EX-99.1 2 tmb-20200731xex99d1.htm EX-99.1

Exhibit 99 .1

Table of contents

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INDEX TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Ardagh Group S.A.

Unaudited Consolidated Interim Financial Statements

Consolidated Interim Income Statement for the three months ended June 30, 2020 and 2019

2

Consolidated Interim Income Statement for the six months ended June 30, 2020 and 2019

3

Consolidated Interim Statement of Comprehensive Income for the three and six months ended June 30, 2020 and 2019

4

Consolidated Interim Statement of Financial Position at June 30, 2020 and December 31, 2019

5

Consolidated Interim Statement of Changes in Equity for the six months ended June 30, 2020 and 2019

6

Consolidated Interim Statement of Cash Flows for the three and six months ended June 30, 2020 and 2019

7

Notes to the Unaudited Consolidated Interim Financial Statements

8

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three and six months ended June 30, 2020

27

Cautionary Statement Regarding Forward-Looking Statements

45

As used herein, “AGSA” or the “Company” refer to Ardagh Group S.A., and “we”, “our”, “us”, “Ardagh” and the “Group” refer to AGSA and its consolidated subsidiaries, unless the context requires otherwise.

Ardagh Group S.A.

1


ARDAGH GROUP S.A.

CONSOLIDATED INTERIM INCOME STATEMENT

Unaudited

Unaudited

Three months ended June 30, 2020

Three months ended June 30, 2019

    

    

Before

    

    

    

Before

    

    

 

exceptional

 

Exceptional

 

 

exceptional

 

Exceptional

 

 

items

 

items

 

Total

 

items

 

items

 

Total

Note

 

$'m

 

$'m

$'m

 

$'m

 

$'m

$'m

 

Note 5

 

Note 5

Revenue

 

4

 

1,606

1,606

1,712

1,712

Cost of sales

 

  

 

(1,371)

(2)

(1,373)

(1,432)

16

(1,416)

Gross profit

 

  

 

235

 

(2)

 

233

 

280

 

16

 

296

Sales, general and administration expenses

 

  

 

(75)

(3)

(78)

(73)

(12)

(85)

Intangible amortization

 

 

(58)

(58)

(59)

(59)

Operating profit

 

  

 

102

 

(5)

 

97

 

148

 

4

 

152

Net finance expense

 

6

 

(71)

(74)

(145)

(108)

(108)

Share of post-tax loss in equity accounted joint venture

9

(13)

(4)

(17)

(Loss)/profit before tax

 

  

 

18

 

(83)

 

(65)

 

40

 

4

 

44

Income tax credit/(charge)

 

  

 

(8)

14

6

(16)

9

(7)

(Loss)/profit from continuing operations

10

(69)

(59)

24

13

37

(Loss)/profit from discontinued operation, net of tax

15

(5)

(5)

39

(7)

32

(Loss)/profit for the period

 

  

 

10

 

(74)

 

(64)

 

63

 

6

 

69

 

  

 

  

 

  

 

  

 

  

 

  

 

  

(Loss)/profit attributable to:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Equity holders

 

  

 

  

 

  

 

(64)

  

 

  

 

69

Non-controlling interests

 

  

 

  

 

  

 

  

 

  

 

(Loss)/profit for the period

 

  

 

  

 

  

 

(64)

 

  

 

  

 

69

(Loss)/earnings per share:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Basic and diluted (loss)/earnings per share attributable to equity holders

7

 

  

 

  

$

(0.27)

 

  

 

  

$

0.29

(Loss)/earnings per share from continuing operations:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Basic and diluted (loss)/earnings per share from continuing operations attributable to equity holders

7

 

  

 

  

$

(0.25)

 

  

 

  

$

0.16

The accompanying notes to the unaudited consolidated interim financial statements are an integral part of these unaudited consolidated interim financial statements.

Ardagh Group S.A.

2


ARDAGH GROUP S.A.

CONSOLIDATED INTERIM INCOME STATEMENT

Unaudited

Unaudited

Six months ended June 30, 2020

Six months ended June 30, 2019

    

    

Before

    

    

    

Before

    

    

    

exceptional

 

Exceptional

 

 

exceptional

 

Exceptional

 

items

 

items

 

Total

 

items

 

items

 

Total

Note

$'m

 

$'m

$'m

 

$'m

 

$'m

$'m

 

Note 5

 

Note 5

Revenue

 

4

3,228

3,228

3,351

3,351

Cost of sales

 

  

(2,731)

(2)

(2,733)

(2,818)

7

(2,811)

Gross profit

 

  

497

 

(2)

 

495

 

533

 

7

 

540

Sales, general and administration expenses

 

  

(173)

(6)

(179)

(154)

(14)

(168)

Intangible amortization

 

(116)

(116)

(117)

(117)

Operating profit

 

  

208

 

(8)

 

200

 

262

 

(7)

 

255

Net finance expense

 

6

(105)

(74)

(179)

(240)

(240)

Share of post-tax loss in equity accounted joint venture

9

(12)

(8)

(20)

Profit before tax

 

  

91

 

(90)

 

1

 

22

 

(7)

 

15

Income tax (charge)/credit

 

  

(32)

28

(4)

(10)

11

1

(Loss)/profit from continuing operations

59

(62)

(3)

12

4

16

Profit from discontinued operation, net of tax

15

22

22

74

(8)

66

Profit for the period

 

  

59

 

(40)

 

19

 

86

 

(4)

 

82

 

  

  

 

  

 

  

 

  

 

  

 

  

Profit attributable to:

 

  

  

 

  

 

  

 

  

 

  

 

  

Equity holders

 

  

  

 

  

 

19

82

Non-controlling interests

 

  

  

 

  

 

Profit for the period

 

  

  

 

  

 

19

 

  

 

  

 

82

Earnings per share:

 

  

  

 

  

 

  

 

  

 

  

 

  

Basic and diluted earnings per share attributable to equity holders

7

  

 

  

$

0.08

 

  

 

  

$

0.35

(Loss)/earnings per share from continuing operations:

 

  

Basic and diluted (loss)/earnings per share from continuing operations attributable to equity holders

7

$

(0.01)

$

0.07

The accompanying notes to the unaudited consolidated interim financial statements are an integral part of these unaudited consolidated interim financial statements.

Ardagh Group S.A.

3


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ARDAGH GROUP S.A.

CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

Unaudited

Three months ended June 30, 

Six months ended June 30, 

2020

2019

2020

2019

Note

$'m

$'m

$'m

$'m

(Loss)/profit for the period

(64)

69

19

82

Other comprehensive expense:

Items that may subsequently be reclassified to income statement

Foreign currency translation adjustments:

-Arising in the period

5

12

(10)

14

5

12

(10)

14

Effective portion of changes in fair value of cash flow hedges:

-New fair value adjustments into reserve

(5)

(9)

(1)

42

-Movement out of reserve to income statement

13

8

(2)

(12)

-Movement in deferred tax

(4)

2

2

(1)

4

1

(1)

29

Loss recognized on cost of hedging:

-New fair value adjustments into reserve

(1)

(6)

(5)

(11)

(1)

(6)

(5)

(11)

Share of other comprehensive income in equity accounted joint venture

9

7

12

Items that will not be reclassified to income statement

-Re-measurement of employee benefit obligations

12

(127)

(43)

(162)

(83)

-Deferred tax movement on employee benefit obligations

28

12

46

21

(99)

(31)

(116)

(62)

Share of other comprehensive expense in equity accounted joint venture

9

(7)

(1)

Total other comprehensive expense for the period

(91)

(24)

(121)

(30)

Total comprehensive (expense)/income for the period

(155)

45

(102)

52

Attributable to:

Equity holders

(155)

45

(102)

52

Non-controlling interests

Total comprehensive (expense)/income for the period

(155)

45

(102)

52

Attributable to:

Continuing operations

(150)

2

(124)

1

Discontinued operation

(5)

43

22

51

Total comprehensive (expense)/income for the period

(155)

45

(102)

52

The accompanying notes to the unaudited consolidated interim financial statements are an integral part of these unaudited consolidated interim financial statements.

Ardagh Group S.A.

4


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ARDAGH GROUP S.A.

CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

Unaudited

As Reported

At June 30, 

At December 31, 

2020

2019

    

Note

    

$'m

    

$'m

Non-current assets

 

  

 

  

Intangible assets

 

8

 

2,760

2,884

Property, plant and equipment

 

8

 

2,645

2,677

Derivative financial instruments

 

 

50

4

Deferred tax assets

 

 

248

204

Investment in material joint venture

9

368

375

Other non-current assets

 

 

66

68

 

  

 

6,137

 

6,212

Current assets

 

  

 

  

 

  

Inventories

 

 

995

964

Trade and other receivables

 

 

869

734

Contract assets

154

151

Derivative financial instruments

 

 

6

3

Cash and cash equivalents

 

 

1,448

614

 

  

 

3,472

 

2,466

TOTAL ASSETS

 

  

 

9,609

 

8,678

Equity attributable to owners of the parent

 

  

 

  

 

  

Issued capital

 

10

 

23

23

Share premium

 

 

1,292

1,292

Capital contribution

 

 

485

485

Other reserves

 

  

 

180

165

Retained earnings

 

  

 

(2,348)

(2,181)

 

  

 

(368)

 

(216)

Non-controlling interests

 

  

 

1

 

1

TOTAL EQUITY

 

 

(367)

 

(215)

Non-current liabilities

 

 

  

 

  

Borrowings

 

11

 

6,296

5,524

Lease obligations

11

277

291

Employee benefit obligations

 

 

852

716

Derivative financial instruments

15

44

Deferred tax liabilities

 

 

319

344

Provisions

 

 

36

29

 

 

7,795

 

6,948

Current liabilities

 

 

  

 

  

Borrowings

 

11

 

521

22

Lease obligations

11

79

73

Interest payable

 

 

41

60

Derivative financial instruments

 

 

32

17

Trade and other payables

 

 

1,357

1,628

Income tax payable

 

 

105

97

Provisions

 

 

46

48

 

 

2,181

 

1,945

TOTAL LIABILITIES

 

 

9,976

 

8,893

TOTAL EQUITY and LIABILITIES

 

  

 

9,609

 

8,678

The accompanying notes to the unaudited consolidated interim financial statements are an integral part of these unaudited consolidated interim financial statements.

Ardagh Group S.A.

5


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ARDAGH GROUP S.A.

CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

Unaudited

Attributable to the owner of the parent

Foreign

currency

Cash flow

Cost of

Non-

Share

Share

Capital

translation

hedge

hedging

Retained

controlling

Total

capital

 premium

 contribution

reserve

reserve

reserve

earnings

Total

interests

 equity

$'m

$'m

$'m

$'m

$'m

$'m

$'m

$'m

$'m

$'m

At January 1, 2019

23

1,292

485

86

(72)

31

(3,401)

(1,556)

1

(1,555)

Profit for the period

82

82

82

Other comprehensive income/(expense)

14

29

(11)

(62)

(30)

(30)

Hedging losses transferred to cost of inventory

7

7

7

Dividends paid (Note 14)

(66)

(66)

(66)

At June 30, 2019

23

1,292

485

100

(36)

20

(3,447)

  

(1,563)

1

(1,562)

At January 1, 2020

23

1,292

485

165

(11)

11

(2,181)

(216)

1

(215)

Profit for the period

19

19

19

Other comprehensive (expense)/income

(13)

15

(6)

(117)

(121)

(121)

Hedging losses transferred to cost of inventory

19

19

19

Dividends paid (Note 14)

(69)

(69)

(69)

At June 30, 2020

23

1,292

485

152

23

5

(2,348)

(368)

1

(367)

The accompanying notes to the unaudited consolidated interim financial statements are an integral part of these unaudited consolidated interim financial statements.

Ardagh Group S.A.

6


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ARDAGH GROUP S.A.

CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

Unaudited

Three months ended June 30, 

Six months ended June 30, 

2020

2019

2020

    

2019

    

Note

    

 $'m

$'m

    

$'m

$'m

Cash flows from operating activities

  

  

  

  

 

  

Cash generated from continuing operations

13

295

241

104

331

Interest paid

  

(73)

(128)

(157)

(208)

Income tax paid

  

(11)

(18)

(23)

(33)

Net cash generated from/(used in) operating activities - continuing operations

211

95

(76)

90

Net cash generated from operating activities - discontinued operation(i)

22

20

Net cash generated from/(used in) operating activities

  

211

117

(76)

 

110

Cash flows from investing activities

  

  

  

 

  

Purchase of property, plant and equipment

  

(102)

(125)

(226)

(274)

Purchase of software and other intangibles

  

(3)

(1)

(5)

(6)

Proceeds from disposal of property, plant and equipment

1

1

Investing cash flows used in continuing operations

(104)

(126)

(230)

(280)

Proceeds from disposal of discontinued operation

32

32

Investing cash flows used in discontinued operation

(28)

(68)

Net cash used in investing activities

  

(72)

(154)

(198)

 

(348)

Cash flows from financing activities

  

  

  

  

 

  

Proceeds from borrowings

3,236

50

4,068

219

Repayment of borrowings

(2,735)

(2,753)

(2)

Early redemption premium paid

  

(61)

(61)

Deferred debt issue costs paid

  

(17)

(22)

(2)

Lease payments

(23)

(18)

(45)

(36)

Dividends paid

14

(69)

(33)

(69)

(66)

Consideration paid on extinguishment of derivative financial instruments

(14)

Financing cash flows from continuing operations

331

(1)

1,118

99

Financing cash flows from discontinued operation

(11)

(13)

Net cash inflow/(outflow) from financing activities

  

331

(12)

1,118

 

86

Net increase/(decrease) in cash and cash equivalents

  

470

(49)

844

 

(152)

Cash and cash equivalents at beginning of period

  

962

416

614

530

Foreign exchange gains/(losses) on cash and cash equivalents

  

16

7

(10)

(4)

Cash and cash equivalents at end of period

  

1,448

374

1,448

 

374

(i) Operating cash flows from the discontinued operation for the three and six months ended June 30, 2019, include interest and income tax payments of $1 million and $4 million, and $2 million and $5 million respectively.

The accompanying notes to the unaudited consolidated interim financial statements are an integral part of these unaudited consolidated interim financial statements.

Ardagh Group S.A.

7


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ARDAGH GROUP S.A.

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1.     General information

Ardagh Group S.A. (the “Company”) was incorporated in Luxembourg on May 6, 2011.

Ardagh Group S.A. and its subsidiaries (together the “Group” or “Ardagh”) are a leading supplier of sustainable innovative, value-added rigid packaging solutions. The Group’s products include metal beverage cans and glass containers primarily for beverage and food markets. End-use categories include beer, wine, spirits, carbonated soft drinks, energy drinks, juices and water, as well as food and pharmaceuticals. Ardagh also holds a stake of approximately 42% in Trivium Packaging B.V. (“Trivium”), a leading supplier of metal packaging in the form of cans and aerosol containers, serving a broad range of end-use categories, principally including food, seafood, pet food and nutrition, as well as beauty and personal care.

These unaudited consolidated interim financial statements reflect the consolidation of the legal entities forming the Group for the periods presented.

The significant accounting policies that have been applied to the unaudited consolidated interim financial statements are described in note 3.

2.     Statement of directors’ responsibilities

The Directors are responsible for preparing the unaudited consolidated interim financial statements. The Directors are required to prepare financial information for each financial period on the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing the unaudited consolidated interim financial statements, the Directors are required to:

-

select suitable accounting policies and then apply them consistently;

-

make judgments and estimates that are reasonable and prudent; and

-

prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Group will continue in business.

The Directors confirm that they have complied with the above requirements in preparing the unaudited consolidated interim financial statements. Changes to accounting policies applied in the three and six months ended June 30, 2020 are outlined in note 3.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website at: www.ardaghgroup.com.

The unaudited consolidated interim financial statements were approved for issue by the board of directors of Ardagh Group S.A. (the “Board”) on July 22, 2020.

3.     Summary of significant accounting policies

Basis of preparation

The unaudited consolidated interim financial statements of the Group for the three and six months ended June 30, 2020 and 2019, have been prepared in accordance with IAS 34 “Interim Financial Reporting”. The unaudited consolidated interim financial statements do not include all of the information required for full annual financial statements and should

Ardagh Group S.A.

8


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be read in conjunction with the Annual Report for the year ended December 31, 2019 which was prepared in accordance with International Financial Reporting Standards (“IFRS”).

The unaudited consolidated interim financial statements are presented in U.S. dollar rounded to the nearest million.

Income tax in interim periods is accrued using the effective tax rate expected to be applied to annual earnings.

The accounting policies, presentation and methods of computation followed in the unaudited consolidated interim financial statements are consistent with those applied in the Group’s latest Annual Report.

Recent changes in accounting pronouncements

The impact of new standards, amendments to existing standards and interpretations issued and effective for annual periods beginning on or after January 1, 2020 have been assessed by the Directors and as a result, no new standards or amendments to existing standards effective January 1, 2020 are expected to have a material impact for the Group. The Directors’ assessment of the impact of new standards, which are not yet effective and which have not been early adopted by the Group, on the consolidated interim financial statements is on-going.

4.     Segment analysis

Following the Group’s announcement in July 2019, to combine the Food & Specialty Metal Packaging business (“Food & Specialty”) with that of the Exal Corporation (“Exal”) to form Trivium, the composition of the Group’s operating and reporting segments changed. Food & Specialty was classified as a discontinued operation. This reflected the basis on which the Group’s performance is reviewed by management and presented to the Board, which has been identified as the Chief Operating Decision Maker (“CODM”) for the Group. The following are the Group’s four operating and reportable segments, with prior year information being updated accordingly:

Metal Beverage Packaging Europe
Metal Beverage Packaging Americas
Glass Packaging Europe
Glass Packaging North America.

Performance of the business is assessed based on Adjusted EBITDA. Adjusted EBITDA is the profit or loss for the period before income tax charge or credit, net finance expense, depreciation and amortization, exceptional operating items and share of profit or loss in equity accounted joint venture. Other items are not allocated to segments, as these are reviewed by the CODM on a group-wide basis. Segmental revenues are derived from sales to external customers. Inter-segment revenue and revenue with joint ventures is not material.

Ardagh Group S.A.

9


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Reconciliation of loss for the period to Adjusted EBITDA

Three months ended June 30, 

Six months ended June 30, 

    

2020

2020

$'m

$'m

Loss from continuing operations

 

(59)

(3)

Income tax (credit)/charge

 

(6)

4

Net finance expense

 

145

179

Depreciation and amortization

 

169

336

Exceptional operating items

 

5

8

Share of post-tax loss in equity accounted joint venture

17

20

Adjusted EBITDA

271

544

Three months ended June 30, 

Six months ended June 30, 

2019

2019

Continuing

    

Discontinued

    

Continuing

    

Discontinued

    

Operations

Operation

Group

Operations

Operation

Group

$'m

$'m

$'m

$'m

$'m

$'m

Profit for the period

 

37

32

69

 

16

66

82

Income tax charge/(credit)

 

7

12

19

 

(1)

29

28

Net finance expense

 

108

3

111

 

240

6

246

Depreciation and amortization

 

162

30

192

 

324

61

385

Exceptional operating items

 

(4)

8

4

 

7

10

17

Adjusted EBITDA

 

310

 

85

395

 

586

 

172

758

Segment results for the three months ended June 30, 2020 and 2019 are:

Revenue

Adjusted EBITDA

    

2020

    

2019

    

2020

    

2019

$'m

$'m

$'m

$'m

Metal Beverage Packaging Europe

 

395

411

70

72

Metal Beverage Packaging Americas

 

435

456

69

66

Glass Packaging Europe

 

368

412

76

99

Glass Packaging North America

 

408

433

56

73

Continuing operations

1,606

1,712

271

310

Discontinued operation

556

85

Group

 

1,606

2,268

271

395

Segment results for the six months ended June 30, 2020 and 2019 are:

Revenue

Adjusted EBITDA

    

2020

    

2019

    

2020

    

2019

$'m

$'m

$'m

$'m

Metal Beverage Packaging Europe

 

780

803

124

141

Metal Beverage Packaging Americas

 

879

895

130

117

Glass Packaging Europe

 

752

804

165

184

Glass Packaging North America

 

817

849

125

144

Continuing operations

3,228

3,351

544

586

Discontinued operation

1,137

172

Group

 

3,228

4,488

544

758

Ardagh Group S.A.

10


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No customer accounted for greater than 10% of total revenue from continuing operations in the six months ended June 30, 2020 (2019: none).

Within each reportable segment our respective packaging containers have similar production processes and classes of customers. Further, they have similar economic characteristics, as evidenced by similar profit margins, similar degrees of risk and similar opportunities for growth. Based on the foregoing, we do not consider that they constitute separate product lines and therefore additional disclosures relating to product lines is not necessary.

The following illustrates the disaggregation of revenue by destination for the three months ended June 30, 2020:

North

Rest of the

Europe

America

world

Total

$'m

$'m

$'m

$'m

Metal Beverage Packaging Europe

392

3

395

Metal Beverage Packaging Americas

376

59

435

Glass Packaging Europe

349

3

16

368

Glass Packaging North America

1

407

408

Group

742

786

78

1,606

The following illustrates the disaggregation of revenue by destination for the three months ended June 30, 2019:

North

Rest of the

Europe

America

world

Total

$'m

$'m

$'m

$'m

Metal Beverage Packaging Europe

406

2

3

411

Metal Beverage Packaging Americas

1

363

92

456

Glass Packaging Europe

398

1

13

412

Glass Packaging North America

433

433

Continuing operations

805

799

108

1,712

Discontinued operation

421

93

42

556

Group

1,226

892

150

2,268

The following illustrates the disaggregation of revenue by destination for the six months ended June 30, 2020:

North

Rest of the

Europe

America

world

Total

$'m

$'m

$'m

$'m

Metal Beverage Packaging Europe

773

1

6

780

Metal Beverage Packaging Americas

1

733

145

879

Glass Packaging Europe

718

7

27

752

Glass Packaging North America

1

816

817

Group

1,493

1,557

178

3,228

Ardagh Group S.A.

11


Graphic

The following illustrates the disaggregation of revenue by destination for the six months ended June 30, 2019:

North

Rest of the

Europe

America

world

Total

$'m

$'m

$'m

$'m

Metal Beverage Packaging Europe

796

3

4

803

Metal Beverage Packaging Americas

2

696

197

895

Glass Packaging Europe

776

3

25

804

Glass Packaging North America

849

849

Continuing operations

1,574

1,551

226

3,351

Discontinued operation

859

194

84

1,137

Group

2,433

1,745

310

4,488

5.     Exceptional items

Three months ended June 30, 

Six months ended June 30, 

    

2020

    

2019

2020

    

2019

$'m

$'m

$'m

$'m

Restructuring costs

 

1

7

Impairment

 

2

4

Start-up related costs

 

2

3

2

4

Past service credit

(37)

(37)

Legal matter

15

15

Exceptional items – cost of sales

 

2

 

(16)

2

 

(7)

Transaction-related and other costs 

 

3

12

6

14

Exceptional items – SGA expenses

 

3

 

12

6

 

14

Debt refinancing and settlement costs

74

74

Exceptional items – finance expense

74

74

Share of exceptional items in material joint venture

4

8

Exceptional items from continuing operations

83

(4)

90

7

Exceptional income tax credit

(14)

(9)

(28)

(11)

Exceptional items from continuing operations, net of tax

69

(13)

62

(4)

Exceptional items from discontinued operation, net of tax

5

7

(22)

8

Total exceptional items, net of tax

 

74

 

(6)

40

 

4

Exceptional items are those that in management’s judgment need to be disclosed by virtue of their size, nature or incidence.

