Half-year Report

14 August 2019

Avast PLC

HALF YEAR RESULTS FOR THE SIX-MONTHS ENDED 30 JUNE 2019

First half performance underpins a strong full year outlook at the upper end of guidance

Avast plc, together with its subsidiaries ('Avast', 'the Group' or 'the Company'), a leading global cybersecurity provider, announces its results for the six-months ended 30 June 2019.

FINANCIAL HIGHLIGHTS

OPERATIONAL AND STRATEGIC HIGHLIGHTS

Statutory Results:

Ondrej Vlcek, Chief Executive of Avast, said:

"We are pleased to report a strong set of group results for the first half of 2019, in line with the Board's expectations. Group Adjusted Revenue increased by 9.2% on a like-for-like basis, driven by double-digit growth in our Consumer Direct Desktop business. We also sustained high levels of profitability with Adjusted EBITDA margin at 55.4%.

"The strategic advantage of our global consumer platform model shows clearly in these results, with strong revenue growth driven by cross-sell promotions within the installed user base. I am delighted to see Avast reap the benefit of its investment in innovation and the customer experience. Strong demand for Avast's value-added solutions, such as VPN, Utilities and AntiTrack, has been accompanied by a resilient performance from our traditional anti-virus products. While the mobile carrier channel was below our expectations, elsewhere in the consumer business there was good momentum in both customer conversion and retention rates.

"Avast reached an important strategic milestone in the first half of 2019 with the release of direct-to-consumer and carrier-based IoT solutions. Using cutting-edge technology, these products will protect users' entire digital lives. We are very excited about the opportunity ahead.

"The Group's first half performance underpins a strong full year outlook. We now expect like-for-like FY2019 revenue growth to be at the upper end of the previously stated high single-digit percentage range."

PRESENTATION OF RESULTS

There will be a live webcast presentation and conference call of the results to analysts and investors at 9:00 AM BST today (14 August 2019). Please register to participation at the Company website https://investors.avast.com. A Q&A facility will be available for conference call participants.

ENQUIRIES

Investors and analysts:

Peter Russell, Director of IR

[email protected]

Media:

Stephanie Kane, VP PR and Corporate Communications

[email protected]

Tavistock

Jos Simson / Lulu Bridges / Jenny Boyd

+44 20 7920 3150

Cautionary statement regarding forward-looking statements

This announcement contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the Company's business. Whilst the Company believes the expectations reflected herein to be reasonable in the light of the information available to them at this time, the actual outcome may be materially different owing to factors beyond the Company's control or within the Company's control where, for example, the Company decides on a change of plan or strategy. Accordingly, no reliance may be placed on the figures contained in such forward-looking statements.

Notes:

Throughout the Half Year Report a number of alternative performance measures are used to provide users with a clearer picture of the performance of the business. This is in line with how management monitor and manage the business day-to-day. Definitions and details are provided below. Further definitions (see 'PRESENTATION OF RESULTS AND DEFINITIONS') and reconciliations (see 'FINANCIAL REVIEW') of non-GAAP measures are included in the notes to the financial statements.

All dollar figures throughout the report are at actual currency rates unless otherwise indicated.

CHIEF EXECUTIVE OFFICER'S REVIEW

The Group has delivered another strong half of topline growth and high levels of profitability. On a like-for-like basis, the Group's Adjusted Billings increased year-on-year 12.5% excluding the currency impact, and 9.2% in actual rates from $416.5m to $454.6m. New product launches in the first half of FY 2018 in both Consumer Direct Desktop and Consumer Indirect contributed to the strong Billings growth in the first half of the current year. The Group's Adjusted Revenue increased year-on-year 9.2% excluding the currency impact, and 8.3% in actual rates, from $389.6 to $421.7m. The Consumer and SMB segments contributed $395.9m and $25.9m respectively. The first half performance gives us confidence for a strong full year outcome. We expect like-for-like FY 2019 revenue growth to be at the upper end of the previously stated high single-digit percentage range.

Consumer

SMB

All three key operating metrics-End of Period Customers, Average Revenue Per Customer, and Average Products per Customer-are tracking in line with full year growth guidance of low single digit, mid single digit and mid single digit respectively.

