners up 117% to 11,061 as at the end of the year.

 

(ii) Targeted world-class delivery to complement our marketplace

Delivery orders grew 220% YoY to 34.7 million (2017: 10.8 million), achieving revenue of £210.0 million (2017: £68.8 million constant currency).

 

During the year, we invested in the targeted roll-out of delivery in key zones enabling us to increase our overall customer base and drive more orders to our Restaurant Partners.

 

We invested £19 million in driving continued exceptional growth in Canada and launching SkipTheDishes technology into Australia. This was less than the £25 million investment we originally outlined due to the outperformance of Skip in Canada. We used our investment to accelerate growth with SkipTheDishes reaching full coverage across Canada during the year, driving triple digit order growth and moving it towards profitability after reaching uEBITDA breakeven during Q4.

 

Our Australian business completed the integration of SkipTheDishes' world-class delivery platform with Menulog's marketplace, creating a hybrid offering. We launched 28 delivery zones covering c.55% of the addressable population, signed-up over 2,700 delivery Restaurant Partners and started to see an improvement in cost per drop and encouragingly reached breakeven on a gross profit basis in our more mature zones.

 

In the UK, we invested £21 million in the roll-out of delivery and now work with over 2,000 Restaurant Partners fulfilling their delivery requirements, across 197 delivery zones covering c.35% of the addressable population. This was more than the £20 million investment we originally outlined as we took the opportunity to accelerate the targeted roll-out delivery. We continued working with third party couriers and also launched an independent courier-model trial using SkipTheDishes' technology in selected cities in Q4. We continued to see an improving trend in the delivery economics reaching breakeven on a gross profit basis in our more mature zones.

 

In December 2018, we completed the acquisition of Flyt, a leading software platform that helps restaurant groups and restaurant suppliers globally to integrate their point of sale ("POS") systems with third party services. Flyt's software enables Just Eat Restaurant Partners to receive orders via Just Eat's platforms directly into their POS system, improving overall operating efficiency and enhancing the customer experience. The acquisition enables us to accelerate the development of Flyt's technology and offer Flyt's services to more of our Restaurant Partners globally.It will also help us accelerate the roll-out of delivery with Quick Service Restaurants and Branded Restaurants both in the UK and globally. The consideration of £22 million was paid using existing cash resources. A further cash consideration may also be payable subject to certain operational and financial criteria being met over the next three years.

 

(iii) Highly experienced team, supporting extraordinary local customer experts

We reorganised our marketing team to put our customers at the heart of everything we do. We created a Customer Team, responsible for Marketing, Digital, Customer Relationship Management (CRM), Business Intelligence (BI), Data, Machine Learning and Operations - all of which are vital for Just Eat to offer our customers the best and easiest way to find and order their food of choice.

 

In order to deliver a world-class hybrid marketplace we've created a global delivery fulfilment team to create a consistent experience for customers, restaurant partners and couriers. Our global fulfilment team is based in Canada and run by online food delivery experts from SkipTheDishes focused on driving innovation and cost optimisation across our delivery network globally. We believe this is a crucial competitive advantage as we extend our hybrid model.

 

Segmental overview

Comparative financial numbers are presented below within the segmental review on a constant currency basis so as to remove the fluctuations associated with operations in different functional currencies.

 

2018	Active customers m	Orders m	Average Order Value £	Revenue £m	uEBITDA1 £m
United Kingdom	12.2	122.8	18.79	385.6	189.5
Canada	3.5	30.7	18.09	177.9	(11.5)
Australia & New Zealand	2.6	13.0	24.22	46.7	6.5
International	8.0	54.7	18.95	169.3	14.2
Total segment	26.3	221.2	19.05	779.5	198.7
Share of associates2	-	-	-	-	(5.7)
Head office	-	-	-	-	(19.1)
Total	26.3	221.2	19.05	779.5	173.9

 

 

2017 constant currency basis	Active customers m	Orders m	Average  Order Value £	Revenue £m	uEBITDA1 £m
United Kingdom	10.5	105.0	17.73	303.8	155.4
Canada	2.0	11.6	18.85	62.3	(11.1)
Australia & New Zealand	3.0	15.2	23.63	46.8	16.2
International	6.0	40.6	19.42	129.0	19.8
Total segment	21.5	172.4	18.73	541.9	180.3
Share of associates2	-	-	-	-	(0.2)
Head office	-	-	-	-	(17.1)
Total	21.5	172.4	18.73	541.9	163.0

1.     The performance of the Group is monitored internally using a variety of statutory and alternative performance measures (APMs). APMs are not defined within IFRS and are used to assess the underlying operational performance of the Group and as such these measures should be considered alongside IFRS measures. The main measure of profitability used by management to assess the performance of the business is Underlying EBITDA ("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 an adjustment for the associates uEBITDA. For full definitions and reconciliations of APMs, please refer to the APM appendix at the end of the document.

2.     Just Eat's share of Latin America uEBITDA is calculated as 33% of Brazil uEBITDA and 100% of Mexico uEBITDA.

 

United Kingdom

Our UK business continued to experience strong growth as one fifth of the UK adult population chose Just Eat as its takeaway food delivery platform of choice during the year. In the first half of the year, we consolidated our number one position through the successful integration of HungryHouse and we remain the UK's most comprehensive online takeaway food delivery platform with over 30,000 Restaurant Partners. Active customers increased 16% to 12.2 million generating 122.8 million orders, up 17% from 2017, despite the impact of exceptionally hot weather in July and August. The UK business hit a number of milestones during the year including supplying over 600,000 orders in one day and our first ever 1 million order weekend.

Revenue increased 27% to £385.6 million driven by strong marketplace order growth, accelerating growth of delivery orders and the inclusion of HungryHouse. Average Order Value ("AOV") increased by 6% to £18.79. uEBITDA increased by 22% to £189.5 million with a margin of 49% (2017: 51%) reflecting investment in the roll-out of delivery in key zones.

Canada

SkipTheDishes, our market-leading Canadian food delivery business, has had an exceptional year and continued to grow triple digits with the launch of multilingual capabilities. This enabled full coverage across Canada, with expansion into Quebec, and supported the launch of new Branded Restaurant Partners, including McDonald's and Tim Hortons, taking the total number of Restaurant Partners to over 16,900, almost doubling year-on-year. Active customers increased 72% to 3.5 million generating 30.7 million orders, up 165% from 2017.

Revenue increased 186% on a constant currency basis to £177.9 million. Revenue growth was ahead of order growth, despite a reduction in AOV, reflecting the addition of lower AOV, higher frequency restaurants to the platform. uEBITDA was a loss of £11.5 million (2017: £11.1 million constant currency), with an improved margin of -7% (2017: -16% constant currency) reflecting the optimisation of delivery zones as we move towards profitability.

Australia & New Zealand

As outlined at the half year, Australia & New Zealand remains highly competitive due to the unusually high proportion of its population residing in two major cities and, as a result, our focus has been on the successful integration of SkipTheDishes' world-class delivery platform with Menulog's marketplace, creating a leading hybrid offering. We continued to scale our delivery business throughout the year with a presence in 28 zones across Sydney, Melbourne and Perth as at year end and signed-up key Branded Restaurant Groups such as Hungry Jack's and KFC, taking the total number of Restaurant Partners to 11,200, up 14% year-on-year. Active customers decreased by 14% to 2.6 million generating orders of 13.0 million (2017: 15.2 million) as we focused on creating a world-class hybrid experience.

Australia & New Zealand generated revenue of £46.7 million, flat on a currency neutral basis, with revenue returning to growth as we exited FY18 following the integration of delivery and sign-up of key Branded Restaurant Groups. uEBITDA decreased to £6.5 million (2017: £16.2 million constant currency) due to our focus on delivering a world-class hybrid marketplace featuring key Branded Restaurant Groups. AOV improved by 3% during the year to over £24.

International

International comprises eight countries - Denmark, France, Ireland, Italy, Mexico, Norway, Spain and Switzerland. International order growth was strong, powered by new Restaurant Partner sign-ups across tier 2, 3 and 4 cities and the targeted roll-out of delivery with third parties in key cities

The number of active customers increased by 34% to 8.0 million generating orders of 54.7 million, up 34% year-on-year. Italy and Spain performed strongly serving over 1 million orders in a month for the first time during the year. Our French business was rebranded from AlloResto to Just Eat during the year and continued to add restaurants outside of Greater Paris.

Our International businesses generated an AOV of £18.95 (2017: £19.42 constant currency) and revenue of £169.3 million (2017: £129 million constant currency), up 31%. uEBITDA was £14.2 million with a margin of 8% (2017: 15% constant currency) reflecting the targeted roll-out of delivery in key zones across Europe and our investment in brand building in Mexico as outlined above.

iFood (Share of uEBITDA from associates)

Just Eat owns a 33% stake in iFood, the leading hybrid marketplace for takeaway food delivery in Brazil. iFood generated revenue of £123.8 million (2017: £64.5 million on a constant currency basis). This represents a 92% increase and was driven by a 103% increase in orders to 110.2 million (2017: 54.3 million). Just Eat's share of results from iFood resulted in an uEBITDA loss of £5.7 million (2017: loss of £0.3 million). The increased loss year-on-year was due to increased investment by iFood in logistics and marketing to capture its significant market opportunity. The results from investment have been strong in both marketplace and delivery, with iFood remaining around 16 times the size of its nearest competitor in Brazil. To fund the investment, iFood requires capital from its shareholders and given iFood's excellent progress to date in capturing the significant opportunity in Brazil, we plan to continue to participate in funding iFood's growth plans.

Operating costs

Operating costs increased to £599.9 million (2017: £382.5 million) comprising Cost of Sales of £216.9 million (2017: £96.0 million), Staff costs of £177.2 million (2017: £135.0 million), Marketing costs of £146.3 million (2017: £110.7 million) and Overhead costs of £59.5 million (2017: £40.8 million). Overhead costs include property, software and administrative costs.

Marketing was broadly flat as a percentage of revenue at 19% (2017: 20%) as we continued to invest heavily in building the brand and driving customer loyalty.

  

Items outside of uEBITDA

Adjusting items from uEBITDA to operating profit of £63.6 million in the year (2017: £235.4 million) primarily comprise depreciation and amortisation of other intangible assets of £25.3 million (2017: £14.0 million), amortisation of intangible assets arising on acquisitions of £23.9 million (2017: £24.4 million) and acquisition transaction and integration costs of £14.8 million (2017: £10.7 million) including £7.5 million relating to the integration of HungryHouse which was acquired on 31 January 2018 (2017: £nil).

A full reconciliation between uEBITDA and operating profit is provided in Note 4 to the financial statements.

Taxation
The business's total income tax charge decreased to £21.8 million (2017: £27.5 million), resulting in an effective tax rate ("ETR") of 21.4%. The decline in the statutory tax charge is driven largely by the recognition of a deferred tax asset relating to the cumulative tax losses in SkipTheDishes in Canada, which is treated as an adjusting item for the purpose of underlying ETR. The ETR on underlying profits was 22.4% (2017: 23.7%), which is reflective of the current tax arising in the profitable markets.

Profit for the year
Statutory profit for the year was £79.9 million (2017: loss of £103.5 million). The loss in 2017 was principally the result of the £180.4 million non-cash impairment charge. Adjusting for this, the loss in 2017 would have been a profit of £76.9 million in 2017.