2020

Exceptional items of $40 million have been recognized in the six months ended June 30, 2020, primarily comprising:

$2 million start-up related costs.
$6 million transaction-related and other costs.
$74 million debt refinancing and settlement costs related to the redemption of notes in May and June 2020 as described in note 11, including premium payable on the early redemption of the notes of $61 million, accelerated amortisation of deferred finance costs and interest charges from the call date to date of redemption.
$8 million from the share of exceptional items in the Trivium joint venture.

Ardagh Group S.A.

12


Graphic

$28 million from tax credits primarily relating to U.S. tax reform and debt refinancing and settlement costs incurred in the period.
$22 million credit in relation to the disposal of Food & Specialty including the finalization of the completion accounts process.

2019

Exceptional items of $4 million have been recognized in the six months ended June 30, 2019 primarily comprising:

$15 million related to the Group’s capacity realignment programs, including restructuring costs ($7 million), property, plant and equipment impairment charges ($4 million) and start-up related costs ($4 million). These costs were incurred in Glass Packaging North America ($11 million) and Metal Beverage Packaging Europe ($4 million).
$37 million pension service credit recognized in Glass Packaging North America following amendments to a pension scheme.
$15 million related to a provision for a court award and related interest, net of the tax adjusted indemnity receivable in respect of the Group’s U.S. glass business legal matter.
$14 million transaction related and other costs, primarily comprised of costs relating to the combination of the Group’s Food & Specialty Metal Packaging business with the business of Exal Corporation.
$11 million from tax credits primarily related to the provision for a court award and related interest in respect of the Group’s U.S glass business legal matter.
$8 million exceptional items from discontinued operation.

6.     Net finance expense

Three months ended June 30, 

Six months ended June 30, 

    

2020

    

2019

2020

    

2019

$'m

$'m

$'m

$'m

Senior Secured and Senior Notes

63

98

120

200

Other interest expense

 

8

14

21

22

Interest expense

 

71

 

112

141

 

222

Net pension interest costs

 

4

5

8

9

Foreign currency translation (gains)/losses

 

(1)

(6)

(32)

4

(Gains)/losses on derivative financial instruments

(1)

(2)

(9)

7

Other finance income

(2)

(1)

(3)

(2)

Finance expense before exceptional items

71

108

105

240

Exceptional finance expense (Note 5)

74

74

Net finance expense from continuing operations

 

145

 

108

179

 

240

Net finance expense from discontinued operation

3

6

Net finance expense

145

111

179

246

Ardagh Group S.A.

13


Graphic

7.     Earnings per share

Basic earnings per share (“EPS”) is calculated by dividing the (loss)/profit for the period attributable to equity holders by the weighted average number of common shares outstanding during the period.

The following table reflects the income statement (loss)/profit and share data used in the basic EPS calculations:

Three months ended June 30, 

Six months ended June 30, 

    

2020

    

2019

2020

    

2019

$'m

$'m

$'m

$'m

(Loss)/profit attributable to equity holders

 

(64)

69

19

82

Weighted average number of common shares for EPS (millions)

 

236.4

 

236.4

236.4

236.4

(Loss)/earnings per share

$

(0.27)

$

0.29

$

0.08

$

0.35

Three months ended June 30, 

Six months ended June 30, 

    

2020

    

2019

2020

    

2019

$'m

$'m

$'m

$'m

(Loss)/profit from continuing operations attributable to equity holders

 

(59)

37

(3)

16

Weighted average number of common shares for EPS (millions)

 

236.4

 

236.4

236.4

236.4

(Loss)/earnings per share from continuing operations

$

(0.25)

$

0.16

$

(0.01)

$

0.07

Diluted earnings per share is consistent with basic earnings per share as there are no dilutive potential common shares.

Please refer to note 10 for details of transactions involving ordinary shares for the six months ended June 30, 2020.

See note 15 for basic and diluted earnings per share from discontinued operation in 2020 and 2019.

Ardagh Group S.A.

14


Graphic

8.     Intangible assets and property, plant and equipment

    

    

Property,

Intangible

plant and

assets

equipment

$'m

$'m

Net book value at January 1, 2020

2,884

2,677

Additions

4

223

Disposals

(1)

Charge for the period

(116)

(220)

Foreign exchange

(12)

(34)

Net book value at June 30, 2020

 

2,760

 

2,645

At June 30, 2020, the carrying amount of goodwill included within intangible assets was $1,622 million (December 31, 2019: $1,624 million).

At June 30, 2020, the carrying amount of the right-of-use assets included within property, plant and equipment was $310 million (December 31, 2019: $315 million).

The Group recognized a depreciation charge of $220 million (2019: $207 million) in the six months ended June 30, 2020, of which $42 million (2019: $33 million) relates to right-of-use assets.

Impairment test for goodwill

Goodwill is not subject to amortization and is tested annually for impairment following the approval of the annual budget (normally at the end of the financial year), or more frequently if events or changes in circumstances indicate a potential impairment.

Management has considered whether any impairment existed at the reporting date, or subsequently to the date that the unaudited consolidated interim finance statements were approved for issue by the board of directors, including assessing whether any cash-generating units (“CGU”) had experienced or are expected to experience prolonged cessation of operations or had suffered or is expected to suffer either a prolonged decline in demand or prices and profitability as a result of COVID-19. In addition, management assessed the likely impact of potential reduced economic activity in the markets in which the Group operates. The results of this assessment are that management concluded goodwill is fully recoverable as at June 30, 2020.  

Ardagh Group S.A.

15


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9.     Investment in material joint venture

Investment in material joint venture is comprised of the Group’s approximate 42% investment in Trivium Packaging B.V. incorporated in the Netherlands, with corporate offices in Amsterdam. The remaining approximate 58% is held by Ontario Teachers Pension Plan Board (“Ontario Teachers”). As the Group jointly controls both the financial and operating policy decisions of Trivium, the investment is accounted for under the equity method. The shareholders of Trivium have entered into a Shareholders Agreement, dated October 31, 2019, which governs their relationship as owners of Trivium, including in respect of the governance of Trivium and its subsidiaries, their ability to transfer their shares in Trivium and other customary matters.

The following tables provide aggregated financial information for Trivium as it relates to the amounts recognized in the income statement, statement of comprehensive income and statement of financial position.

Three months ended June 30,

Six months ended June 30,

2020

2020

$'m

$'m

Loss for the period

(17)

(20)

Other comprehensive income

11

Total comprehensive expense

(17)

(9)

At June 30,

At December 31,

2020

2019

$'m

$'m

Investment in joint venture

368

375

The reconciliation of summarized financial information presented to the carrying amount of the Group’s interest in Trivium is set out below.

2020

$'m

Group's interest in net assets of joint venture - January 1, 2020

375

Share of total comprehensive expense

(9)

Foreign exchange

2

Carrying amount of interest in joint venture - June 30, 2020

368

In respect of the Group’s equity accounted investment in Trivium Packaging B.V., management has considered the carrying amount of the investment and concluded that it is fully recoverable as at June 30, 2020.

During the three months ended June 30, 2020, Trivium management has updated the provisional fair values and useful lives for property, plant and equipment and intangible assets acquired upon formation of Trivium on October 31, 2019, resulting in measurement period adjustments that require recognition by Ardagh in the current period. As a result, the reported share of post-tax loss in equity accounted joint venture for the three months ended June 30, 2020, includes adjustments for the two months ended December 31, 2019 as well as the three months ended March 31, 2020, related to depreciation and amortization, net of tax, arising from the revised fair values and useful lives determined for property, plant and equipment and intangible assets acquired. The impacts of these adjustments, on the reported share of post-tax loss in equity accounted joint venture are $12 million for the three months and $5 million for the six months, ended June 30, 2020.

Ardagh Group S.A.

16


Graphic

The  Group is party to a Mutual Services Agreement (“MSA”) with Trivium, pursuant to which the Group and Trivium provide services to each other. The services generally relate to administrative support in respect of treasury activities, tax reporting, procurement and logistics, R&D and certain IT services. The MSA provides for the sharing of certain facilities leased by the Group in connection with the provision of services, with appropriate segregations in place between the Group’s entities, on the one hand, and Trivium, on the other hand.

The Group recognized income of $5 million and $11 million in respect of the MSA in the three and six months ended June 30, 2020 respectively (June 30, 2019: $nil and $nil). 

The Group had balances outstanding with Trivium reflected within trade and other receivables of $4 million (December 31, 2019: $40 million) and trade and other payables of $1 million (December 31, 2019: $9 million).

On May 18, 2020, the Group, as lender, entered into a credit facility (the “Trivium Credit Facility”) with Trivium, as borrower. The amount under the Trivium Credit Facility is $57 million, which steps down to $36 million on December 15, 2020. The Trivium Credit Facility matures on April 30, 2021, with an option to extend to October 31, 2021. At June 30, 2020, the amount outstanding under the Trivium Credit Facility was $nil.

10.

Issued capital and reserves

Share capital

Issued and fully paid shares:

Class A
common shares
(par value €0.01)

Class B
common shares
(par value €0.10)

Total shares

Total

(million)

(million)

(million)

$'m

At December 31, 2019

18.66

217.70

236.36

23

Share issuance

At June 30, 2020

18.66

217.70

236.36

23

There were no material share transactions in the six months ended June 30, 2020.

Ardagh Group S.A.

17


Graphic

11.Financial assets and liabilities

At June 30, 2020 the Group’s net debt and available liquidity was as follows:

  

  

Maximum

  

Final 

  

  

  

  

amount

maturity

Facility

Undrawn

Facility

Currency

drawable

date

 type

Amount drawn

amount

Local

Local

currency

currency

$'m

$'m

m

m

 

5.250% Senior Secured Notes

USD

700

30-Apr-25

Bullet

700

700

4.125% Senior Secured Notes

USD

1,215

15-Aug-26

Bullet

1,215

1,215

2.125% Senior Secured Notes

EUR

439

15-Aug-26

Bullet

439

492

2.125% Senior Secured Notes

EUR

790

15-Aug-26

Bullet

790

885

6.000% Senior Notes

USD

800

15-Feb-25

Bullet

800

829

4.750% Senior Notes

GBP

400

15-Jul-27

Bullet

400

491

5.250% Senior Notes

USD

800

15-Aug-27

Bullet

800

800

5.250% Senior Notes

USD

1,000

15-Aug-27

Bullet

1,000

1,000

Global Asset Based Loan Facility

USD

660

07-Dec-22

Revolving

519

519

141

Lease obligations

 

Various

 

 

Amortizing

356

Other borrowings/credit lines

 

EUR/USD

 

 

Rolling

 

Amortizing

2

1

Total borrowings / undrawn facilities

 

  

 

  

 

  

 

  

 

7,289

142

Deferred debt issue costs and bond discounts and bond premium

 

  

 

  

 

  

 

  

 

  

(116)

Net borrowings / undrawn facilities

 

  

 

  

 

  

 

  

 

  

 

7,173

142

Cash and cash equivalents

 

  

 

  

 

  

 

  

 

  

 

(1,448)

1,448

Derivative financial instruments used to hedge foreign currency and interest rate risk

 

  

 

  

 

  

 

  

 

  

 

(35)

Net debt / available liquidity

 

  

 

  

 

  

 

  

 

  

 

5,690

1,590

              Net debt includes the fair value of associated derivative financial instruments that are used to hedge foreign exchange and interest rate risks relating to Group borrowings.

The fair value of the Group’s total borrowings excluding lease obligations at June 30, 2020 is $6,812 million (December 31, 2019: $5,774 million).

Ardagh Group S.A.