Consumer Direct Desktop Operational KPIs

Consumer Products

We have continued to add materially to the scale and capability of our products. The first half of 2019 saw the launch of Avast's IoT router-based solution via the Italian operator Wind Tre, the first of our carrier partners worldwide to add the security, based on Avast's Smart Life platform. In addition, after period close in July, Avast started to offer its IoT product Omni directly to our US user base through in-product messaging. These new home network protection solutions are being combined with Avast's on-device protection and parental controls so that people can have security and privacy everywhere they go.

Following the success of Avast AntiTrack, AVG AntiTrack has been added to the consumer portfolio to meet demand for privacy protection. Avast Cleanup and AVG TuneUp, products that help optimise device performance, have both benefited from upgrades to boost functionality.

Business Unit Performance

Consumer Direct Desktop

Consumer Direct Mobile

Consumer Indirect

This business unit includes Avast Secure Browser ('ASB'), distribution of third party software, Jumpshot analytics, and advertising within mobile applications.

SMB

FINANCIAL REVIEW

Billings, Revenue and EBITDA

In line with our expectations, the Group has achieved good growth and maintained high levels of profitability.

The Group's Adjusted Billings increased by $29.4m to $459.6m in the half year ended 30 June 2019, driven by the core Consumer Direct Desktop business. This represented a 10.1% increase excluding FX or 6.8% in actual rates. Excluding Discontinued Business and the disposal of Managed Workplace, the Group's Adjusted Billings increased by $38.1m to $454.6m. This represented a 12.5% increase excluding FX or 9.2% in actual rates. Subscription billings represented 84.7% of the Group's total Adjusted Billings in HY 2019 ended 30 June 2019, benefiting from both deferred revenue strength and FY 2019 new billings performance. Excluding Discontinued Business and the disposal of Managed Workplace business, the Group's Adjusted Revenue increased by $32.2m to $421.7m, representing a 9.2% increase excluding FX or 8.3% in actual rates.

Adjusted Revenue in the period of $426.8m included $260.0m from the release of prior-period deferred revenue. The Adjusted Deferred Revenue9 balance at the end of the period was $471.3m, comprising $417.1m that will be recognised within 12 months of the balance sheet date. This compares to $427.7m, comprising of $378.6m respectively, at the same time last year. The average subscription length at the half year ended 30 June 2019 was 14 months, flat versus FY 2018.

The Group's statutory Billings increased by $29.4m to $459.6m in the half year ended 30 June 2019, which represents a 6.8% increase. The Group's statutory Revenue increased by $36.8m to $425.4m, which represents a 9.5% increase. It should be noted that the difference between the Group's statutory Revenue of $425.4m and Group's Adjusted Revenue of $426.8 in H1 2019 is diminishing as the magnitude of non-cash historical adjustments arising from the AVG acquisition decreases. These adjustments are expected to be negligible after 2019.

Profitability was driven by the Group's scale and operating leverage. Adjusted EBITDA increased 6.5% to $236.5m, resulting in Adjusted EBITDA margin of 55.4% (including c.1pt upside from IFRS 16 adoption in 2019). This is in line with half year guidance of a slight year-on-year decrease adjusting for the IFRS 16 impact, due to carry over of 2018 investments (55.1% EBITDA margin in HY 2018). Full year outlook remains flat (excluding IFRS 16). (For IFRS 16 adoption see '4.2. New standards, interpretations and amendments adopted by the Group')

The Statutory Operating Profit increase of $52.2m was driven by a more modest impact from the deferred revenue haircut from the AVG acquisition of $10.7m, an increase in Adjusted EBITDA of $14.4m, lower exceptional items of $20.9m, lower depreciation and amortisation of acquisition and non-acquisition intangibles of $13.1m and the lower impact of other adjustments of $0.9m, partially offset by higher share-based payments costs of $(7.8)m.

The table below presents the Group's Adjusted Billings and Adjusted Revenue for the periods indicated:

Costs

The increase in the Group's Adjusted Cost of Revenues reflects higher sales commissions and licence fees of $(2.0)m related to the increase in Adjusted Revenue, offset by a positive FX impact of $0.6m. Adjusted Cost of Revenues represent the Group's cost of revenues adjusted for depreciation and amortisation charges, share-based payments charges, exceptional items, COGS deferral adjustment and gross-up adjustment.