Earnings per share
Adjusted EPS was 17.0 pence (2017: 16.8 pence), up 1% on last year and broadly tracking the increase in uEBITDA  Statutory basic EPS increased to 12.1 pence (2017: loss per share of 15.2 pence).

The Alternative Performance Measures appendix to the financial statements includes a reconciliation between statutory and adjusted EPS.

Balance sheet

In 2018, non-current assets increased by £295.9 million (2017: £167.1 million), primarily as a result of the acquisition of HungryHouse and Flyt. Over the course of the year, £24.8 million (2017: £18.8 million) was capitalised relating to specific technology projects. Other non-current assets includes the business's £51.1 million investment in our associate iFood (2017: £38.0 million). The Company's holding increased to 33% during the year (2017: 32%).

Updated segmental disclosure for 2019
To reflect the evolution of the business, our operations in Mexico and Brazil, which are managed by our associate iFood, will be excluded from our reported uEBITDA from full year 2019 onwards. Full segmental disclosure under the updated methodology can be found at the end of this release.

Outlook
In 2019, we will leverage the improvements we have made in our marketplace business to drive order and revenue growth, while we now also expect to grow marketplace uEBITDA margins year on year. Furthermore, we anticipate 2019 will see our Canadian business, SkipTheDishes, report its first full year uEBITDA profit, demonstrating the route to profitability for delivery. We will invest this increased profit in accelerating our other exciting delivery initiatives along the pathway towards profitability, principally in the UK and Australia. The targeted roll-out of delivery in key zones will allow us to increase our overall customer base and serve even more brilliant food moments.

The Board expects to report full year 2019 revenue in the range of £1.0 billion to £1.1 billion and uEBITDA (both excluding Brazil and Mexico) in the range of £185 million to £205 million. Under iFood's latest plan, the Board expects Just Eat's share of its Latin American operations (being Brazil and Mexico together) to report an uEBITDA loss in the range of £80 million to £100 million. Just Eat will fully participate in funding iFood's exciting growth plans, maintaining its shareholding.

 

Peter Duffy Interim Chief Executive Officer Just Eat plc                       5 March 2019

Paul Harrison Chief Financial Officer Just Eat plc                       5 March 2019

 

 

 

 

Appendix

Updated segmental disclosure for 2019
To reflect the evolution of the business, our operations in Mexico and Brazil, which are managed by our associate iFood, will be excluded from our reported uEBITDA from full year 2019 onwards. The tables below detail the segmental results under this new methodology. Full APM disclosure can be found at the end of this release.

 

2018	Active customers m	Orders m	Average Order Value £	Revenue £m	uEBITDA £m
United Kingdom	12.2	122.8	18.79	385.6	189.5
Canada	3.5	30.7	18.09	177.9	(11.5)
Australia & New Zealand	2.6	13.0	24.22	46.7	6.5
Europe	7.2	49.7	20.18	171.0	25.0
Total segment	25.5	216.2	19.34	781.2	209.5
Head office	-	-	-	-	(19.1)
Total excluding LATAM	25.5	216.2	19.34	781.2	190.4
Mexico	0.8	5.0	6.48	(1.7)	(10.8)
Brazil	-	-	-	-	(5.7)
Total including LATAM	26.3	221.2	19.05	779.5	173.9

 

 

2017 constant currency basis	Active customers m	Orders m	Average Order Value £	Revenue £m	uEBITDA £m
United Kingdom	10.5	105.0	17.73	303.8	155.4
Canada	2.0	11.6	18.85	62.3	(11.1)
Australia & New Zealand	3.0	15.2	23.63	46.8	16.2
Europe	5.6	38.1	20.17	128.1	23.3
Total segment	21.1	169.9	18.89	541.0	183.8
Head office	-	-	-	-	(17.1)
Total excluding LATAM	21.1	169.9	18.89	541.0	166.7
Mexico	0.4	2.5	8.10	0.9	(3.5)
Brazil	-	-	-	-	(0.2)
Total including LATAM	21.5	172.4	18.73	541.9	163.0

 

 

 

 

Consolidated income statement

Year ended 31 December 2018

 

	Notes	2018 £m	2017 (restated1) £m
Continuing operations
Revenue	3	779.5	546.3
Cost of sales		(216.9)	(96.0)
Gross profit		562.6	450.3
Administrative expenses		(452.3)	(522.2)
Operating profit/(loss)1		110.3	(71.9)
Share of results of associates	11	(6.7)	(0.6)
Other gains and losses	5	0.8	(2.0)
Investment revenue		0.4	0.7
Finance costs		(3.1)	(2.2)
Profit/(loss) before tax		101.7	(76.0)
Taxation	6	(21.8)	(27.5)
Profit/(loss) for the year		79.9	(103.5)
Attributable to:
Equity shareholders		82.7	(102.7)
Non-controlling interests		(2.8)	(0.8)
		79.9	(103.5)
Earnings per ordinary share (pence)
Basic	7	12.1	(15.2)
Diluted	7	12.1	(15.2)

1.    The definition of operating profit has been restated in the year to exclude the results of associated undertakings. See Note 2 for further information.

 

 

Consolidated statement of other comprehensive income

Year ended 31 December 2018

 

		2018 £m	2017 £m
Profit/(loss) for the year		79.9	(103.5)
Items that may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations		(17.3)	(6.5)
Fair value movements on cash flow hedges		-	(0.1)
Fair value movements on available-for-sale investments		-	0.1
Other comprehensive loss for the year		(17.3)	(6.5)
Total comprehensive income/(loss) for the year		62.6	(110.0)
Attributable to:
Equity shareholders		65.2	(109.1)
Non-controlling interests		(2.6)	(0.9)
Total comprehensive income/(loss) for the year		62.6	(110.0)

 

 

 

 

Consolidated balance sheet

As at 31 December 2018

 

	Notes	2018 £m	2017 £m
Non-current assets
Goodwill	8	770.7	544.9
Other intangible assets	9	136.9	94.5
Property, plant and equipment	10	25.9	19.0
Investments in associates	11	54.6	41.4
Available-for-sale investments		1.0	4.2
Deferred tax assets	6	28.9	18.1
		1,018.0	722.1
Current assets
Operating cash		106.2	213.6
Cash to be paid to Restaurant Partners		79.7	51.5
Cash and cash equivalents		185.9	265.1
Inventories		5.5	2.8
Trade and other receivables		24.2	24.2
Derivative financial instruments		-	0.1
Current tax assets		0.1	0.4
		215.7	292.6
Total assets		1,233.7	1,014.7
Current liabilities
Trade and other payables		(240.1)	(185.2)
Derivative financial instruments		(0.3)	(0.6)
Current tax liabilities		(28.8)	(36.4)
Deferred revenue		(3.1)	(3.3)
Provisions for liabilities	12	(11.5)	(22.6)
Borrowings	13	(0.3)	(0.4)
		(284.1)	(248.5)
Net current (liabilities)/assets		(68.4)	44.1
Non-current liabilities
Deferred tax liabilities	6	(20.6)	(18.2)
Deferred revenue		(3.9)	(0.8)
Provisions for liabilities	12	(20.8)	(20.2)
Borrowings	13	(102.4)	(0.3)
		(147.7)	(39.5)
Total liabilities		(431.8)	(288.0)
Net assets		801.9	726.7
Equity
Share capital		6.8	6.8
Share premium		563.4	562.7
Retained earnings		155.9	65.9
Translation reserve		70.8	88.3
Other reserves		(6.0)	(5.2)
Equity attributable to shareholders of the Company		790.9	718.5
Non-controlling interests		11.0	8.2
Total equity		801.9	726.7

 

 

 

Consolidated statement of changes in equity

Year ended 31 December 2018

 

	Notes	Share capital £m	Share premium account £m	Retained earnings £m	Translation reserve £m	Other reserves £m	Equity attributable to shareholders of the Company £m	Non- controlling interest ("NCI") £m	Total equity £m
At 1 January 2017		6.8	562.2	160.7	94.7	(6.4)	818.0	7.7	825.7
Loss for the year		-	-	(102.7)	-	-	(102.7)	(0.8)	(103.5)
Other comprehensive loss		-	-	-	(6.4)	-	(6.4)	(0.1)	(6.5)
Total comprehensive loss for the year		-	-	(102.7)	(6.4)	-	(109.1)	(0.9)	(110.0)
Exercise of share options		-	0.5	-	-	-	0.5	-	0.5
Share based payment charge		-	-	6.1	-	-	6.1	-	6.1
Exercise of JSOP/SIP awards		-	-	-	-	1.2	1.2	-	1.2
Adjustment for cash-settled share options		-	-	(0.2)	-	-	(0.2)	-	(0.2)
Tax on share options	6	-	-	2.0	-	-	2.0	-	2.0
Funding received from NCI		-	-	-	-	-	-	1.4	1.4
At 31 December 2017		6.8	562.7	65.9	88.3	(5.2)	718.5	8.2	726.7
Profit for the year		-	-	82.7	-	-	82.7	(2.8)	79.9
Other comprehensive loss		-	-	-	(17.5)	-	(17.5)	0.2	(17.3)
Total comprehensive income for the year		-	-	82.7	(17.5)	-	65.2	(2.6)	62.6
Exercise of share options		-	0.5	-	-	-	0.5	-	0.5
Share based payment charge		-	-	7.3	-	-	7.3	-	7.3
Exercise of JSOP/SIP awards		-	0.2	0.6	-	(0.8)	-	-	-
Tax on share options	6	-	-	(0.6)	-	-	(0.6)	-	(0.6)
Funding received from NCI		-	-	-	-	-	-	5.4	5.4
At 31 December 2018		6.8	563.4	155.9	70.8	(6.0)	790.9	11.0	801.9

 

 

 

 

Consolidated cash flow statement

Year ended 31 December 2018

 

 

	Notes	2018 £m	2017 (restated1) £m
Operating profit/(loss)1		110.3	(71.9)
Adjustments for:
Amortisation of intangible assets	9	37.2	31.1
Depreciation of property, plant and equipment	10	12.0	7.3
Loss on disposal of property, plant and equipment and intangible assets		1.9	0.9
Increase in provisions		(0.8)	0.3
Non-cash share based payment charges, including social security costs		8.0	6.6
Impairment charges		-	180.4
Other non-cash items		-	(0.3)
		168.6	154.4
Increase in inventories		(2.8)	(0.2)
Increase in receivables		(8.3)	(4.6)
Increase in cash to be paid to Restaurant Partners		28.2	17.7
Increase in payables, excluding cash to be paid to Restaurant Partners		9.2	25.0
Increase/(decrease) in deferred revenue		2.7	(0.6)
Net cash generated by operations		197.6	191.7
Interest paid		(1.5)	(0.7)
Facility fees paid		(1.3)	(2.3)
Income taxes paid		(37.5)	(22.0)
Net cash from operating activities		157.3	166.7
Investing activities
Interest received		0.4	0.7
Acquisition of subsidiary businesses	14	(252.5)	(0.4)
Acquisition of interests in associates	11	(12.4)	(2.6)
Funding provided to associates	11	(30.6)	(0.8)
Disposal of subsidiary businesses		-	3.6
Disposal of minority stake in Mexican business		-	1.2
Purchase of intangible assets		(33.3)	(24.0)
Purchase of property, plant and equipment		(20.3)	(14.6)
Other cash inflows		-	1.2
Net cash used in investing activities		(348.7)	(35.7)
Financing activities
Proceeds from exercise of options and awards		1.1	3.1
Cash inflow on borrowings	13	185.0	-
Repayment of borrowings	13	(80.0)	(0.4)
Funding received from NCI		5.4	-
Net cash generated from financing activities		111.5	2.7
Net (decrease)/increase in cash and cash equivalents		(79.9)	133.7
Cash and cash equivalents at beginning of year2		265.1	130.6
Effect of changes in foreign exchange rates		0.7	0.8
Cash and cash equivalents at end of year2		185.9	265.1

1.    The definition of operating profit has been restated in the year to exclude the results of associated undertakings. See Note 2 for further information.