18


Graphic

At December 31, 2019, the Group’s net debt and available liquidity was as follows:

    

    

Maximum

    

Final

    

    

    

amount

 maturity

Facility

Undrawn

Facility

Currency

drawable

date

 type

Amount drawn

amount

Local

Local

 

currency

currency

$'m

$'m

m

m

 

2.750% Senior Secured Notes

 

EUR

 

741

 

15-Mar-24

 

Bullet

 

741

832

4.250% Senior Secured Notes 

USD

695

15-Sep-22

Bullet

695

695

2.125% Senior Secured Notes

EUR

439

15-Aug-26

Bullet

439

493

4.125% Senior Secured Notes

USD

500

15-Aug-26

Bullet

500

500

4.750% Senior Notes

GBP

400

15-Jul-27

Bullet

400

528

6.000% Senior Notes

USD

1,700

15-Feb-25

Bullet

1,700

1,708

5.250% Senior Notes

USD

800

15-Aug-27

Bullet

800

800

Global Asset Based Loan Facility

USD

663

07-Dec-22

Revolving

663

Lease obligations

 

Various

 

 

Amortizing

364

Other borrowings/credit lines

 

EUR/USD

 

 

Rolling

 

Amortizing

22

1

Total borrowings / undrawn facilities

 

  

 

  

 

  

 

  

 

5,942

664

Deferred debt issue costs and bond premium

 

  

 

  

 

  

 

  

 

  

(32)

Net borrowings / undrawn facilities

 

  

 

  

 

  

 

  

 

  

 

5,910

664

Cash and cash equivalents

 

  

 

  

 

  

 

  

 

  

 

(614)

614

Derivative financial instruments used to hedge foreign currency and interest rate risk

 

  

 

  

 

  

 

  

 

  

 

32

Net debt / available liquidity

 

  

 

  

 

  

 

  

 

  

 

5,328

1,278

Maturity profile

The maturity profile of the Group’s Senior Secured Notes and Senior Notes is as follows:

At June 30,

At December 31,

2020

    

2019

$'m

$'m

Within one year or on demand

Between one and three years

695

Between three and five years

1,529

832

Greater than five years

4,883

4,029

Total Senior Secured Notes and Senior Notes

6,412

 

5,556

Ardagh Group S.A.

19


Graphic

The maturity profile of the Group’s net borrowings is as follows:

At June 30,

At December 31,

    

2020

    

2019

$'m

$'m

Within one year or on demand

 

600

 

95

Between one and three years

 

109

 

802

Between three and five years

 

1,593

 

900

Greater than five years

 

4,987

 

4,145

Total borrowings

 

7,289

 

5,942

Deferred debt issue costs and bond discounts and bond premium

(116)

(32)

Net borrowings

7,173

5,910

A number of the Group’s borrowing agreements contain certain covenants that restrict the Group’s flexibility in areas such as incurrence of additional indebtedness (primarily maximum secured borrowings to Adjusted EBITDA and a minimum Adjusted EBITDA to interest expense), payment of dividends and incurrence of liens. The Global Asset Based Loan Facility is subject to a springing fixed charge coverage ratio covenant. The facility also includes cash dominion, representations, warranties, events of default and other covenants that are generally of a nature customary for such facilities.

Financing activity

2020

On April 7, 2020, the Group issued $500 million 5.250% Senior Secured Notes due 2025 and on April 8, 2020, the Group issued $200 million add-on 5.250% Senior Secured Notes due 2025. Net proceeds from the issuance of the notes were used to redeem in full a $300 million term loan credit facility on April 8, 2020 and for general corporate purposes.

On June 2, 2020, the Group issued $1,000 million 5.250% Senior Notes due 2027. The notes are non-fungible mirror notes to the $800 million 5.250% Senior Notes due 2027, issued in August, 2019. The net proceeds from the issuance of the notes were used to repurchase, by means of a tender and consent offer, approximately $900 million of the $1,700 million 6.000% Senior Notes due 2025, together with applicable redemption premium and accrued interest.

On June 4, 2020, the Group issued $715 million add-on 4.125% Senior Secured Notes due 2026. The notes are an add-on to the $500 million 4.125% Senior Secured Notes due 2026, issued in August, 2019. Proceeds from the issuance of the notes, net of expenses, were used to redeem in full the $695 million 4.250% Senior Secured Notes due 2022, together with applicable redemption premium and accrued interest.

On June 10, 2020, the Group issued €790 million  2.125% Senior Secured Notes due 2026. The notes are non-fungible mirror notes to the 2.125% Senior Secured Notes due 2026, issued in August, 2019. Proceeds from the issuance of the notes, net of expenses, were used to redeem in full the €741 million 2.750% Senior Secured Notes due 2024, together with applicable redemption premium and accrued interest.

Lease obligations at June 30, 2020, of $356 million primarily reflect $42 million of new leases, offset by $45 million of principal repayments and $5 million of favorable foreign currency movements in the six months ended June 30, 2020.

At June 30, 2020 the Group had $141 million available under the Global Asset Based Loan Facility. See note 19. ‘Other Information’.

Ardagh Group S.A.

20


Graphic

Cross currency interest rate swaps

The Group hedges certain of its external borrowings and interest payable thereon using cross-currency interest rate swaps (“CCIRS”), with a net asset position at June 30, 2020 of $35 million (December 31, 2019: $32 million net liability).

Fair value methodology

There has been no change to the fair value hierarchies for determining and disclosing the fair value of financial instruments.

Fair values are calculated as follows:

(i)Senior secured and senior notes – the fair value of debt securities in issue is based on valuation techniques in which all significant inputs are based on observable market data and represent Level 2 inputs.
(ii)Global Asset Based Loan Facility and other borrowings – the estimated value of fixed interest-bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debts with similar credit risk and remaining maturity and represents Level 2 inputs.
(iii)CCIRS – the fair value of the CCIRS are based on quoted market prices and represent Level 2 inputs.
(iv)Commodity and foreign exchange derivatives – the fair value of these derivatives are based on quoted market prices and represent Level 2 inputs.

12.   Employee benefit obligations

Employee benefit obligations at June 30, 2020 have been reviewed in respect of the latest discount rates and asset valuations. A re-measurement loss of $127 million and $162 million (2019: loss of $43 million and $83 million) has been recognized in the unaudited consolidated interim statement of comprehensive income for the three and six months ended June 30, 2020 respectively.

The re-measurement loss of $127 million recognized for the three months ended June 30, 2020 consisted of an increase in the obligations of $268 million (2019 increase: $81 million), partly offset by an increase in asset valuations of $141 million (2019 increase: $38 million).

The re-measurement loss of $162 million recognized for the six months ended June 30, 2020 consisted of an increase in obligations of $139 million (2019 increase: $248 million) and a decrease in the asset valuations of $23 million (2019 increase: $165 million).

13.   Cash generated from operating activities

Three months ended June 30, 

Six months ended June 30, 

    

2020

    

2019

2020

    

2019

$'m

$'m

$'m

$'m

(Loss)/profit from continuing operations

(59)

37

(3)

16

Income tax (credit)/charge

 

(6)

7

4

 

(1)

Net finance expense

 

145

108

179

 

240

Share of post-tax loss in equity accounted joint venture

17

20

Depreciation and amortization

 

169

162

336

 

324

Exceptional operating items

 

5

(4)

8

 

7

Movement in working capital

 

37

(53)

(372)

 

(230)

Transaction-related, start-up and other exceptional costs paid

 

(13)

(10)

(67)

 

(17)

Exceptional restructuring paid

 

(6)

(1)

 

(8)

Cash generated from continuing operations

 

295

 

241

104

331

Ardagh Group S.A.

21


Graphic

14.   Dividends

Three months ended June 30, 

Six months ended June 30, 

    

2020

    

2019

2020

    

2019

$'m

$'m

$'m

$'m

Cash dividends on common shares declared and paid:

 

Interim dividend for 2020: $0.14 per share (2019: $0.14 per share)

(33)

(33)

(33)

Interim dividend for 2020: $0.15 per share (2019: $0.14 per share)

(36)

(33)

(36)

(33)

(69)

(33)

(69)

(66)

On February 19, 2020, the Company declared a cash dividend of $0.14 per common share. The dividend of $33 million was paid on April 1, 2020 to shareholders of record on March 18, 2020.

On April 22, 2020, the Company declared a cash dividend of $0.15 per common share. The dividend of $36 million was paid on June 17, 2020 to shareholders of record on June 3, 2020.

15. Discontinued operation

On October 31, 2019, the Group completed the combination of Food & Specialty with the business of Exal to form Trivium. As a result, Food & Specialty has been reported as a discontinued operation in the three and six months ended June 30, 2019 in accordance with IFRS 5.

Results of discontinued operation

Basic and diluted earnings per share from discontinued operation 2020

Three months ended June 30,

Six months ended June 30,

2020

2020

$'m

$'m

(Loss)/profit from discontinued operation attributable to equity holders

(5)

22

Weighted average number of common shares for EPS (millions)

236.4

236.4

(Loss)/earnings per share from discontinued operation

$

(0.02)

$

0.09

As indicated in note 5, during the six months ended June 30, 2020, the Group recognized a credit of $22m primarily as a result of a gain arising from the remeasurement of the consideration for the disposal of Food & Specialty.

Ardagh Group S.A.

22


Graphic

Results, basic and diluted earnings per share from discontinued operation 2019

Three months ended June 30,

Six months ended June 30,

    

2019

    

2019

$'m

$'m

Revenue

556

1,137

Expenses

(512)

(1,042)

Profit before tax

44

95

Income tax charge

(12)

(29)

Profit from discontinued operation

32

66

Total comprehensive income from discontinued operation

Attributable to equity holders

43

51

Basic and diluted earnings per share from discontinued operation

$

0.13

$

0.28

16.   Related party transactions

With the exception of the transactions in note 9 ‘Investment in material joint venture’ and note 15 ‘Discontinued operation’, there have been no transactions in the six months ended June 30, 2020 with related parties, as disclosed in the Group’s Annual Report, that had a material effect on the financial position or performance of the Group.

17.   Contingencies

Environmental issues

The Group is regulated under various national and local environmental, occupational health and safety and other governmental laws and regulations relating to:

the operation of installations for manufacturing of metal packaging and surface treatment using solvents;
the operation of installations for manufacturing of container glass;
the generation, storage, handling, use and transportation of hazardous materials;
the emission of substances and physical agents into the environment;
the discharge of waste water and disposal of waste;
the remediation of contamination;
the design, characteristics, collection and recycling of its packaging products; and
the manufacturing, sale and servicing of machinery and equipment for the container glass and metal packaging industry.

The Group believes, based on current information that it is in substantial compliance with applicable environmental laws and regulations and permit requirements. It does not believe it will be required, under existing or

Ardagh Group S.A.

23


Graphic

anticipated future environmental laws and regulations, to expend amounts, over and above the amounts accrued, which will have a material effect on its business, financial condition or results of operations or cash flows. In addition, no material proceedings against the Group arising under environmental laws are pending.

Legal matters

In 2015, the German competition authority (the Federal Cartel Office) initiated an investigation of the practices in Germany of metal packaging manufacturers, including Ardagh’s Food & Specialty Metal Packaging business which was sold to Trivium. In 2018, the European Commission took over this investigation and the German investigation is, as a result, at an end. Ardagh has agreed to provide an indemnity in respect of certain losses that Trivium might incur in connection with this investigation. The European Commission’s investigation is ongoing, and there is, at this stage no certainty as to the extent of any charge which may arise. Accordingly, no provision or indemnification liability has been recognized.

With the exception of the above legal matter, the Group is involved in certain other legal proceedings arising in the normal course of its business. The Group believes that none of these proceedings, either individually or in aggregate, are expected to have a material adverse effect on its business, financial condition, results of operations or cash flows.

18.   Seasonality of operations

The Group’s revenue and cash flows are both subject to seasonal fluctuations with the Group generally building inventories in anticipation of these seasonal demands resulting in working capital requirements typically being the greatest at the end of the first quarter of the year.  

The demand for our metal beverage products is strongest during spells of warm weather and therefore demand typically peaks during the summer months, as well as in the period leading up to holidays in December. Demand for beverage products within our Glass Packaging business is similarly strongest during the summer and during periods of warm weather, as well as the period leading up to holidays in December.