The Group's statutory Cost of revenues decreased by $13.1m to $(107.5)m primarily due to the lower amortisation of acquisition intangibles. The amortisation of acquisition intangibles represents intangible assets acquired through business combinations.

The increase in the Group's Adjusted Operating costs excluding the positive impact of IFRS 16 implementation of $4.3m was $(11.9)m. The increase was caused by investment into personnel costs of $(6.6)m, office costs and equipment of $(0.7)m, marketing and paid search of $(4.2)m, consultancy and outsourced services of $(0.2)m, IT services and maintenance costs of $(1.1)m, sales commissions of $(0.5)m, higher travel and training spend of $(0.7)m, carry over impact of PLC costs of $(1.9)m and other costs and FX of $4.0m. Adjusted Operating costs represent the Group's operating costs adjusted for depreciation and amortisation charges, share-based payments charges and exceptional items.

The decrease in the Group's statutory Operating costs of $2.3m, from $(158.3)m to $(156.0)m, reflects lower exceptional items, partially offset by higher share-based payments and higher depreciation and amortisation of non-acquisition intangibles.

Exceptional items

Exceptional items are income or expenses that arise from events or transactions that are clearly distinct from the ordinary activities of the Group. The Group believes that these material and non-recurring items should be separately disclosed to show the underlying business performance of the Group more accurately. Once an item is disclosed as exceptional, it will remain exceptional through completion of the event or programme, regardless the materiality of the residual impact in a future period.Exceptional items in 2019 consist primarily of legal and professional fees related to the disposal of a subsidiary and related business operation (Managed Workplace business of SMB segment) and to the acquisition of TrackOFF (see Note 8 Exceptional items). Portion of the exceptional items directly related to the disposal of business operation was included in the investing cash flow, costs related to the acquisition were included in operating cash flow. The net gain on disposal of business operation of $17.5m (see Note 3 Disposal of business operation) was treated as exceptional and it is not included in the Adjusted Net income. Exceptional items in 2018 related mainly to IPO costs.

Finance income and expense

Adjusted finance expense on a net basis was $(39.8)m in 2019, $11.9m lower compared to $(51.7)m in H1 2018. Excluding the negative impact of the implementation of IFRS 16 of $(1.2)m, the adjusted finance costs decreased by $13.1m. The decrease was driven by lower total loan interest costs of $15.3m resulting from the repayment of $300m debt post IPO and the additional repayment of $197.4m in 2019 (see Note 16 Term Loan), partially offset by the negative impact of revaluation of derivatives and other finance costs.

The Group's statutory net finance costs increased by $(1.2)m to $(35.5)m in 2019 resulting from the decrease in adjusted finance costs described above, offset by the lower unrealised foreign exchange gains in 2019 from the Euro denominated debt.

Income tax

In the half year ended 30 June 2019, the Group reported an Income tax expense of $(31.3)m, compared to the income tax benefit of $84.8m in the half year ended 30 June 2018. The income tax benefit in 2018 was primarily driven by transfer of AVG E-comm web shop to Avast Software B.V. ("Avast BV") on 1 May 2018. Subsequently, the former Dutch AVG business from Avast BV (including the web shop) was sold to Avast Software s.r.o. The total net impact of this transaction was $94.4m, which was treated as an exceptional item in 2018. The transferred IP is amortised for tax purposes over 15 years.

Income tax was further impacted by the tax expense of the foreign exchange movements on intercompany loans arising in the statutory accounts of the subsidiary concerned of $1.0m (tax benefit of $(9.4)m in H1 2018) and the recognition of previously unrecognised tax losses carried forward of subsidiaries Piriform Inc. and Remotium Inc.of $4.7m related to the previous periods.

The tax impact of other adjusted items represents the tax impact of amortisation of acquisition intangibles, deferred revenue haircut reversal arising from prior acquisitions, exceptional items and other adjusted items, which has been calculated applying the tax rate that the Group determined to be applicable to the relevant item.

Adjusted Income tax is $(37.7)m for HY 2019, resulting in an adjusted effective tax rate of 20.3% (H1 2018: 20.0%). The Adjusted effective tax rate is the Adjusted Income tax percentage of Adjusted Profit before tax of $186.0m (defined as Adjusted Net Income of $148.2m before the deduction of Adjusted Income tax of $(37.7)m.)