2.    Includes £79.7 million (2017: £51.5 million) of Restaurant Partner cash.

 

 

 

 

 

 

Notes to the consolidated financial statements

Year ended 31 December 2018

 

1. General information

Just Eat plc (the "Company") and subsidiaries controlled by the Company (together, the "Group") operate a leading global marketplace for online food delivery. The Company is a public limited company listed on the premium listing segment of the Official List of the Financial Conduct Authority and is incorporated and domiciled in England and Wales. Our registered address is Masters House, 107 Hammersmith Road, London, W14 0QH, United Kingdom.

The financial information, comprising the consolidated income statement, consolidated statement of other comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and related notes 1 to 15, has been taken from the consolidated financial statements of Just Eat plc (the "Company") for the year ended 31 December 2018, which were approved by the Board of Directors on 5 March 2019. The financial information does not constitute statutory accounts within the meaning of sections 435(1) and (2) of the Companies Act 2006, or contain sufficient information to comply with the disclosure requirements of International Financial Reporting Standards ("IFRS").

An unqualified report on the consolidated financial statements for the year ended 31 December 2018 has been given by the auditor Deloitte LLP. It did not include reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain any statement under sections 498(2) or (3) of the Companies Act 2006.

The consolidated financial statements will be filed with the Registrar of Companies, following their approval by the Company's shareholders at the Company's Annual General Meeting on 1 May 2019.

 

2. Basis of preparation

We have prepared the financial statements in accordance with International Financial Reporting Standards as endorsed by the European Union ("IFRS"), those parts of the Companies Act 2006 (the "Act") applicable to companies reporting under IFRS and Article 4 of the International Accounting Standard ("IAS") Regulations.

These consolidated financial statements have been prepared on the historical cost basis, except for assets and liabilities acquired as part of a business combination, deferred contingent consideration, provisions, available-for-sale investments, and derivative financial instruments, which have been measured at fair value.

The Directors have a reasonable expectation that the Company and the Group will be able to operate within the level of available facilities and cash for the foreseeable future and accordingly believe that it is appropriate to prepare the financial statements on a going concern basis. The Directors have made appropriate enquiries and considered the business plans which provide financial projections for the foreseeable future. For the purposes of this review, we consider that to be the year ending 31 December 2021. The Directors have also reviewed the principal risks considered in the Strategic Report within the Group's Annual Report and Accounts and taken account of the results of sensitivity testing. Based on the Group's forecasts, the Directors are satisfied that the Company, and the Group as a whole, have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements have been prepared on the going concern basis.

The policies have been consistently applied to all years presented with the exception of the change in definition of operating profit as explained below and the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on 1 January 2018. Neither of the two new accounting standards resulted in a restatement of the comparative figures.

Prior year restatement: Change in definition of operating profit

During the year the definition of operating profit has been restated to exclude the results of our associated undertakings. The financial performance of these businesses is not within the control of the Group and therefore does not reflect our operational performance. No other performance measures were restated. The operating loss of £72.5 million previously reported for the year ended 31 December 2017 has been restated to £71.9 million as a result of removing the results of the associates.

In previous periods, we have separated out certain items within administrative expenses and disclosed them as exceptional items. All such items are already included within the reconciliations for relevant alternative performance measure and therefore this classification is no longer applied.

Critical judgements in the application of accounting policies

For some companies, critical judgements can be made when applying accounting policies that could have a significant impact on the amounts recognised in the consolidated financial statements. No such judgements were made by us in the current year.

Key sources of estimation uncertainty

At the balance sheet date, key assumptions regarding the future and other key sources of estimation uncertainty are made. A significant risk may exist where changes to these assumptions causes a material adjustment to the carrying value of assets and liabilities within the next financial year. The potential impairment of goodwill and uncertain tax positions are the only key sources of estimation uncertainty which could realise this risk.

Impairment of goodwill

The consolidated balance sheet includes significant carrying values of goodwill and identifying whether there are indicators of impairment requires a good understanding of the drivers of value behind the asset. This is of significance to the Group due to the impairment of the goodwill associated with the Australia & New Zealand ("ANZ") cash-generating unit ("CGU") in 2017.

At each reporting period end, an assessment is performed in order to determine whether there are any indicators of impairment. This involves considering the performance of the business and any significant changes to the markets in which we operate. Impairment exists when the carrying value of an asset or CGU exceeds its recoverable amount, which is the higher of its fair value less costs of disposal ("FVLCD") and its value in use ("VIU").

The key assumptions used in the VIU calculations are the discount rate and the anticipated future cash flows. The key assumptions used in the FVLCD are similar to the VIU. However, the assumptions are based on a likely market participant's perspective when completing a discounted cash flow model and are therefore guided by advice received from third party advisers. In both the VIU and FVLCD calculations, discount rates are used which reflect current market assessments of the time value of money and the risks specific to the particular CGU. The assumptions on growth in future cash flows are based on past experience, recent results and future expectations, in particular, order growth.

The main drivers for future order growth are the continued investment in marketing, which helps drive brand awareness and drive Customer traffic to our platforms, and the investment in technology, which ensures the platforms are stable, secure, efficient and scalable. This investment will assist in increasing both the relevant overall market as well as the CGU's market share over the medium to long-term. Winning large chains of quick service restaurants is also a key driver for future growth, due to the impact on order volumes and the effect of encouraging new users to our platform.

Future expected cash flows reflect the most recent financial projections presented to the Board. These cover a three year period. A further two years of growth projections are applied to the initial projections, based on previous experience of growth rates across all CGUs. For the majority of the CGUs, a long-term growth rate is applied to the fifth year of our projected cash flows, equivalent to the long-term rates of inflation expected in the relevant economies. However, some markets are expected to experience a period of sustained high growth continuing from the end of the fifth year to reaching relative stability (the medium-term). Due to the higher level of uncertainty resulting from this growth stage, these are the CGUs with the highest risk of impairment. The ANZ and Italian CGUs have seen significant investment in delivery capability in 2018. The full impact of this investment is expected to crystallise through the medium term, following a pattern similar to that experienced by the SkipTheDishes business in Canada. For these CGUs, it is appropriate to use forecasts extending beyond five years as it correlates with experience in similar markets. The medium-term period extends to eight years for both CGUs. Mexico is one of the least mature markets we have operations in and therefore extrapolating short-term cash outflows could indicate an impairment. However, the business has also been valued based on a potential disposal value and given that this is greater than the carrying value, no impairment is required.

The key assumptions used to determine the recoverable amount for ANZ, Mexico, Italy and all other CGUs, including a sensitivity analysis, are disclosed and further explained in Note 8.

Uncertain tax positions

Our tax charge is the sum of the total current and deferred tax charges arising in each jurisdiction. As a result of our growing global footprint and the changing global tax environment and income taxes arising in numerous jurisdictions, there are some transactions for which the ultimate tax determination is uncertain during the ordinary course of business. The calculation of our total tax charge involves estimation and judgement in respect of certain matters where the tax impact is uncertain until a conclusion is reached with the relevant tax authority or through a legal process. Resolving tax issues can take several years and is not always within our control. Current tax liabilities are recognised for uncertain tax positions when we have a present obligation as a result of a past event and it is probable that there will be a future outflow of funds to a taxing authority. These may be, for example, in respect of enquiries raised and additional tax assessments issued.

Liabilities in respect of uncertain tax positions are measured based on interpretation of country-specific tax law and assigning probabilities to the possible likely outcomes and range of taxes payable in order to ascertain a weighted average probable liability. In-house tax experts, external tax experts and previous experience are used to help assess the tax risks when determining and recognising such liabilities. See Note 6 for further details of the £19.9 million tax provision held at 31 December 2018, which includes an amount relating to an ongoing transfer pricing audit in Denmark. The tax provision held in relation to the Danish matter is calculated based on probability weighting of a range of possible outcomes, the most extreme of which is the full claim of £126 million. Therefore, it is possible that a change in our estimate could result in a material adjustment within the next 12 months. The key areas which are factored into our estimate of the likely outcome are: whether the basis for the claim made by the Danish authorities is valid; the valuation applied to the relevant assets; and the length of time over which royalty relief may be applied, ranging from 5 years to 25 years.

Where the final amounts payable are different to the liabilities recognised in previous periods, the required adjustments in respect of prior years are recorded in the current period in the income statement, or directly in equity, as appropriate.

New and amended standards adopted

IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers were both adopted on 1 January 2018. Neither standard has had a material impact on our financial position or performance therefore no restatement of the comparative figures has been required. No other new standards, amendments or interpretations to standards effective for the first time for the financial year beginning on 1 January 2018 have had a material impact on our financial position or performance, nor the disclosures in these consolidated financial statements.

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for the year ended 31 December 2018 and have not been early adopted.

With the exception of IFRS 16 Leases, none of the accounting standards issued but not yet effective are expected to have a significant impact on our annual financial statements, including IFRIC 23 Uncertainty Over Income Tax Treatments.

IFRIC 23 clarifies how to apply the recognition and measurement requirements in IAS 12 Taxes when there is uncertainty over income tax treatments. In particular, the interpretation addresses whether uncertain tax treatments should be considered separately or together with one or more other uncertain tax treatments, and addresses the assumptions an entity makes about the examination of tax treatments by taxation authorities. IFRIC 23 is effective from 1 January 2019.

IFRS 16

The new leasing standard will be adopted with effect from 1 January 2019.

IFRS 16 replaces IAS 17 Leases, with the key change being that lessee accounting will eliminate the IAS 17 distinction between operating leases and finance leases, treating all such leases in the same manner as finance leases under IAS 17.

Where an arrangement meets the IFRS 16 definition of a lease and we act as a lessee, at commencement a loan obligation for future lease payables will be recognised together with an equal value non-current asset representing the right to use the leased item. This will have no impact on net assets at the commencement date, but due to the different methods of unwinding the asset and liability, over time, a difference will arise.

Lease costs will be recognised in the form of depreciation of the right-of-use asset and interest on the lease liability, which may impact the phasing of operating profit and profit before tax, compared to the cost profiles and presentation in the income statement under IAS 17. This will also impact the classification of associated cash flows in the consolidated cash flow statement.

We intend to apply the modified retrospective basis when adopting the standard, meaning that the carrying amount of the initial right-of-use assets will equal the respective lease liabilities for all leases entered into before 1 January 2019, therefore no restatement of prior years is required. The impact of the change in accounting standard on each line item in the financial statements will be provided.

If we had implemented IFRS 16 on 1 January 2018, using estimated discount rates based on lease specific incremental borrowing rates, the impact of applying the modified retrospective basis would be as follows:

Income statement

Administrative expenses would be broadly consistent, as a result of the lease expense of between £5 million and £10 million being replaced by an increase in depreciation on the right-of-use asset in the same range. Finance costs would increase by less than £5 million to reflect the current year unwind of the discounted lease liability.