The Group manages the seasonality of working capital principally by supplementing operating cash flows with drawings under our Global Asset Based Loan facility.

19. Other information

COVID-19

The outbreak of the COVID-19 pandemic and measures to prevent its spread, including restrictions on travel, imposition of quarantines and prolonged closures of workplaces and other businesses, including hospitality, leisure and entertainment outlets, and the related cancellation of events, has impacted our business in a number of ways. This has included an adverse effect from reduced global economic activity and resulting demand for our customers’ products and, therefore, the products we manufacture. It may also adversely affect our ability to operate our business, including potential disruptions to our supply chain and workforce. The COVID-19 impact on capital markets could also impact our cost of borrowing.

The ultimate significance of the impact of these disruptions, including the extent of their adverse impact on our financial and operational results, will be determined by the length of time that such disruptions continue which will, in turn, depend on the duration of the COVID-19 pandemic, the impact of governmental and other regulations in response to the pandemic and the resulting effect on macroeconomic activity and consumer behavior.

During the three months ended June 30, 2020, our Glass business, in particular, was affected, and experienced reductions in customer demand and therefore revenue as a direct consequence of the various global lockdowns and the

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related impact to “on-premise” sales. The aforementioned reduction in customer demand caused loss of margin in addition to excess capacity costs as a result of lower production volumes. In addition, throughout the Group, incremental COVID-19 related costs, including increased safety and cleaning costs were incurred.

Our response to the COVID-19 across our business operations can be summarized as follows:

Business Continuity

We are a leading supplier of consumer packaging solutions, comprising metal beverage cans and glass containers, primarily for the beverage and food end markets in Europe, North America and Brazil. In the markets we operate in, Ardagh is an essential provider of packaging to the beverage and food supply chain. Our people are deemed “Essential Critical Infrastructure Workers” under the guidance of the U.S. Department of Homeland Security, as are our customers. Where other governments issued guidance, we received equivalent designations in all other countries where we operate. We will continue to manage our capacity in response to the evolution of demand.

Employee health and safety

The health and safety of our 16,000 employees and their families and communities, as well as our contractors, suppliers and customers has been our highest priority since the outbreak of the crisis. We established a Group-wide task force to ensure an effective and consistent response across our business. Regular updates have been issued and a dedicated intranet site established to facilitate effective communication of recommendations, policies and procedures. Communication with all stakeholders has been a core element in our response.

Measures continue to evolve in line with best practice and with recommendations by national health authorities and the World Health Organization. Initiatives introduced to date have included: enhanced hygiene procedures in all locations, including increased cleaning in our production facilities; increased investment in personal protective equipment; adapting work practices and routines to ensure social distancing; establishing procedures for self-isolation; travel advisories including restrictions on all non-essential travel, prior to broader restrictions on any travel; restrictions on visitors to our production facilities or by our employees to external facilities; actively encouraging and ultimately requiring remote working for non-operational personnel, and enhancing our IT capability to facilitate increased remote working.

Available liquidity

The Group’s long-term liquidity needs primarily relate to the service of our debt obligations. We expect to satisfy our future long-term liquidity needs through a combination of cash flow generated from operations and, where appropriate, to refinance our debt obligations in advance of their respective maturity dates as we have successfully done in the past and in recent months.

The Group generates substantial cash flow from our operations on an annual basis. As a precautionary measure in response to the increased macroeconomic uncertainty related to COVID-19, we increased our cash on hand and total available liquidity, by drawing on our Global Asset Based Loan facility. As outlined in note 11, cash and cash equivalents was increased further during the second quarter and the Group also enhanced its capital structure by refinancing certain debt obligations, resulting in the Group having no Senior Secured Notes or Senior Notes maturing before 2025.

The Group had $1,448 million in cash and cash equivalents and restricted cash as of June 30, 2020, as well as available but undrawn liquidity of $142 million under its credit facilities.

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Going concern

At the date that the unaudited consolidated interim financial statements were approved for issue by the board of directors, the Board has formed the judgement that there is a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future. Accordingly, these unaudited consolidated interim financial statements have been prepared on a going concern basis.

In assessing whether the going concern assumption is appropriate, the Board has taken into account all available information about a period, extending to at least, July 31, 2021. In particular, the Board has considered the impact of the novel coronavirus and measures to prevent its spread being imposed by Governments in the countries in which the Group, its suppliers and its customers operate as previously referred to.

In arriving at its conclusion, the Board has taken account of the Group’s current and anticipated trading performance, together with current and anticipated levels of cash and net debt and the availability of committed borrowing facilities. The Board has developed a number of adverse scenarios to reflect potential COVID-19 impacts on the Group’s liquidity. These informed the Board’s judgement that it is appropriate to prepare the unaudited consolidated interim financial statements using the going concern basis.

Customer credit risk

Group policy is to extend credit to customers of good credit standing. Credit risk is managed on an on-going basis, by experienced people within the Group. The Group’s policy for the management of credit risk in relation to trade receivables involves periodically assessing the financial reliability of customers, taking into account their financial position, past experience and other factors and regularly monitoring the utilization of credit limits. The Group monitors actual historical credit losses and adjusts for forward-looking information to measure the level of expected losses. Management’s assessment includes consideration of adverse changes in the payment status of customers of the Group, or national or local economic conditions that correlate with defaults on receivables owing to the Group, which may also provide a basis for an increase in the level of provision above historic loss experience.

Management does not expect any significant counterparty to fail to meet its obligations and there is no recent history of default with customers. Significant balances are assessed for evidence of increased credit risk. Examples of factors considered are high probability of bankruptcy, breaches of contract or major concession being sought by the customer. Instances of significant single customer related bad debts are rare and there is no significant concentration of risk associated with particular customers.

20.   Events after the reporting period

On July 22, 2020, the Board declared a cash dividend of $0.15 per common share, payable on October 1, 2020 to the shareholders of record on September 17, 2020.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read together with, and is qualified in its entirety by, reference to the Unaudited Consolidated Interim Financial Statements for the three and six months ended June 30, 2020  including the related notes thereto. As used in this section, the “Group” refers to Ardagh Group S.A. and its subsidiaries.

Some of the measures used in this report are not measurements of financial performance under IFRS and should not be considered an alternative to cash flow from operating activities as a measure of liquidity or an alternative to operating profit/(loss) or profit/(loss) for the period as indicators of our operating performance or any other measures of performance derived in accordance with IFRS.

Business Drivers

The main factors affecting our results of operations for Metal Beverage Packaging and Glass Packaging are: (i) global economic trends and end-consumer demand for our products; (ii) prices of energy and raw materials used in our business, primarily aluminum, steel, cullet, sand, soda ash and coatings, and our ability to pass through these and other cost increases to our customers, through contractual pass through mechanisms under multi-year contracts, or through renegotiation in the case of short-term contracts; (iii) investment in operating cost reductions; (iv) acquisitions; and (v) foreign exchange rate fluctuations and currency translation risks arising from various currency exposures, primarily with respect to the euro, U.S. dollar, British pound, Swedish krona, Polish zloty, Danish krone and Brazilian real.

The outbreak of the COVID-19 pandemic and measures to prevent its spread, including restrictions on travel, imposition of quarantines and prolonged closures of workplaces and other businesses, including hospitality, leisure and entertainment outlets, and the related cancellation of events, has impacted our business in a number of ways. This has included an adverse effect from reduced global economic activity and resulting demand for our customers’ products and, therefore, the products we manufacture. It may also adversely affect our ability to operate our business, including potential disruptions to our supply chain and workforce. The COVID-19 impact on capital markets could also impact our cost of borrowing.

The ultimate significance of the impact of these disruptions, including the extent of their adverse impact on our financial and operational results, will be determined by the length of time that such disruptions continue which will, in turn, depend on the duration of the COVID-19 pandemic, the impact of governmental and other regulations in response to the pandemic and the resulting effect on macroeconomic activity and consumer behavior.

During the three months ended June 30, 2020, our Glass business, in particular, was affected, and experienced reductions in customer demand and therefore revenue as a direct consequence of the various global lockdowns and the related impact to “on-premise” sales. The aforementioned reduction in customer demand caused loss of margin in addition to excess capacity costs as a result of lower production volumes. In addition, throughout the Group, incremental COVID-19 related costs, including increased safety and cleaning costs were incurred.

In addition, certain other factors affect revenue and operating profit/(loss) for Metal Beverage Packaging and Glass Packaging.

Metal Beverage Packaging

Metal Beverage Packaging generates its revenue from supplying metal can packaging to the beverage end-use category. Revenue is primarily dependent on sales volumes and sales prices.

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Sales volumes are influenced by a number of factors, including factors driving customer demand, seasonality and the capacity of our metal beverage packaging plants. Demand for our metal beverage cans may be influenced by trends in the consumption of beverages, industry trends in packaging, including marketing decisions, and the impact of environmental regulations and shifts in consumer sentiment towards a greater awareness of sustainability issues. The demand for our beverage products is strongest during spells of warm weather and therefore demand typically peaks during the summer months, as well as in the period leading up to holidays in December. Accordingly, we generally build inventories in the first and fourth quarter in anticipation of the seasonal demands in our beverage business.

Metal Beverage Packaging’s Adjusted EBITDA is based on revenue derived from selling our metal beverage cans and is affected by a number of factors, primarily cost of sales. The elements of Metal Beverage Packaging’s cost of sales include (i) variable costs, such as electricity, raw materials (including the cost of aluminum), packaging materials, decoration and freight and other distribution costs, and (ii) fixed costs, such as labor and other plant-related costs including depreciation, maintenance and sales, marketing and administrative costs. Metal Beverage Packaging’s variable costs have typically constituted approximately 75% and fixed costs approximately 25% of the total cost of sales for our Metal Beverage Packaging business.

Glass Packaging

Glass Packaging generates its revenue principally from selling glass containers. Glass Packaging revenue is primarily dependent on sales volumes and sales prices. Glass Packaging includes our glass engineering business, Heye International.

Sales volumes are affected by a number of factors, including factors impacting customer demand, seasonality and the capacity of Glass Packaging’s plants. Demand for glass containers may be influenced by trends in the consumption of beverages, fruit and vegetable harvests, industry trends in packaging, including marketing decisions, governmental regulations and the impact of environmental regulations, as well as changes in consumer sentiment including a greater awareness of sustainability issues.

In the U.S., for example, the growth in consumption of imported beer has seen reduced demand for domestically-produced mass beer brands, resulting in reduced demand for glass packaging for this end-use category. Recent years have also seen an increase in the imports of empty glass containers into the United States. In response, the Group reduced production capacity in its Glass Packaging North America division by over 10%, combined between 2018 and 2019. In addition, the Group is pursuing growth opportunities in stronger performing end-markets, including food, wines and spirits and has converted production capacity from the mass beer sector to serve these alternative end-markets. Investments in advanced inspection equipment and automation have also been undertaken, and continue to be undertaken, in order to enhance quality and productivity.

Beverage sales within our Glass Packaging business are seasonal in nature, with strongest demand during the summer and during periods of warm weather, as well as the period leading up to holidays in December. Accordingly, Glass Packaging’s shipment volumes of glass containers is typically lower in the first quarter. Glass Packaging builds inventory in the first quarter in anticipation of these seasonal demands. In addition, Glass Packaging generally schedules shutdowns of its plants for furnace rebuilding and repairs of machinery in the first quarter. These strategic shutdowns and seasonal sales patterns adversely affect profitability in Glass Packaging’s glass manufacturing operations during the first quarter of the year. Plant shutdowns may also affect the comparability of results from period to period. Glass Packaging’s working capital requirements are typically greatest at the end of the first quarter of the year.