Cash Flow

Unlevered free cash flow represents the amount of cash generated by operations after allowing for capital expenditure, taxation and working capital movements. Unlevered free cash flow provides an understanding of the Group's cash generation and is a supplemental measure of liquidity in respect of the Group's operations.

Levered free cash flow represents amounts of incremental cash flows the Group has after it has met its financial obligations (after interest and lease repayments) and is defined as Unlevered Free Cash Flow less cash interest and lease repayments.

The working capital movement in H1 2018 comprised a positive movement in payables driven by outstanding unpaid IPO expenses at the end of June 2018.

Lower capex in H1 2019 was caused by the timing of internal projects mainly to H2 2019.

The cash tax included in the calculation of Unlevered Free Cash Flow excludes a $49.4m Dutch exit tax paid in March 2019 as this was treated as an exceptional item. The decrease in the adjusted cash tax is driven by the Czech Republic true-up system, where a company is obliged to make quarterly income tax advances based on its last known tax liability. Upon filing a tax return, tax advances paid during the year for which the tax return is filed offset the final tax liability. As the taxable income for 2017 was significantly higher than the taxable income for 2018 due to unrealized FX gain on intercompany loans, the reported cash tax in H1 2018 was higher by the amount of the true up. No such true up payment occurred in 2019.

The following table presents a reconciliation between the Group's Adjusted Cash EBITDA and Net cash flows from operating activities as per the consolidated statement of cash flows.

The Group's net cash flow from operating activities increased by $10.4m primarily due to higher Adjusted Cash EBITDA of $21.8m, lower cash tax of $24.9m, lower exceptional items (excl. transaction costs) of $21.2m, positive impact of the movement in provisions and allowances of $2.7m and positive change in FX gains/losses and other financial expenses and non-cash gains of $0.9m, offset by Dutch exit tax paid of $(49.4)m, negative impact of working capital movement (excl. change in deferred revenue and deferred COGS) of $(10.1)m and employer's costs on share-based payments of $(1.5)m (see Note 7 Share-based payments). Portion of the exceptional items directly related to the disposal of business operation of $(0.3)m was included in the cash flows from investing activities.

The Group's net cash inflow from investing activities of $13.3m was comprised of capex of $(3.2)m, consideration paid for TrackOFF acquisition net of cash acquired of $(11.2)m (see Note 2 Business combinations), proceeds from the sale of a business operation net of cash disposed and transaction costs of $26.7m (see Note 3 Sale of a business operation) and interest received of $1.0m. The Group's net cash outflow from investing activities in H1 2018 consisted solely of capex of $(5.0)m.

The Group's net cash outflow from financing activities includes $(83.7)m dividend paid, $(197.4)m net voluntary repayment of borrowings, $(33.5)m mandatory repayment of borrowings, interest paid of $(26.1)m, transaction costs related to borrowings of $(0.5)m, lease repayments of $(4.1)m and proceeds from the exercise of options of $19.9m. Increase in lease repayments in H1 2019 was driven by implementation of IFRS 16. The Group's net cash flows from financing activities in 2018 included $195.8 net proceeds from the issue of shares, $(300)m voluntary repayment of borrowings in 2018, $(41.7)m mandatory repayment of borrowings, $(3.1)m transactions costs related to borrowings, $(36.5)m interest paid and $(1.5)m lease repayments.

Financing

The Group further reduced its term loan by the repayment of $400m from USD tranche on 29 March 2019, while executing an incremental €177.5m ($202.6m) add-on to EUR tranche (see Note 16 Term Loan). As of 30 June 2019, the total Gross debt11 of the Group was $1,244.0m and the total Net debt11 was $1,104.6m. The decrease in gross debt since 31 December 2018 is attributable to $197.4m voluntary repayment of borrowings, $33.5m of mandatory repayment of borrowings, $3.0m decrease in lease liabilities and a positive unrealised FX gain of $4.3m on the EUR tranche of the loan. The Group adopted IFRS 16 as of 1 January 2019 using the modified retrospective approach and did not restate for the year prior to first adoption. The balance of lease liabilities as of 31 December 2018, shown in the table below, have been presented as if adjusted for opening balance of IFRS 16 impact.

Principal exchange rates applied

The table below summarises the principal exchange rates used for the translation of foreign currencies into US Dollar. The assets and liabilities are translated using period-end exchange rates. Income and expense items are translated at the average exchange rates for the period.