Balance sheet

At 31 December 2018, a right-of-use asset of between £20 million and £30 million would be recognised as a non-current asset, along with a lease liability in the same range.

Cash flow statement

The lease payments would be reclassified from operating activities to financing activities.

 

3. Revenue

Revenue by source

	2018			2017
	£m	%		£m	%
Commission revenue	680.3	87		458.4	84
Administration fees	81.8	11		60.1	11
Discounts	(32.8)	(4)		(14.5)	(3)
Order-driven revenue	729.3	94		504.0	92
Top-placement fees	42.3	5		31.6	6
Sign-up fees and other revenue	7.9	1		10.7	2
Ancillary revenue	50.2	6		42.3	8
Total revenue	779.5	100		546.3	100

 

Revenue by category

	2018	2017
	£m	£m
Total revenue from rendering of services, being revenue as disclosed in the consolidated income statement	779.5	546.3
Investment revenue	0.4	0.7
Total revenue as defined in IAS 18 Revenue	779.9	547.0

 

4. Operating segments

IFRS 8 Operating Segments requires operating segments to be identified on the same basis as is used internally for the review of performance and allocation of resources by the Chief Operating Decision Maker ("CODM"). The CODM is the Chief Executive Officer.

Our operations are organised and reported internally in four segments, split geographically. The main measure of profitability used by the CODM to assess the performance of the business is Underlying EBITDA ("uEBITDA"). EBITDA is defined as earnings before investment revenue and costs, taxation, depreciation, amortisation and asset impairment charges. uEBITDA also excludes share based payment charges, including social security costs, acquisition transaction and integration costs, foreign exchange gains and losses, and other gains and losses. Included within total uEBITDA is our share of uEBITDA losses from associates.

The CODM uses uEBITDA to assess internal performance, as it excludes items that are either non-cash, relate to investment, or do not reflect the day to day commercial performance of the business. As a result, uEBITDA provides a measure of the underlying performance of the business and is considered to enhance the comparability of profit or loss across segments. Accordingly, Executive Team incentives are partially based on uEBITDA results and therefore, it is considered to be both useful and necessary to disclose this measure. Further details relating to the non-IFRS financial performance measures are provided as an appendix to these Annual Report & Accounts

Due to both the current and expected future size of the Canada segment, during the year we have changed our reporting segments to: United Kingdom; Canada; Australia & New Zealand ("ANZ"); and International. Previously, the segments were: United Kingdom; ANZ; Established Markets; and Developing Markets. The International segment consists of Denmark, France, Ireland, Italy, Mexico, Norway, Spain and Switzerland. Each of the operations in the International segment have similar business models and are expected to have similar long-term uEBITDA margins and display similar economic characteristics. The comparative segmental disclosures below have been restated to reflect this change. The operating segments reflect the information reported to the CODM.

Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Central administration costs are allocated to the individual segments on a consistent basis year-on-year. The CODM does not regularly review segment assets and liabilities and therefore no such details are provided below.

Segment revenue

2018	United Kingdom £m	Canada £m	ANZ £m	International £m	Head office £m	Total £m
Gross revenue	385.6	179.2	46.7	169.3	11.2	792.0
Less inter-segment revenue	-	(1.3)	-	-	(11.2)	(12.5)
External revenue	385.6	177.9	46.7	169.3	-	779.5

 

2017 (restated)	United Kingdom £m	Canada £m	ANZ £m	International £m	Head office £m	Total £m
Gross revenue	304.1	64.4	49.8	128.3	3.3	549.9
Less inter-segment revenue	(0.3)	-	-	-	(3.3)	(3.6)
External revenue	303.8	64.4	49.8	128.3	-	546.3

 

Segment uEBITDA and results

	Notes	2018 £m	2017 (restated1) £m
United Kingdom		189.5	155.4
Canada		(11.5)	(11.4)
ANZ		6.5	17.3
International		14.2	19.4
Total segment uEBITDA		198.7	180.7
Share of results from associates' uEBITDA		(5.7)	(0.2)
Head office		(19.1)	(17.0)
uEBITDA		173.9	163.5
Share based payment charges, including social security costs		(8.0)	(6.6)
Impairment charges		-	(180.4)
Acquisition transaction and integration costs		(14.8)	(10.7)
Net foreign exchange gains		2.7	0.5
Share of associates' uEBITDA		5.7	0.2
Depreciation	10	(12.0)	(7.3)
Amortisation - acquired intangible assets	9	(23.9)	(24.4)
Amortisation - other intangible assets	9	(13.3)	(6.7)
Operating profit/(loss)1		110.3	(71.9)
Share of results of associates	11	(6.7)	(0.6)
Other gains and losses	5	0.8	(2.0)
Investment revenue		0.4	0.7
Finance costs		(3.1)	(2.2)
Profit/(loss) before tax		101.7	(76.0)

1.    The definition of operating profit has been restated in the year to exclude the results of associated undertakings. See Note 2 for further information. In addition, the segment groupings themselves have been restated as noted in the accounting policy above.

 

5. Other gains and losses

	Notes	2018 £m	2017 £m
Decrease/(increase) in minority shareholders' buy-out provision	12	0.3	(0.5)
Gain/(loss) on derivative financial instruments		0.3	(0.4)
Fair value gain on stepped acquisition of Flyt Limited	14	0.7	-
Increase in contingent consideration liability	12	(0.5)	(1.1)
Total other gains and losses		0.8	(2.0)

 

6. Taxation

Income tax expense

	2018 £m	2017 £m
Current taxation
Current year	31.4	38.0
Adjustment for prior years	(0.2)	(0.3)
	31.2	37.7
Deferred taxation
Temporary timing differences	(9.3)	(10.0)
Adjustment for prior years	(0.1)	(0.2)
	(9.4)	(10.2)
Total tax charge for the year	21.8	27.5

 

UK corporation tax was calculated at 19.00% (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 debit of £0.6 million (2017: £2.0 million credit), which comprised of £0.6 million credit relating to current tax and £1.2 million debit relating to deferred tax.

Factors affecting the tax expense for the year

The total tax charge for the year can be reconciled to the profit/(loss) per the income statement as follows:

	2018 £m	2017 £m
Profit/(loss) before tax	101.7	(76.0)
UK rate of 19.00% (2017: 19.25%)	19.3	(14.6)
Adjusted for the effects of:
Non-deductible expenditure	2.7	3.1
Non-taxable income	(1.0)	(5.9)
Share based payments	0.8	0.3
Impairment charges	-	34.7
Prior year adjustments	(0.3)	(0.5)
Unrecognised deferred tax asset changes	(1.5)	1.6
Overseas tax rates	(2.1)	(1.7)
Other overseas taxes (including movement in provisions)	2.7	10.4
Associates results	1.2	0.1
Total tax charge for the year	21.8	27.5
Effective tax rate	21.4%	(36.2%)

 

The effective tax rate ("ETR") for the year ended 31 December 2018 is 21.4% (2017: -36.2%). Underlying ETR is provided in the Alternative Performance Measures appendix to these Annual Report and Accounts.

The total tax charge of £21.8 million (2017: £27.5 million) is made up of: a current tax charge of £31.2 million (2017: £37.7 million), primarily consisting of corporate tax arising in the UK, Denmark, France, Ireland and Switzerland; and a deferred tax credit of £9.4 million (2017: £10.2 million) resulting from the unwind of deferred tax liabilities arising on acquired intangibles and the recognition of a deferred tax asset on the cumulative losses in SkipTheDishes in Canada.

As a result of the geographical spread of our 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 £19.9 million at 31 December 2018 (2017: £17.4 million).

Included within the total uncertain tax provision is an amount held in relation to an ongoing transfer pricing audit in Denmark. In 2012, our transfer pricing arrangements were updated, in-line with the OECD Transfer Pricing Guidelines, to reflect the commercial and economic reality of our headquarters being established in the UK. An Advanced Pricing Agreement ("APA") was submitted to the Danish and UK Competent Authorities to obtain certainty over the position taken. The Danish Tax Authorities subsequently opened a local transfer pricing audit into the periods covered by the APA and in January 2018 issued a formal notice of assessment from their findings, making a claim that the taxable income for financial year 2013 should be increased, equalling an additional tax payment of £126 million, including interest and surcharges. We strongly disagree with the claim made by the Danish Tax Authorities and have appealed the assessment through a Mutual Agreement Procedure ("MAP") between the UK and Danish Competent Authorities. During the MAP, the two tax authorities enter into discussions with the intention of resolving the transfer pricing dispute. Our case was formally accepted into the MAP in April 2018. We expect this issue to be resolved through the MAP, with the outcome being full elimination of the potential double taxation. Such an outcome may result in a reallocation of income between the UK and Denmark with different tax rates applying over different time periods and net interest charges. An amount has been provided in respect of this uncertain tax position. This is a key source of estimation uncertainty as outlined in Note 2.

As we operate in multiple countries, our effective tax rate will be impacted by the tax rates applicable in those countries. We expect our future tax charge and effective tax rate will be driven by various factors including: The timing of the recognition of tax losses; changes in the mix of business profits; local or international tax reform (for example any arising from the implementation of the OECD's BEPS actions and European Union state aid investigations), new challenges by the tax authorities or the resolution of ongoing enquiries raised by tax authorities; and the impact of any acquisitions, disposals or restructurings.

Deferred tax

	Losses (assets) £m	Share based payment (assets) £m	Short-term temporary differences (assets) £m	Short-term temporary differences (liabilities) £m	Acquired intangibles (assets) £m	Acquired intangibles (liabilities) £m	Total £m
At 1 January 2017	10.8	2.3	1.2	(0.2)	0.1	(25.7)	(11.5)
Foreign exchange movements	(0.4)	-	-	(0.1)	-	0.1	(0.4)
Credit to the income statement	1.8	0.7	0.2	0.1	-	7.2	10.0
Credit to equity	-	1.1	-	-	-	-	1.1
Prior year adjustment	0.3	-	-	(0.1)	-	-	0.2
Arising on acquisition	-	-	-	-	-	0.5	0.5
At 31 December 2017	12.5	4.1	1.4	(0.3)	0.1	(17.9)	(0.1)
Foreign exchange movements	(0.1)	-	-	-	-	0.5	0.4
Credit to the income statement	2.8	0.2	0.6	-	-	5.7	9.3
Credit to equity	-	(1.2)	-	-	-	-	(1.2)
Prior year adjustment	(0.1)	-	0.3	(0.1)	-	-	0.1
Arising on acquisition	8.3	-	-	-	-	(8.5)	(0.2)
At 31 December 2018	23.4	3.1	2.3	(0.4)	0.1	(20.2)	8.3

 

		2018 £m	2017 £m
Analysed as:
Deferred tax liabilities		(20.6)	(18.2)
Deferred tax assets		28.9	18.1
Net deferred tax asset/(liability)		8.3	(0.1)

 

Deferred tax is provided in respect of temporary differences that have originated but not reversed at the balance sheet date and is determined using the tax rates that are expected to apply when the temporary differences reverse. Deferred tax assets are recognised only to the extent that it is probable that they will be recovered.