Glass Packaging’s Adjusted EBITDA is based on revenue derived from selling glass containers and glass engineering products and services and is affected by a number of factors, primarily cost of sales. The elements of Glass Packaging’s cost of sales for its glass container manufacturing business include (i) variable costs, such as natural gas and electricity, raw materials (including the cost of cullet), packaging materials, decoration and freight and other distribution costs, and (ii) fixed costs, such as labor and other plant-related costs including depreciation, maintenance and sales, marketing and administrative costs. Glass Packaging’s variable costs have typically constituted approximately 40% and fixed costs approximately 60% of the total cost of sales for our glass container manufacturing business.

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Results of operations

Three months ended June 30, 2020 compared with three months ended June 30, 2019:

Unaudited

(in $ millions)

Three months ended June 30, 

2020

    

2019

Revenue

 

1,606

1,712

Cost of sales

 

(1,373)

(1,416)

Gross profit

 

233

 

296

Sales, general and administration expenses

 

(78)

(85)

Intangible amortization

 

(58)

(59)

Operating profit

 

97

 

152

Net finance expense

 

(145)

(108)

Share of post-tax loss in equity accounted joint venture

(17)

(Loss)/profit before tax

 

(65)

 

44

Income tax credit/(charge)

 

6

(7)

(Loss)/profit from continuing operations

(59)

37

(Loss)/profit from discontinued operation

(5)

32

(Loss)/profit for the period

 

(64)

 

69

Revenue

Revenue in the three months ended June 30, 2020 decreased by $106 million, to $1,606 million, compared with $1,712 million in the three months ended June 30, 2019. The decrease in revenue is primarily driven by unfavorable foreign currency translation effects of $25 million, unfavorable volume/mix effects, and the pass through to customers of lower input costs.

Cost of sales

Cost of sales in the three months ended June 30, 2020 decreased by $43 million, or 3%, to $1,373 million, compared with $1,416 million in the three months ended June 30, 2019. The decrease in cost of sales is principally due to lower input costs and favorable foreign currency translation effects, partly offset by higher exceptional cost of sales which increased by $18 million. Further analysis of the movements in exceptional items is set out in the “Supplemental Management’s Discussion and Analysis” section.

Gross profit

Gross profit in the three months ended June 30, 2020 decreased by $63 million, or 21%, to $233 million, compared with $296 million in the three months ended June 30, 2019. Gross profit percentage in the three months ended June 30, 2020 decreased by 280 basis points to 14.5%, compared with 17.3% in the three months ended June 30, 2019.  Excluding exceptional cost of sales, gross profit percentage in the three months ended June 30, 2020 decreased by 180 basis points to 14.6% compared with 16.4% in the three months ended June 30, 2019. Further analysis of the movements in exceptional items is set out in the “Supplemental Management’s Discussion and Analysis” section.

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Sales, general and administration expenses

Sales, general and administration expenses in the three months ended June 30, 2020 decreased by $7 million, or 8%, to $78 million, compared with $85 million in the three months ended June 30, 2019. Excluding exceptional items, sales, general and administration expenses increased by $2 million. Exceptional sales, general and administration expenses decreased by $9 million, due to lower transaction-related and other costs.

Intangible amortization

Intangible amortization of $58 million in the three months ended June 30, 2020 decreased by $1 million compared with $59 million in the three months ended June 30, 2019.

Operating profit

Operating profit in the three months ended June 30, 2020 decreased by $55 million, or 36%, compared with the three months ended June 30, 2019, as lower gross profit, as outlined above, was partly offset by lower sales, general and administration expenses and lower intangible amortization.

Net finance expense

Net finance expense for the three months ended June 30, 2020 increased by $37 million, or 34%, to $145 million compared with $108 million for the three months ended June 30, 2019. Net finance expense for the three months ended June 30, 2020 and 2019 comprised the following:

Unaudited

(in $ millions)

Three months ended June 30, 

2020

    

2019

Interest expense

 

71

112

Net pension interest costs

 

4

5

Foreign currency translation gains

(1)

(6)

Gains on derivative financial instruments

 

(1)

(2)

Other finance income

(2)

(1)

Finance expense before exceptional items

 

71

 

108

Exceptional finance expense

74

Net finance expense from continuing operations

145

108

Net finance expense from discontinued operation

3

Net finance expense

145

111

Interest expense decreased by $41 million to $71 million in the three months ended June 30, 2020 compared with $112 million in the three months ended June 30, 2019. The decrease primarily relates to lower interest expense on the Group’s Senior Secured Notes and Senior Notes, which were reduced in 2019 using proceeds from the disposal of Food & Specialty, and lower other interest expense.

Foreign currency translation gains in the three months ended June 30, 2020 decreased by $5 million, to $1 million, compared with a gain of $6 million in the three months ended June 30, 2019, driven by foreign exchange rate fluctuations, primarily the British pound.

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Gains on derivative financial instruments of $1 million in the three months ended June 30, 2020 decreased by $1 million, compared to a gain of $2 million in the three months ended June 30, 2019. The gain is related to the Group’s CCIRS.

Exceptional finance expense for the three months ended June 30, 2020 of $74 million primarily related to costs associated with the debt refinancings and related redemption activities in the period, principally comprising early redemption premiums, accelerated amortization of deferred financing costs, and interest charges from the call date to date of redemption.

Share of post–tax loss in equity accounted joint venture

The Group recognized a $17 million share of post-tax loss in its equity accounted joint venture, relating to its approximate 42% investment in Trivium. Please refer to note 9 of these unaudited consolidated interim financial statements.

Income tax credit/(charge)

Income tax credit in the three months ended June 30, 2020 was $6 million, a movement of $13 million from an income tax charge of $7 million in the three months ended June 30, 2019. The movement of $13 million in the income tax charge is primarily due to a decrease in the pre-exceptional income tax charge of $8 million in the three months ended June 30, 2020, which is attributable to a decrease in profit before exceptional items in the three months ended June 30, 2020 compared to the three months ended June 30, 2019, in addition to an increase in exceptional tax credits of $5 million in the three months ended June 30, 2020, mainly relating to exceptional finance expense.

The effective income tax rate on profit before exceptional items and share of post-tax loss in equity accounted joint venture for the three months ended June 30, 2020 was 26%, compared with a rate of 40% for the three months ended June 30, 2019. The decrease in the effective tax rate is primarily attributable to changes in profitability mix, in addition to the reduction in net finance expense.

Loss from continuing operations

As a result of the items described above, the Group recognized a loss of $59 million for the three months ended June 30, 2020, compared with a profit of $37 million in the three months ended June 30, 2019.

Loss from discontinued operation

Loss from discontinued operation of $5 million in the three months ended June 30, 2020 reflects the finalization of the remeasurements related to the disposal of Food & Specialty.

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Six months ended June 30, 2020 compared with six months ended June 30, 2019:

Unaudited

(in $ millions)

Six months ended June 30, 

2020

    

2019

Revenue

 

3,228

3,351

Cost of sales

 

(2,733)

(2,811)

Gross profit

 

495

 

540

Sales, general and administration expenses

 

(179)

(168)

Intangible amortization

 

(116)

(117)

Operating profit

 

200

 

255

Net finance expense

 

(179)

(240)

Share of post-tax loss in equity accounted joint venture

(20)

Profit before tax

 

1

 

15

Income tax (charge)/credit

 

(4)

1

(Loss)/profit from continuing operations

(3)

16

Profit from discontinued operation

22

66

Profit for the period

 

19

 

82

Revenue

Revenue in the six months ended June 30, 2020 decreased by $123 million, to $3,228 million, compared with $3,351 million in the six months ended June 30, 2019. The decrease in revenue is primarily driven by unfavorable foreign currency translation effects of $45 million, unfavourable volume/mix effects, and the pass through to customers of lower input costs.

Cost of sales

Cost of sales in the six months ended June 30, 2020 decreased by $78 million, or 3%, to $2,733 million, compared with $2,811 million in the six months ended June 30, 2019. The decrease in cost of sales is principally due to lower input costs and favorable foreign currency translation effects, partly offset by $9 million higher exceptional cost of sales. Further analysis of the movements in exceptional items is set out in the “Supplemental Management’s Discussion and Analysis” section.

Gross profit

Gross profit in the six months ended June 30, 2020 decreased by $45 million, or 8%, to $495 million, compared with $540 million in the six months ended June 30, 2019. Gross profit percentage in the six months ended June 30, 2020 decreased by 80 basis points to 15.3%, compared with 16.1% in the six months ended June 30, 2019. Excluding exceptional cost of sales, gross profit percentage in the six months ended June 30, 2020 decreased by 50 basis points to 15.4% compared with 15.9% in the six months ended June 30, 2019. Further analysis of the movements in exceptional items is set out in the “Supplemental Management’s Discussion and Analysis” section.

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Sales, general and administration expenses

Sales, general and administration expenses in the six months ended June 30, 2020 increased by $11 million, or 7%, to $179 million, compared with $168 million in the six months ended June 30, 2019. Excluding exceptional items, sales, general and administration expenses increased by $19 million. Exceptional sales, general and administration expenses decreased by $8 million, due to lower transaction-related and other costs.

Intangible amortization

Intangible amortization of $116 million in the six months ended June 30, 2020 decreased by $1 million, compared with $117 million in the six months ended June 30, 2019.

Operating profit

Operating profit in the six months ended June 30, 2020 decreased by $55 million, compared with the six months ended June 30, 2019 as lower gross profit, as outlined above, and higher sales, general and administration expenses were partly offset by lower intangible amortization.

Net finance expense

Net finance expense for the six months ended June 30, 2020 decreased by $61 million, or 25%, to $179 million compared with $240 million for the six months ended June 30, 2019. Net finance expense for the six months ended June 30, 2020 and 2019 comprised the following:

Unaudited

(in $ millions)

Six months ended June 30, 

2020

    

2019

Interest expense

 

141

222

Net pension interest costs

 

8

9

Foreign currency translation (gains)/losses

(32)

4

(Gains)/losses on derivative financial instruments

 

(9)

7

Other finance income

(3)

(2)

Finance expense before exceptional items

105

240

Exceptional finance expense

74

Net finance expense from continuing operations

 

179

 

240

Net finance expense from discontinued operation

6

Net finance expense

179

246

Interest expense decreased by $81 million to $141 million in the six months ended June 30, 2020 compared with $222 million in the six months ended June 30, 2019. The decrease primarily relates to lower interest expense on the Group’s Senior Secured Notes and Senior Notes, which were reduced in 2019 using proceeds from the disposal of Food & Specialty.

Foreign currency translation gains in the six months ended June 30, 2020 increased by $36 million, to $32 million, compared with a loss of $4 million in the six months ended June 30, 2019 driven by foreign exchange rate fluctuations, primarily the British pound.

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Gains on derivative financial instruments in the six months ended June 30, 2020 increased by $16 million, to $9 million, compared to a loss of  $7 million in the six months ended June 30, 2019. The gain is related to the Group’s CCIRS.

Exceptional finance expense for the six months ended June 30, 2020 of $74 million primarily related to costs associated with the debt refinancings and related redemption activities in the period, principally comprising early redemption premiums, accelerated amortization of deferred financing costs, and interest charges from the call date to date of redemption.

Share of post–tax loss in equity accounted joint venture

The Group recognized a $20 million share of post-tax loss in its equity accounted joint venture, relating to its approximate 42% investment in Trivium. Please refer to note 9 of these unaudited consolidated interim financial statements.

Income tax (charge)/credit

Income tax charge in the six months ended June 30, 2020 was $4 million, a movement of $5 million from an income tax credit of $1 million in the six months ended June 30, 2019. The movement of $5 million in the income tax charge is primarily due to an increase in the pre-exceptional income tax charge of $22 million in the six months ended June 30, 2020, which is attributable to an increase in profit before exceptional items in the six months ended June 30, 2020 compared to the six months ended June 30, 2019. The increase in the pre-exceptional income tax charge is partly offset by an increase in exceptional tax credits of $17 million in the six months ended June 30, 2020, mainly relating to tax credits from recent U.S. tax reform and exceptional finance expense.

The effective income tax rate on profit before exceptional items and share of post-tax loss in equity accounted joint venture for the six months ended June 30, 2020 was 31%, compared with a rate of 45% for the six months ended June 30, 2019. The decrease in the effective tax rate is primarily attributable to changes in profitability mix, in addition to the reduction in net finance expense.

Loss from continuing operations

As a result of the items described above, the Group recognised a loss of $3 million for the six months ended June 30, 2020, compared with a profit of $16 million in the six months ended June 30, 2019.

Profit from discontinued operation

Profit from discontinued operation of $22 million in the six months ended June 30, 2020 primarily relates to a gain arising from the remeasurement of the consideration for the disposal of Food & Specialty.

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Supplemental Management’s Discussion and Analysis

Key operating measures

Adjusted EBITDA consists of profit/(loss) for the year before income tax charge/(credit), net finance expense, depreciation and amortization, exceptional operating items and share of profit or loss in equity accounted joint venture. We use Adjusted EBITDA to evaluate and assess our segment performance. Adjusted EBITDA is presented because we believe that it is frequently used by securities analysts, investors and other interested parties in evaluating companies in the packaging industry. However, other companies may calculate Adjusted EBITDA in a manner different from ours. Adjusted EBITDA is not a measure of financial performance under IFRS and should not be considered an alternative to profit/(loss) as indicators of operating performance or any other measures of performance derived in accordance with IFRS.

For a reconciliation of the profit/(loss) for the period to Adjusted EBITDA see note 4 of the unaudited consolidated interim financial statements.

Adjusted EBITDA in continuing operations in the three months ended June 30, 2020 decreased by $39 million, or 13%, to $271 million, compared with $310 million in the three months ended June 30, 2019.

Adjusted EBITDA in continuing operations in the six months ended June 30, 2020 decreased by $42 million, or 7%, to $544 million, compared with $586 million in the six months ended June 30, 2019.

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Exceptional items

The following table provides detail on exceptional items from continuing operations included in cost of sales and sales, general and administration expenses:

Three months ended June 30, 

Six months ended June 30, 

    

2020

    

2019

2020

    

2019

$'m

$'m

$'m

$'m

Restructuring costs

 

1

7

Impairment

 

2

4

Start-up related costs

 

2

3

2

4

Past service credit

 

(37)

(37)

Legal matter

 

15

15

Exceptional items – cost of sales

 

2

(16)

2

(7)

Transaction-related and other costs 

3

12

6

14

Exceptional items – SGA expenses

3

12

6

14

Debt refinancing and settlement costs

74

74

Exceptional items – finance expense

74

74

Share of exceptional items in material joint venture

4

8

Exceptional items from continuing operations

83

(4)

90

7

Exceptional income tax credit

(14)

(9)

(28)

(11)

Exceptional items from continuing operations, net of tax

 

69

(13)

62

(4)

Exceptional items from discontinued operation, net of tax

5

7

(22)

8

Total exceptional items, net of tax

74

(6)

40

4

Exceptional items of $40 million have been recognized in the six months ended June 30, 2020, primarily comprising:

$2 million start-up related costs.
$6 million transaction-related and other costs.
$74 million debt refinancing and settlement costs related to the redemption of notes in May and June 2020 as described in note 11 of the unaudited consolidated interim financial statements, including premium payable on the early redemption of the notes of $61 million, accelerated amortisation of deferred finance costs and interest charges from the call date to date of redemption.
$8 million from the share of exceptional items in the Trivium joint venture.
$28 million from tax credits primarily relating to recent U.S. tax reform and debt refinancing and settlement costs incurred in the period.
$22 million credit in relation to the disposal of Food & Specialty including the finalization of the completion accounts process.

Exceptional items of $4 million have been recognized in the six months ended June 30, 2019 primarily comprising:

$15 million related to the Group’s capacity realignment programs, including restructuring costs ($7 million), property, plant and equipment impairment charges ($4 million) and start-up related costs ($4 million). These costs were incurred in Glass Packaging North America ($11 million) and Metal Beverage Packaging Europe ($4 million)

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$37 million pension service credit recognized in Glass Packaging North America following amendments to a pension scheme.
$15 million related to a provision for a court award and related interest, net of the tax adjusted indemnity receivable in respect of the Group’s U.S. glass business legal matter.
$14 million transaction-related and other costs, primarily comprised of costs relating to to the combination of the Group’s Food & Specialty Metal Packaging business with the business of Exal Corporation.
$11 million from tax credits primarily related to the provision for a court award and related interest in respect of the Group’s U.S glass business legal matter.
$8 million exceptional items from discontinued operation.

Segment Information

Three months ended June 30, 2020 compared with three months ended June 30, 2019

Segment results for the three months ended June 30, 2020 and 2019 are:

(in $ millions)

(in $ millions)

Revenue

Adjusted EBITDA

    

2020

    

2019

    

2020

    

2019

Metal Beverage Packaging Europe

 

395

411

70

72

Metal Beverage Packaging Americas

 

435

456

69

66

Glass Packaging Europe

 

368

412

76

99

Glass Packaging North America

 

408

433

56

73

Continuing operations

1,606

1,712

271

310

Discontinued operation

556

85

Group

 

1,606

 

2,268

 

271

 

395

Revenue

Metal Beverage Packaging Europe. Revenue decreased by $16 million, or 4%, to $395 million in the three months ended June 30, 2020, compared with $411 million in the three months ended June 30, 2019. Excluding unfavorable foreign currency translation effects of $13 million, revenue decreased by $3 million, principally reflecting the pass through of lower input costs, partly offset by volume/mix growth of 2%.

Metal Beverage Packaging Americas. Revenue decreased by $21 million, or 5%, to $435 million in the three months ended June 30, 2020, compared with $456 million in the three months ended June 30, 2019. The decrease in revenue principally reflected the pass through of lower input costs, partly offset by favorable volume/mix effects of 1%.

Glass Packaging Europe. Revenue decreased by $44 million, or 11%, to $368 million in the three months ended June 30, 2020, compared with $412 million in the three months ended June 30, 2019. Excluding unfavorable foreign currency translation effects of $12 million, revenue decreased by $32 million, or 8%, mainly due to unfavorable volume/mix effects of 10%, primarily as a result of COVID-19 impacted demand, partly offset by contracted price increases.

Glass Packaging North America. Revenue decreased by $25 million, or 6%, to $408 million in the three months ended June 30, 2020, compared with $433 million in the three months ended June 30, 2019. The decrease in revenue reflected unfavorable volume/mix effects of 6%, principally due to the impact of COVID-19 on demand.

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Adjusted EBITDA

Metal Beverage Packaging Europe. Adjusted EBITDA decreased by $2 million, or 3%, to $70 million in the three months ended June 30, 2020, compared with $72 million in the three months ended June 30, 2019. Excluding unfavorable foreign currency translation effects of $2 million, Adjusted EBITDA was in line with the prior year, as favorable volume/mix effects were offset by lower selling prices.

Metal Beverage Packaging Americas. Adjusted EBITDA increased by $3 million, or 5%, to $69 million in the three months ended June 30, 2020, compared with $66 million in the three-month period ended June 30, 2019. The increase was mainly driven by favorable volume/mix effects and operating cost savings.

Glass Packaging Europe. Adjusted EBITDA decreased by $23 million, or 23%, to $76 million in the three months ended June 30, 2020, compared with $99 million in the three months ended June 30, 2019. The decrease primarily reflected unfavorable volume/mix effects and lower production resulting in unfavorable fixed cost absorption, partly offset by contracted price increases  and other operating cost savings.

Glass Packaging North America. Adjusted EBITDA decreased by $17 million, or 23%, to $56 million in the three months ended June 30, 2020, compared with $73 million in the three months ended June 30, 2019. The decrease was mainly as a result of unfavorable volume/mix effects and lower production resulting in unfavorable fixed cost absorption and increased costs.

Six months ended June 30, 2020 compared with six months ended June 30, 2019

Segment results for the six months ended June 30, 2020 and 2019 are:

(in $ millions)

(in $ millions)

Revenue

Adjusted EBITDA

    

2020

    

2019

    

2020

    

2019

Metal Beverage Packaging Europe

 

780

803

124

141

Metal Beverage Packaging Americas

 

879

895

130

117

Glass Packaging Europe

 

752

804

165

184

Glass Packaging North America

 

817

849

125

144

Continuing operations

3,228

3,351

544

586

Discontinued operation

1,137

172

Group

 

3,228

 

4,488

 

544

 

758

Revenue

Metal Beverage Packaging Europe. Revenue decreased by $23 million, or 3%, to $780 million in the six months ended June 30, 2020, compared with $803 million in the six months ended June 30, 2019. Excluding unfavorable foreign currency translation effects of $23 million, revenue was in line with the prior year as the pass through of lower input costs was offset by favorable volume/mix effects of 2%.

Metal Beverage Packaging Americas. Revenue decreased by $16 million, or 2%, to $879 million in the six months ended June 30, 2020, compared with $895 million in the six months ended June 30, 2019. The decrease in revenue principally reflected the pass through of lower input costs, partly offset by favorable volume/mix effects of 3%.

Glass Packaging Europe. Revenue decreased by $52 million, or 6%, to $752 million in the six months ended June 30, 2020, compared with $804 million in the six months ended June 30, 2019. Excluding unfavorable foreign

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currency translation effects of $22 million, revenue decreased by $30 million, mainly driven by unfavorable volume/mix effects of 6%, primarily as a result of COVID-19 impacted demand, partly offset by contracted price increases.

Glass Packaging North America. Revenue decreased by $32 million, or 4%, to $817 million in the six months ended June 30, 2020, compared with $849 million in the six months ended June 30, 2019. The decrease in revenue principally reflected unfavorable volume/mix effects of 4%, which includes the effects of COVID-19 on demand.

Adjusted EBITDA

Metal Beverage Packaging Europe. Adjusted EBITDA decreased by $17 million, or 12%, to $124 million in the six months ended June 30, 2020, compared with $141 million in the six months ended June 30, 2019. Excluding unfavorable foreign currency translation effects of $4 million, Adjusted EBITDA decreased by $13 million, principally due to the impact of a prior year pension credit and lower selling prices which were partly offset by favorable volume/mix effects.

Metal Beverage Packaging Americas. Adjusted EBITDA increased by $13 million, or 11%, to $130 million in the six months ended June 30, 2020, compared with $117 million in the six-month period ended June 30, 2019. The increase was mainly driven by operating cost savings, favorable volume/mix effects and contracted price increases.

Glass Packaging Europe. Adjusted EBITDA decreased by $19 million, or 10%, to $165 million in the six months ended June 30, 2020, compared with $184 million in the six months ended June 30, 2019. The decrease primarily reflected unfavorable volume/mix effects, lower production resulting in unfavorable fixed cost absorption, partly offset by contract price increases and other operating cost savings.

Glass Packaging North America. Adjusted EBITDA decreased by $19 million, or 13%, to $125 million in the six months ended June 30, 2020, compared with $144 million in the six months ended June 30, 2019. The decrease was mainly due to unfavorable volume/mix effects and lower production resulting in unfavorable fixed cost absorption and increased costs.

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Liquidity and Capital Resources

Cash requirements related to operations

Our principal sources of cash are cash generated from operations and external financings, including borrowings and other credit facilities. Our principal funding arrangements include borrowings available under the Global Asset Based Loan Facility.