Earnings per share

Basic Adjusted earnings per share amounts are calculated by dividing the Adjusted net income for the period by the weighted average number of shares of common stock outstanding during the year. The diluted Adjusted earnings per share amounts consider the weighted average number of shares of common stock outstanding during the year adjusted for the effect of dilutive options. See Note 12 for the statutory earnings per share.

Dividend

On 13 August 2019, the Directors declared an interim dividend of 4.4 cents per share payable in October 2019. This represents one third of 40% of the Group's levered free cash flow in 2018, in accordance with the Company's dividend policy. This will be paid in US dollars on 11 October 2019 to shareholders on the register on 13 September 2019. There will be an option for shareholders to elect to receive the dividend in pounds sterling and such an election should be made no later than 20 September 2019. Further details regarding the currency election process and payment of the dividend can be found on the Company's website at investors.avast.com.

The foreign exchange rate at which dividends declared in US dollars will be converted into pounds sterling will be calculated based on the average exchange rate over the five business days prior to 26 September 2019, and announced shortly thereafter. In accordance to the Company's dividend policy, the Group aims to pay a final dividend in Q2 2020 based on the Group's final 2019 levered free cash flow (c.40% of levered FCF less interim dividend).

Proposed Dividend Timetable

Ex-dividend Date: 12 September 2019

Record Date: 13 September 2019

Last Date for Currency Election: 20 September 2019

Payment: 11 October 2019

Notes:

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties which could have a material adverse effect on the Group's business, results of operations, financial condition and/or prospects set out in the last annual report and financial statements dated 9 April 2019 remain valid at the date of this report. These risks and uncertainties are:

PRESENTATION OF RESULTS AND DEFINITIONS

This Half Year Report contains certain non-IFRS financial measures to provide further understanding and a clearer picture of the financial performance of the Group. These alternative performance measures (APMs) are used for the assessment of the Group's performance and this is in line with how management monitor and manage the business day-to-day. It is not intended that APMs are a substitute for, or superior to statutory measures. The APMs are not defined or recognised under IFRS including Adjusted Billings, Adjusted Revenue, Adjusted EBITDA, Adjusted Cash EBITDA, Adjusted Net Income and Unlevered Free Cash Flow as defined and reconciled below.

These non-IFRS financial measures and other metrics are not measures recognised under IFRS. The non-IFRS financial measures and other metrics, each as defined herein, may not be comparable to similarly titled measures presented by other companies as there are no generally accepted principles governing the calculation of these measures and the criteria upon which these measures are based can vary from company to company. Even though the non-IFRS financial measures and other metrics are used by management to assess the Group's financial results and these types of measures are commonly used by investors, they have important limitations as analytical tools, and investors should not consider them in isolation or as substitutes for analysis of the Group's position or results as reported under IFRS. The Group considers the following metrics to be the KPIs it uses to help evaluate growth trends, establish budgets and assess operational performance and efficiencies. The definition of non-GAAP measures in the six months ended 30 June 2019 are consistent with those presented in the IPO prospectus and there have been no changes to the bases of calculation.

CONSOLIDATED STATEMENT OF ADJUSTED PROFIT AND LOSS 

FOR THE SIX-MONTHS ENDED 30 JUNE 2019

($'m)

Adjusted Billings

Billings represent the full value of products and services being delivered under subscription and other agreements and include sales to new end customers plus renewals and additional sales to existing end customers. Under the subscription model, end customers pay the Group for the entire amount of the subscription in cash upfront upon initial delivery of the applicable products. Although the cash is paid upfront, under IFRS, subscription revenue is deferred and recognised rateably over the life of the subscription agreement, whereas non-subscription revenue is typically recognised immediately. Adjusted Billings represent the Group's reported without adjusting items in 2019 half year and likewise in the comparative period.

Adjusted Revenue

Adjusted Revenue represents the Group's reported adjusted for the Deferred Revenue Haircut Reversal12 and Gross-Up Adjustment13. These historical adjustments are negligible from 2019. The following is a reconciliation of the Group's statutory Revenue to the Group's Adjusted Billings, Group's statutory Revenue to the Group's Adjusted Revenue:

Adjusted EBITDA

Adjusted earnings before interest, taxation, depreciation and amortisation ('Adjusted EBITDA') is defined as the Group's operating profit/loss before depreciation, amortisation of non-acquisition intangible assets, share-based payments, exceptional items, amortisation of acquisition intangible assets, the Deferred Revenue Haircut Reversal12 and the COGS Deferral Adjustments14.