Deferred tax assets arising from temporary differences have not been recognised in tax jurisdictions where there is insufficient evidence that the asset will be recovered. The amount of the asset not recognised at 31 December 2018 was £18.3 million (2017: £20.4 million). The asset would be recognised if sufficient suitable taxable profits were made in the future and the recovery of the asset became probable.

Deferred tax assets not recognised

	2018 £m	2017 £m
Accelerated capital allowances	1.3	1.5
Short-term timing differences	0.4	0.4
Unrelieved tax losses	16.6	18.5
Total	18.3	20.4

 

The majority of our tax losses for which no deferred tax has been recognised do not expire. A total of £0.2 million of gross losses (unrecognised deferred tax asset of £0.05 million) expire in less than five years' time, £17.4 million of gross losses (unrecognised deferred tax asset of £5.2 million) expire in five to ten years' time and £4.0 million of gross losses (unrecognised deferred tax asset of £1.0 million) expire in more than 10 years' time.
 

7. Earnings per share

We use earnings per share as a measure of management performance. The principal metric used is adjusted earnings per share. This note sets out the IFRS earnings per share. Adjusted earnings per share is provided in the Alternative Performance Measures appendix to these financial statements.

Basic and diluted earnings per share

	2018 Number of shares ('000)	2017 Number of shares ('000)
Weighted average number of Ordinary shares for basic earnings per share	681,042	676,844
Effect of dilution:
Share options and awards	4,389	5,159
Unvested JSOP shares	-	943
Weighted average number of Ordinary shares adjusted for the effect of dilution	685,431	682,946

 

	2018 (pence)	2017 (pence)
Earnings per ordinary share
Basic	12.1	(15.2)
Diluted1	12.1	(15.2)

1. Due to the losses made in the year ended 31 December 2017 there is no dilutive effect of shares for that year.

 

8. Goodwill

Carrying value of goodwill

		2018 £m	2017 £m
At 1 January		544.9	725.2
Arising on acquisition		236.6	-
SkipTheDishes acquisition adjustment		-	1.5
Impairment charges		-	(180.4)
Foreign exchange movements		(10.8)	(1.4)
At 31 December		770.7	544.9

 

During the year we completed the acquisition of Hungryhouse Holdings Limited ("Hungryhouse") and Flyt Limited ("Flyt"), resulting in the recognition of £236.6 million of goodwill in total from these transactions. Further details are provided in Note 14.

Due to timing constraints between the acquisition of SkipTheDishes on 14 December 2016 and the publication of the 2016 Annual Report, the acquisition accounting in 2016 was provisional, based on estimated inputs. In the prior year, the valuation models and acquisition accounting were finalised, resulting in an increase in goodwill of £1.5 million (see Note 14). The Flyt acquisition in 2018 is currently held at provisional value due to the timing of the transaction.

Goodwill is attributable to the future growth of the acquired businesses, through expansion of the networks of Restaurant Partners and the number of orders per Restaurant Partner, anticipated future operating synergies, and the ability to leverage intellectual property in new markets around the world. In addition, the goodwill balances represented the value of the businesses' active Customer bases and assembled workforce, which do not meet the recognition criteria of an intangible asset.

Goodwill allocated by CGU

Goodwill acquired in a business combination is allocated on acquisition to the CGUs that are expected to benefit from that business combination.

During the year we integrated the operations of SkipTheDishes and Just Eat Canada and as a result these two CGUs were combined, leading to the transfer of £6.1 million into the SkipTheDishes CGU and its renaming to "Canada".

As a result of the acquisition of Hungryhouse, the UK CGU has been separately disclosed and the existing goodwill balance of £4.3 million attributable to this CGU has been moved from the "Other CGUs" category where it was previously disclosed.

 

 

 

The carrying amount of goodwill has been allocated as follows:

CGU	Acquisitions	As at 31 December 2017 £m	Transfers £m	Arising on acquisition £m	Foreign exchange £m	As at 31 December 2018 £m
ANZ	Menulog Group Limited ("MGL")	271.2	-	-	(11.5)	259.7
UK	Hungryhouse Holdings Limited, Flyt Limited, Meal 2 Order.com Limited, Nifty Nosh Limited and others	-	4.3	236.6	-	240.9
Canada ("CA")	SkipTheDishes Restaurant Services Inc., Orderit.ca	91.8	6.1	-	(2.3)	95.6
Spain ("ES")	SinDelantal Internet, S.L., La Nevera Roja	58.3	-	-	0.7	59.0
Italy ("IT")	Click Eat, Jeb S.r.l, Clicca e Mangia, PizzaBo	42.6	-	-	0.5	43.1
France ("FR")	FBA Invest SaS	44.0	-	-	0.5	44.5
Mexico ("MX")	SinDelantal Mexico SA de C.V., hellofood Mexico	19.6	-	-	1.2	20.8
Other CGUs1		17.4	(10.4)	-	0.1	7.1
Total goodwill		544.9	-	236.6	(10.8)	770.7

1.    Other CGUs include Denmark, Ireland and Switzerland. The individual amount of goodwill assigned to these CGUs is not considered significant in comparison with the carrying value of goodwill.

 

Impairment review

For the year ended 31 December 2018, no impairment charge has arisen. During the prior year, a non-cash impairment charge of £180.4 million was recorded in respect of the ANZ CGU. The charge was driven by lower projected cash flows within the business plans resulting in a reassessment of expected future business performance in light of the prevailing trading environment.

For all CGUs except for MX, the recoverable amount was determined by measuring their VIU. The recoverable amount for the MX CGU was calculated based on FVLCD.

The key VIU assumptions used were:

	ANZ	UK	CA	ES	IT	FR
Pre-tax discount rate1	10.7%	10.9%	11.3%	11.2%	11.3%	11.8%
Terminal growth rate2	2.5%	2.0%	2.0%	1.8%	1.6%	1.9%
Number of years forecasted before terminal growth rate applied	8	5	5	5	8	5

1.    Pre-tax discount rates have been calculated using the Capital Asset Pricing Model, the inputs of which include a country risk-free rate, equity risk premium, Group size premium and a risk adjustment (beta).

2.    Terminal growth rate is based on long-term inflationary rates in the country of operation.

 

FVLCD was calculated based on a revenue multiple model based on budgeted revenues for 2019 and is therefore a level 3 measurement. Level 3 measurements are based inputs which are normally unobservable to market participants. Costs of disposal can be assumed to be 10% of expected disposal proceeds.

Sensitivity analysis

We have conducted sensitivity analysis on each CGU's VIU. This included either increasing the discount rates, reducing the long-term growth rate, or reducing the anticipated future cash flows through changes to revenue or costs in each of the years through to the terminal year.

 

The sensitivity assumptions applied to the VIU calculations are set out in the table below. These are considered to be reasonably possible, but not likely.

	ANZ	UK	CA	ES	IT	FR
Increase in discount rate	1%	1%	1%	1%	1%	1%
Reduction in long-term growth rate applied in terminal year	(1%)	(1%)	(1%)	(1%)	(1%)	(1%)
Decrease in total revenue for all years through to terminal year	(5%)	(5%)	(5%)	(5%)	(5%)	(5%)
Increase in total costs for all years through to terminal year	5%	5%	5%	5%	5%	5%

 

Sensitivity analysis demonstrates that it is reasonably possible that an impairment charge could arise in the ANZ, ES and IT CGUs. The following table sets out the goodwill attributable to each of these CGUs, the excess of the recoverable amount over the carrying value of each CGU under the base case assumptions set out above (the "headroom"), together with the potential headroom (shown as a positive value) or impairment (shown as negative values) under each of the four sensitised scenarios.
 

	ANZ	ES	IT
Goodwill	259.7	59.0	43.1
Headroom under base case assumptions	21.1	15.4	10.8
1% increase in discount rate	(27.6)	5.5	1.6
1% reduction in long-term growth	(12.0)	7.6	4.3
5% reduction in total revenue for each year through to terminal year	(77.9)	(21.3)	(47.5)
5% increase in total costs for each year through to terminal year	(62.6)	(16.4)	(44.5)

 

9. Other intangible assets

	Notes	Patents, licences and IP £m	Restaurant contracts £m	Brands £m	Development costs £m	Total £m
Cost
At 1 January 2017		17.7	77.1	30.1	13.2	138.1
Additions		5.6	-	-	18.8	24.4
SkipTheDishes acquisition adjustment1	14	(0.8)	4.0	(5.0)	-	(1.8)
Transfers		4.6	-	-	(4.6)	-
Disposals		(3.9)	(0.8)	(1.0)	(0.5)	(6.2)
Foreign exchange movements		(0.1)	(0.3)	-	-	(0.4)
At 31 December 2017		23.1	80.0	24.1	26.9	154.1
Additions		4.9	-	-	27.3	32.2
Arising on acquisition		-	39.4	-	10.8	50.2
Transfers		5.6	-	-	(5.6)	-
Disposals		(0.6)	-	-	(1.3)	(1.9)
Foreign exchange movements		(0.2)	(2.3)	(0.6)	-	(3.1)
At 31 December 2018		32.8	117.1	23.5	58.1	231.5
Amortisation
At 1 January 2017		9.4	18.7	5.4	1.2	34.7
Charge for the year		6.3	13.0	9.0	2.8	31.1
Transfers		0.3	-	-	(0.3)	-
Disposals		(3.9)	(0.8)	(1.0)	(0.1)	(5.8)
Foreign exchange movements		-	(0.3)	(0.1)	-	(0.4)
At 31 December 2017		12.1	30.6	13.3	3.6	59.6
Charge for the year		6.1	21.1	2.2	7.8	37.2
Disposals		(0.5)	-	-	(0.5)	(1.0)
Foreign exchange movements		(0.2)	(0.7)	(0.3)	-	(1.2)
At 31 December 2018		17.5	51.0	15.2	10.9	94.6
Carrying amount
At 31 December 2018		15.3	66.1	8.3	47.2	136.9
At 31 December 2017		11.0	49.4	10.8	23.3	94.5

1.    Due to timing constraints between the acquisition of SkipTheDishes on 14 December 2016 and the publication of the 2016 Annual Report, the prior year acquisition accounting was provisional, as permitted under IFRS 3 Business Combinations. The prior year valuation of the acquired intangible assets was based on estimated inputs. In the current year, the valuation models and acquisition accounting have been finalised, resulting in an increase in intangible assets of £1.8 million (see Note 14).

 

10. Property, plant and equipment

	Fixtures and fittings £m	Equipment £m	Leasehold improvements £m	Total £m
Cost
At 1 January 2017	6.1	15.2	3.9	25.2
Transfers	(0.5)	0.5	-	-
Additions	1.1	7.3	5.9	14.3
Disposals	(0.5)	(2.8)	-	(3.3)
Foreign exchange movements	-	0.1	-	0.1
At 31 December 2017	6.2	20.3	9.8	36.3
Additions	1.2	17.2	1.6	20.0
Disposals	(0.2)	(4.7)	(0.2)	(5.1)
Foreign exchange movements	0.1	-	0.1	0.2
At 31 December 2018	7.3	32.8	11.3	51.4
Accumulated depreciation
At 1 January 2017	4.1	6.7	2.0	12.8
Charge for the year	1.1	5.1	1.1	7.3
Transfers	(0.5)	0.5	-	-
Disposals	(0.4)	(2.4)	-	(2.8)
Foreign exchange movements	-	0.1	(0.1)	-
At 31 December 2017	4.3	10.0	3.0	17.3
Charge for the year	1.2	8.6	2.2	12.0
Disposals	(0.2)	(3.6)	(0.2)	(4.0)
Foreign exchange movements	0.1	-	0.1	0.2
At 31 December 2018	5.4	15.0	5.1	25.5
Carrying amount
At 31 December 2018	1.9	17.8	6.2	25.9
At 31 December 2017	1.9	10.3	6.8	19.0

 

11. Investments in associates

We have investments in two associates, IF-JE Participações S.A. ("IF-JE") and IF-JE Holdings B.V. ("IF-JE NL"). Both associates are 33% owned, with the remaining 67% owned by Movile Internet Movel S.A. ("Movile"), or parties connected to Movile. Both entities are accounted for using the equity method in these consolidated financial statements as we are considered to have significant influence through representation on the companies' board of directors and through the voting rights given by share ownership. Only IF-JE is considered to be material.

IF-JE operates a marketplace for online food delivery. IF-JE is incorporated and has its principal place of business in Brazil, an area of significant growth potential and complementary to our strategic objectives.

During the year ended 31 December 2018 we paid £24.7 million to acquire additional shareholdings in IF-JE from other non-controlling parties. A further £12.4 million was paid against historic liabilities, taking the total cash payment to £37.1 million. In addition, we provided IF-JE with working capital funding of £5.9 million (2017: £0.8 million). We received additional shares as consideration for the funding. The majority shareholder Movile also participated in the funding.

IF-JE NL is a holding company with its principal place of residence in the Netherlands. The primary investment of IF-JE NL is El Cocinero a Cuerda SL ("ECAC"), a Mexican online food marketplace business. IF-JE NL owns 49% of ECAC, the remaining 51% is owned directly by us, therefore ECAC is fully consolidated in these financial statements and the investment in the IF-JE NL associated undertaking represents only the holding company activities.

During the year, no dividends have been received from associated undertakings (2017: £nil).

	2018				2017
	IF-JE £m	IF-JE NL £m	Total £m		IF-JE £m	IF-JE NL £m	Total £m
100% of the results of the business
Revenue	123.8	-	123.8		76.2	-	76.2
uEBITDA	(17.2)	-	(17.2)		(0.7)	-	(0.7)
Loss after tax	(19.5)	(0.1)	(19.6)		(1.1)	(1.6)	(2.7)
Our share of the results of the business
uEBITDA	(5.7)	-	(5.7)		(0.2)	-	(0.2)
Losses after tax1, 2	(6.7)	-	(6.7)		(0.6)	-	(0.6)
Total comprehensive loss1, 2	(6.7)	-	(6.7)		(0.6)	-	(0.6)
100% of the net assets of the business
Non-current assets	32.1	12.5	44.6		41.6	12.3	53.9
Current assets	83.9	-	83.9		33.4	0.1	33.5
Non-current liabilities	(1.6)	-	(1.6)		(4.3)	-	(4.3)
Current liabilities	(82.7)	(2.0)	(84.7)		(37.3)	(2.2)	(39.5)
Net assets and total equity	31.7	10.5	42.2		33.4	10.2	43.6
Our share of interest in associated undertaking's net assets	10.6	3.5	14.1		10.7	3.4	14.1
Goodwill on acquisition of interest in associate	40.5	-	40.5		27.3	-	27.3
Carrying value of interest in associated undertaking	51.1	3.5	54.6		38.0	3.4	41.4

1.    Our share of losses after tax and total comprehensive loss include amortisation of acquired intangibles recognised by us, but not by IF-JE.

2.    The loss after tax and total comprehensive loss were entirely derived from continuing activities.

 

12. Provisions for liabilities

	Notes	Contingent consideration £m	Other provisions £m	Total 2018 £m	Total 2017 £m
At 1 January		30.0	12.8	42.8	56.7
Arising on acquisition	14	20.8	0.2	21.0	-
Additional provisions in the year		-	0.3	0.3	18.9
Utilised in the year		-	(0.5)	(0.5)	(5.3)
Released to the income statement		(0.6)	(1.4)	(2.0)	(0.2)
Transferred to trade and other payables		(28.0)	-	(28.0)	(27.8)
Unwinding of discount		0.2	-	0.2	0.9
Foreign exchange movements		(1.6)	0.1	(1.5)	(0.4)
At 31 December		20.8	11.5	32.3	42.8

 

	2018 £m	2017 £m
Current	11.5	22.6
Non-current	20.8	20.2
Total provisions for liabilities	32.3	42.8

 

Contingent consideration of £20.8 million arose during the year in relation to the acquisition of Flyt, which is expected to be utilised in December 2021. Further details are provided in Note 14. As at 31 December 2017, £20.2 million of contingent consideration related to the acquisition of SkipTheDishes and £9.8 million related to IF-JE (see Note 11), both amounts were transferred to trade and other payables when the final amounts were agreed, with £0.6 million of excess provision released to the income statement.

At 31 December 2018, other provisions included £9.8 million (2017: £9.6 million) in respect of our commitment to buy out the minority shareholder of FBA Invest SaS and associated legal costs. The amount payable is dependent on the result of the French businesses for 2016 and 2017. The timing of the settlement of our commitment is uncertain, but is unlikely to be within three years of the balance sheet date. Movements in the provision, other than its utilisation, are charged/credited to other gains and losses.

 

13. Liabilities arising from financing activities and net debt

The table below details changes in liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the consolidated cash flow statement as cash flows from financing activities.

During the year, £2.5 million of capitalised loan arrangement fees were transferred from trade and other receivables.

	As at 31 December 2017 £m	Cash flows £m	Foreign exchange movements £m	Transferred from trade and other receivables £m	Transferred to trade and other payables £m	As at 31 December 2018 £m
Non-current
Revolving credit facility	-	(105.0)	0.1	2.5	-	(102.4)
Other borrowings	(0.3)	-	-	-	0.3	-
Non-current borrowings	(0.3)	(105.0)	0.1	2.5	0.3	(102.4)
Current
Other borrowings	(0.4)	-	0.1	-	-	(0.3)
Liabilities arising from financing activities	(0.7)	(105.0)	0.2	2.5	0.3	(102.7)
Operating cash	213.6	(108.1)	0.7	-	-	106.2
Net cash	212.9	(213.1)	0.9	2.5	0.3	3.5

 

 

	As at 31 December 2016 £m	Cash flows £m	Foreign exchange movements £m	Transferred from trade and other receivables £m	Transferred to trade and other payables £m	As at 31 December 2017 £m
Non-current
Revolving credit facility	-	-	-	-	-	-
Other borrowings	(0.6)	0.4	(0.1)	-	-	(0.3)
Non-current borrowings	(0.6)	0.4	(0.1)	-	-	(0.3)
Other long-term liabilities	(0.3)	-	-	-	0.3	-
Current
Other borrowings	(0.4)	-	-	-	-	(0.4)
Liabilities arising from financing activities	(1.3)	0.4	(0.1)	-	0.3	(0.7)
Operating cash	96.8	116.0	0.8	-	-	213.6
Net cash	95.5	116.4	0.7	-	0.3	212.9

 

14. Acquisitions

Acquisition of Hungryhouse

On 15 December 2016, we announced the agreement to acquire 100% of the share capital of Hungryhouse from Delivery Hero Holding GmbH. Approval from the Competition and Markets Authority ("CMA") was obtained on 16 November 2017 and completion of the acquisition occurred on 31 January 2018 for consideration totalling £239.5 million.

Funding for the acquisition was obtained from both existing cash reserves and a draw down on the revolving credit facility. Estimated deferred consideration of £23.5 million is payable on 31 January 2019.

The acquisition is consistent with our strategic ambition for growth and increased market presence in every geography in which we operate. Hungryhouse is an online food company operating solely in the UK, with a comparable business model to Just Eat.

The acquisition is expected to generate significant benefits for Restaurant Partners and Customers. It creates an enlarged customer base for Restaurant Partners to access, whilst increasing the breadth of choice on offer to UK consumers through our platform. The combination of the two businesses also generates compelling economic benefits of scale, with high operating leverage expected to drive material synergies post integration. Goodwill is attributable to the future growth of the acquired business, through expansion of their networks of Restaurant Partners, the number of orders per restaurant, and the anticipated future operational synergies. In addition, the goodwill balance represents the value of the consumer bases and assembled workforce, which do not meet the recognition criteria of an intangible asset. None of the goodwill is expected to be deductible for tax purposes. No brand asset was recognised on acquisition of Hungryhouse, given that the brand was number two behind Just Eat and there would be little incentive for any market participant to have acquired the Hungryhouse brand itself.

Transaction costs incurred on acquisition in the year were £1.8 million and integration costs £7.5 million, both of which are recorded in administrative expenses in the income statement.

Acquisition of Flyt

On 22 December 2018, we acquired 92% of the share capital of Flyt Limited (formerly named Flypay Limited) for an initial cash outlay of £21.8 million with an estimated earnout to the founders and previous owners of £20.8 million, payable over three years, with the actual amount contingent upon certain revenue and profit targets being met in that three year window. We acquired an 8% shareholding in Flyt in September 2016 for £3.5 million, which was treated as an available-for-sale investment prior to the acquisition of the remaining shareholding. At the point control was obtained, the fair value of the 8% investment was £4.2 million, the difference to the carrying value of £3.5 million was included in other gains and losses (see Note 5).

The core Flyt application is middleware that connects a restaurant's point of sale terminal to third party applications, such as the Just Eat platform. This enables orders and payments to be made directly from the third party applications to the point of sale terminals. Flyt works with some of the UK's largest branded restaurant groups.

The acquisition of Flyt creates in-house point of sale integration expertise which improves our platform and creates a more attractive solution to large branded restaurant groups.

Goodwill is attributable to the anticipated operational benefits and improvements to our commercial offering. In addition, the goodwill balance represents the value of the consumer bases and assembled workforce, which do not meet the recognition criteria of an intangible asset. None of the goodwill is expected to be deductible for tax purposes.

Transaction costs incurred on acquisition in the year were £0.5 million, which are recorded in administrative expenses in the income statement.

 

Fair value of business acquired in the current period

	Hungryhouse £m	Flyt1 £m	Total £m
Cash	7.9	-	7.9
Intangible assets - Restaurant contracts	39.4	-	39.4
Intangible assets - Development costs	-	10.8	10.8
Deferred tax liabilities in respect of the intangible assets	(6.7)	(1.8)	(8.5)
Deferred tax asset in respect of losses	6.5	1.7	8.2
Trade and other receivables	0.1	0.9	1.0
Trade and other payables	(8.5)	(0.4)	(8.9)
Provisions	(0.2)	-	(0.2)
	38.5	11.2	49.7
Goodwill	201.0	35.6	236.6
Total consideration	239.5	46.8	286.3
Satisfied by:
Cash consideration	216.0	21.8	237.8
Contingent consideration	23.5	20.8	44.3
Fair value of shareholding at the point control obtained	-	4.2	4.2
Total consideration	239.5	46.8	286.3
Net cash outflow arising on acquisition:
Cash consideration	216.0	21.8	237.8
Cash acquired	(7.9)	-	(7.9)
Net cash outflow	208.1	21.8	229.9
Contribution since control obtained
Revenue	n/a	n/a	n/a
uEBITDA	n/a	n/a	n/a

1.    Due to the limited amount of time since the acquisition of Flyt, on 31 December 2018, the acquisition accounting is provisional. This includes the valuation of the acquired intangible assets as some of the inputs to the valuation models are based on estimates.

 

Immediately after acquisition, the Hungryhouse Customers and Restaurant Partners were transferred on to the Just Eat UK ordering platform. The Hungryhouse platform ceased operating on 22 May 2018. Because of this, it is not possible to track Hungryhouse's total contribution to our results since the date of acquisition, as information is only available in respect of orders placed directly through the Hungryhouse platform, which would exclude orders from Hungyhouse Customers that had transferred on to the Just Eat platform.

As the Flyt business was acquired on 22 December 2018, there was no significant contribution to our revenue or profits during the year ended 31 December 2018.

 

 

Net cash outflow on acquisition of businesses

The total cash impact of current and historic acquisitions in the year was as follows:

	Hungryhouse £m	Flyt £m	Total £m
Net cash outflow	208.1	21.8	229.9
Cash payments made in prior periods	(6.0)	-	(6.0)
	202.1	21.8	223.9
Deferred consideration payments made in respect of SkipTheDishes			28.6
			252.5

 

15. Related party transactions

Compensation of key management personnel

Key management personnel comprises members of the Board and the Executive Team. Key management personnel compensation is shown in the table below:

	2018 £m	2017 £m
Short-term employee benefits	8.2	5.4
Post-employment pension	0.1	0.1
Termination benefits	1.0	-
Share based compensation	2.7	2.0
Total compensation of key management personnel	12.0	7.5

 

The amounts disclosed in the table above are the amounts recognised as an expense during the reporting period related to key management personnel.

On 24 March 2014, prior to the IPO, the Company called all the unpaid subscription amounts, totalling £13.2 million, in respect of certain shares issued under the JSOP. In order to facilitate this, the Company made loans to participants of the JSOP and Estera Trust (Jersey) Limited totalling £5.3 million and £7.9 million, respectively. The loans provided to the participants of the JSOP included loans to key management personnel totalling £4.9 million. As at 31 December 2018, the amount due from key management personnel in respect of these loans was £nil (2017: £0.2 million).

 

Key management personnel's interests in the PSP, the JSOP and the EMI scheme

The outstanding share options and awards held by key management personnel are summarised below:

Year of issue	2018 Number ('000)	2017 Number ('000)	Vesting date	Weighted average threshold/ exercise price (pence)
2011	-	1	Up to April 2012	-
2013	408	926	Up to July 2016	49.9
2015	159	321	Up to May 2018	-
2016	463	658	Up to December 2019	-
2017	647	573	Up to September 2020	-
2018	833	-	Up to September 2021	-
	2,511	2,479

 

Amounts owed by or to related parties

With the exception of key management personnel and £1.1 million (2017: £0.6 million) accrued for IF-JE management services, no amounts were owed by and to related parties at the balance sheet date.

Other transactions with related parties

As explained in Note 11, funding transactions took place with companies in which a non-controlling interest is held by us.

 

 

Alternative Performance Measures

Overview

When assessing and discussing financial performance, certain Alternative Performance Measures ("APMs") of historical or future financial performance, financial position or cash flows are used which are not defined or specified under IFRS. APMs are used to improve the comparability of information between reporting periods and operating segments.

APMs should be considered in addition to, not as a substitute for, or as superior to, measures reported in accordance with IFRS.

APMs are not uniformly defined by all companies. Accordingly, the APMs used may not be comparable with similarly titled measures and disclosures made by other companies.

Our APMs fall into two categories:

• Financial APMs: In most cases, these reflect financial measures that can be directly derived from the financial statements, although the tax impact of any adjusting items would not normally be provided. However, certain other financial APMs, such as the revenue per order information, cannot be derived from the financial statements as the component elements are not separately disclosed. The accounting policies applied when calculating APMs are the same as those set out in the consolidated financial statements.

• Non-financial APMs: These measures incorporate certain non-financial information that we believe is useful when assessing the performance of the business, such as the number of orders.

 

Financial APMs

The following table reconciles the consolidated income statement to the key profit measures used internally to assess performance.

		Adjusted results 2018 £m	Adjusting items 2018 £m	Reported  results 2018 £m	Adjusted results 2017 (restated1) £m	Adjusting items 2017 (restated1) £m	Reported results 2017 (restated1) £m
Continuing operations
Revenue		779.5	-	779.5	546.3	-	546.3
Cost of sales		(216.9)	-	(216.9)	(96.0)	-	(96.0)
Gross profit		562.6	-	562.6	450.3	-	450.3
Administrative expenses		(408.3)	(44.0)	(452.3)	(300.6)	(221.6)	(522.2)
Operating profit/(loss)2		154.3	(44.0)	110.3	149.7	(221.6)	(71.9)
Share of results of associates		(5.7)	(1.0)	(6.7)	(0.2)	(0.4)	(0.6)
Other gains and losses		-	0.8	0.8	-	(2.0)	(2.0)
Investment revenue		0.4	-	0.4	0.7	-	0.7
Finance costs		(3.1)	-	(3.1)	(2.2)	-	(2.2)
Profit/(loss) before tax		145.9	(44.2)	101.7	148.0	(224.0)	(76.0)
Taxation		(32.7)	10.9	(21.8)	(35.1)	7.6	(27.5)
Profit/(loss) for the year		113.2	(33.3)	79.9	112.9	(216.4)	(103.5)
Attributable to:
Equity shareholders		116.0	(33.3)	82.7	113.7	(216.4)	(102.7)
Non-controlling interests		(2.8)	-	(2.8)	(0.8)	-	(0.8)
		113.2	(33.3)	79.9	112.9	(216.4)	(103.5)
Earnings per ordinary share (pence)
Basic		17.0	(4.9)	12.1	16.8	(32.0)	(15.2)
Diluted		16.9	(4.8)	12.1	16.7	(31.9)	(15.2)
Reconciliation of operating profit/(loss) to EBITDA
Operating profit/(loss)2		154.3	(44.0)	110.3	149.7	(221.6)	(71.9)
Include: Share of results of associates		(5.7)	(1.0)	(6.7)	(0.2)	(0.4)	(0.6)
Include: Other gains and losses		-	0.8	0.8	-	(2.0)	(2.0)
Remove: Impairment charges		-	-	-	-	180.4	180.4
Remove: Depreciation of property, plant & equipment		12.0	-	12.0	7.3	-	7.3
Remove: Acquisition related intangible asset amortisation		-	23.9	23.9	-	24.4	24.4
Remove: Amortisation of non-acquisition related intangible assets		13.3	-	13.3	6.7	-	6.7
EBITDA1		173.9	(20.3)	153.6	163.5	(19.2)	144.3

1.    The definition of operating profit has been restated in the year to exclude the results of associated undertakings. EBITDA has not been restated.

2.    EBITDA before adjusting items equals uEBITDA. A full definition of uEBITDA and Adjusted EPS is provided below.
 

Underlying EBITDA ("uEBITDA")

The main measure of profitability used by the Chief Operating Decision Maker ("CODM") to assess the performance of our businesses is uEBITDA, in conjunction with uEBITDA margin. EBITDA is defined as earnings before investment revenue and costs, taxation, depreciation, amortisation and asset impairment charges. uEBITDA also excludes share based payment charges (including the related social security costs), acquisition transaction and integration costs, foreign exchange gains and losses, and other gains and losses. Included within uEBITDA is our share of uEBITDA losses from associates.

The CODM uses uEBITDA as it excludes items that are either non-cash, relate to investment, or do not reflect the day to day commercial performance of the business. As a result, uEBITDA provides a measure of the underlying performance of the business and is considered to enhance the comparability of profit or loss across segments. Accordingly, Executive Team incentives are partially based on uEBITDA results and therefore, it is considered to be both useful and necessary to disclose this measure in our Annual Report & Accounts.

uEBITDA margin is calculated as uEBITDA divided by revenue.

Segmental uEBITDA is as follows:

		2018 £m	2017 £m
United Kingdom		189.5	155.4
Canada		(11.5)	(11.4)
ANZ		6.5	17.3
International		14.2	19.4
Total segment uEBITDA		198.7	180.7
Share of results from associates' uEBITDA		(5.7)	(0.2)
Head office		(19.1)	(17.0)
uEBITDA		173.9	163.5

 

A reconciliation of uEBITDA to operating profit, together with further details of the component elements of these adjustments, is set out below.

		2018 £m	2017 £m
Share based payment charges, including related social security costs		8.0	6.6
Impairment charges and acquisition related intangible asset amortisation		23.9	204.8
Acquisition transaction and integration costs		14.8	10.7
Net foreign exchange gains		(2.7)	(0.5)
Operating profit adjusting items		44.0	221.6
Depreciation and amortisation of property, plant & equipment and other intangible assets		25.3	14.0
Share of associates' uEBITDA		(5.7)	(0.2)
uEBITDA adjusting items		63.6	235.4
Operating profit/(loss)		110.3	(71.9)
uEBITDA		173.9	163.5

 

Share based payment charges, including related social security costs

Share based payments arise as a result of our long-term incentive schemes and only the social security costs associated with these charges give rise to a cash outflow.

As these charges are excluded from our internal performance measures for remuneration purposes, they are also excluded from externally reported uEBITDA.

Impairment charges and acquisition related intangible asset amortisation

	Notes	2018 £m	2017 £m
Impairment charges	8	-	180.4
Acquisition related intangible asset amortisation	9	23.9	24.4
Total		23.9	204.8

 

During the year ended 31 December 2017, an impairment charge of £180.4 million was recorded in respect of the ANZ business. The charge was driven by lower projected cash flows in the business' plans resulting in a reassessment of expected future business performance in light of the recent trading environment.

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

During the year, our 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.

Impairment charges and acquisition related intangible asset amortisation are non-cash charges and while they are linked to operational factors in the business, they are not reflective of the day to day commercial performance of the business. These charges are therefore excluded from our internal performance measures for remuneration purposes. As a result, they are excluded from uEBITDA.

Acquisition transaction and integration costs

		2018 £m	2017 £m
M&A transaction costs		3.0	1.7
Acquisition integration costs		11.8	9.0
Total		14.8	10.7

 

M&A transaction costs relate to legal, due diligence and other costs incurred as a result of our acquisitions (see Note 14) and aborted acquisitions. For the year ended 31 December 2018, they include £1.8 million (2017: £1.3 million) of costs in respect of the acquisition of Hungryhouse.

Acquisition integration costs relate to the integration of recently acquired businesses. For the year ended 31 December 2018, £7.5 million relates to the integration of Hungryhouse, which includes the costs of running two offices and platforms during employee consultation processes, redundancy costs, lease termination costs and related advisers' fees.

SkipTheDishes' management provided post-completion services amounting to £2.9 million (2017: £9.0 million) in the current year, which are also included in this category. These charges are separate to the acquisition consideration.

While acquisition related costs are recurring, and are expected to be incurred in future periods, they do not represent ongoing costs of our commercial operations and are therefore excluded for performance management purposes.

Net foreign exchange gains

Movements in foreign exchange rates are outside of our control and as a result these charges or credits are excluded from our internal performance measures for remuneration purposes. They are therefore excluded from uEBITDA.

Depreciation and amortisation of property, plant & equipment and non-acquisition related intangible assets

	Notes	2018 £m	2017 £m
Depreciation of property, plant & equipment	10	12.0	7.3
Amortisation of other intangible assets, excluding acquisition related assets	9	13.3	6.7
Total		25.3	14.0

 

Depreciation of tangible and intangible fixed assets are non-cash charges. As these charges are excluded from internal performance measures for remuneration purposes, they are also excluded from uEBITDA as reported in these financial statements.

Share of associates' uEBITDA

Although the results of associated undertakings are not within our control and do not reflect the operational performance of our business, historically these have been included within internal profit measures and have been included in the key performance metric of uEBITDA. As explained further below, in 2019 the share of associates' uEBITDA will no longer form part of our total uEBITDA measure and management performance will not be assessed on it.

Adjusted earnings per share

Adjusted earnings per share is calculated using an underlying profit measure attributable to the equity shareholders and is used in discussions within the investment analyst community. This APM is also used as a vesting condition in certain share based incentive schemes. It is defined as profit attributable to the equity shareholders, before share based payment charges (including the related social security costs), asset impairment charges, acquisition transaction and integration costs, other gains and losses, foreign exchange gains and losses, and amortisation in respect of acquired intangible assets. Similar to uEBITDA, Adjusted earnings per share will exclude the associates' results in 2019 and beyond. A reconciliation is provided below.

 

 

	2018 £m	2018 Pence per share, basic	2017 £m	2017 Pence per share, basic
Profit/(loss) for the year attributable to equity shareholders	82.7	12.1	(102.7)	(15.2)
Share based payment charges, including social security costs	8.0	1.2	6.6	1.0
Impairment charges and acquisition related intangible asset amortisation	23.9	3.5	204.8	30.3
Acquisition transaction and integration costs	14.8	2.2	10.7	1.6
Net foreign exchange gains	(2.7)	(0.4)	(0.5)	(0.1)
Share of associates' losses below uEBITDA	1.0	0.1	0.4	0.1
Other gains and losses	(0.8)	(0.1)	2.0	0.3
Taxation on adjusting items (see below)	(10.9)	(1.6)	(7.6)	(1.1)
Adjusted earnings	116.0	17.0	113.7	16.8

 

	2018 Number of shares ('000)	2017 Number of shares ('000)
Weighted average number of Ordinary shares for basic earnings per share	681,042	676,844
Effect of dilution:
Share options and awards	4,389	5,159
Unvested JSOP shares	-	943
Weighted average number of Ordinary shares adjusted for the effect of dilution	685,431	682,946

 

	2018 (pence)	2017 (pence)
Earnings per ordinary share
Basic	12.1	(15.2)
Diluted	12.1	(15.2)
Adjusted earnings per ordinary share
Basic	17.0	16.8
Diluted	16.9	16.6

 

Underlying Effective Tax Rate ("Underlying ETR")

	2018				2017
	Adjusted results 2018 £m	Adjusting items 2018 £m	Reported  results 2018 £m		Adjusted results 2017   £m	Adjusting items 2017   £m	Reported results 2017   £m
Profit/(loss) before tax	145.9	(44.2)	101.7		148.0	(224.0)	(76.0)
UK rate of 19.00% (2017: 19.25%)	27.7	(8.4)	19.3		28.5	(43.1)	(14.6)
Adjusted for the effects of:
Non-deductible expenditure	1.5	1.2	2.7		0.6	2.5	3.1
Non-taxable income	(0.8)	(0.2)	(1.0)		(5.9)	-	(5.9)
Share based payments	-	0.8	0.8		-	0.3	0.3
Impairment charges	-	-	-		-	34.7	34.7
Prior year adjustments	(0.3)	-	(0.3)		(0.5)	-	(0.5)
Unrecognised deferred tax asset changes	(0.3)	(1.2)	(1.5)		2.3	(0.7)	1.6
Overseas tax rates	1.1	(3.2)	(2.1)		(0.3)	(1.4)	(1.7)
Other overseas taxes	2.7	-	2.7		10.4	-	10.4
Associates results	1.1	0.1	1.2		-	0.1	0.1
Total tax charge for the year	32.7	(10.9)	21.8		35.1	(7.6)	27.5
Effective tax rate	22.4%		21.4%		23.7%		(36.2%)

 

Underlying ETR is the effective tax rate on our adjusted results for the year and is prepared on a consistent basis with uEBITDA and is necessary to calculate adjusted earnings per share. Underlying ETR for the year ended 31 December 2018 was 22.4% (2017: 23.7%). Underlying profit is defined as profit before tax before share based payment charges, including social security costs, impairment charges, acquisition transaction and integration costs, 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 recognition of a deferred tax asset relating to the cumulative tax losses in SkipTheDishes Restaurant Services Inc. in Canada has also been treated as an adjusting item.

 

 

Average revenue per order ("ARPO")

ARPO is calculated as the total of order driven revenue, divided by total orders and is a key driver of revenue, along with the number of orders processed.

	2018 £m	2017 £m
Revenue (£m)	779.5	546.3
Sign-up fees, top placement income and other revenue (£m)	(50.2)	(42.3)
Order driven revenue (£m)	729.3	504.0
Total orders (millions)	221.2	172.4
ARPO (£)	3.30	2.92

 

Non-financial APMs

 

APM	Definition and calculation	Purpose
Orders	Number of successful orders placed.	The number of orders the Group processes for our Restaurants Partners is a direct measure of performance.
Active Customers	Number of Customers who have placed at least one order within the last 12 months at the reporting date.	Increasing the number of Active Customers is one outcome used to measure the successful level of channel shift from offline to digital ordering.
Number of restaurants	The number of Restaurant Partners capable of taking orders across all Just Eat platforms at the reporting date.	One element of providing greater choice to Customers is to enable access onto our platforms to a growing number of restaurants and cuisine types.

 

Future changes to APMs

Subsequent to the year end, we have changed our internal definition of uEBITDA to exclude both the results of associated undertakings and the results of our Mexican subsidiary, which together comprise our Latin America ("LATAM") business. A new measure of Adjusted EBITDA is therefore total uEBITDA, excluding LATAM. Although the Mexican business is within our control, operational performance has been delegated to iFood, the non-controlling partner and, as noted in our Annual report on remuneration, Just Eat management will no longer be assessed on the performance of the business. The results of our associated undertakings are now excluded from operating profit and therefore it is also appropriate to remove them from uEBITDA.

The impact of the changes on the reported results would be as follows:

Year ended 31 December 2018	As originally stated £m	Mexican subsidiary £m	Brazilian associate £m	As restated £m
uEBITDA excluding LATAM ("Adjusted EBITDA")	173.9	10.8	5.7	190.4
Share based payment charges, including social security costs	(8.0)	-	-	(8.0)
Acquisition transaction and integration costs	(14.8)	-	-	(14.8)
Net foreign exchange gains	2.7	-	-	2.7
Share of results from associates	5.7	-	(5.7)	-
Operating losses of Mexican operations	-	(10.8)	-	(10.8)
Depreciation	(12.0)	-	-	(12.0)
Amortisation - acquired intangible assets	(23.9)	-	-	(23.9)
Amortisation - other intangible assets	(13.3)	-	-	(13.3)
Operating profit	110.3	-	-	110.3
Share of results of associates	(6.7)	-	-	(6.7)
Other gains and losses	0.8	-	-	0.8
Investment revenue	0.4	-	-	0.4
Finance costs	(3.1)	-	-	(3.1)
Loss before tax	101.7	-	-	101.7
Adjusted earnings attributable to shareholders	116.0	7.9	(1.0)	122.9
Adjusted earnings attributable to NCIs	(2.8)	2.8	-	-
	113.2	10.7	(1.0)	122.9

 

Year ended 31 December 2017	As originally stated1 £m	Mexican subsidiary £m	Brazilian associate £m	As restated £m
uEBITDA excluding LATAM ("Adjusted EBITDA")	163.5	3.6	0.2	167.3
Share based payment charges, including social security costs	(6.6)	-	-	(6.6)
Impairment charges	(180.4)	-	-	(180.4)
Acquisition transaction and integration costs	(10.7)	-	-	(10.7)
Net foreign exchange gains	0.5	(0.1)	-	0.4
Share of results from associates below uEBITDA	(0.4)	-	0.4	-
Operating losses of Mexican operations	-	(3.6)	-	(3.6)
Depreciation	(7.3)	0.1	-	(7.2)
Amortisation - acquired intangible assets	(24.4)	-	-	(24.4)
Amortisation - other intangible assets	(6.7)	-	-	(6.7)
Operating loss1	(72.5)	-	0.6	(71.9)
Share of results of associates	-	-	(0.6)	(0.6)
Other gains and losses	(2.0)	-	-	(2.0)
Investment revenue	0.7	-	-	0.7
Finance costs	(2.2)	-	-	(2.2)
Loss before tax	(76.0)	-	-	(76.0)
Adjusted earnings attributable to shareholders	113.7	2.8	0.2	116.7
Adjusted earnings attributable to NCIs	(0.8)	0.8	-	-
	112.9	3.6	0.2	116.7

1.    In 2018 Operating profit/(loss) was restated to remove the share of results from associates. The figures presented in this table are those originally reported, prior to the 2018 restatement.

 

Had these changes been applied in 2018 to the information provided to the CODM, the information disclosed in the segmental analysis in our consolidated financial statements would have been required to be restated as follows:

 

Segment revenue

Year ended 31 December 2018	United Kingdom £m	Canada £m	ANZ £m	Europe £m	Head office £m	Total excluding LATAM £m	LATAM £m	Total £m
Gross revenue	385.6	179.2	46.7	171.0	11.2	793.7	(1.7)	792.0
Inter-segment revenue	-	(1.3)	-	-	(11.2)	(12.5)	-	(12.5)
External revenue	385.6	177.9	46.7	171.0	-	781.2	(1.7)	779.5

 

 

Year ended 31 December 2017	United Kingdom £m	Canada £m	ANZ £m	Europe £m	Head office £m	Total excluding LATAM £m	LATAM £m	Total £m
Gross revenue	304.1	64.4	49.8	127.3	3.3	548.9	1.0	549.9
Inter-segment revenue	(0.3)	-	-	-	(3.3)	(3.6)	-	(3.6)
External revenue	303.8	64.4	49.8	127.3	-	545.3	1.0	546.3

 

Segment uEBITDA and results

		2018 £m	2017 (restated1) £m
United Kingdom		189.5	155.4
Canada		(11.5)	(11.4)
ANZ		6.5	17.3
Europe		25.0	23.0
Head office		(19.1)	(17.0)
uEBITDA excluding LATAM ("Adjusted EBITDA")		190.4	167.3
LATAM		(10.8)	(3.6)
Total uEBITDA1		179.6	163.7
Share based payment charges, including social security costs		(8.0)	(6.6)
Impairment charges		-	(180.4)
Acquisition transaction and integration costs		(14.8)	(10.7)
Net foreign exchange gains		2.7	0.5
Depreciation		(12.0)	(7.3)
Amortisation - acquired intangible assets		(23.9)	(24.4)
Amortisation - other intangible assets		(13.3)	(6.7)
Operating profit/(loss)1		110.3	(71.9)
Share of results of associates		(6.7)	(0.6)
Other gains and losses		0.8	(2.0)
Investment revenue		0.4	0.7
Finance costs		(3.1)	(2.2)
Profit/(loss) before tax		101.7	(76.0)

1.    The definition of operating profit and uEBITDA have been restated in the year to exclude the results of associated undertakings.