The following table outlines our principal financing arrangements as at June 30, 2020:

  

  

Maximum

  

Final 

  

  

  

  

amount

maturity

Facility

Undrawn

Facility

Currency

drawable

date

 type

Amount drawn

amount

Local

Local

    

currency

currency

$'m

$'m

m

m

 

5.250% Senior Secured Notes

USD

700

30-Apr-25

Bullet

700

700

4.125% Senior Secured Notes

USD

1,215

15-Aug-26

Bullet

1,215

1,215

2.125% Senior Secured Notes

EUR

439

15-Aug-26

Bullet

439

492

2.125% Senior Secured Notes

EUR

790

15-Aug-26

Bullet

790

885

6.000% Senior Notes

USD

800

15-Feb-25

Bullet

800

829

4.750% Senior Notes

GBP

400

15-Jul-27

Bullet

400

491

5.250% Senior Notes

USD

800

15-Aug-27

Bullet

800

800

5.250% Senior Notes

USD

1,000

15-Aug-27

Bullet

1,000

1,000

Global Asset Based Loan Facility

USD

660

07-Dec-22

Revolving

519

519

141

Lease obligations

 

Various

 

 

Amortizing

356

Other borrowings/credit lines

 

EUR/USD

 

 

Rolling

 

Amortizing

2

1

Total borrowings / undrawn facilities

 

  

 

  

 

  

 

  

 

7,289

142

Deferred debt issue costs and bond discounts and bond premium

 

  

 

  

 

  

 

  

 

  

(116)

Net borrowings / undrawn facilities

 

  

 

  

 

  

 

  

 

  

 

7,173

142

Cash and cash equivalents

 

  

 

  

 

  

 

  

 

  

 

(1,448)

1,448

Derivative financial instruments used to hedge foreign currency and interest rate risk

 

  

 

  

 

  

 

  

 

  

 

(35)

Net debt / available liquidity

 

  

 

  

 

  

 

  

 

  

 

5,690

1,590

The Group enhanced its capital structure by refinancing certain debt obligations, resulting in the Group having no Senior Secured Notes or Senior Notes maturing before 2025. Please refer to note 11 of the unaudited consolidated interim financial statements for further detail.

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The maturity profile of the Group’s Senior Secured Notes and Senior Notes is as follows:

At June 30,

At December 31,

2020

    

2019

$'m

$'m

Within one year or on demand

Between one and three years

695

Between three and five years

1,529

832

Greater than five years

4,883

4,029

Total Senior Secured Notes and Senior Notes

6,412

 

5,556

The following table outlines the minimum repayments the Group is obliged to make, attributable to the continuing operation, in the twelve months ending June 30, 2021, assuming that the other credit lines will be renewed or replaced with similar facilities as they mature.

    

    

Maximum

    

    

    

Minimum net

Amount

repayment for

Drawable

Final

the twelve

Local

Maturity

Facility

months ending

Facility

   

Currency

   

Currency

   

Date

   

Type

   

June 30, 2021

(in millions)

(in $ millions)

Lease obligations

 

Various

 

 

 

Amortizing

 

79

Other borrowings/credit lines

 

EUR/USD

 

 

Rolling

 

Amortizing

 

2

Minimum net repayment

 

  

 

  

 

  

 

  

 

81

The Group generates substantial cash flow from its operations and had $1,448 million in cash and cash equivalents and restricted cash as of June 30, 2020, as well as available but undrawn liquidity of $142 million under its credit facilities.

We believe that our cash balances and future cash flow from operating activities, as well as our credit facilities, will provide sufficient liquidity to fund our purchases of property, plant and equipment, interest payments on our notes and other credit facilities, and dividend payments for at least the next twelve months. In addition, we believe that we will be able to fund certain additional investments from our current cash balances, credit facilities and cash flow from operating activities.

The Group’s long-term liquidity needs primarily relate to the service of our debt obligations. We expect to satisfy our future long-term liquidity needs through a combination of cash flow generated from operations and, where appropriate, to refinance our debt obligations in advance of their respective maturity dates as we have successfully done in the past.

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Cash flows

The following table sets forth a summary of our cash flow for the six months ended June 30, 2020 and 2019:

Unaudited

(in $ millions)

Six months ended June 30, 

    

2020

    

2019

Operating profit from continuing operations

 

200

255

Depreciation and amortization

 

336

324

Exceptional operating items

 

8

7

Movement in working capital (1)

 

(372)

(230)

Transaction-related, start-up and other exceptional costs paid

 

(67)

(17)

Exceptional restructuring paid

 

(1)

(8)

Cash generated from continuing operations

 

104

 

331

Interest paid

 

(157)

(208)

Income tax paid

 

(23)

(33)

Net cash (used in)/generated from operating activities - continuing operations

(76)

90

Net cash generated from operating activities - discontinued operation (2)

20

Net cash (used in)/generated from operating activities

 

(76)

 

110

Capital expenditure (3) 

 

(230)

(280)

Investing cash flows used in continuing operations

(230)

(280)

Proceeds from disposal of discontinued operation

32

Investing cash flows from discontinued operation

(68)

Net cash used in investing activities

 

(198)

 

(348)

Proceeds from borrowings

4,068

219

Repayment of borrowings

(2,753)

(2)

Early redemption premium paid

 

(61)

Deferred debt issue costs paid

(22)

(2)

Lease payments

(45)

(36)

Dividends paid

 

(69)

(66)

Consideration paid on extinguishment of derivative financial instruments

(14)

Financing cash flows from continuing operations

1,118

99

Financing cash flows from discontinued operation

(13)

Net inflow from financing activities

 

1,118

 

86

Net increase/(decrease) in cash and cash equivalents

 

844

 

(152)

Cash and cash equivalents at beginning of period

 

614

530

Foreign exchange losses on cash and cash equivalents

 

(10)

(4)

Cash and cash equivalents at end of period

 

1,448

 

374


(1)Working capital comprises inventories, trade and other receivables, contract assets, trade and other payables, contract liabilities and current provisions.

(2)Operating cash flows from discontinued operation for the six months ended June 30, 2019, include interest and income tax payments of $2 million and $5 million respectively.

(3)Capital expenditure is the sum of purchase of property, plant, and equipment, and software and other intangibles, net of proceeds from disposal of property, plant and equipment. Capital expenditure for the six months ended June 30, 2020 includes $76 million related to the Group’s Business Growth Investment projects.

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Net cash used in operating activities – continuing operations

Net cash used in operating activities for the six months ended June 30, 2020, of $76 million represents an increase of $166 million, compared with a $90 million net cash inflow from operating activities in the same period in 2019. The increase was due to an increase in working capital outflows of $142 million, an increase in transaction-related, start-up and other exceptional costs paid of $50 million, partly offset by an increase in depreciation and amortization of $12 million, an increase in exceptional operating items of $1 million and a decrease in exceptional restructuring costs paid of $7 million. Net cash from operating activities in continuing operations was further impacted by interest paid and tax paid of $157 million and $23 million respectively.  

Net cash used in investing activities – continuing operations

Net cash used in investing activities decreased by $50 million to $230 million in the six months ended June 30, 2020, compared with $280 million in the same period in 2019 due to decreased capital expenditure primarily due to the timing of projects and furnace rebuilds.

Net inflow from financing activities – continuing operations

Net cash from financing activities represents an inflow of $1,118 million in the six months ended June 30, 2020 compared with a $99 million inflow in the same period in 2019.

Proceeds from borrowings of $4,068 million and repayment of borrowings of $2,753 million principally reflects the effects of the refinancing activities during the six months ended June 30, 2020, as described in note 11 of the unaudited consolidated interim financial statements.

Lease payments of $45 million in the six months ended June 30, 2020, increased by $9 million compared to $36 million in the six months ended June 30, 2019, reflecting increased principal repayments on the Group’s lease obligations.

In the six months ended June 30, 2019 the Group paid dividends to shareholders of $69 million. On February 19, 2020, the Company declared a cash dividend of $0.14 per common share. The dividend of $33 million was paid on April 1, 2020 to shareholders of record on March 18, 2020. On April 22, 2020, the Company declared a cash dividend of $0.15 per common share. The dividend of $36 million was paid on June 17, 2020 to shareholders of record on June 3, 2020.

Working capital

For the six months ended June 30, 2020, the working capital outflow during the period increased by $142 million to $372 million, from an outflow of $230 million for the six months ended June 30, 2019. The increase is mainly due to unfavorable movements from inventory, trade and other payables and trade and other receivables compared with the same period in 2019.

Exceptional operating costs paid

Transaction-related, start-up and other exceptional costs paid in the six months ended June 30, 2020 increased by $50 million to $67 million, compared with $17 million in the six months ended June 30, 2019. In the six months ended June 30, 2020 amounts paid primarily related to costs relating to the combination of the Group’s Food & Speciality Metal Packaging business with the business of Exal Corporation to form Trivium.

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Exceptional restructuring costs paid in the six months ending June 30, 2020, of $1 million were $7 million lower compared with the six month period ended June 30, 2019 as result of higher restructuring costs in Glass Packaging North America in the prior year.

Income tax paid

Income tax paid during the six months ended June 30, 2020 was $23 million, which represents a decrease of $10 million, compared with the six months period ended June 30, 2019. The decrease is primarily attributable to the timing of tax payments and refunds received in certain jurisdictions.

Capital expenditure – continuing operations

(in $ millions)

Six months ended June 30, 

    

2020

    

2019

Metal Beverage Packaging Europe

 

49

52

Metal Beverage Packaging Americas

 

65

58

Glass Packaging Europe

 

54

87

Glass Packaging North America

 

62

83

Net capital expenditure

230

280

Capital expenditure for the six months ended June 30, 2020 decreased by $50 million to $230 million, compared with $280 million for the six months ended June 30, 2019. The decrease was primarily attributable to the timing of projects and furnace rebuild and repair activity. Capital expenditure for the six months ended June 30, 2020 includes $76 million related to the Group’s Business Growth Investment projects.  

In Metal Beverage Packaging Europe, capital expenditure in the six months ended June 30, 2020 was $49 million compared with $52 million in the same period in 2019 with the decrease primarily attributable to the timing of capital investment projects. In Metal Beverage Packaging Americas capital expenditure in the six months ended June 30, 2020 was $65 million, compared with $58 million in the same period in 2019 with the increase primarily attributable to increased capital investment initiatives. In Glass Packaging Europe, capital expenditure was $54 million in the six months ended June 30, 2020, compared with $87 million in the same period in 2019 with the decrease mainly attributable to furnace rebuild and repair activity in 2019. In Glass Packaging North America, capital expenditure was $62 million in the six months ended June 30, 2020, compared with $83 million in the same period in 2019, reflecting the timing of furnace rebuild and repair activity.

Receivables Factoring and Related Programs

The Group participates in several uncommitted accounts receivable factoring and related programs with various financial institutions for certain receivables, accounted for as true sales of receivables, without recourse to the Group. Receivables of $407 million were sold under these programs at June 30, 2020 (December 31, 2019: $473 million).

Trade Payables Processing

Our suppliers have access to independent third party payable processors. The processors allow suppliers, if they choose, to sell their receivables to financial institutions at the sole discretion of both the supplier and the financial institution. We have no involvement in the sale of these receivables and the suppliers are at liberty to use these arrangements if they wish to receive early payment. As the original liability to our suppliers, including amounts due and scheduled payment dates, remains as agreed in our supply agreements and is neither legally extinguished nor substantially modified, the Group continues to present such obligations within trade payables.

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Cautionary Statement Regarding Forward-Looking Statements

This report includes statements that are, or may be deemed to be, forward-looking statements. All statements other than statements of historical fact included in this report regarding our business, financial condition, results of operations and certain of our plans, objectives, assumptions, projections, expectations or beliefs with respect to these items and statements regarding other future events or prospects, are forward-looking statements. These statements include, without limitation, those concerning: our strategy and our ability to achieve it; expectations regarding sales, profitability and growth; our possible or assumed future results of operations; R&D, capital expenditures and investment plans; adequacy of capital; and financing plans. The words “aim”, “may”, “will”, “expect”, “is expected to”, “anticipate”, “believe”, “future”, “continue”, “help”, “estimate”, “plan”, “schedule”, “intend”, “should”, “would be”, “seeks”, “estimates”, “shall” or the negative or other variations thereof, as well as other statements regarding matters that are not historical fact, are or may constitute forward-looking statements.

Although we believe that the estimates reflected in the forward-looking statements are reasonable, such estimates may prove to be incorrect. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.

All forward-looking statements included in this report are based on information available to us on the date of this report. We undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by applicable law. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this report.

Ardagh Group S.A.

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