Adjusted Cash EBITDA

Cash earnings before interest, taxation, depreciation and amortisation ('Adjusted Cash EBITDA') is defined as Adjusted EBITDA plus the net deferral of revenue, the net change in deferred cost of goods sold and the reversal of the COGS Deferral Adjustments14.The following is a reconciliation of the Group's statutory Operating profit to Adjusted EBITDA and Adjusted Cash EBITDA:

Adjusted Net income

Adjusted Net Income represents statutory net income plus the Deferred Revenue Haircut Reversal12, share-based payments, exceptional items, amortisation of acquisition intangible assets, unrealised foreign exchange gain/loss on the EUR tranche of the bank loan, the COGS Deferral Adjustments14, the tax impact from the unrealised exchange differences on intercompany loans and the tax impact of the foregoing adjusting items and IP transfers, less gain on disposal of business operation. The following is a reconciliation of the Group's statutory Net income to Adjusted Net Income:

Unlevered Free Cash Flow

Represents Adjusted Cash EBITDA less capex, plus cash flows in relation to changes in working capital (excluding change in deferred revenue and change in deferred cost of goods sold as these are already included in Adjusted Cash EBITDA) and taxation. Changes in working capital are as per the cash flow statement on an unadjusted historical basis and unadjusted for exceptional items.

Levered Free Cash Flow

Represents amounts of incremental cash flows the Group has after it has met its financial obligations (after interest and lease repayments) and is defined as Unlevered Free Cash Flow less cash interest and lease repayments.

Rounding

Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided, however growth rates are calculated based on precise actual numbers.

Notes:

DIRECTORS' RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

The unaudited condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union

The interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report in Financial statements dated 9 April 2019 that could do so."

On behalf of the Board

Ondrej Vlcek

Chief Executive of Avast

INDEPENDENT REVIEW REPORT TO AVAST PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 which comprises the Consolidated Statement of Profit and Loss, Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Shareholder's Equity, Consolidated Statement of Cash Flow and the related explanatory notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 4, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP

London

13 August 2019

13 August 2019

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

FOR THE SIX-MONTHS ENDED 30 JUNE 2019

($'m)

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX-MONTHS ENDED 30 JUNE 2019

($'m)

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 30 JUNE 2019

($'m)

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

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE SIX-MONTHS ENDED 30 JUNE 2019

($'m)

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

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX-MONTHS ENDED 30 JUNE 2019

($'m)

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

1. General information

Avast plc, together with its subsidiaries (collectively, 'Avast', 'the Group' or 'the Company'), is a leading global cybersecurity provider. Avast plc is domiciled in the United Kingdom and its registered address is 110 High Holborn, London WC1V 6JS. Avast plc's registered number is 07118170.

The Interim Condensed Financial Statements were approved for issue by the Board of Directors on 13 August 2019 and have been reviewed but not audited.

These Interim Condensed Financial Statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006.

The financial information in respect of the financial year ended 31 December 2018 has been extracted from the audited financial statements for that financial year that have been delivered to the registrar and on which the auditors gave an unqualified audit opinion which did not include an emphasis of matter reference or a statement under sections 498(2) or (3) of Companies Act 2006. 

2. Business combinations

On 24 May 2019, Avast Software, Inc. purchased a 100% stake in the American company TrackOFF, Inc. ('TrackOFF'), a developer of tools to protect users' identities and personal lives. The Group has acquired TrackOFF due to the further development of Avast's Anti-tracking products and other products that help users maintain their privacy online. The interim condensed consolidated financial statements include the results of TrackOFF for the one-month period.

The transaction was implemented through a legal merger between a subsidiary of Avast Software, Inc. and TrackOFF, following which Avast Software, Inc. became the sole shareholder of the surviving company. The fair value of the consideration at the acquisition date was determined by the Group to be $12.8 million for 100% ownership. The consideration given was paid in cash.

The fair value of assets acquired and liabilities incurred on the acquisition date was determined on provisional basis as follows: